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EXHIBIT 4-4
CONVERTIBLE DEBENTURE AND WARRANT
PURCHASE AGREEMENT
BETWEEN
VERSO TECHNOLOGIES, INC.
AND
THE INVESTORS SIGNATORY HERETO
DATED AS OF OCTOBER 31, 2000
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CONVERTIBLE DEBENTURE AND WARRANT PURCHASE AGREEMENT (this
"Agreement"), dated as of October 31, 2000, between VERSO TECHNOLOGIES, INC., a
Minnesota corporation (the "Company"), and the investors signatory hereto (each
such investor is a "Purchaser" and all such investors are, collectively, the
Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers severally and not jointly desire to purchase from the Company, the
Company's 7.50% Convertible Debenture in the aggregate principal amount of
$4,500,000, which shall be in the form of Exhibit A (the "Debentures"), and
which is convertible into shares of the Company's common stock, $.01 par value
per share (the "Common Stock").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE 1
1.1 Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement, at the Closing (as defined below), the Company shall
issue and sell to the Purchasers, and the Purchasers severally and not jointly
shall purchase from the Company, the Debentures for an aggregate purchase price
of $4,500,000.
1.2 The Closing. The closing of the purchase and sale of the
Debentures (the "Closing") shall take place at the offices of the Company, 000
Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, concurrent with the closing
of the transaction contemplated by that Agreement and Plan of Merger by and
between the Company, MC Acquisition Corporation, a wholly-owned subsidiary of
the Company, and MessageClick, Inc. dated as of October 31, 2000 (the "Merger
Agreement"). The date of the Closing is hereinafter referred to as the ("Closing
Date"). At the Closing, the parties shall deliver or shall cause to be delivered
the following: (a) the Company shall deliver to each Purchaser (i) a Debenture
in the aggregate principal amount indicated below such Purchaser's name on the
signature page to this Agreement, (ii) a Common Stock purchase warrant, in the
form of Exhibit B, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire such number of shares of Common
Stock indicated below such Purchaser's name on the signature page to this
Agreement, (the "Warrant"), (iii) an executed Agreement, dated the date hereof,
(iv) a Registration Rights Agreement among the Company and the Purchasers, in
the form of Exhibit C (the "Registration Rights Agreement"), and (v) an opinion
of Xxxxxx & Xxxxxx LLP in form and substance reasonably satisfactory to
Purchaser; and (b) each Purchaser shall deliver to the Company (i) the purchase
price indicated below such Purchaser's name on the signature page to this
Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose,
and (ii) an executed Agreement and Registration Rights Agreement.
1.3 Certain Defined Terms. For purposes of this Agreement,
"Business Day," "Commission," "Effective Date," "Person," "Trading Day" and
"Underlying Shares Registration Statement" shall have the meanings set forth in
the Debenture.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Minnesota with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is
an entity, duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority, corporate or otherwise, to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not be reasonably expected to, individually or in the
aggregate, (x) adversely affect the legality, validity or enforceability of the
Securities (as defined below) or any of this Agreement, the Registration Rights
Agreement, the Debenture or the Warrant (collectively, the "Transaction
Documents"), (y) have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").
(b) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). Neither the Company nor any Subsidiary is
in violation of any of the provisions of its respective certificate or articles
of incorporation, by-laws or other charter or organizational documents.
(c) Capitalization. The number and type of authorized,
issued and outstanding capital stock of the Company is set forth in Schedule
2.1(c). Except as disclosed in Schedule 2.1(c), the Company owns all of the
capital stock of each Subsidiary. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of securities of the
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Company or any Subsidiary entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company or any Subsidiary by virtue
of any of the Transaction Documents. Except as a result of the purchase and sale
of the Debenture and the Warrant and except as disclosed in Schedule 2.1(c),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The Company has no stock appreciation rights, phantom stock plan or similar
rights outstanding other than stock appreciation rights or similar rights that
have been issued under the Company's stock incentive or stock purchase plans.
(d) Issuance of the Debenture and the Warrant. The
Debenture and the Warrant will be duly and validly issued, free and clear of all
liens, encumbrances, security interests, pledges, mortgages, preferential rights
and rights of first refusal of any kind (collectively, "Liens"). On the date
hereof and on the Closing Date, the Company will have (and will, at all times
while the Debenture and the Warrant are outstanding, maintain) an adequate
reserve of duly authorized shares of Common Stock, reserved for issuance to the
holder of the Debenture and the Warrant, to enable it to perform its conversion,
exercise and other obligations thereunder. The shares of Common Stock issuable
upon conversion of the Debenture and upon exercise of the Warrant are
collectively referred to herein as the "Underlying Shares." The Debenture, the
Warrant and the Underlying Shares are collectively referred to herein as the
"Securities." When issued in accordance with the Debenture and the Warrant (as
the case may be), the Underlying Shares will be duly authorized, validly issued,
fully paid and nonassessable, and free and clear of all Liens. Issuance of the
Debenture, the Warrant and the Underlying Shares, or any of them does not and
will not constitute a default under or give rise to a right of termination,
cancellation, restriction or acceleration of any right or obligation of the
Company or its Subsidiaries or a loss of any benefit to which the Company or its
Subsidiaries is entitled under any provision of any agreement, contract or other
instrument binding upon or applicable to the Company or its Subsidiaries or any
of the properties, assets, licenses, franchises, permits or other similar
authorizations of either of them.
(e) No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of the Company's articles or
certificate of incorporation, by-laws or any other organizational documents or
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
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Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), as could not reasonably be expected to, individually or in the aggregate,
have or result in a Material Adverse Effect. The business of the Company is not
being conducted in violation of the Company's articles or certificate of
incorporation, by-laws or any other organizational documents or any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, could not reasonably be expected to
have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company
nor any Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.8, (ii) applicable Blue Sky filings, (iii) the consent of the "Lenders" under
the Revolving Credit and Security Agreement dated March 14, 2000, among the
Company, the other borrowers from time to time party thereto, the various
lenders who are or may become parties thereto as lenders ("Lenders"), and PNC
Bank, National Association, in its capacity as administrative and collateral
agent for the Lenders (together with its successors in such capacity, "Agent")
(as at any time amended, the "PNC Agreement"), and (iv) in all other cases where
the failure to obtain such consent, waiver, authorization or order, or to give
such notice or make such filing or registration could not reasonably be expected
to have or result in, individually or in the aggregate, a Material Adverse
Effect (collectively, the "Required Approvals").
(g) Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could reasonably be
expected to, individually or in the aggregate, have or result in a Material
Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, could
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgement or order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not reasonably be expected to, individually or in the aggregate,
have or result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchaser set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchaser as
contemplated hereby are exempt from the registration requirements
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of the Securities Act of 1933, as amended (the "Securities Act"). Neither the
Company nor any Person acting on its behalf has taken or is, to the knowledge of
the Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has
filed all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a), 14 and 15(d) thereof, for the three years preceding
the date hereof (or such shorter period as the Company was required by law to
file such material) (the foregoing materials being collectively referred to
herein as the "SEC Documents" and, together with the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required under the Exchange Act. The financial statements
of the Company included in the SEC Documents comply in all material respects
with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. Since June 30, 2000, except as specifically disclosed in the
Disclosure Materials or Schedule 2.1(j), (a) there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities other than
within (x) above that could not, in the aggregate, reasonably be expected to
result in a Material Adverse Effect, (c) the Company has not altered its method
of accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans with respect to its capital stock, consulting
agreements, stock purchase plan and earnout agreements with acquired companies),
or purchased or redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
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(l) Certain Fees. No fees or commissions will be payable
by the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and its Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Seniority. Except as disclosed in Schedule 2.1(m), as
of the date of this Agreement, no indebtedness of the Company could be Senior
Indebtedness as defined in Section 11 of the Debenture.
(n) Listing and Maintenance Requirements. The Company's
Common Stock is listed on the NASDAQ National Market ("NASDAQ"). The Company has
not, in the twelve months preceding the date hereof, received written notice
from any stock exchange, market or trading facility on which the Common Stock is
or has been listed (or on which it has been quoted) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such exchange, market or trading facility. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(o) Patents and Trademarks. (i) The Company and its
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and rights which are necessary or material for use in connection with
their respective businesses as described in the SEC Documents, except where the
failure to so have could not have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice or is aware that the Intellectual Property Rights used
by the Company or its Subsidiaries violates or infringes upon the rights of any
Person. To the best knowledge of the Company, all such Intellectual Property
Rights are enforceable, and there is no existing infringement by another Person
of any of the Intellectual Property Rights.
(ii) There are no outstanding options, licenses
(whether to or from the Company) or agreements of any kind relating to the
Intellectual Property Rights described in paragraph (i) of this Section 2.1(o)
or granting rights to any other Person to manufacture, license, produce,
assemble, market or sell products or services derived or derivable from the
Intellectual Property Rights of the Company or its Subsidiaries, nor is the
Company or its Subsidiaries bound by or a party to any options, licenses or
agreements of any kind with respect to the Intellectual Property Rights of any
other Person;
(iii) Neither the Company nor its Subsidiaries has
received any communications alleging that such Person or any of its employees
has violated or infringed or, by conducting its business as proposed, would
violate or infringe, any of the Intellectual Property Rights of any other
Person;
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(iv) Neither the Company nor its Subsidiaries is
aware that any of its employees is obligated under any contract (including
licenses, covenants, or commitments of any nature) or other agreement, or
subject to any judgment, decree, or order of any court or administrative agency,
that would interfere with the use of such employee's best efforts to promote the
interests of the Company or its Subsidiaries with respect to the Intellectual
Property Rights of the Company or its Subsidiaries or otherwise or that would
conflict with the business of the Company or its Subsidiaries as it exists or as
it is proposed to be conducted; and
(v) Neither the execution nor delivery of this
Agreement, nor the carrying on of the business of the Company or its
Subsidiaries by the employees of such Person nor the conduct of the business of
the Company or its Subsidiaries as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant, or instrument under which
any of such employees is now obligated. The Company does not believe it is or
will be necessary to utilize any inventions of any of the employees of the
Company or its Subsidiaries (or people such person currently intends to hire)
made prior to their employment by such Person.
(p) Rights of Participation. No Person has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
(q) Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents and are operating their
respective businesses in compliance with the terms thereof, except where the
failure to possess such permits or operate their business could not,
individually or in the aggregate, reasonably be expected to have or result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(r) Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens, except for Liens in favor of the Lenders under the PNC Agreement and
Liens that do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and its Subsidiaries are in compliance
in all material respects.
(s) Absence of Certain Proceedings. Neither the Company
nor any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving (A) a claim of violation of or liability under
federal or state securities laws or (B) a claim of breach of fiduciary duty. The
Company does not have pending before the Commission any request for confidential
treatment of information, and the Company has no knowledge of any expected such
request that could be made prior to the Effective Date. There has not been, and
to the best of the Company's knowledge, there is not pending or contemplated,
any investigation by
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the Commission involving the Company or any current or former director or
officer of the Company or any Subsidiary of the Company.
