**EXHIBIT 4.2**

 

**THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISEHEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OROFFERED FOR SALE OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVEREGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWSOR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCHREGISTRATION IS NOT REQUIRED.**

 

# **WARRANT**

# ** **

**TO PURCHASE             SHARESOF COMMON STOCK OF**

 

**TRI-SSECURITY CORPORATION**

 

Issue Date:                                

 

**THIS CERTIFIES THAT**, for value received,                                     or (subject to the restrictions on transfer contained herein) its registeredassigns (the “Holder”) is entitled to purchase from Tri-S SecurityCorporation, a Georgia corporation (the “Company”), at any time or fromtime to time after 9:00 a.m., Atlanta, Georgia time, after the date onwhich Shareholder Approval (as hereinafter defined) is obtained and prior to5:00 p.m., Atlanta, Georgia time, on the date which is the thirdanniversary of the Issue Date set forth above (the “Expiration Date”),at the place where the Warrant Agency (as hereinafter defined) is located, atthe Exercise Price (as hereinafter defined), the number of shares of commonstock, $0.001 par value per share (the “Common Stock”), of the Companyspecified above, all subject to adjustment and upon the terms and conditions ashereinafter provided.

 

Capitalizedterms used and not otherwise defined in this Warrant shall have the meaningsset forth in Article V hereof.

 

**ARTICLE I**

 

**EXERCISE OF WARRANTS**

 

1.1.                              Methodof Exercise.  To exercise thisWarrant in whole or in part, after the date on which Shareholder Approval isobtained, the Holder shall deliver to the Company at the Warrant Agency:  (a) this Warrant; (b) a writtennotice, substantially in the form of the subscription notice attached hereto asAnnex 1 (the “Subscription Notice”), of such Holder’s election toexercise this Warrant, which notice shall specify the number of shares ofCommon Stock to be purchased, the denominations of the share certificate orcertificates desired and the name or names of the Eligible Holder(s) in whichsuch certificates are to be registered; and (c) payment of the ExercisePrice with respect to such shares of Common Stock.  Such payment may be made, at the option ofthe Holder, by cash, money order, certified or bank cashier’s check or wiretransfer.

 

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TheCompany shall, as promptly as practicable and in any event within five (5) BusinessDays thereafter, execute and deliver or cause to be executed and delivered, inaccordance with such subscription notice, a certificate or certificatesrepresenting the aggregate number of shares of Common Stock specified in saidnotice.  The share certificate orcertificates so delivered shall be in such denominations as may be specified insuch notice (or, if such notice shall not specify denominations, one certificateshall be issued) and shall be issued in the name of the Holder or such othername or names of Eligible Holder(s) as shall be designated in such notice.  Such certificate or certificates shall bedeemed to have been issued, and such Holder or any other person so designatedto be named therein shall be deemed for all purposes to have become holders ofrecord of such shares, as of the date the aforementioned notice is received bythe Company.  If this Warrant shall havebeen exercised only in part, the Company shall, at the time of delivery of thecertificate or certificates, deliver to the Holder a new Warrant evidencing theright to purchase the remaining shares of Common Stock called for by thisWarrant, which new Warrant shall in all other respects be identical with thisWarrant.  The Company shall pay allexpenses payable in connection with the preparation, issuance and delivery ofshare certificates and new Warrants as contemplated by Section 2.6 below(other than transfer or similar taxes in connection with the transfer ofsecurities), except that, if share certificates or new Warrants shall beregistered in a name or names other than the name of the Holder, fundssufficient to pay all transfer taxes payable as a result of such transfer shallbe paid by the Holder at the time of delivering the aforementioned notice orpromptly upon receipt of a written request of the Company for payment.

 

Ifthis Warrant shall be surrendered for exercise within any period during whichthe transfer books for shares of the Common Stock of the Company or other securitiespurchasable upon the exercise of this Warrant are closed for any purpose, theCompany shall not be required to make delivery of certificates for thesecurities purchasable upon such exercise until the date of the reopening ofsaid transfer books.

 

1.2.                              SharesTo Be Fully Paid and Nonassessable. All shares of Common Stock issued upon the exercise of this Warrantshall be validly issued, fully paid and nonassessable.

 

1.3.                              NoFractional Shares To Be Issued.  TheCompany shall not be required to issue fractions of shares of Common Stock uponexercise of this Warrant.  If anyfraction of a share would, but for this Section, be issuable upon any exerciseof this Warrant, in lieu of such fractional share the Company shall issue tothe Holder a whole share of Common Stock.

