EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of February 24, 2004, by and among VERSO TECHNOLOGIES, INC.,
a Minnesota corporation (the "COMPANY"), and the investors signatory hereto
(each a "INVESTOR" and collectively, the "INVESTORS").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as February 20, 2004, among the Company and the Investors (the
"PURCHASE AGREEMENT").
The Company and the Investors 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 respective meanings set forth in this Section 1:
"EFFECTIVE DATE" means, as the case may be, the date that a
Registration Statement filed pursuant to Section 2(a) or 2(b) is first declared
effective by the Commission.
"EFFECTIVENESS DATE" means: (a) with respect to the
Registration Statement required to be filed under Section 2(a) to cover the
resale by the Holders of the Registrable Securities, the earlier of: (a)(i) the
90th day following the Closing Date; provided, that, if the Commission reviews
and has written comments to such Registration Statement that would require the
filing of a pre-effective amendment thereto with the Commission, then the
Effectiveness Date under this clause (a)(i) shall be the 120th day following the
Closing Date, and (ii) the fifth Trading Day following the date on which the
Company is notified by the Commission that such Registration Statement will not
be reviewed or is no longer subject to further review and comments, and (b) with
respect to any additional Registration Statements that may be required pursuant
to Section 2(b), the earlier of: (b)(i) the 90th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under such Section; provided, that, if the
Commission reviews and has written comments to such Registration Statement that
would require the filing of a pre-effective amendment thereto with the
Commission, then the Effectiveness Date under this clause (b)(i) shall be the
120th day following the date that the Company first knows, or reasonably should
have known, that such additional Registration Statement is required under such
Section and (ii) the fifth Trading Day following the date on which the Company
is notified by the Commission that such additional Registration Statement will
not be reviewed or is no longer subject to further review and comments.
"EFFECTIVENESS PERIOD" means, for any Registration Statement,
the date which is the earlier of (i) five years after the Effective Date for
such Registration Statement, (ii) such time as all of the Registrable Securities
covered by such Registration Statement have been publicly sold by the Holders,
or (iii) such time as all of the Registrable Securities covered by such
Registration Statement may be sold pursuant to Rule 144(k).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means (a) with respect to the Registration
Statement required to be filed pursuant to Section 2(a) in respect of the
Registrable Securities, the 30th day following the Closing Date, and (b) with
respect to any additional Registration Statements that may be required pursuant
to Section 2(b), the 30th day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
"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).
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means: (i) the Shares and (ii) the
Warrant Shares.
"REGISTRATION STATEMENT" means any registration statement
required to be filed in accordance with Section 2(a) or (b), including (in each
case) the Prospectus, amendments and supplements to such registration statements
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statements.
"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 415" means Rule 415 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 424" means Rule 424 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.
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issued or issuable
to the Investors pursuant to the Purchase Agreement.
"TRADING MARKET" means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market or the NASDAQ
SmallCap Market, on which the Common Stock is listed or quoted for trading on
the date in question.
"WARRANTS" mean the Warrants issued or issuable pursuant to
the Purchase Agreement.
"WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
2. Registration.
(a) On or prior to the Filing Date, the Company shall
prepare and file with the Commission a Registration Statement covering the
resale of all Registrable Securities not already covered by an existing and
effective Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement) the "Plan of Distribution"
attached hereto as Annex A. The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as soon
as possible in accordance with the time frames set forth in Section 2(c), below,
and shall use its best efforts to keep the Registration Statement continuously
effective under the Securities Act until the date which is the earlier of (i)
five years after the Effective Date, (ii) such time as all of the Registrable
Securities have been publicly sold by the Holders, or (iii) such time as all of
the Registrable Securities may be sold pursuant to Rule 144(k) (the
"EFFECTIVENESS PERIOD").
(b) If for any reason the Commission does not permit all
of the Shares and all Warrant Shares to be included in the Registration
Statement filed pursuant to Section 2(a), or for any other reason any
Registrable Securities are not included in a Registration Statement filed under
this Agreement, then the Company shall prepare and file as soon as possible
after the date on which the Commission shall indicate as being the first date or
time that such filing may be made, but in any event by its Filing Date, an
additional Registration Statement covering the resale of all Registrable
Securities not already covered by an existing and effective Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415.
Each such Registration Statement shall contain (except if otherwise required
pursuant to written comments received from the Commission upon a review of such
Registration Statement) the "Plan of Distribution" attached hereto as Annex A.
The Company shall use its best efforts to cause each such Registration Statement
to be declared effective under the Securities Act as soon as possible in
accordance with the time frames set forth in Section 2(c), below, and shall use
its best efforts to keep such Registration Statement continuously effective
under the Securities Act during its entire Effectiveness Period.