(t) Labor Relations. Except as disclosed in Schedule
2.1(t), no material labor problem exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company or any of its
Subsidiaries.
(u) Disclosure. All disclosure provided to the Purchaser
regarding the Company or any of its Subsidiaries, its business and the
transactions contemplated hereby, including the representations and warranties
contained herein and the Schedules to this Agreement, furnished by or on behalf
of the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(v) Insurance. Each of the Company and its Subsidiaries
maintains insurance of the types and in the amounts generally deemed adequate
for its business covering all risks customarily insured against, all of which
insurance is in full force and effect.
(w) Material Agreements. Each of the Company and its
Subsidiaries is a party to all agreements that are necessary for the conduct of
the business of such Person as presently conducted and as proposed to be
conducted and all such agreements are currently in effect. Neither the Company
nor its Subsidiaries is in breach of any provision of any such agreement where
such breach would have a Material Adverse Effect.
(x) Taxes. Each of the Company and its Subsidiaries has
filed all necessary federal, state, local, and foreign income and franchise tax
returns and has paid or accrued all taxes shown as due thereon except for such
taxes as are being contested in good faith, and the Company has no knowledge of
any tax deficiency which has been or might be asserted or threatened against the
Company or its Subsidiaries which would have a Material Adverse Effect.
2.2 Representations and Warranties of the Purchasers. Each
Purchaser hereby for itself and no other Purchaser, represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by such Purchaser of this Agreement and the
Registration Rights Agreement and the consummation by it of the transactions
contemplated hereby and thereby, including purchase by such Purchaser of the
Securities hereunder, has been duly authorized by all necessary action on the
part of such Purchaser. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is considered
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in a proceeding at law or in equity) and except to the extent that rights to
indemnification and contribution contained in this Agreement may be limited by
federal or state securities laws or public policy relating thereto.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of the Registration Rights Agreement, to sell or otherwise dispose of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute the Securities.
(c) Purchaser Status. At the time such Purchaser was
offered the Securities, it was, at the date hereof it is, and on the Closing
Date and on each exercise date under the Warrant it will be an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of the Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Securities,
and has so evaluated the merits and risks of such investment.
(e) Ability of the Purchaser to Bear Risk of Investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) Reliance. Such Purchaser understands and acknowledges
that (i) the Securities are being offered and sold to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of such
exemption depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations, and such Purchaser hereby
consents to the reliance.
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(h) Limitation. The Company acknowledges and agrees that
no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
this Section 2.2.
ARTICLE 3
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act, or pursuant to an
available exemption from or in a transaction not subject to the registration
requirements of the Securities Act, and in compliance with any applicable
federal and state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company,
except as otherwise set forth herein, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, such counsel and the form and substance of which opinion shall be
reasonably satisfactory to counsel for the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act, it being understood that no such opinion shall be required upon
expiration of the holding period set forth in Rule 144(k) of the Securities Act.
Notwithstanding the foregoing, the Company, without requiring a legal opinion as
described in the immediately preceding sentence, hereby consents to and agrees
to register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities by a Purchaser to an
Affiliate (as such term is defined in Rule 501(a) under the Securities Act) of
such Purchaser, and any transfer among any such Affiliates, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of the Purchaser under this Agreement
and the Registration Rights Agreement. With respect to HIG Investors, L.L.C.
("HIG"), "Affiliate" shall additionally, to the extent not already included in
such definition, mean (A) all lineal descendants of Xxxxxxxx X. Xxxxxxxx,
deceased, and all spouses and adopted children of such descendants; (B) all
trusts for the benefit of any person described in clause (A) and the trustees of
such trusts; (C) all legal representatives of any person or trust described in
clauses (A) or (B); (D) all partnerships, corporations, limited liability
companies or other entities controlling, controlled by or under common control
with any person trust or entity described in clauses (A), (B), (C) or (D).
"Control" for these purposes shall mean the ability to influence, direct or
otherwise significantly affect the major policies, activities or actions of any
person or entity.
(b) Each Purchaser agrees to the imprinting, so long as
is required by Section 3.1(c), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [CONVERTIBLE] [EXERCISABLE] HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE
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SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
(c) Underlying Shares shall not contain the legend set
forth above nor any other legend if, in the opinion of counsel to the Company,
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission) or (ii) the holding period set forth in Rule 144(k) of the
Securities Act shall have expired.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Debenture and (ii)
exercise of the Warrant will result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Underlying Shares
upon (x) conversion of the Debenture and (y) exercise of the Warrant is
unconditional and absolute, subject to the limitations set forth in the
Debenture or in the Warrant, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a), 14 and 15(d) of the Exchange Act. As long as the Purchasers own
Securities, if the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
such information as is required for the Purchasers to sell the Securities under
Rule 144 promulgated under the Securities Act. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell Underlying Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including causing its attorneys to render and deliver any legal
opinion required in order to permit the Purchasers to sell Underlying Shares
under Rule 144 upon notice of an intention to sell or other form of notice
having a similar effect. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that could be integrated with the
offer or sale of the Securities in a manner that could require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares. If on any date the Company
could be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from
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issuing the sum of (a) 175% of the number of Underlying Shares as would then be
issuable upon a conversion in full of the Debenture, and (b) the number of
Underlying Shares issuable upon exercise in full of the Warrant (the "Current
Required Minimum"), in either case, due to the unavailability of a sufficient
number of authorized but unissued or reserved shares of Common Stock, then the
Board of Directors of the Company shall promptly prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's certificate of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as reasonably requested by the Purchasers in order to provide for such
number of authorized and unissued shares of Common Stock to enable the Company
to comply with its issuance, conversion, exercise and reservation of shares
obligations as set forth in this Agreement, the Debenture and the Warrant (the
sum of (x) the number of shares of Common Stock then outstanding plus all shares
of Common Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (y) the Current Required Minimum, shall be a
reasonable number). In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain stockholder approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later than the earlier to occur of (x) the 25th day after the date on which the
Commission shall have indicated that they approve of or have no further comments
on the preliminary proxy materials to be delivered by the Company to its
stockholders in connection with the meeting contemplated by this Section and (y)
the 90th day after request by a holder of a conversion or other issuance that
could require the actions contemplated in this Section) and (c) within two
Business Days of obtaining such stockholder authorization, file an appropriate
amendment to the Company's certificate or articles of incorporation to evidence
such increase.
3.6 Reservation and Listing of Underlying Shares.
(a) The Company shall (i) in the time and manner required
by any national securities exchange, market, trading or quotation facility on
which the Common Stock is then traded, prepare and file with such national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed for trading an additional shares listing application
covering a number of shares of Common Stock which is not less than the Current
Required Minimum, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing on any such national securities exchange or
market or trading or quotation facility on which the Common Stock is then listed
as soon as possible thereafter, and (iii) provide to the Purchasers evidence of
such listing, and the Company shall maintain the listing of its Common Stock
thereon. If the number of Underlying Shares issuable upon conversion in full of
the then outstanding Debenture and upon exercise of the then unexercised portion
of the Warrant exceeds 100% of the number of Underlying Shares previously listed
on account thereof with any such required exchanges, then the Company shall take
the necessary actions to list immediately a number of Underlying Shares as
equals no less than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of
Common Stock for issuance upon conversion of the Debenture in full and upon
exercise in full of the Warrant in accordance with this Agreement, the Debenture
and the Warrant, respectively, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
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3.7 Conversion and Exercise Obligations of the Company. The
Company shall honor conversion of the Debenture and exercise of the Warrant and
shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debenture and the Warrant.
3.8 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on the Closing Date, issue a press release reasonably acceptable to
the Purchaser disclosing the transactions contemplated hereby, (ii) file with
the Commission a Report on Form 8-K disclosing the transactions contemplated
hereby within ten Business Days after the Closing Date (including this
Agreement, the form of Warrant and the Registration Rights Agreement as exhibits
thereto), and (iii) timely file with the Commission a Form D promulgated under
the Securities Act as required under Regulation D promulgated under the
Securities Act and provide a copy thereof to the Purchaser promptly after the
filing thereof. The Company shall, no less than one Business Day prior to the
filing of any disclosure required by clauses (ii) and (iii) above, provide a
copy thereof to the Purchasers. Such filings will not be made without the
consent of the Purchasers, which consent shall not to be unreasonably withheld
or delayed. The Company and the Purchasers shall consult with each other in
issuing any other press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency or
stock market or trading facility with respect to the transactions contemplated
hereby, and neither party shall issue any such press release or otherwise make
any such public statement, filings or other communications without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law or stock market regulations, in which such case the disclosing
party shall provide the other party with prior notice of such public statement,
filing or other communication.
3.9 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes.
3.10 Reimbursement. If any Purchaser, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the reasonable cost of any investigation and preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which a Purchaser is a named party, the Company will pay such Purchaser the
charges, as reasonably determined by such Purchaser, for the time of any
officers or employees of a Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearings, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of such Purchaser who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of such
Purchaser and any such Affiliate, and shall be binding upon and inure to
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the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Purchasers and any such Affiliate and any such Person. The
Company also agrees that neither the Purchasers nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of the
Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or entity in connection with
the transactions contemplated by this Agreement.
3.11 Certain Trading Restrictions. (a) Each Purchaser agrees that
it will not enter into and will not encourage or assist others into entering on
its behalf into any Short Sales (as hereinafter defined) or have other Persons
do so on it or their behalf for so long as its holds the Debenture. For purposes
hereof, a "Short Sale" by a Purchaser shall mean a sale of Common Stock by such
Purchaser that is marked as a short sale and that is made at a time when there
is no equivalent offsetting long position in the Common Stock held by such
Purchaser. For purposes of determining whether there is an equivalent offsetting
long position in the Common Stock held by a Purchaser, on any date of
computation, Underlying Shares that would be issuable upon the conversion in
full of the Debenture or exercise in full of the Warrant held by such Purchaser
shall be deemed to be held long by such Purchaser.
(b) The Company shall not issue or sell any of the
principal amount of the Debentures to any Person other than the Purchasers.
3.12 No Dividends. So long as any amount remains outstanding under
the Debentures, the Company shall not pay any dividend on account of any
outstanding capital stock, except dividends paid in shares of, or rights to
acquire shares of, the Company's capital stock.
ARTICLE 4
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Debentures and the Warrants at the Closing. The obligation of the
Purchasers to acquire the Debentures and the Warrants at the Closing is subject
to the satisfaction by the Company or waiver by such Purchaser, at or before the
Closing Date, of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
shall be true and correct in all material respects (except for such
representations and warranties as are qualified by materiality or Material
Adverse Effect, which representations or warranties shall be true and correct in
all respects) as of the date when made and as of the Closing Date as though made
on and as of such date;
(ii) Delivery of Closing Items. The Company shall have
delivered to the Purchasers all of the items required to have been delivered by
the Company under Section 1.2 on or before the Closing Date;
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(iii) No Injunction. The consummation of any of the
transactions contemplated by the Transaction Documents shall not violate any
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction;
(iv) Adverse Changes. Since June 30, 2000, no event or
series of events which reasonably could be expected to have or result in a
Material Adverse Effect shall have occurred;
(v) No Suspensions of Trading in Common Stock; Listing.
