EXHIBIT 4.2


 


THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
OFFERED FOR SALE OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED.


 


WARRANT


 


TO PURCHASE
             SHARES
OF COMMON STOCK OF


 


TRI-S
SECURITY CORPORATION


 


Issue Date:                                


 


THIS CERTIFIES THAT, for value received,                                     
or (subject to the restrictions on transfer contained herein) its registered
assigns (the “Holder”) is entitled to purchase from Tri-S Security
Corporation, a Georgia corporation (the “Company”), at any time or from
time to time after 9:00 a.m., Atlanta, Georgia time, after the date on
which Shareholder Approval (as hereinafter defined) is obtained and prior to
5:00 p.m., Atlanta, Georgia time, on the date which is the third
anniversary of the Issue Date set forth above (the “Expiration Date”),
at the place where the Warrant Agency (as hereinafter defined) is located, at
the Exercise Price (as hereinafter defined), the number of shares of common
stock, $0.001 par value per share (the “Common Stock”), of the Company
specified above, all subject to adjustment and upon the terms and conditions as
hereinafter provided.


 


Capitalized
terms used and not otherwise defined in this Warrant shall have the meanings
set forth in Article V hereof.


 


ARTICLE I


 


EXERCISE OF WARRANTS


 


1.1.                              Method
of Exercise.  To exercise this
Warrant in whole or in part, after the date on which Shareholder Approval is
obtained, the Holder shall deliver to the Company at the Warrant Agency:  (a) this Warrant; (b) a written
notice, substantially in the form of the subscription notice attached hereto as
Annex 1 (the “Subscription Notice”), of such Holder’s election to
exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased, the denominations of the share certificate or
certificates desired and the name or names of the Eligible Holder(s) in which
such certificates are to be registered; and (c) payment of the Exercise
Price with respect to such shares of Common Stock.  Such payment may be made, at the option of
the Holder, by cash, money order, certified or bank cashier’s check or wire
transfer.


 





















 


The
Company shall, as promptly as practicable and in any event within five (5) Business
Days thereafter, execute and deliver or cause to be executed and delivered, in
accordance with such subscription notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
notice.  The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice (or, if such notice shall not specify denominations, one certificate
shall be issued) and shall be issued in the name of the Holder or such other
name or names of Eligible Holder(s) as shall be designated in such notice.  Such certificate or certificates shall be
deemed to have been issued, and such Holder or any other person so designated
to be named therein shall be deemed for all purposes to have become holders of
record of such shares, as of the date the aforementioned notice is received by
the Company.  If this Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
right to purchase the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.  The Company shall pay all
expenses payable in connection with the preparation, issuance and delivery of
share certificates and new Warrants as contemplated by Section 2.6 below
(other than transfer or similar taxes in connection with the transfer of
securities), except that, if share certificates or new Warrants shall be
registered in a name or names other than the name of the Holder, funds
sufficient to pay all transfer taxes payable as a result of such transfer shall
be paid by the Holder at the time of delivering the aforementioned notice or
promptly upon receipt of a written request of the Company for payment.


 


If
this Warrant shall be surrendered for exercise within any period during which
the transfer books for shares of the Common Stock of the Company or other securities
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for the
securities purchasable upon such exercise until the date of the reopening of
said transfer books.


 


1.2.                              Shares
To Be Fully Paid and Nonassessable. 
All shares of Common Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable.


 


1.3.                              No
Fractional Shares To Be Issued.  The
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of this Warrant.  If any
fraction of a share would, but for this Section, be issuable upon any exercise
of this Warrant, in lieu of such fractional share the Company shall issue to
the Holder a whole share of Common Stock.


 


1.4.                              Securities
Laws; Share Legend.  The Holder, by
acceptance of this Warrant, agrees that this Warrant and all shares of Common
Stock issuable upon exercise of this Warrant will be disposed of only in
accordance 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 the
Company may deem advisable under the Securities Act and applicable state
securities laws, all certificates representing shares of Common Stock (as well
as any other securities issued hereunder in respect of any such shares) issued
upon exercise of this Warrant shall be endorsed as follows:


 


2





















 


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


 


Any
certificate issued at any time in exchange or substitution for any certificate
bearing such legend (except a new certificate issued upon completion of a
public distribution pursuant to a registration statement under the Securities
Act) shall also bear such legend unless, in the opinion of counsel (in form and
substance reasonably satisfactory to the Company) selected by the Holder of
such certificate and reasonably acceptable to the Company, the securities
represented thereby need no longer be subject to restrictions on resale under
the Securities Act.


 


ARTICLE II


 


WARRANT AGENCY; TRANSFER, EXCHANGE
AND

REPLACEMENT OF WARRANT


 


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


 


2.2.                              Ownership
of Warrant.  The Company may deem and
treat the person in whose name this Warrant is registered as the holder and
owner hereof (notwithstanding any notations of ownership or writing hereon made
by any person other than the Company) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.