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(c) If: (i) a Registration Statement is not filed on or
prior to its Filing Date (if the Company files a Registration Statement without
affording the Holders the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) the Company fails to file a pre-effective
amendment responsive to comments received from the Commission to a Registration
Statement filed hereunder by the tenth day following the date such comments are
received from the Commission, (iii) a Registration Statement is not declared
effective by the Commission on or prior to its required Effectiveness Date, or
(iv) after its Effective Date, without regard for the reason thereunder or
efforts therefor, such Registration Statement ceases for any reason to be
effective and available to the Holders as to all Registrable Securities to which
it is required to cover at any time prior to the expiration of its Effectiveness
Period, for an aggregate of 20 Trading Days for all such events (any such
failure or breach being referred to as an "EVENT," and for purposes of clauses
(i), and (iii), for purposes of clause (ii) the date on which such ten days are
exceeded or for purposes of clause (iv) the date on which such twenty Trading
Day period is exceeded, being referred to as "EVENT DATE"), then, in addition to
any other rights available to the Holders under the Transaction Documents or
under applicable law, (x) on each such Event Date the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
1.0% of the aggregate unsold portion of the Investment Amount of such Holder
pursuant to the Purchase Agreement (the full amount of such liquidated damages
being due and payable without pro ration on such Event Date; and (y) on each
monthly anniversary of each such Event Date thereof (if the applicable Event
shall not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as liquidated damages and
not as a penalty, equal to 1.0% of the aggregate unsold portion of the
Investment Amount paid by such Holder pursuant to the Purchase Agreement;
provided, however, that the parties agree that the total amount of liquidated
damages that are payable by the Company for all Events is limited with respect
to each Holder to an amount equal to 12% (for all Events aggregated) of the
aggregate unsold portion of the Investment Amount of such Holder pursuant to the
Purchase Agreement. If the Company fails to pay any liquidated damages pursuant
to this Section in full within seven days after the date payable, the Company
will pay interest thereon at a rate of 12% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Holder, accruing
daily from the date such liquidated damages are due until such amounts, plus all
such interest thereon, are paid in full. The liquidated damages pursuant to the
terms hereof shall apply on a pro rata basis for any portion of a month prior to
the cure of an Event.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than four Trading Days prior to the filing
of a Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall furnish to the Holders copies of the
"Selling Stockholders" section of such document, the "Plan of Distribution" and
any risk factor contained in such document that addresses specifically this
transaction or the Selling Stockholders, as proposed to be filed which documents
will be subject to the review of such Holders. The Company shall not file a
Registration Statement or any such Prospectus or any amendments or supplements
thereto that does not contain the disclosure
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containing such Holder as a "Selling Stockholder" as provided to the Company by
such Holder in connection therewith; provided, however, that notwithstanding any
provision in this Agreement, all periods under Section 2 of this Agreement shall
be tolled for each day more than two Trading Days that the Company does not
receive the written disclosure of a Holder's beneficial ownership of Common
Stock, "control person" with respect to the Registrable Securities, and the name
and address of such Holder following the Company's delivery to the Holder of the
Registration Statement, related Prospectus or information request.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to each Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for its Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) use its best efforts
to cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424; (iii) use its best efforts to respond as promptly as reasonably
possible to any comments received from the Commission with respect to each
Registration Statement or any amendment thereto and, as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to such Registration Statement that would not
result in the disclosure to the Holders of material and non-public information
concerning the Company; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
Registration Statements and the disposition of all Registrable Securities
covered by each Registration Statement.
(c) Notify the Holders as promptly as reasonably possible
(and, in the case of (i)(A) below, not less than three Trading Days prior to
such filing) and (if requested by any such Person) confirm such notice in
writing no later than one Trading Day following the day (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto to
each of the Holders that pertain to the Holders as a Selling Stockholder or to
the Plan of Distribution, but not information which the Company believes would
constitute material and non-public information); and (C) with respect to each
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to a Registration Statement
or Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or
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that requires any revisions to such Registration Statement, Prospectus or other
documents so that, in the case of such Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto and all
exhibits to the extent requested by such Person (including those previously
furnished) promptly after the filing of such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as
many copies of each Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(g) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of all
jurisdictions within the United States reasonably requested by any Holder
proposing to sell securities in such jurisdiction, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statements; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or subject the Company to any material tax in
any such jurisdiction where it is not then so subject.
(h) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to the Registration Statements, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may request.