The trading in the Common Stock shall not have been suspended by the Commission
or on The Nasdaq Stock Market (except for any suspensions of trading of not more
than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this
Agreement, and the Common Stock shall have been at all times since such date
been listed for trading on NASDAQ;
(vi) Merger Closing. The transactions contemplated by the
Merger Agreement shall have been consummated; and
(vii) Approvals. The Company shall have obtained all
Required Approvals and any other consents required in connection herewith.
4.2 Conditions Precedent to the Obligation of the Company to sell
the Debentures and the Warrants at the Closing. The obligation of the Company to
sell the Debentures and the Warrants at the Closing is subject to the
satisfaction by the Purchasers or waiver by the Company, at or before the
Closing Date, of each of the following conditions:
(i) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser contained herein
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made on and as of such date;
(ii) Delivery of Closing Items. The Purchaser shall have
delivered to the Company all of the items required to have been delivered by the
Purchaser under Section 1.2 hereof; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.
ARTICLE 5
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement, provided that the Company
shall reimburse HIG for a total of $50,000 of HIG's expenses. The
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Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Securities.
5.2 Entire Agreement; Amendments. The Transaction Documents,
together with the Exhibits and Schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:00 p.m.
(Atlanta, Georgia time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Agreement later than 5:00 p.m.
(Atlanta, Georgia time) on any date and earlier than 11:59 p.m. (Atlanta,
Georgia time) on such date, (iii) the Business Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:
If to the Company: Verso Technologies, Inc.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxx & Hardin LLP
2700 International Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Hussle, Esq.
If to a Purchaser: To the address set forth under
such Purchaser's name on the
signature pages to this Agreement
With copies to: To the person at the address set
forth under such Purchaser's name on
the signature pages to this
Agreement.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company
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and the holders of 75% in principal amount of the Debentures or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchaser.
5.7 No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. The corporate laws of the State of Minnesota
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Illinois, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of Chicago, County of Xxxx, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
5.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery, exercise
and conversion (as the case may be) of the Warrant and the Debenture for a
period of five years from the Closing Date.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding
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obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby, and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. The Company and the Purchasers agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any
breach of its obligations described in the foregoing sentence and hereby agrees
to waive in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
VERSO TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
and Chief Financial Officer
HIG INVESTORS, L.L.C.
By: /s/ Xxxx Xxxxxx
----------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
Debenture Purchase Price: $3,700,000
Warrants: 822,222
Address for Notice:
HIG INVESTORS, L.L.C.
With copies to:
Xxxxxx & Xxxxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Pucker, Esq.
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THE XXXXXX X. XXXX REVOCABLE
TRUST
By: /s/ Xxxxxx X. Xxxx
---------------------------------------------
Xxxxxx X. Xxxx or Xxxxxx X. Xxxx, not
individually, but solely as trustee of the
Xxxxxx X. Xxxx Revocable Trust u/a/d 12/17/84
Debenture Purchase Price: $500,000
Warrants: 111,111
Address for Notice:
---------------------------------------------
---------------------------------------------
---------------------------------------------
With copies to:
Xxxxxx & Xxxxxxx
000 X. Xxxxxx Xx., Xxxxx 0000
Xxxxxxx, XX 00000
XXXXXX X. AND XXXXXX X. XXXX
MEMORIAL FOUNDATION
By: /s/ Xxxx Xxxxxxx
---------------------------------------------
Xxxx Xxxxxxx, Vice President
Summit Bank, Trustee
Debenture Purchase Price: $200,000
Warrants: 44,445
Address for Notice:
---------------------------------------------
---------------------------------------------
---------------------------------------------
With copies to:
Xxxxxx & Xxxxxxx
000 X. Xxxxxx Xx., Xxxxx 0000
Xxxxxxx, XX 00000
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JIBS EQUITIES, L.P.
By: /s/ Xxxxxxx Xxxxxxxxxx
---------------------------------------------
Xxxxxxx Xxxxxxxxxx, its general partner
Debenture Purchase Price: $100,000
Warrants: 22,222
Address for Notice:
---------------------------------------------
---------------------------------------------
---------------------------------------------
With copies to:
---------------------------------------------
---------------------------------------------
---------------------------------------------
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EXHIBIT A
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
Atlanta, Georgia
NOVEMBER __, 2000
NO. [ ]
$_____________
VERSO TECHNOLOGIES, INC.
7.50% CONVERTIBLE DEBENTURE
DUE NOVEMBER ____, 2005(1)
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of VERSO TECHNOLOGIES, INC., a Minnesota corporation, having a
principal place of business at 000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx
00000 (the "Company"), and is designated as a 7.50% Convertible Debenture, due
November ____, 2005(1), in the aggregate principal amount of Four Million Five
Hundred Thousand Dollars ($4,500,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to the order of
_______________________ or its registered assigns (the "Holder"), the principal
sum of ________________________ Dollars ($__________), on November ___, 2005(1)
or such earlier date as the Debenture is required or permitted under Section
4(b) to be repaid as provided hereunder (the "Maturity Date") and to pay
interest thereon at the rate of 7.50% per annum, payable in arrears on each
Conversion Date (as defined herein) and on each March 31, June 30, September 30
and December 31 of each year during which this Debenture remains outstanding
(for purposes of payment of interest, each Conversion Date and each quarterly
date being an "Interest Payment Date"), in cash. Interest shall be calculated on
the basis of a 360-day year consisting of twelve thirty-day months and shall
accrue daily (but compound annually) commencing on the Original Issue Date (as
defined in Section 6) until payment (whether through conversion of all
outstanding principal amount hereunder or otherwise) in full of the principal
sum, together with all accrued and unpaid interest and other amounts which may
become due hereunder, has been made. Interest hereunder will be paid to the
Person (as defined in Section 6) in whose name this Debenture is registered on
the records of the Company regarding registration and transfers of the Company's
debentures (the "Debenture Register"). All overdue accrued and unpaid interest
to be paid in cash hereunder shall entail a late fee at the rate of 18% per
annum (or such lower maximum amount of interest permitted to be charged under
applicable law) (to
-----------------------
(1) Five years from the Closing Date.
24
accrue daily, from the date such interest is due hereunder through and including
the date of payment), payable in cash. This Debenture may not be prepaid by the
Company without the prior written consent of the Holder.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 6) and may be transferred or exchanged to
another Person only in compliance with the Purchase Agreement. Prior to due
presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any
one of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal
of, interest on or any other amount due in respect of, this Debenture, free of
any claim of subordination, by the fifth Business Day (as defined in Section 6)
following the date on which such amount was due (whether on an Interest Payment
Date or the Maturity Date, by acceleration or otherwise);
(ii) the Company shall fail to observe or perform
any other covenant, agreement or warranty contained in, or otherwise commit any
breach of, any Transaction Document (as defined in Section 6) other than those
matters that are the specific subject of another Event of Default under this
Section, and such failure or breach shall not have been remedied within twenty
Business Days after the date on which notice of such failure or breach shall
have been given;
(iii) the Company or any of its Subsidiaries (a)
is, or is deemed for the purposes of any law to be, unable to pay its debts as
they fall due or to be insolvent, or admits inability to pay its debts as they
fall due; or (b) suspends making payments on all or any class of its debts or
announces an intention to do so, or a moratorium is declared in respect of any
of its indebtedness; or (c) by reason of financial difficulties, begins
negotiations with all or any class of its creditors with a view to the
readjustment or rescheduling of any of its indebtedness;
(iv) (a) any step (including petition, proposal
or convening a meeting) is taken with a view to a composition, assignment or
arrangement with all or any class of the
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creditors of the Company or any of its Subsidiaries; or (b) a meeting of the
Company or any of its Subsidiaries is convened for the purpose of considering
any resolution for (or petition for) its winding-up or its administration or any
such resolution is passed; or (c) any person presents a petition for the
winding-up of the Company or any of its Subsidiaries or the grant of an
administration order (unless such petition is frivolous, vexatious or an abuse
of process and (in any such case) is discharged within 60 days); or (d) any
other step (including petition, proposal or convening a meeting) is taken with a
view to the rehabilitation, administration, custodianship, liquidation,
winding-up or dissolution of the Company or any of its Subsidiaries or any other
insolvency proceedings involving the Company or any of its Subsidiaries;
(v) (a) any liquidator, trustee in bankruptcy,
judicial custodian, compulsory manager, receiver, administrative receiver,
administrator or the like is appointed in respect of the Company or any of its
Subsidiaries or any part of its assets; or (b) the Board of Directors of the
Company or any of its Subsidiaries requests the appointment of a liquidator,
trustee in bankruptcy, judicial custodian, compulsory manager, receiver,
administrative receiver, administrator or the like; or (c) any other steps are
taken to enforce any security interest over any part of the assets of the
Company or any of its Subsidiaries unless in the case of any lien of any nature
whatsoever, the amount secured by it is less than $500,000;
(vi) any attachment, sequestration, distress or
execution affects any asset of the Company or any of its Subsidiaries and is not
lifted or discharged within 14 days or, if both the aggregate amount of the
relevant claim and the aggregate market value of all assets subject to the
relevant process are less than $500,000, 30 days;
(vii) the Company shall default in any of its
payment obligations under any other debenture or any mortgage, credit agreement
or other facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or evidenced
any indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding five hundred
thousand dollars ($500,000), whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable without such indebtedness having been discharged in full
or any acceleration of such indebtedness having been rescinded or annulled in
full within the applicable grace period;
(viii) the Common Stock shall not be quoted for
trading on The Nasdaq National Market ("NASDAQ") or, if the Common Stock shall
hereafter become listed or quoted for trading on the Nasdaq SmallCap Market, The
New York Stock Exchange, or American Stock Exchange (each, a "Subsequent
Market"), it shall fail to be quoted or listed for trading on such Subsequent
Market, for an aggregate of five Trading Days;
(ix) the Company shall be a party to any Change
of Control Transaction (as defined in Section 7), shall agree to sell or dispose
of all or substantially all of its assets in one or more transactions (whether
or not such sale would constitute a Change of Control Transaction), or shall
redeem or repurchase shares of Common Stock or other equity securities of the
Company (other than redemptions of Underlying Shares (as defined in Section 7));
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26
(x) the Company shall fail for any reason to
deliver certificates to a Holder prior to the fifth (5th) Trading Day after a
Delivery Date (as defined in Section 4(d)) pursuant to and in accordance with
Section 4(e) or the Company shall provide notice to the Holder, including by way
of public announcement, at any time, of its intention not to comply with
requests for conversions of any Debentures in accordance with the terms hereof;
(xi) a final judgment or final judgments for the
payment of money are entered by a court or courts of competent jurisdiction
against the Company or any of its Subsidiaries and such judgment remains unpaid
or unstayed or undischarged for a period of 30 days, provided the aggregate
amount of such unpaid or undischarged judgments exceeds $500,000; or
(xii) the Company shall fail for any reason to
deliver the payment in cash pursuant to a Buy-In (as defined herein) within five
Business Days after written notice for such Buy-In is provided.