 


2.3.                              Transfer
of Warrant.  This Warrant may only be
transferred 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 2.3
shall be null and void and the transferee shall not be entitled to exercise any
of the rights of the holder of this Warrant. 
The Company agrees to maintain at the Warrant Agency books for the
registration of such transfers of Warrants, and transfer of this Warrant and
all 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 in
the form of the assignment attached hereto as Annex 2, duly
executed by the Holder or its duly authorized agent or attorney-in-fact, with
signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes
payable upon such transfer; and (ii) an investment representation letter,
in form and substance acceptable to the Company, executed by the assignee or
assignees of this Warrant.  Upon
surrender of this Warrant in accordance with this Section 2.3, the Company
(subject to being satisfied that such transfer is in compliance with 


 


3





















 


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


 


2.4.                              Division
or Combination of Warrants.  This
Warrant may be divided or combined with other Warrants, in connection with the
partial exercise of this Warrant, upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the Holders hereof and
thereof or their respective duly authorized agents or attorneys-in-fact.  Subject to compliance with Section 2.3
as to any transfer which may be involved in the 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.


 


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


 


2.6.                              Expenses
of Delivery of Warrants.  Except as
otherwise expressly provided herein, the Company shall pay all expenses (other
than transfer taxes as described in Section 2.3) and other charges payable
in connection with the preparation, issuance and delivery of Warrants hereunder
and shares of Common Stock upon the exercise hereof.


 


ARTICLE III


 


LIMITATIONS ON
EXERCISE; ADJUSTMENT PROVISIONS


 


3.1                                 Shareholder
Approval.  In no event shall the Holder of this Warrant be permitted to exercise
this Warrant or any portion hereof pursuant to Article I hereof until the
Company 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 statement
pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), in connection with a Shareholder Meeting and shall seek to convene
such meeting as promptly thereafter as practicable.


 


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


 


4





















 


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


 


3.3                                 Adjustment
Provision.  In the event that, after
the date hereof, the Company shall: (i) pay a dividend or make a
distribution on the outstanding shares of Common Stock in the Company’s capital
stock (which shall include any options, warrants or other rights to acquire
capital stock); (ii) subdivide the outstanding shares of Common Stock into
a larger number of shares; (iii) combine the outstanding shares of Common
Stock into a smaller number of shares; or (iv) issue any shares of the
Company’s capital stock in reclassification of the Common Stock, then, and in
each such case, the Exercise Price in effect immediately prior to such event
shall be adjusted so that the Holder shall, upon exercise of this Warrant, be
entitled to receive the number of shares of Common Stock or other securities of
the Company that the Holder would have owned or would have been entitled to receive
upon or by reason of any of the events described above, had this Warrant had
been exercised prior to the occurrence of such event.  In the event that the shares of Common Stock
are ever converted into a greater or lesser number of shares of another corporation
or entity through a merger or similar transaction, a proportionate adjustment
shall be made to the Exercise Price to account for such change.  The Company shall give prompt written notice
to the Holder following the occurrence of any event which requires an
adjustment to the Exercise Price pursuant to the terms hereof.


 


ARTICLE IV


 


REPRESENTATIONS AND WARRANTIES


 


4.1                                 Representations
and Warranties of Holder.  The Holder
represents and warrants to the Company as follows:


 


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


 


5





















 


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


 


(b)                                 Disclosure
of Information.  The Holder has
received or has had full access to all the information it considers necessary
or appropriate to make an informed investment decision with respect to the
acquisition of this Warrant and the underlying shares of Common Stock.  The Holder further has had an opportunity to
ask questions and receive answers from the Company regarding the terms and
conditions to the offering of this Warrant and its underlying shares of Common
Stock and to obtain additional information (to the extent the Company possessed
such information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Holder or to which the
Holder has access.


 


(c)                                  Investment
Experience.  The Holder understands
that the purchase of this Warrant and its underlying shares of Common Stock
involves substantial risk.  The Holder: (i) has
experience as an investor in securities and acknowledges that the Holder is
able to fend for itself, can bear the economic risk of such Holder’s investment
in this Warrant and its underlying shares of Common Stock and has such
knowledge and experience in financial or business matters that the Holder is
capable of evaluating the merits and risks of its investment in this Warrant
and its underlying shares of Common Stock; and/or (ii) has a preexisting
personal or business relationship with the Company and certain of its officers,
directors or controlling persons of a nature and duration that enables the
Holder to be aware of the character, business acumen and financial
circumstances of such persons.


 


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


 


ARTICLE V


 


DEFINITIONS


 


The
following terms, as used in this Warrant, have the following respective
meanings:


 


“Business
Days” means each day in which banking institutions in Atlanta, Georgia are
not required or authorized by law or executive order to close.


 


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


 


“Common
Stock” 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.


 


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


 


“Exchange
Act” has the meaning set forth in Section 3.1.


 


“Exercise
Price” means $4.80 per share of Common Stock, subject to adjustment
pursuant to Article III.


 


6





















 


“Expiration
Date” 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 the
Memorandum.