 

1.4.                              SecuritiesLaws; Share Legend.  The Holder, byacceptance of this Warrant, agrees that this Warrant and all shares of CommonStock issuable upon exercise of this Warrant will be disposed of only inaccordance with the Securities Act of 1933, as amended (the “Securities Act”)and the rules and regulations of the Securities and Exchange Commission(the “Commission”) promulgated thereunder.  In addition to any other legend which theCompany may deem advisable under the Securities Act and applicable statesecurities laws, all certificates representing shares of Common Stock (as wellas any other securities issued hereunder in respect of any such shares) issuedupon exercise of this Warrant shall be endorsed as follows:

 

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THESECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIESLAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERREDEXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANYAPPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLYSATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Anycertificate issued at any time in exchange or substitution for any certificatebearing such legend (except a new certificate issued upon completion of apublic distribution pursuant to a registration statement under the SecuritiesAct) shall also bear such legend unless, in the opinion of counsel (in form andsubstance reasonably satisfactory to the Company) selected by the Holder ofsuch certificate and reasonably acceptable to the Company, the securitiesrepresented thereby need no longer be subject to restrictions on resale underthe Securities Act.

 

# **ARTICLE II**

 

**WARRANT AGENCY; TRANSFER, EXCHANGEANDREPLACEMENT OF WARRANT**

 

2.1.                              WarrantAgency.  Until such time, if any, asan independent agency shall be appointed by the Company to perform servicesdescribed herein with respect to this Warrant (the “Warrant Agency”),the Company shall perform the obligations of the Warrant Agency provided hereinat its principal office address or such other address as the Company shallspecify by prior written notice to the Holder.

 

2.2.                              Ownershipof Warrant.  The Company may deem andtreat the person in whose name this Warrant is registered as the holder andowner hereof (notwithstanding any notations of ownership or writing hereon madeby any person other than the Company) for all purposes and shall not beaffected by any notice to the contrary, until presentation of this Warrant forregistration of transfer as provided in this Article II.

 

2.3.                              Transferof Warrant.  This Warrant may only betransferred to a purchaser subject to and in accordance with this Section 2.3,and any attempted transfer which is not in accordance with this Section 2.3shall be null and void and the transferee shall not be entitled to exercise anyof the rights of the holder of this Warrant. The Company agrees to maintain at the Warrant Agency books for theregistration of such transfers of Warrants, and transfer of this Warrant andall rights hereunder shall be registered, in whole or in part, on such books,upon surrender of this Warrant at the Warrant Agency in accordance with this Section 2.3,together with: (i) a written assignment of this Warrant, substantially inthe form of the assignment attached hereto as Annex 2, dulyexecuted by the Holder or its duly authorized agent or attorney-in-fact, withsignatures guaranteed by a bank or trust company or a broker or dealerregistered with the NASD, and funds sufficient to pay any transfer taxespayable upon such transfer; and (ii) an investment representation letter,in form and substance acceptable to the Company, executed by the assignee orassignees of this Warrant.  Uponsurrender of this Warrant in accordance with this Section 2.3, the Company(subject to being satisfied that such transfer is in compliance with 

 

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Section 1.4) shall execute and deliver a new Warrant or Warrantsof like tenor and representing in the aggregate the right to purchase the samenumber of shares of Common Stock in the name of the assignee or assignees andin the denominations specified in the instrument of assignment, and thisWarrant shall promptly be canceled. Notwithstanding the foregoing, a Warrant may be exercised by a newHolder without having a new Warrant issued. The Company shall not be required to pay any Federal or state transfertax or charge that may be payable in respect of any transfer of this Warrant orthe issuance or delivery of certificates for Common Stock in a name other thanthat of the registered Holder of this Warrant.

 

2.4.                              Divisionor Combination of Warrants.  ThisWarrant may be divided or combined with other Warrants, in connection with thepartial exercise of this Warrant, upon surrender hereof and of any Warrant orWarrants with which this Warrant is to be combined at the Warrant Agency,together with a written notice specifying the names and denominations in whichthe new Warrant or Warrants are to be issued, signed by the Holders hereof andthereof or their respective duly authorized agents or attorneys-in-fact.  Subject to compliance with Section 2.3as to any transfer which may be involved in the division or combination, theCompany shall execute and deliver a new Warrant or Warrants in exchange for theWarrant or Warrants to be divided or combined in accordance with such notice.