(b) If any Event of Default occurs, the full principal
amount of this Debenture, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become, at the Holder's
election immediately due and payable in cash. The aggregate amount payable upon
an Event of Default shall be equal to the Mandatory Prepayment Amount (as
defined in Section 6). Interest shall accrue on the Mandatory Prepayment Amount
hereunder from the date such amount is due hereunder through the date of
prepayment in full thereof at the rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law), to accrue daily from the
date such payment is due hereunder through and including the date of payment.
The Debenture for which the full prepayment price hereunder shall have been paid
in accordance herewith shall promptly be surrendered to or as directed by the
Company. The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by the Holder at any time prior to payment hereunder. No
such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
Section 4. Conversion.
(a) Conversion at Option of Holder. The Holder shall
effect conversions hereunder by delivering to the Company by facsimile a
completed conversion notice in the form attached as Exhibit A (a "Holder
Conversion Notice") and delivery to the Company within two Trading Days
thereafter of the principal amount of this Debenture to be converted. The Holder
Conversion Notice shall specify the date on which such conversion is to be
effected, which date may not be prior to the date such Holder Conversion Notice
is deemed to have been delivered hereunder (a "Conversion Date"). If no
Conversion Date is specified in a Holder Conversion Notice, the Conversion Date
shall be the date that such Holder Conversion Notice is deemed delivered
hereunder. Each Holder Conversion Notice, once given, shall be irrevocable. If
the Holder is converting less than all of the principal amount represented by
this Debenture, or if a conversion hereunder cannot be effected in full for any
reason, the Company shall honor such conversion to the extent permissible
hereunder and shall promptly deliver to the Holder (in the
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manner and within the time set forth in Section 4(d)) a new Debenture for such
principal amount as has not been converted.
(b) Conversion at Option of the Company.
(i) If the conditions set forth in this
subsection are satisfied, the Company may require the conversion of all or a
portion of the principal amount of the Debentures subject to an effective
Underlying Shares Registration Statement. The Company shall only have the right
to require conversions hereunder if and when (i) the average of the closing
sales price of the Common Stock as reported by Bloomberg L.P. (or any successor
to its function of reporting share prices) for any twenty (20) consecutive
Trading Days equals or exceeds 300% of the then-current Conversion Price, (ii)
the Underlying Shares Registration Statement shall be effective and the
prospectus thereunder available to the Holders for the resale of all Underlying
Shares issuable upon such conversion on the Company Conversion Date (as defined
below), (iii) the Company has available sufficient unreserved and available
shares of Common Stock to fulfill its share delivery requirements upon such
conversion, (iv) the Common Stock is listed or quoted for trading on the NASDAQ
or a Subsequent Market during the entire twenty Trading Day calculation period
described above in this subsection and through the Company Conversion Date, and
(v) such conversion would not result in a violation of Section 4(d) or a default
under Section 4(e).
(ii) The Company shall exercise its right to
require conversions under Section 4(b)(i) by delivering to the Holder a
completed conversion notice in the form attached as Exhibit B (a "Company
Conversion Note"). Each of a Company Conversion Notice and a Holder Conversion
Notice is sometimes referred to herein as a "Conversion Notice". Each Company
Conversion Notice shall specify the principal amount of Debentures to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date such Company Conversion Notice is deemed to have
been delivered hereunder (a "Company Conversion Date"). Each of a Company
Conversion Date and a Holder Conversion Date is referred to herein as a
"Conversion Date". If no Conversion Date is specified in a Company Conversion
Notice, the Conversion Date shall be the date that such Company Conversion
Notice is deemed delivered hereunder. Subject to the Holder's rights under
Section 4(b), the conversion subject to each Company Conversion Notice, once
given, shall be irrevocable. Not more than five (5) Trading Days following
receipt of the Company Conversion Notice, the Holder shall deliver to the
Company the principal amount of Debentures subject to such Company Conversion
Notice against receipt of the Underlying Shares. If the Company is requiring
conversion of less than the full principal amount represented by the
Debenture(s) tendered by the Holder following a Company Conversion Notice, or if
a conversion hereunder cannot be effected in full for any reason, the Company
shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the time set forth in
Section 4(e)) a new Debenture for such principal amount as has not been
converted.
(c) Number of Underlying Shares Issuable Upon Conversion.
(i) The number of shares of Common Stock
issuable upon a conversion hereunder shall be determined by adding the sum of
(i) the quotient obtained by dividing (x) the principal amount of this Debenture
to be converted and (y) the Conversion Price
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(as defined herein), and (ii) the amount equal to (I) the product of (x) the
principal amount of this Debenture to be converted and (y) the product of (1)
.0002083333 (or such higher amount if required due to an increase in the
interest rate of the debenture due to defaults or otherwise) and (2) the number
of days for which such principal amount was outstanding, divided by (II) the
Conversion Price on the Conversion Date, provided, that (1) if the Company shall
have paid the interest at issue in cash, subsection (ii) shall not be used in
the calculation of the number of shares of Common Stock issuable upon such
conversion, and (2) only such portion of the accrued and outstanding amount of
interest owing on the principal amount being converted shall be calculated in
subsection (ii), giving credit for previously paid interest on such principal
amount.
(ii) Notwithstanding anything to the contrary
contained herein, if on any Conversion Date: (1) the number of shares of Common
Stock at the time authorized, unissued and unreserved for all purposes, or held
as treasury stock, is insufficient to permit issuance of the shares upon
Conversion; (2) the Common Stock is not listed or quoted for trading on the
NASDAQ or on a Subsequent Market; or (3) the issuance of such shares of Common
Stock would result in a violation of Section 4(d) below, then, at the option of
the Holder, the Company, in lieu of delivering shares of Common Stock pursuant
to Section 4(c), shall deliver, within five Trading Days of each applicable
Conversion Date, an amount in cash equal to the product of (a) the outstanding
principal amount of the Debentures to be converted on such Conversion Date and
(b) the product of (x) .0002083333 (or such higher amount if required due to an
increase in the interest rate of the debenture due to defaults or otherwise) and
(y) the number of days for which such principal amount was outstanding, less any
interest previously paid in cash.
(d) Certain Conversion Restrictions.
If the Common Stock is then listed for trading on the
NASDAQ or the Nasdaq SmallCap Market and the Company has not obtained the
Stockholder Approval (as defined below), then the Company is precluded from
issuing at a Conversion Price or, with respect to the Warrant described below in
this sentence, an exercise price, that is less than the closing sales price per
share of the Common Stock on the Trading Day immediately preceding the closing
of the transactions contemplated by the Purchase Agreement, subject to equitable
adjustment in the event of stock splits and similar events (such price, the
"Market Price"), in excess of ____________ shares of Common Stock (the "Issuable
Maximum") upon conversion of the Debenture and exercise of the Warrant (as
defined in the Purchase Agreement). The Issuable Maximum equals 19.999% of the
number of shares of Common Stock outstanding immediately prior to the closing of
the transactions set forth in the Purchase Agreement. Accordingly, if on any
Conversion Date (A) the Common Stock is listed for trading on the NASDAQ or the
Nasdaq SmallCap Market and (B) the Company shall not have previously obtained
the vote of stockholders (the "Stockholder Approval"), if any, as may be
required by the applicable rules and regulations of the Nasdaq Stock Market (or
any successor entity) applicable to approve the issuance of a number of shares
of Common Stock in excess of the Issuable Maximum at a price below the Market
Price, then the Company shall issue to the Holder a number of shares of Common
Stock equal to the lesser of (x) the number of shares of Common Stock issuable
upon such conversion at the Conversion Price and (y) the Issuable Maximum less
all shares of Common Stock previously issued upon conversion of this Debenture
and as
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payment of interest thereon (but only those shares issued at a Conversion Price
less than the Market Price) and all shares of Common Stock previously issued
upon any exercise of the Warrant (but only those shares issued at an exercise
price less than the Market Price). With respect to the principal amount of this
Debenture tendered for conversion at issue for which a conversion in accordance
with the Conversion Price would, when aggregated with all shares of Common Stock
previously issued on account of conversions of this Debenture and payment of
interest thereon and upon exercise of the Warrant (at the exercise and
Conversion Price described in the immediately preceding sentence) (the "Excess
Principal"), result in the issuance of a number of shares of Common Stock in
excess of the Issuable Maximum, the Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Stockholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the first to occur of (x) the twenty-fifth day from the date that the
Commission approves or indicates that it has no further comments to the
Company's preliminary proxy statement, if any, prepared for delivery to the
stockholders of the Company in connection with the Stockholder Approval
contemplated hereby and (y) the 90th day after such request (such date the
"Approval Date"), or (2) pay cash to the Holder in an amount equal to the
Mandatory Prepayment Amount for the Excess Principal. If the Holder shall have
elected the first option pursuant to the immediately preceding sentence and the
Company shall have failed for any reason to obtain the Stockholder Approval on
or prior to the Approval Date, then within three days of the Holder's demand
therefore, which may be given at any time following the Approval Date, the
Company shall pay cash to the Holder in an amount equal to the Mandatory
Prepayment Amount for the Excess Principal. If the Company fails to pay the
Mandatory Prepayment Amount in full pursuant to this Section within seven days
of the date payable, the Company will pay interest thereon at a rate of 18% per
annum (or such lesser maximum amount that is permitted to be paid by applicable
law) to the Holder, accruing daily from the Conversion Date until such amount,
plus all such interest thereon, is paid in full. It is understood and agreed
that shares of Common Stock delivered to and held by the Holder or one of its
affiliates on account of conversion hereunder may not cast votes on the matter
of Stockholder Approval. Shares delivered on account of conversion hereunder and
not held by the Holder or its affiliates may cast votes on the matter of
Stockholder Approval. Any Mandatory Prepayment Amount owing pursuant to this
Section shall be due and payable by the 20th day following the demand therefor.
(e) Delivery of Certificates.
(i) Not later than three (3) Trading Days after
any Conversion Date (a "Delivery Date"), the Company will deliver to the Holder
(A) a certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of this Debenture, (B) a Debenture or Debentures in
a principal amount equal to the principal amount this Debenture not converted,
and (C) a bank check in the amount of accrued and unpaid interest, provided,
that the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion of the principal amount of this
Debenture until this Debenture is delivered for conversion to the Company, or
the Holder notifies the Company that this Debenture has been lost, stolen or
destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. The Company shall, upon request of the Holder, if
available, use its best efforts to deliver any
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30
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case of
any Conversion Notice such certificate or certificates are not delivered to or
as directed by the Holder by the Delivery Date after a Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
certificates representing the principal amount of this Debenture tendered for
conversion.