 


“Shareholder
Approval” means the affirmative vote of at least a majority of the votes
cast at a Shareholder Meeting at which a quorum is present to approve the
potential issuance in connection with the Offering of more than 20% of the
outstanding shares of Common Stock for purpose of complying with the rules governing
The Nasdaq Stock Market, Inc.


 


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


 


“Securities
Act” has the meaning set forth in Section 1.4.


 


“Subscription
Notice” has the meaning set forth in Section 1.1.


 


“Warrant
Agency” has the meaning set forth in Section 2.1.


 


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


 


ARTICLE VI


 


MISCELLANEOUS


 


6.1.                              Governing
Law.  This Warrant shall be governed
in all respects by the laws of the State of Georgia, without reference to its
conflicts of law principles.


 


6.2.                              Covenants
To Bind Successor and Assigns.  All
covenants, stipulations, promises and agreements contained in this Warrant by
or on behalf of the Company shall bind its successors and assigns, whether or
not so expressed.


 


6.3.                              Entire
Agreement.  This Warrant, the
Memorandum and the Subscription Agreement constitute the full and entire understanding
and agreement between the parties with regard to the subject matter hereof and
no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenant except as specifically set forth
herein or therein.


 


6.4.                              Waivers
and Amendments.  No failure or delay
of the Holder in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise


 


7





















 


of such right or power, or any abandonment or discontinuance of steps
to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.  The rights and remedies of the Holder are
cumulative and not exclusive of any rights or remedies which it would otherwise
have.  The provisions of this Warrant may
be amended, modified or waived with (and only with) the written consent of the
Company and the Holders of a majority in interest of the Warrants issued
pursuant to the Memorandum then outstanding.


 


Any
such amendment, modification or waiver effected pursuant to this Section shall
be binding upon the Holders of all Warrants issued pursuant to the Memorandum
and upon the Company.  In the event of
any such amendment, modification or waiver the Company shall give prompt notice
thereof to all holders of Warrants issued pursuant to the Memorandum and, if
appropriate, notation thereof shall be made on all such Warrants thereafter
surrendered for registration of transfer or exchange.


 


6.5.                              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, 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 set forth under its signature below, which shall be the address shown
on the books maintained by the Warrant Agency, until the Holder shall notify
the Company and the Warrant Agency 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 Executive
Officer, Tri-S Security Corporation, 3700 Mansell Road, Suite 200,
Alpharetta, Georgia 30022.


 


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


 


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


 


8





















 


6.8.                              Section Headings.  The section headings used herein are for
convenience of reference only, do not constitute a part of this Warrant and
shall not affect the construction of or be taken into consideration in
interpreting this Warrant.


 


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


 


[Signature Page Follows]


 


9





















 


IN WITNESS WHEREOF, the Company and Holder
have duly executed and delivered this Warrant, or caused this Warrant to be
duly 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:

  
	
   

  	
   

  
	
   

  	
  [                                                            ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile
  No.:

  	
   

  	
   

  
						



 


10





















 


Annex 1


 


SUBSCRIPTION NOTICE


 


Dated:                   


 


The
undersigned hereby irrevocably elects to exercise the right of purchase
evidenced 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 in
the 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


 


Please
issue a certificate or certificates for such shares of Common Stock in the
following name or names and denominations:


 


	
  Name:

  	
   

  	
   

  
	
   

  	
  (Please
  typewrite or print in block letters.)

  
	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  
	
   

  
	
  Denomination:

  	
   

  	
   

  
					



 


Representations and Warranties


 


In
connection with the exercise of the attached Warrant, the undersigned hereby
represents and warrants that:


 


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


 


(ii) it
recognizes that the shares of Common Stock issuable pursuant to the attached
Warrant are subject to, and are transferable only upon compliance with, the
provisions of the Warrant;


 


(iii) if
the undersigned is an individual, the undersigned is an “accredited investor”
as that term is defined in Rule 501(a)(5) or (6) of Regulation D
promulgated under the Securities Act by reason that the undersigned is an
individual (i) having an individual net worth, or a joint net worth with
the 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 the
two most recent years or joint


 





















 


income with the undersigned’s spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same income level
in 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) it
is purchasing the shares of Common Stock for investment and not with a view to
resale or distribution or any present intention to resell or distribute, except
in compliance with the Securities Act and all applicable state securities laws.


 


Issuance of New Warrant


 


If
said number of shares shall not be all the shares issuable upon exercise of the
attached Warrant, a new Warrant is to be issued in the name of the undersigned
for the balance remaining of such shares less any fraction of a share paid in
cash.


 


 


	
  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.

  
				



 


2





















 


Annex 2


 


Assignment


 


For
value received, the undersigned hereby sells, assigns and transfers unto:


 


	
  Name:

  	
   

  	
   

  
	
   

  	
  (Please type or
  print in block letters)

  
	
   

  
	
  Address:

  	
   

  	
   

  
				



 


the right to purchase
Common Stock (as defined in the attached Warrant) represented by the attached
Warrant to the extent of                               
shares as to which such right is exercisable and does hereby irrevocably
constitute 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.