 

2.5.                              Loss,Theft, Destruction of Warrant Certificates. Upon receipt by the Company of evidence reasonably satisfactory to theCompany of the loss, theft, destruction or mutilation of this Warrant and, inthe case of any such loss, theft or destruction, upon receipt of indemnity orsecurity (in customary form) reasonably satisfactory to the Company, or, in thecase of any such mutilation, upon surrender and cancellation of such Warrantand upon reimbursement of the Company’s reasonable incidental expenses, theCompany will make and deliver, in lieu of such lost, stolen, destroyed ormutilated Warrant, a new Warrant of like tenor and representing the right topurchase the same aggregate number of shares of Common Stock.

 

2.6.                              Expensesof Delivery of Warrants.  Except asotherwise expressly provided herein, the Company shall pay all expenses (otherthan transfer taxes as described in Section 2.3) and other charges payablein connection with the preparation, issuance and delivery of Warrants hereunderand shares of Common Stock upon the exercise hereof.

 

**ARTICLE III**

 

**LIMITATIONS ONEXERCISE; ADJUSTMENT PROVISIONS**

 

3.1                                 ShareholderApproval.  In no event shall the Holder of this Warrant be permitted to exercisethis Warrant or any portion hereof pursuant to Article I hereof until theCompany has obtained Shareholder Approval. No later than thirty (30) days after the termination of the Offering,the Company shall file with the Commission a preliminary proxy statementpursuant to the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), in connection with a Shareholder Meeting and shall seek to convenesuch meeting as promptly thereafter as practicable.

 

3.2                                 BeneficialOwnership.  In no event shall the Holder of this Warrant be permitted to exercisethis Warrant or any portion hereof pursuant to Article I hereof if, upon

 

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such exercise, the number of shares of Common Stock to be issuedpursuant to such exercise plus the number of shares of Common Stockbeneficially owned by the Holder would exceed 4.99% of the number of shares ofCommon Stock then issued and outstanding, it being the intent of the Companyand the Holder that the Holder not be deemed at any time to have the power tovote or dispose of greater than 4.99% of the number of shares of Common Stockissued and outstanding at any time. Nothing contained herein shall be deemed torestrict the right of the Holder to exercise this Warrant or any portionthereof at such time as such exercise will not violate the provisions of this Section 3.2.  As used herein, beneficial ownership shall bedetermined in accordance with Section 13(d) of the Exchange Act.  To the extent that the limitation containedin this Section 3.2 applies (and without limiting any rights the Companymay otherwise have), the Company may rely on the Holder’s determination ofwhether this Warrant is exercisable pursuant to the terms hereof, the Companyshall have no obligation whatsoever to verify or confirm the accuracy of suchdetermination, and the submission of a Subscription Notice by the Holder shallbe deemed to be the Holder’s representation that this Warrant is exercisablepursuant to the terms hereof.

 

3.3                                 AdjustmentProvision.  In the event that, afterthe date hereof, the Company shall: (i) pay a dividend or make adistribution on the outstanding shares of Common Stock in the Company’s capitalstock (which shall include any options, warrants or other rights to acquirecapital stock); (ii) subdivide the outstanding shares of Common Stock intoa larger number of shares; (iii) combine the outstanding shares of CommonStock into a smaller number of shares; or (iv) issue any shares of theCompany’s capital stock in reclassification of the Common Stock, then, and ineach such case, the Exercise Price in effect immediately prior to such eventshall be adjusted so that the Holder shall, upon exercise of this Warrant, beentitled to receive the number of shares of Common Stock or other securities ofthe Company that the Holder would have owned or would have been entitled to receiveupon or by reason of any of the events described above, had this Warrant hadbeen exercised prior to the occurrence of such event.  In the event that the shares of Common Stockare ever converted into a greater or lesser number of shares of another corporationor entity through a merger or similar transaction, a proportionate adjustmentshall be made to the Exercise Price to account for such change.  The Company shall give prompt written noticeto the Holder following the occurrence of any event which requires anadjustment to the Exercise Price pursuant to the terms hereof.

 

## **ARTICLE IV**

 

**REPRESENTATIONS AND WARRANTIES**

 

4.1                                 Representationsand Warranties of Holder.  The Holderrepresents and warrants to the Company as follows:

 

(a)                                  Purchasefor Own Account.  This Warrant andthe shares of Common Stock to be acquired upon exercise of this Warrant by theHolder will be acquired for investment for the Holder’s account, not as anominee or agent, and not with a view to the public resale or distribution withinthe meaning of the Securities Act, and the Holder has no present intention ofselling, granting any participation in, or otherwise distributing the same.  If not an individual, the

 

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Holder also represents that the Holder has not been formed for thespecific purpose of acquiring this Warrant or the shares of Common Stock to beacquired upon exercise of this Warrant.