(ii) If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section 4 by the
Delivery Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, $5,000 for each Trading Day after the Delivery
Date until such certificates are delivered. Nothing herein shall limit the
Holder's right to pursue actual damages or declare an Event of Default pursuant
to Section 3 herein for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and the Holder shall have the right to pursue all remedies available to
it at law or in equity, including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any other
Section hereof or under applicable law. Further, if the Company shall not have
delivered any cash due in respect of conversions of this Debenture or as payment
of interest hereon by the Delivery Date, the Holder may, by notice to the
Company, require the Company to issue shares of Common Stock, except that for
such purpose the Conversion Price applicable thereto shall be the lesser of the
Conversion Price on the Conversion Date and the Conversion Price on the date of
the Holder's demand. Any such shares will be subject to the provisions of this
Section.
(iii) In addition to any other rights available to
the Holder, if the Company fails to deliver to the Holder such certificate or
certificates pursuant to this Section 4 by the Delivery Date, and if after the
Delivery Date the Holder purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of the
Underlying Shares which the Holder anticipated receiving upon such conversion (a
"Buy-In"), then the Company shall pay in cash to the Holder (in addition any
remedies available to or elected by the Holder) the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the lesser of (A) the
aggregate number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue or (B) the number of shares of Common
Stock so purchased, multiplied by (2) the Conversion Price of the Common Stock
on the Conversion Date, in which event the number of shares of Common Stock that
would have been issued had the Company timely complied with its delivery
requirements under this Section 4 shall not be so issued. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In in connection with an attempted conversion of Debentures with respect
to which the Conversion Price of the Underlying Shares on the applicable
Conversion Date multiplied by the number of Underlying Shares was equal to
$2,000 under clause (A) of the immediately preceding sentence, the Company shall
be required to pay the Holder $9,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In. Notwithstanding anything contained herein to the contrary, if a Holder
requires the Company to make payment in respect of a Buy-In for the failure to
timely deliver
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certificates hereunder and the Company timely pays in full such payment, the
Company shall not be required to pay such Holder liquidated damages under
Section 4(e)(ii) in respect of the certificates resulting in such Buy-In.
(f) Conversion Price; Adjustment. The Conversion Price of
this Debenture on any Conversion Date (the "Conversion Price") shall be equal to
$4.50, subject to adjustment as provided for in subsection (i) through (x)
below.
(i) If the Company, at any time while this
Debenture is outstanding, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (other than PIK
dividend preferred stock), (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine
(including by way of a reverse stock split) outstanding shares
of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares
of capital stock of the Company, then the Conversion Price
shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common
Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the
case of a subdivision, combination or re-classification.
(ii) If the Company, at any time while this
Debenture is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to the
Holder) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share
Market Value at the record date mentioned below, then the
Conversion Price shall be multiplied by a fraction, of which
the denominator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of
shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price
of the total number of shares so offered would purchase at
such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the
determination of stockholders entitled to receive such rights,
options or warrants. However, upon the expiration of any such
right, option or warrant to purchase shares of the Common
Stock the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section, if any such right,
option or warrant shall expire and shall not have been
exercised, the Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been
(but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the
Conversion Price made upon the issuance of such rights,
options or warrants been made on the basis of offering for
subscription or
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purchase only that number of shares of the Common Stock
actually purchased upon the exercise of such rights, options
or warrants actually exercised.
(iii) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as
defined below), at any time while this Debenture is
outstanding shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are
convertible into or exchangeable for shares of Common Stock
("Common Stock Equivalents"), to any Person (and not to the
Holder) entitling such Person to acquire shares of Common
Stock at a price per share less than the Conversion Price (if
the holder of the Common Stock or Common Stock Equivalent so
issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants,
options or rights issued in connection with such issuance, be
entitled to receive shares of Common Stock at a price less
than the Conversion Price, such issuance shall be deemed to
have occurred for less than the Conversion Price), then, the
Conversion Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such
shares of Common Stock or such Common Stock Equivalents plus
the number of shares of Common Stock which the offering price
for such shares of Common Stock or Common Stock Equivalents
would purchase at the Conversion Price, and the denominator of
which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number
of shares of Common Stock so issued or issuable, provided that
for purposes hereof, all shares of Common Stock that are
issuable upon conversion exercise or exchange of Common Stock
Equivalents shall be deemed outstanding immediately after the
issuance of such Common Stock Equivalents. Such adjustment
shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued. However, upon the expiration of
any Common Stock Equivalents the issuance of which resulted in
an adjustment in the Conversion Price pursuant to this
Section, if any such Common Stock Equivalents shall expire and
shall not have been exercised, the Conversion Price shall
immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price
which it would have been (but reflecting any other adjustments
in the Conversion Price made pursuant to the provisions of
this Section after the issuance of such Common Stock
Equivalents) had the adjustment of the Conversion Price made
upon the issuance of such Common Stock Equivalents been made
on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon
the exercise of such Common Stock Equivalents actually
exercised. The foregoing shall not apply to any (i) issuances
of securities as consideration in a merger, consolidation or
acquisition of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is
not to raise equity capital), or as consideration for the
acquisition of a business, product or license by the Company,
(ii) the issuance of securities upon the exercise or
conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof, or
(iii) the grant of options or warrants, or the issuance of
additional securities, under any duly authorized Company stock
option, restricted stock plan or stock purchase plan for the
benefit of the Company's employees.
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(iv) If the Company, at any time while this
Debenture is outstanding, shall distribute to all holders of
Common Stock (and not to the Holder) evidences of its
indebtedness or assets or rights or warrants to subscribe for
or purchase any security, then in each such case the
Conversion Price at which this Debenture shall thereafter be
convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such
distribution by a fraction, of which the denominator shall be
the Per Share Market Value determined as of the record date
mentioned above, and of which the numerator shall be such Per
Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets
or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the
Company's Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the
Holders of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one
share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) In case of any reclassification of the
Common Stock or any compulsory share exchange pursuant to
which the Common Stock is converted into other securities,
cash or property, the Holder shall have the right thereafter
to, at its option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any
other amounts then owing hereunder in respect of this
Debenture only, into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or
share exchange, and the Holder of this Debenture shall be
entitled upon such event to receive such amount of securities,
cash or property as the shares of the Common Stock of the
Company into which the then outstanding principal amount,
together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture
could have been converted immediately prior to such
reclassification or share exchange would have been entitled or
(B) require the Company to prepay the aggregate of the
outstanding principal amount of this Debenture, plus all
interest and other amounts due and payable thereon, at a price
determined in accordance with Section 3(b). The entire
prepayment price shall be paid in cash. This provision shall
similarly apply to successive reclassifications or share
exchanges.
(vi) All calculations under this Section 4 shall
be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. No adjustments in the Conversion Price
shall be required if such adjustment is less than $0.01,
provided, however, that any adjustments which by reason of
this Section are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(vii) Whenever the Conversion Price is adjusted
pursuant hereto, the Company shall promptly mail to the Holder
a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(viii) If (A) the Company shall declare a dividend
(or any other distribution) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock; (C) the Company shall
authorize the granting
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34
to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders
of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of
any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or (E) the
Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of
conversion of this Debenture, and shall cause to be mailed to
the Holder at its last address as it shall appear upon the
stock books of the Company, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange,
provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in
such notice. The Holder is entitled to convert this Debenture
during the twenty-day period commencing the date of such
notice to the effective date of the event triggering such
notice.
(ix) In case of any (1) merger or consolidation
of the Company with or into another Person, or (2) sale by the
Company of more than one-half of the assets of the Company
(based upon their then fair market value) in one or a series
of related transactions, the Holder shall have the right to
(A) if permitted under Section 3(b) hereof, exercise its
rights of prepayment under Section 3(b) with respect to such
event, or (B) convert its aggregate principal amount of this
Debenture then outstanding into the shares of stock and other
securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such merger,
consolidation or sale, and the Holder shall be entitled upon
such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock
into which such aggregate principal amount of this Debenture
could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (C) in the
event that the Holder shall have elected under clause (A)
above and the Company shall not have failed to pay the amounts
due under Section 3(b) by the second Business Day prior to the
closing of such Change of Control Transaction, or shall have
indicated its intention to do so, then in the case of a merger
or consolidation at the closing thereof, (x) require the
surviving entity to issue shares of convertible preferred
stock or convertible debentures with such aggregate stated
value or in such face amount, as the case may be, equal to the
aggregate principal amount of this Debenture then held by the
Holder, plus all accrued and unpaid interest and other amounts
owing thereon, which newly issued shares of preferred stock or
debentures shall have terms identical (including with respect
to
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35
conversion) to the terms of this Debenture (except, in the
case of preferred stock, as may be required to reflect the
differences between equity and debt) and shall be entitled to
all of the rights and privileges of the Holder set forth
herein and the agreements pursuant to which this Debenture was
issued (including, without limitation, as such rights relate
to the acquisition, transferability, registration and listing
of such shares of stock other securities issuable upon
conversion thereof), and (y) simultaneously with the issuance
of such convertible preferred stock or convertible debentures,
shall have the right to convert such instrument only into
shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common
Stock following such merger or consolidation. In the case of
clause (C), the conversion price applicable for the newly
issued shares of convertible preferred stock or convertible
debentures shall be based upon the amount of securities, cash
and property that each share of Common Stock would receive in
such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for
such transaction. The terms of any such merger, sale or
consolidation shall include such terms so as to continue to
give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or
redemption following such event. This provision shall
similarly apply to successive such events.
(g) The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of this Debenture and
payment of interest hereon, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the Holder,
not less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4) upon the conversion of the
outstanding principal amount of this Debenture and payment of interest
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Underlying Shares Registration Statement has
been declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.
(h) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the Holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(i) The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the
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36
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
(j) Any provision herein to be contrary notwithstanding,
no adjustment in the Conversion Price of this Debenture shall be made in respect
of the issuance by the Company of additional shares of Common Stock or
additional Common Stock Equivalents (i) unless the consideration per share for
an additional share of Common Stock Equivalents is less than the Conversion
Price in effect on the date of, and immediately prior to, such issue except as
set forth in Section 4(f)(ii); or (ii) in any case where the shares of Common
Stock or the Common Stock Equivalents are issued or issuable (A) upon
conversions of this Debenture, (B) upon exercise of outstanding options or
warrants, (C) to any bank lender, or (D) to employees, officers or directors of,
or consultants to, the Company pursuant to stock option or stock purchase plans
or agreements or terms approved by the Company's Board of Directors.
(k) Any and all notices or other communications or
deliveries to be provided by the Holder hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service or sent by certified or registered mail, postage prepaid,
addressed to the Company, at 000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx
00000, Facsimile No.: (000) 000-0000, attention: Chief Financial Officer, or
such other address or facsimile number as the Company may specify for such
purposes by notice to the Holder delivered in accordance with this Section, with
a copy to (other than for Conversion Notices) Xxxxxx & Xxxxxx LLP, 229 Peachtree
Street, N.E., 0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx 00000, Facsimile No.:
(000) 000-0000, attention: Xxxxxx X. Hussle, Esq. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail, postage
prepaid, addressed to the Holder at ____________________________________________
_____________________________, with a copy to (other than for Conversion
Notices) _______________________________________, Attention:
___________________, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:00 p.m. (Atlanta, Georgia time), (ii) the date after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section later than 5:00 p.m.
(Atlanta, Georgia time) on any date and earlier than 11:59 p.m. (Atlanta,
Georgia time) on such date, (iii) four days after deposit in the United States
mail, (iv) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (v) upon actual receipt by the party to
whom such notice is required to be given.
Section 5. Unconditional Obligation. Except as expressly
provided herein, no provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, interest and liquidated damages (if any) on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. This Debenture ranks pari passu
with all other debentures of the Company now or hereafter issued under the terms
set forth herein. As long as this Debenture is outstanding, the Company shall
not and shall cause it subsidiaries not to,
14
37
without the consent of the Holder, (i) amend its articles of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder (it being understood that the creation of a class of preferred stock that
does not otherwise alter the relative rights, preferences or terms of this
Debenture or otherwise breach other provisions of the Transaction Documents will
not violate this clause); or (ii) enter into any agreement with respect to the
foregoing. Except as otherwise provided herein, the Company may not prepay the
principal amount under this Debenture without the consent of the Holder.
Section 6. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a day on
which banking institutions in the State of Illinois are authorized or required
by law or other government action to close.
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's Board of Directors which is
not approved by a majority of those individuals who are members of the Board of
Directors on the date hereof (or by those individuals who are serving as members
of the Board of Directors on any date whose nomination to the board of directors
was approved by a majority of the members of the Board of Directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or more of the assets (based upon their then fair market value) of the
Company in one or a series of related transactions, or (iv) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Effective Date" means the date that an Underlying Shares
Registration Statement is declared effective by the Commission.
"Mandatory Prepayment Amount" shall equal the sum of (i) the
principal amount of this Debenture to be prepaid, plus all accrued and unpaid
interest thereon, and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of such principal amount.
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38
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the NASDAQ, or if
there is no such price on such date, then the closing bid price on the NASDAQ on
the date nearest preceding such date, or (b) if the shares of Common Stock are
not then listed or quoted on the NASDAQ, the closing sale or bid price, as
applicable, for a share of Common Stock on a Subsequent Market, at the close of
business on such date, or (c) if the shares of Common Stock are not then listed
or quoted on a Subsequent Market, then the average of the "bulletin board"
quotes on such date, as determined in good faith by the Holder, or (d) if the
shares of Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the Holder.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Debenture and
Warrant Purchase Agreement, dated as of October 31, 2000, to which the Company
and the original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the shares of Common
Stock are traded on the NASDAQ, or (b) if the shares of Common Stock are not
listed on the NASDAQ, a day on which the shares of Common Stock are traded on a
Subsequent Market, or (c) if the shares of Common Stock are not quoted on the
NASDAQ or any Subsequent Market, a day on which the shares of Common Stock are
quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided that if the shares of Common Stock are
not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any Business Day.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of this Debenture or as payment of interest in accordance with
the terms hereof.
"Underlying Shares Registration Statement" means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering, among other things, the holder's resale right with
respect to the Underlying Shares.
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39
Section 7. This Debenture shall not entitle the Holder to any of
the rights of a stockholder of the Company, including, without limitation, the
right to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of the mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 9. No current indebtedness of the Company is, and no
future indebtedness of the Company will be, senior to this Debenture in right of
payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise, other than Senior Indebtedness (as defined below),
indebtedness secured by purchase money security interests (which will be senior
as to the underlying asset covered thereby) and capital lease obligations (which
will be senior as to the property covered thereby).
Section 10. (a) Subordination to Senior Indebtedness.
Subject to the provisions of this Section 10 relating to payments on the
Subordinated Indebtedness that are permitted to be made to the extent and under
the circumstances set forth herein, Holder hereby postpones and subordinates all
of the Subordinated Indebtedness to the full and final payment and discharge of
all of the Senior Indebtedness.
(b) Except as otherwise provided in Section
10(c) hereof, Company may pay to Holder, and Holder may accept and retain, any
regularly scheduled installments of principal and interest due and owing to
Holder from Company under this Debenture in accordance with its tenor, but
without prepayment (whether mandatory or optional) or payment upon acceleration.
Holder and Company may exercise their rights under this Debenture to convert all
or a portion of the Subordinated Indebtedness to Common Stock.
(c) Company shall not be permitted to make any
payments with respect to the Debenture (other than distributions of Common Stock
upon the conversion of all or a portion of the Subordinated Indebtedness to
Common Stock), and Holder shall not be permitted to retain any payments with
respect to the Debenture (other than distributions of Common Stock upon the
conversion of all or a portion of the Subordinated Indebtedness to Common Stock)
if, at the time of making such payment, or as a result thereof, any PNC Event of
Default exists or would exist. In no event shall any Lender's continuing to
honor any requests of Company or any other borrower for loans or other
extensions of credit under the PNC Agreement after the occurrence or existence
of any such PNC Default or PNC Event of Default be deemed a waiver thereof,
unless such PNC Default or PNC Event of Default is expressly waived in writing
by the Lenders.
(d) If any payment, distribution or security, or
the proceeds thereof, are received by Holder on account of or with respect to
any of the Subordinated Indebtedness
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40
other than as expressly permitted in this Section 10, Holder shall forthwith
deliver same to Agent, for application to the Senior Indebtedness outstanding
under the PNC Agreement, in the form received (except for the addition of any
endorsement or assignment necessary to effect a transfer of all rights therein)
or, at Agent's option, Holder shall pay to Agent the amount thereof on demand.
Until so delivered, any such payment, distribution or security shall be held by
Holder in trust for Agent and shall not be commingled with other funds or
property of Holder.
(e) Any amendment or modification of the terms
of this Section 10 shall not be effective against any Senior Creditor unless
such Senior Creditor so consents in writing.
(f) No present or future Senior Creditor shall
be prejudiced in its right to enforce the provisions of this Section 10 by any
act or failure to act on the part of Company.
(g) Holder agrees and acknowledges that in no
event shall Holder accept, receive or otherwise obtain any Lien on any assets of
Company or any of its subsidiaries. If, notwithstanding the foregoing, Holder is
granted or otherwise acquires such a Lien, Holder agrees and acknowledges such
Lien shall be subordinated to any and all Liens held by any Senior Creditor on
any such assets.
(h) If the Senior Indebtedness has been
indefeasibly paid and discharged, Holder shall be subrogated (without any
representation by or recourse to any Senior Creditor) to the rights of Senior
Creditors to receive payments or distributions of cash, property or securities
payable or distributable on account of the Senior Indebtedness, to the extent of
all payments and distributions paid over to or for the benefit of Senior
Creditors pursuant to this Section 10 on account of the Subordinated
Indebtedness. In no event, however, shall Holder have any rights or claims
against any Senior Creditor for any alleged impairment of Holder's subrogation
rights, Holder acknowledging that any actions taken by a Senior Creditor with
respect to the Senior Indebtedness or the collateral securing all or any part of
the Senior Indebtedness are authorized and consented to by Holder.
(i) The provisions of this Debenture
subordinating the Subordinated Indebtedness are solely for the purpose of
defining the relative rights of Senior Creditors and Holder and shall not
impair, as between Holder and Company, the obligation of Company, which is
unconditional and absolute, to pay the Subordinated Indebtedness in accordance
with its terms except as payment thereof may be postponed in accordance with
this Debenture.
(j) For purposes of this Section 10, the
following terms shall have the following meanings:
"Agent" shall mean PNC Bank, National Association, in its
capacity as administrative and collateral agent for the Lenders, and its
successors in such capacity.
"Insolvency Proceeding" means any action, suit, case or
proceeding commenced by or against Company or any of its subsidiaries for the
appointment of a receiver for Company, any of Company's subsidiaries, any of
Company's property any property of any subsidiary of Company, for an order for
relief under any chapter of the United States bankruptcy code, as an
18
41
assignment for the benefit of creditors or for any relief under any other
insolvency law relating to the readjustment, reorganization, composition or
extension of debts owed by Company or any subsidiary.
"Lenders" shall mean the various lenders who are or may become
parties to the PNC Agreement from time to time.
"Lien" shall mean any security interest, statutory lien,
common law lien, equitable lien, or judicial lien or other interest in any
property.
"PNC Agreement" shall mean the Revolving Credit and Security
Agreement dated March 14, 2000, among Company, the other borrowers from time to
time party thereto, Lenders and Agent, as such agreement may be amended,
modified, restated, replaced, extended, refinanced, increased, renewed or
supplemented from time to time, any and all agreements relating thereto and any
agreement executed with or in favor of the Agent or any of the Lenders in
connection with any amendment, modification, restatement, replacement,
extension, refinancing, renewal or supplement thereof.
"PNC Default" shall have the meaning ascribed to the term
"Default" in the PNC Agreement.
"PNC Event of Default" shall have the meaning ascribed to the
term "Event of Default" in the PNC Agreement.
"Senior Creditor" shall mean any holder of any of the Senior
Indebtedness.
"Senior Indebtedness" means the principal of, and premium, if
any, and interest on (i) all indebtedness of Company for monies borrowed from
banks, trust companies, insurance companies and other financial institutions
whose primary business is lending money, including, without limitation,
commercial paper and accounts receivable sold or assigned by Company to such
institutions and any indebtedness of Company incurred in any Insolvency
Proceeding, and (ii) principal of, and premium, if any, and interest on any
indebtedness or obligations of a subsidiary of Company of the kinds described in
(i) above assumed or guaranteed in any manner by Company, as any of such
indebtedness, obligations or liabilities described in (i) or (ii) may be
amended, modified, restated, replaced, extended, refinanced, increased, renewed
or supplemented from time to time, and "Senior Indebtedness" shall include, all
indebtedness, liabilities, debts and obligations of Company and the other
borrowers to Agent and Lenders under the PNC Agreement, including, without
limitation, all principal, interest, fees and other expenses due and owing
thereunder.
"Subordinated Indebtedness" means (i) all liabilities of
Company to Holder under this Debenture, the Purchase Agreement or the
Registration Rights Agreement, (ii) all interest, fees, charges, expenses and
attorneys' fees for which Company is now or hereafter becomes liable to pay to
Holder under any agreement referred to in clause (i) or by law in connection
with such agreements, and (iii) any renewals, extensions or refinancings of any
of the foregoing.
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Section 11. This Debenture shall be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to
conflicts of laws principles thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of Chicago, County of Xxxx, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waive, and agree not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. Each of the Company and the Holder hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by receiving a copy thereof sent to the Company
at the address in effect for notices to it under this instrument and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
Section 12. Any waiver by the Company or the Holder of a breach
of any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
Section 13. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances. If it
shall be found that any interest or other amount deemed interest due hereunder
shall violate applicable laws governing usury, the applicable rate of interest
due hereunder shall automatically be lowered to equal the maximum permitted rate
of interest.