 

(b)                                 Disclosureof Information.  The Holder hasreceived or has had full access to all the information it considers necessaryor appropriate to make an informed investment decision with respect to theacquisition of this Warrant and the underlying shares of Common Stock.  The Holder further has had an opportunity toask questions and receive answers from the Company regarding the terms andconditions to the offering of this Warrant and its underlying shares of CommonStock and to obtain additional information (to the extent the Company possessedsuch information or could acquire it without unreasonable effort or expense)necessary to verify any information furnished to the Holder or to which theHolder has access.

 

(c)                                  InvestmentExperience.  The Holder understandsthat the purchase of this Warrant and its underlying shares of Common Stockinvolves substantial risk.  The Holder: (i) hasexperience as an investor in securities and acknowledges that the Holder isable to fend for itself, can bear the economic risk of such Holder’s investmentin this Warrant and its underlying shares of Common Stock and has suchknowledge and experience in financial or business matters that the Holder iscapable of evaluating the merits and risks of its investment in this Warrantand its underlying shares of Common Stock; and/or (ii) has a preexistingpersonal or business relationship with the Company and certain of its officers,directors or controlling persons of a nature and duration that enables theHolder to be aware of the character, business acumen and financialcircumstances of such persons.

 

(d)                                 AccreditedInvestor Status.  The Holder is an“accredited investor” within the meaning of Regulation D promulgated under theSecurities Act.

 

**ARTICLE V**

 

**DEFINITIONS**

 

Thefollowing terms, as used in this Warrant, have the following respectivemeanings:

 

“BusinessDays” means each day in which banking institutions in Atlanta, Georgia arenot required or authorized by law or executive order to close.

 

“Commission”has the meaning set forth in Section 1.4.

 

“CommonStock” has the meaning set forth in the first paragraph of this Warrant.

 

“Company”has the meaning set forth in the first paragraph of this Warrant.

 

“EligibleHolder” means the Holder and any permitted transferee of the Holderpursuant to and in accordance with this Warrant.

 

“ExchangeAct” has the meaning set forth in Section 3.1.

 

“ExercisePrice” means $4.80 per share of Common Stock, subject to adjustmentpursuant to Article III.

 

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“ExpirationDate” has the meaning set forth in the first paragraph of this Warrant.

 

“Holder”has the meaning set forth in the first paragraph of this Warrant.

 

“Memorandum”means the Company’s Confidential Private Offering Memorandum dated July 26,2005.

 

“NASD”means The National Association of Securities Dealers, Inc.

 

“Offering”means the offer and sale of the Company’s securities as contemplated by theMemorandum.

 

“ShareholderApproval” means the affirmative vote of at least a majority of the votescast at a Shareholder Meeting at which a quorum is present to approve thepotential issuance in connection with the Offering of more than 20% of theoutstanding shares of Common Stock for purpose of complying with the rules governingThe Nasdaq Stock Market, Inc.

 

“ShareholderMeeting” means a meeting of the Company’s shareholders.

 

“SecuritiesAct” has the meaning set forth in Section 1.4.

 

“SubscriptionNotice” has the meaning set forth in Section 1.1.

 

“WarrantAgency” has the meaning set forth in Section 2.1.

 

“Warrant”means this Warrant which is issued as part of a series of similar warrantsissued pursuant to the Memorandum and the terms of that certain SubscriptionAgreement entered into between the Company and the Holder, accepted by theCompany on [                    ],2005 (the “Subscription Agreement”).

 

**ARTICLE VI**

 

**MISCELLANEOUS**

 

6.1.                              GoverningLaw.  This Warrant shall be governedin all respects by the laws of the State of Georgia, without reference to itsconflicts of law principles.

 

6.2.                              CovenantsTo Bind Successor and Assigns.  Allcovenants, stipulations, promises and agreements contained in this Warrant byor on behalf of the Company shall bind its successors and assigns, whether ornot so expressed.

 

6.3.                              EntireAgreement.  This Warrant, theMemorandum and the Subscription Agreement constitute the full and entire understandingand agreement between the parties with regard to the subject matter hereof andno party shall be liable or bound to any other party in any manner by anywarranties, representations, or covenant except as specifically set forthherein or therein.