Section 14. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
VERSO TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
Attest:
By:
----------------------------------
Name:
Title:
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44
EXHIBIT A
CONVERSION NOTICE
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
the Common Stock (the "Common Stock") of Verso Technologies, Inc. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
----------------------------------------------
Date to Effect Conversion
----------------------------------------------
Principal Amount of Debentures to be Converted
----------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Signature
----------------------------------------------
Name
----------------------------------------------
Address
45
EXHIBIT B
COMPANY CONVERSION NOTICE
(To be Executed by the Company to Require Conversion of Debentures)
The undersigned authorized officer of Verso Technologies, Inc. (the "Company")
hereby requires the conversion of the principal amount of the Company's
Debentures held by the registered holder addressee hereof of the Company's
Common Stock (the "Common Stock") pursuant to the conditions of the Debentures
as of the date written below. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations:
---------------------------------------------
Date to Effect Conversion
----------------------------------------------
Principal Amount of Debentures to be Converted
----------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Signature
----------------------------------------------
Name and Office
----------------------------------------------
Signature
----------------------------------------------
Name
46
EXHIBIT B
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
VERSO TECHNOLOGIES, INC.
WARRANT
Warrant No. _______
Dated: November__, 2000
Verso Technologies, Inc., a Minnesota corporation (the "Company"),
hereby certifies that, for value received, ________________________________, or
its registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of __________ shares of common
stock, $.01 par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares"). The initial
"Exercise Price" for Warrant Shares shall be $7.50, and shall be subject to
adjustment from time to time as provided in Section 7. The Holder may acquire
Warrant Shares under this Warrant at such times as is provided for in Section
3(a) hereof.
This Warrant shall be subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address for notice set forth in Section
10. Upon any such registration or transfer, a new warrant to purchase Common
Stock, in substantially the form of this Warrant (any such new warrant, a "New
47
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company at its address for notice set
forth in Section 11 for one or more New Warrants, evidencing in the aggregate
the right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
(c) This Warrant has been issued subject to certain
investment representations of the original Holder set forth in the Convertible
Debenture and Warrant Purchase Agreement among the Company and the Holder dated
as of October 31, 2000 (the "Purchase Agreement") and may only be transferred or
exchanged in compliance with the transfer restrictions contained therein.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 6:00 P.M., Atlanta, Georgia time, and from
time to time from and after the date hereof and through and including November
__, 2005 (the "Expiration Date"). At 6:00 P.M., Atlanta, Georgia time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value. Prior to the Expiration Date, the Company
may not call or otherwise redeem this Warrant without the prior written consent
of the Holder.
(b) Upon surrender of this Warrant, with the Form of
Election to Purchase attached hereto duly completed and signed, to the Company
at its address for notice set forth in Section 11 and upon payment of the
Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in the manner provided hereunder, all as
specified by the Holder in the Form of Election to Purchase, the Company shall
promptly (but in no event later than three (3) business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except (i) either in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become the holder of record of such Warrant Shares as of
the Date of Exercise of this Warrant.
(c) A "Date of Exercise" means the date on which the
Company shall have received (i) this Warrant (or any New Warrant, as applicable)
with the Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly
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48
signed, and (ii) payment of the Exercise Price for the number of Warrant Shares
so indicated by the Holder hereof to be purchased.
(d) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares
representing not less than 10% of the original Warrant Shares or such lesser
amount as is then remaining available for exercise. If less than all of the
Warrant Shares which may be purchased under this Warrant are exercised at any
time, the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares
for which no exercise has been evidenced by this Warrant.
4. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
5. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
6. Reservation of Warrant Shares. The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 7). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
7. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 7. Upon each such adjustment of the
Exercise Price pursuant to this Section 7, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
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49
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
preferred stock which contain a stated dividend rate) or otherwise make a
distribution or distributions on shares of its Common Stock or on any other
class of capital stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock into a larger number of shares, or (iii)
combine outstanding shares of Common Stock into a smaller number of shares, then
the Exercise Price shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
after such event. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 7(b)
upon any exercise following any such reclassification or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to the
Holder of this Warrant) evidences of its indebtedness or assets (including cash)
or rights or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 7(a), (b) and (d)), then in each such case the Exercise
Price shall be determined by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Exercise Price determined as of the record date mentioned above,
and of which the numerator shall be such Exercise Price on such record date less
the then fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share of
Common Stock as determined by the Company's independent certified public
accountants that regularly examine the financial statements of the Company (an
"Appraiser").
(d) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while this Warrant is outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that is convertible into
or exchangeable for shares of Common Stock ("Common Stock Equivalents"), to any
Person (other than the Holder of this Warrant), entitling such Person to acquire
shares of Common Stock at a price per share less than the Exercise Price (if the
holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of
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50
purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights issued in
connection with such issuance, be entitled to receive shares of Common Stock at
a price less than the Exercise Price, such issuance shall be deemed to have
occurred for less than the Exercise Price), then the Exercise Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such Common
Stock or such Common Stock Equivalents plus the number of shares of Common Stock
which the offering price for such shares of Common Stock or Common Stock
Equivalents would purchase at the Exercise Price, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of Common Stock so issued or
issuable, provided that for purposes hereof, all shares of Common Stock that are
issuable upon conversion, exercise or exchange of Common Stock Equivalents shall
be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. However, upon the expiration of any Common Stock
Equivalents the issuance of which resulted in an adjustment in the Exercise
Price pursuant to this Section, if any such Common Stock Equivalents shall
expire and shall not have been exercised, the Exercise Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Exercise Price made pursuant to the provisions of
this Section after the issuance of such Common Stock Equivalents) had the
adjustment of the Exercise Price made upon the issuance of such Common Stock
Equivalents been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such Common Stock Equivalents actually exercised. The foregoing shall not
apply to any (i) issuances of securities as consideration in a merger,
consolidation or acquisition of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or as consideration for the acquisition of a business, product
or license by the Company, (ii) the issuance of securities upon the exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, or (iii) the grant of options or warrants, or
the issuance of additional securities, under any duly authorized Company stock
option, restricted stock plan or stock purchase plan for the benefit of the
Company's employees.
(e) In case of any (1) merger or consolidation of the
Company with or into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company (based upon their then fair market value)
in one or a series of related transactions, (A) the Holder shall have the right
at all times from and after the date of such merger, sale or consolidation, as
the case may be, to and including the Expiration Date, to exercise this Warrant
for the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock immediately following such
merger, consolidation or sale, and the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled, or (B) the acquiring company or newly created company shall have the
right to pay the Holder the value of the Warrant determined on a Black-Scholes
basis. (For example, if (1) the Company merges with and into another Person
("Newco") and as a result thereof each share of Common Stock shall entitle the
holder thereof to receive two shares of the common stock of Newco and $2.00 in
cash,
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51
and (2) the Exercise Price is at the effective time of such merger $6.00 per
share, then at all times thereafter this Warrant shall upon the payment of $6.00
times the number of Warrant Shares represent the right to receive (A) that
number of shares of the Common Stock of Newco as is equal to two times the
Warrant Shares, and (B) that amount of cash as is equal to $2.00 times the
number of Warrant Shares.) The terms of any such merger, sale or consolidation
shall include such terms so as to continue to give the Holder the right to
receive the securities, cash and property set forth in this Section upon any
conversion or redemption following such event. This provision shall similarly
apply to successive such events.
(f) For the purposes of this Section 7, the following
clauses shall also be applicable:
(i) Record Date. In case the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(g) All calculations under this Section 7 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to
Section 7(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(i) If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
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52
(iii) the Company shall authorize the
granting to all holders of the
Common Stock rights or warrants to
subscribe for or purchase any
shares of capital stock of any
class or of any rights; or
(iv) the approval of any stockholders of
the Company shall be required in
connection with any
reclassification of the Common
Stock, any consolidation or merger
to which the Company is a party,
any sale or transfer of all or
substantially all of the assets of
the Company, or any compulsory
share exchange whereby the Common
Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the
voluntary dissolution, liquidation
or winding up of the affairs of the
Company,
then the Company shall cause to be mailed to the Holder at its last address as
it shall appear upon the Warrant Register, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
8. Payment of Exercise Price. The Holder shall pay the Exercise
Price by delivering immediately available funds.
9. Fractional Shares. The Company shall not be required to issue
or cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.
10. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:00 p.m. (Atlanta, Georgia time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication
7
53
is delivered via facsimile at the facsimile telephone number specified in this
Section later than 5:00 p.m. (Atlanta, Georgia time) on any date and earlier
than 11:59 p.m. (Atlanta, Georgia time) on such date, (iii) the business day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be:
If to the Company: Verso Technologies, Inc.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxx & Hardin LLP
2700 International Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Hussle, Esq.
If to a Purchaser:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Attn:
---------------------------------------
With copies to:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Facsimile No.:
------------------------------
Attn:
---------------------------------------
11. Warrant Agent. The Company shall serve as warrant agent under
this Warrant. Upon thirty days' notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
12. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns. This Warrant may
be amended or waived only in writing signed by the Company and the Holder and
their successors and assigns.
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54
(b) Subject to Section 12(a), above, nothing in this Warrant shall
be construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) The corporate laws of the State of Minnesota shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of Illinois, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of Chicago, County of Xxxx, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waive, and agree not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. Each of the Company and the Holder hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by receiving a copy thereof sent to the Company
at the address in effect for notices to it under this instrument and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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55
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its duly authorized officer as of the date first indicated above.
VERSO TECHNOLOGIES, INC.
By:
------------------------------
Name:
Title:
56
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Verso Technologies, Inc.:
The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of Verso Technologies, Inc.
(the "Common Stock") and encloses herewith $________ in cash, certified or
official bank check or checks, which sum represents the aggregate Exercise Price
(as defined in the Warrant) for the number of shares of Common Stock to which
this Form of Election to Purchase relates, together with any applicable taxes
payable by the undersigned pursuant to the Warrant.
The Exercise Price applicable to the purchase hereunder equals $______.
The Holder hereby represents and warrants to the Company that it is an
accredited investor under Rule 501(a) promulgated under the Securities Act of
1933, as amended.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
----------------------------------
-------------------------------
(Please print name and address)
57
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
-------------------------------
(Please print name and address)
-------------------------------
-------------------------------
Dated: ____________________________,
Name of Holder:
(Print)
-------------------------------
(By:)
---------------------------------
(Name:)
-------------------------------
(Title:)
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
58
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Verso Technologies,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Verso Technologies, Inc. with full power
of substitution in the premises.
Dated: ______________, ______
-------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
-------------------------------------
Address of Transferee
-------------------------------------
-------------------------------------
In the presence of:
-----------------------------
59
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 22, 2000, among VERSO TECHNOLOGIES, INC., a
Minnesota corporation (the "Company"), and the investors signatory hereto (each
such investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").
This Agreement is made pursuant to the Convertible Debenture Purchase
Agreement, dated as of October 31, 2000 between the Company and the Purchasers
(the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of Georgia generally are authorized or required by law or other government
actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.01 par
value per share, or such securities that such stock shall hereafter be
reclassified into.