 

6.4.                              Waiversand Amendments.  No failure or delayof the Holder in exercising any power or right hereunder shall operate as awaiver thereof, nor shall any single or partial exercise

 

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of such right or power, or any abandonment or discontinuance of stepsto enforce such a right or power, preclude any other or further exercisethereof or the exercise of any other right or power.  The rights and remedies of the Holder arecumulative and not exclusive of any rights or remedies which it would otherwisehave.  The provisions of this Warrant maybe amended, modified or waived with (and only with) the written consent of theCompany and the Holders of a majority in interest of the Warrants issuedpursuant to the Memorandum then outstanding.

 

Anysuch amendment, modification or waiver effected pursuant to this Section shallbe binding upon the Holders of all Warrants issued pursuant to the Memorandumand upon the Company.  In the event ofany such amendment, modification or waiver the Company shall give prompt noticethereof to all holders of Warrants issued pursuant to the Memorandum and, ifappropriate, notation thereof shall be made on all such Warrants thereaftersurrendered for registration of transfer or exchange.

 

6.5.                              Notices.  All notices or other communications requiredor permitted hereunder shall be in writing and shall be mailed by express,registered or certified mail, postage prepaid, return receipt requested, sentby telecopy, or by courier service guaranteeing overnight delivery with chargesprepaid, or otherwise delivered by hand or by messenger, and shall beconclusively deemed to have been received by a party hereto and to be effectiveon the day on which delivered or telecopied to such party at its address setforth below (or at such other address as such party shall specify to the otherparties hereto in writing), or, if sent by registered or certified mail, on thethird Business Day after the day on which mailed, addressed to such party atsuch address.

 

In thecase of the Holder, such notices and communications shall be addressed to itsaddress set forth under its signature below, which shall be the address shownon the books maintained by the Warrant Agency, until the Holder shall notifythe Company and the Warrant Agency in writing that notices and communicationsshould be sent to a different address, in which case such notices andcommunications shall be sent to the address specified by the Holder.  In the case of the Company, such notices andcommunications shall be addressed as follows: Attention:  Chief ExecutiveOfficer, Tri-S Security Corporation, 3700 Mansell Road, Suite 200,Alpharetta, Georgia 30022.

 

6.6.                              Survivalof Agreements; Representations and Warranties, etc.  All covenants made by the Company hereinshall be considered to have been relied upon by the Holder and shall survivethe issuance and delivery of the Warrant, regardless of any investigation madeby the Holder, and shall continue in full force and effect so long as this Warrantis outstanding.

 

6.7.                              Severability.  In case any one or more of the provisionscontained in this Warrant shall be held to be invalid, illegal or unenforceablein any respect, the validity, legality and enforceability of the remainingprovisions contained herein shall not in any way be affected or impairedthereby. The parties shall endeavor in good faith negotiations to replace theinvalid, illegal or unenforceable provisions with valid provisions the economiceffect of which comes as close as possible to that of the invalid, illegal orunenforceable provisions.

 

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6.8.                              Section Headings.  The section headings used herein are forconvenience of reference only, do not constitute a part of this Warrant andshall not affect the construction of or be taken into consideration ininterpreting this Warrant.

 

6.9.                              NoRights as Shareholder; No Limitations on Company Action.  This Warrant shall not entitle the Holder toany rights as a shareholder of the Company. No provision of this Warrant and noright or option granted or conferred hereunder shall in any way limit, affector abridge the exercise by the Company of any of its corporate rights or powersto recapitalize, amend its certificate of incorporation, reorganize,consolidate or merge with or into another corporation or to transfer all or anypart of its property or assets, or the exercise of any other of its corporaterights or powers.

 

**[Signature Page Follows]**

 

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**IN WITNESS WHEREOF**, the Company and Holderhave duly executed and delivered this Warrant, or caused this Warrant to beduly executed and delivered, all as of the date first written above.

 
| ** ** | **TRI-S  SECURITY CORPORATION**                                                                                                                                                                                                                                                                                                                                                |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                                                                                                                                                           |
|       |                                                                                                                                                                                                                                                                                                                                                                           |
|       | By:                                                                                                                                                                                                                                                                                                                                                                            |   |   |
|       |                                                                                                                                                                                                                                                                                                                                                                           | Name:   Ronald G. Farrell |
|       |                                                                                                                                                                                                                                                                                                                                                                           | Title:  Chief Executive Officer |
|       |                                                                                                                                                                                                                                                                                                                                                                           |
| ** ** | **HOLDER:**                                                                                                                                                                                                                                                                                                                                                                    |
| ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                     |
| ** ** | **[                                                            ]** |
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| ** ** | **Address:**                                                                                                                                                                                                                                                                                                                                                                   | ** ** | ** ** |
| ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                     | ** ** | ** ** |
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| ** ** | **Facsimile  No.:**                                                                                                                                                                                                                                                                                                                                                            | ** ** | ** ** |
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Annex 1