"Debentures" means the Convertible Debentures issued to the
Purchasers in accordance with the Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Other Stockholders" shall mean Persons who, by virtue of
agreements with the Company other than this Agreement, are entitled to include
their securities in certain registrations hereunder.
60
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Piggyback Registration" shall have the meaning set forth in
Section 2(a).
"Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company and one counsel
selected to represent the Holders, blue sky fees and expenses, and expenses of
any regular or special audits incident to or required by any such registration,
but shall not include (i) Selling Expenses; (ii) the compensation of regular
employees of the Company, which shall be paid in any event by the Company; and
(iii) blue sky fees and expenses incurred in connection with the registration or
qualification of any Registrable Securities in any state, province or other
jurisdiction in a registration pursuant to Section 2 hereof to the extent that
the Company shall otherwise be making no offers or sales in such state, province
or other jurisdiction in connection with such registration.
"Registrable Securities" means (A) the shares of Common Stock
issued or issuable upon conversion of the Debentures and the Warrants and (B)
any shares of Common Stock issued as a dividend or distributed with respect to
or in replacement of the shares referred to in (A) above, provided that a
Registrable Security ceases to be a Registrable Security when (i) it is
registered under the Securities Act; (ii) it is sold or transferred in
accordance with the requirements of Rule 144; or (iii) it is sold in a private
transaction in which the transferor's rights under this Agreement are not
assigned.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 145" mean Rule 145 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
2. Piggyback Registrations.
(a) Right to Piggyback. If at any time prior to the five
(5) year anniversary of the date hereof the Company shall determine to register
any shares of Common Stock for its own account or the account of another holder
of Common Stock, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a Rule 145 transaction, or a
registration on any registration form that does not permit secondary sales, the
Company will:
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(i) promptly give to each Holder written notice
thereof, which notice briefly describes the Holders' rights under this Section 2
(including notice deadlines);
(ii) use its best efforts to include in such
registration (and any related filing or qualification under applicable blue sky
laws), except as set forth in Section 2(b) below, and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by any Holder and received by the Company within thirty (30)
days after the written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify all or a
part of a Holder's Registrable Securities; and
(iii) keep such registration effective for a
period of one hundred eighty (180) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 2(a)(i). In such event, the right of any Holder
to registration pursuant to this Section 2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company. The foregoing notwithstanding, with respect to any of the documents
and/or agreements referred to in this Section 2(b), (i) no Holder shall be
required to make any representation or warranty with respect to or on behalf of
the Company or any other stockholders of the Company and (ii) the liability of
any Holder shall be limited as set forth in Section 5(b) hereof.
(c) Priority on Primary Registrations. If a registration
is an underwritten primary registration on behalf of the Company and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in the registration creates a
substantial risk that the price per share of Common Stock will be reduced, the
Company will include in such registration first, the securities that the Company
proposes to sell, and second, the Registrable Securities and the other
securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities and such other securities on the basis of
the number of shares which are owned by such holders.
(d) Priority on Secondary Registrations. If a
registration is an underwritten secondary registration on behalf of holders of
the Company's securities and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in the registration creates a substantial risk that the price per share of
Common Stock will be reduced, the Company will include in such registration
first, the securities requested to be included therein by the holders requesting
such registration, and second, the Registrable Securities and the other
securities requested to be included in such registration, pro rata among the
holders of such securities on the basis of the number of shares of Common Stock
or Registrable Securities which are owned by such holders.
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3. Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 2 hereof, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will use its best efforts
to:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective (provided that before
filing a registration statement or prospectus, or any amendments or supplements
thereto, the Company will furnish copies of all such documents proposed to be
filed to the counsel or counsels for the sellers of the Registrable Securities
covered by such registration statement);
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(d) notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances then
existing; provided, however, the Company shall not be obligated to prepare and
furnish any such prospectus supplements or amendments relating to any material
nonpublic information at any such time as the Board of Directors of the Company
has determined that, for good business reasons, the disclosure of such material
nonpublic information at that time would be materially detrimental to the
Company in the circumstances and is not otherwise required under applicable law
(including applicable securities laws) provided the Company may only delay its
obligations pursuant to the aforementioned proviso for a period of 60 days in
any 180-day period;
(e) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange and/or included in
any national quotation system on which similar securities issued by the Company
are then listed or included;
(f) provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration;
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(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(h) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) consent to
general service of process in any such jurisdiction, or (iii) subject it to
taxation in any such jurisdiction);
(i) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other customary
actions as the holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(j) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
provided, however, that any records, information or documents that are furnished
by the Company and that are non-public shall be used only in connection with
such registration and shall be kept strictly confidential by any seller of
Registrable Securities except to the extent disclosure of such records,
information or documents is required by written order of a court or other
governmental authority having jurisdiction; and
(k) at the request of any seller of such Registrable
Securities in connection with an underwritten offering, furnish on the date or
dates provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the sellers of Registrable Securities,
covering such matters as such counsel, underwriters and sellers may reasonably
agree upon, including such matters as are customarily furnished in connection
with an underwritten offering, and (ii) a letter or letters from the independent
certified public accountants of the Company addressed to the underwriters and
the sellers of Registrable Securities, covering such matters as such
accountants, underwriters and sellers may reasonably agree upon, in which
letter(s) such accountants shall state, without limiting the generality of the
foregoing, that they are independent certified public accountants within the
meaning of the Securities Act and that in their opinion the financial statements
and other financial data of the Company included in the registration statement,
the prospectus(es), or any amendment or supplement thereto, comply in all
material respects with the applicable accounting requirements of the Securities
Act.
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4. Registration Expenses. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2 hereof shall be borne by the Company. All Selling Expenses relating to
securities so registered shall be borne by the Holders of such securities pro
rata on the basis of the number of shares of securities so registered on their
behalf.
5. Indemnification
(a) The Company will indemnify each Holder, each of its
officers, directors, partners, members, managers, legal counsel and accountants
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification, or compliance
has been effected pursuant to this Section 1, and each underwriter, if any, and
each person who controls within the meaning of Section 15 of the Securities Act
any underwriter, against all expenses, claims, losses, damages, and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company or relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, members,
managers, legal counsel and accountants and each person controlling such Holder,
each such underwriter, and each person who controls any such underwriter, for
any legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability,
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability, or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter and stated to be
specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 5(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld). The payments required by this Section 5(a) will be made
periodically during the course of the investigation or defense, as and when
bills are received or expenses incurred.
(b) Each Holder will, if Registrable Securities held by
him are included in the securities as to which such registration, qualification,
or compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or Other Stockholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders,
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65
Other Stockholders, directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, (i) that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld) and (ii) that in no
event shall any indemnity under this Section 5(b) exceed the gross proceeds from
the offering received by such Holder.
(c) Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense; provided, however, that
the Indemnifying Party shall bear the expense of such defense of the Indemnified
Party if (i) the Indemnifying Party has agreed in writing to pay such expenses,
(ii) the Indemnifying Party shall have failed to assume the defense of such
claim or employ counsel reasonably satisfactory to the Indemnified Party, or
(iii) in the reasonable judgment of the Indemnified Party, based upon the
written advice of such Indemnified Party's counsel, representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interest; provided, however, that in no event shall the
Indemnifying Party be liable for the fees and expenses of more than one counsel
for all Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
event, allegations or circumstances, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 5, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
of a release to such Indemnified Party from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the conduct, statements or
7
66
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the costs, fines, penalties, losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 5, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions providing for the greatest indemnity of the
Indemnified Party shall control.
6. Information by Holder. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in Section 2.
7. Notice to Discontinue; Notice by Holders.
(a) Notice to Discontinue. Each Holder agrees by
acquisition of such securities that, upon receipt of any notice from the Company
of any event of the kind described in Section 3(c), the Holder will discontinue
disposition of Registrable Securities until the Holder receives copies of the
supplemented or amended prospectus contemplated by Section 3(c). In addition, if
the Company requests, the holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in the Holder's
possession, of the prospectus covering the Registrable Securities current at the
time of receipt of such notice. If the Company gives any such notice, the time
period mentioned in Section 2(a)(iii) shall be extended by the number of days
elapsing between the date of notice and the date that each Holder who has
included Registrable Securities in such registration receives the copies of the
supplemented or amended prospectus contemplated in Section 3(c).
(b) Notice by Holders. Whenever the Holders have
requested that any Registrable Securities be registered pursuant to this
Agreement, those Holders shall notify the Company, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event, which as to any Holder is (i) to its respective
knowledge; (ii) solely within its respective knowledge; and (iii) solely as to
matters concerning that Holder, as a result of which the prospectus included in
the registration statement, then in effect, contains an untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein, in light of the circumstances then existing, not misleading.
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8. Miscellaneous
(a) Remedies. In the event of a breach by the Company or
by the Holder, of any of their obligations under this Agreement, the Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and the Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) Delay of Registration. No Holder shall have any right
to take any action to restrain, enjoin, or otherwise delay any registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of Section 1 hereof.
(c) Compliance. The Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
a registration statement covering such Registrable Securities.
(d) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holder.
(e) Notices. Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:00 p.m.
(Atlanta, Georgia time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in the Purchase Agreement later than
6:00 p.m. (Atlanta, Georgia time) on any date and earlier than 11:59 p.m.
(Atlanta, Georgia time) on such date, (iii) the Business Day following the date
of mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:
If to the Company: Verso Technologies, Inc.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxx & Xxxxxx LLP
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68
2700 International Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Hussle, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature page hereto
With copies to: To the person at the address set forth under
such Purchaser's name on the signature page
hereto
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock
transfer books of the Company or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of the Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
the Holder. The Holder may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.
(g) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(h) Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of Illinois, without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of Chicago, County of Xxxx, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
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(i) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(j) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(k) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed by their respective duly authorized officers, all as of
the date first written above.
VERSO TECHNOLOGIES INC.
By:
-----------------------------
NAME:
TITLE:
HIG INVESTORS, L.L.C.
By:
------------------------------
NAME:
TITLE:
Address for Notice:
HIG Investors, L.L.C.
With copies to:
Xxxxxx & Xxxxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Pucker, Esq.
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71
THE XXXXXX X. XXXX REVOCABLE TRUST
By:
-------------------------------------
Xxxxxx X. Xxxx or Xxxxxx X. Xxxx, not
individually, but solely as trustee
of the Xxxxxx X. Xxxx Revocable Trust
u/a/d 12/17/84
Address for Notice:
With copies to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Pucker, Esq.
XXXXXX X. AND XXXXXX X. XXXX
MEMORIAL FOUNDATION
By:
-------------------------------------
-------------------------------------
Summit Bank, Trustee
Address for Notice:
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72
With copies to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Pucker, Esq.
JIBS EQUITIES, L.P.
By:
-------------------------------------
Xxxxxxx Xxxxxxxxxx, its general partner
Address for Notice:
With copies to:
Same
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