 

SUBSCRIPTION NOTICE

 

Dated:                   

 

Theundersigned hereby irrevocably elects to exercise the right of purchaseevidenced by the attached Warrant for, and to purchase thereunder,                     shares of Common Stock of Tri-s Security Corporation as provided for therein.The undersigned tenders herewith payment of the Exercise Price (as defined inthe attached Warrant) for such shares in the form of cash, money order,certified or bank cashier’s check or wire transfer.

 

Instructions for Registration of Common Stock

 

Pleaseissue a certificate or certificates for such shares of Common Stock in thefollowing name or names and denominations:

 
| Name:         |                                           |   |
|---------------|------------------------------------------------|--------|
|          | (Please  typewrite or print in block letters.) |
|          |
| Address:      |                                           |   |
|          |
|          |
| Denomination: |                                           |   |
|               |                                                |        |  |  |

 

Representations and Warranties

 

Inconnection with the exercise of the attached Warrant, the undersigned herebyrepresents and warrants that:

 

(i) itrecognizes that the shares of Common Stock issuable pursuant to the attachedWarrant have not been registered under the Securities Act of 1933, as amended(the “Securities Act”), or any applicable state securities laws, and may nottransferred, sold, or offered for sale unless registered pursuant to theSecurities Act and all applicable state securities laws or unless an exemptionfrom such registration in available and the Company has received an opinion tothat effect from counsel reasonably satisfactory to the Company;

 

(ii) itrecognizes that the shares of Common Stock issuable pursuant to the attachedWarrant are subject to, and are transferable only upon compliance with, theprovisions of the Warrant;

 

(iii) ifthe undersigned is an individual, the undersigned is an “accredited investor”as that term is defined in Rule 501(a)(5) or (6) of Regulation Dpromulgated under the Securities Act by reason that the undersigned is anindividual (i) having an individual net worth, or a joint net worth withthe undersigned’s spouse, at the time of the purchase that exceeds $1,000,000,or (ii) who had an individual income in excess of $200,000 in each of thetwo most recent years or joint

 

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income with the undersigned’s spouse in excess of $300,000 in each ofthose years and has a reasonable expectation of reaching the same income levelin the current year; or if the undersigned is a corporation or other entity,the undersigned is an “accredited investor” as that term is defined in Rule 501(a)(1),(2), (3) or (7) of Regulation D promulgated under the Securities Act;and

 

(iv) itis purchasing the shares of Common Stock for investment and not with a view toresale or distribution or any present intention to resell or distribute, exceptin compliance with the Securities Act and all applicable state securities laws.

 

Issuance of New Warrant

 

Ifsaid number of shares shall not be all the shares issuable upon exercise of theattached Warrant, a new Warrant is to be issued in the name of the undersignedfor the balance remaining of such shares less any fraction of a share paid incash.

 

 
| Signature: |   |
|------------|--------|
|       | Note:  | The above signature  should correspond exactly with the name on the face of the attached Warrant  or with the name of the assignee appearing in the assignment form below. |
|            |        |  |  |

 

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Annex 2

 

Assignment

 

Forvalue received, the undersigned hereby sells, assigns and transfers unto:

 
| Name:    |                                     |   |
|----------|------------------------------------------|--------|
|     | (Please type or  print in block letters) |
|     |
| Address: |                                     |   |
|          |                                          |        |  |

 

the right to purchaseCommon Stock (as defined in the attached Warrant) represented by the attachedWarrant to the extent of                               shares as to which such right is exercisable and does hereby irrevocablyconstitute and appoint                                                                                                                                               ,attorney-in-fact, to transfer said Warrant on the books of Verso Technologies, Inc.,with full power of substitution in the premises.

 

 
| Dated:     |   |                                                                                               |
|------------|--------|----------------------------------------------------------------------------------------------------|
|       |   |
|       |   |
| Signature: |   |
|       | Note:  | The above  signature should correspond exactly with the name on the face of the attached  Warrant. |
|            |        |                                                                                                    |  |  |  |

 

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