(i) Upon the occurrence of any event contemplated by
Section 3(c)(v), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the affected Registration
Statements or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, no Registration
Statement nor any Prospectus will contain an untrue statement of a material fact
or omit to state a material fact required to be
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stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, investment advisors, partners,
members and employees of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys'
fees) and expenses (collectively, "LOSSES"), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any Prospectus or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (2) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), the use by such Holder of an outdated or
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defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of an Advice or an amended or supplemented Prospectus, but only if and to the
extent that following the receipt of the Advice or the amended or supplemented
Prospectus the misstatement or omission giving rise to such Loss would have been
corrected. The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising solely out of or based solely upon: (x)
such Holder's failure to comply with the prospectus delivery requirements of the
Securities Act or (y) any untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the extent
that, (1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement (it being understood that the
Holder has approved Annex A hereto for this purpose), such Prospectus or such
form of Prospectus or in any amendment or supplement thereto or (2) in the case
of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the
use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of an Advice or an amended or supplemented
Prospectus, but only if and to the extent that following the receipt of the
Advice or the amended or supplemented Prospectus the misstatement or omission
giving rise to such Loss would have been corrected. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
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An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld, delayed or conditioned. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public
policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each 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 each 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. Notwithstanding anything to the
contrary contained in this Agreement, specifically including, but not limited
to, the liquidated damages provisions set forth in Section 2(c), above, each
Holder and the Company hereby agree that the maximum amount of liquidated
damages permitted in accordance with Section 2(c), above, is not, and shall not
be deemed to be, (x) the sole remedy of any of the Holders hereunder, (y) a bar
against any Holder pursuing any action against the Company to enforce any of
such Holder's respective rights hereunder (or in respect of other agreements
related to the transactions contemplated hereby or executed contemporaneously
herewith) or to obtain the benefits of this Agreement (or of any of the other
agreements related to the transactions contemplated hereby or executed
contemporaneously herewith), or (z) a limitation of any remedy to which any
Holder may otherwise be entitled to pursue and be awarded against the Company;
provided, however, that, if any such economic remedy shall be awarded against
the Company, it shall be reduced, on a dollar-for-dollar basis, by an amount
equivalent to the amount of liquidated damages tendered to such Holder by the
Company in connection with the Company's obligations, as set forth in Section
2(c).
(b) No Piggyback on Registrations. Except as and to the
extent specified in Schedule 3.1(u) to the Purchase Agreement, neither the
Company nor any of its security holders (other than the Holders in such capacity
pursuant hereto) may include securities of the Company in a Registration
Statement to be filed pursuant to this Agreement other than the Registrable
Securities, and the Company shall not after the date hereof enter into any
agreement providing any such right to any of its security holders. Except as and
to the extent specified in Schedule 3.1(u) of the Purchase Agreement, the
Company has not previously entered into any agreement granting any registration
rights with respect to any of its securities to any Person, which agreements
have not been fully satisfied.
10
(c) Compliance. Each 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
the Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(c), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement or
until it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
(e) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
(f) Amendments and Waivers. No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and the Investors holding a majority of the Registrable Securities. 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 subsequent default 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.
(g) 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 5:30 p.m. (New
York City time) on a Trading Day, (ii) the Trading 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 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
11
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
Attention: Chief Financial Officer
(000) 000-0000 (facsimile)
With a copy to:
(which shall not Xxxxxx & Xxxxxx LLP
constitute a notice) 2700 International Tower
000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Hussle, Esq.
(000) 000-0000 (facsimile)
If to an Investor: To the address set forth under such
Investor's name on the signature
pages 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.
(h) 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 each Holder. The Company may
not assign its rights or obligations hereunder without the prior written consent
of each Holder. Each Holder may assign its respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(i) Execution and 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.
(j) 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 New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective Affiliates, employees
or agents) shall be
12
commenced exclusively in the state and federal courts sitting in the City of New
York, Borough of Manhattan (the "NEW YORK COURTS"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts 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 Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such 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. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any Proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of this Agreement,
then the prevailing party in such Proceeding shall be reimbursed by the other
party for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) 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.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Independent Nature of Investors' Obligations and
Rights. The obligations of each Investor hereunder are several and not joint
with the obligations of any other Investor hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. The decision of each Investor to purchase Securities
pursuant to the Transaction Documents has been made independently of any other
Investor. Nothing contained herein or in any other agreement or document
delivered at any closing, and no action taken by any Investor pursuant hereto or
thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
13
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it
shall not be necessary for any other Investor to be joined as an additional
party in any Proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
14
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
VERSO TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxx X. Xxxx
Title: Chairman of the Board and
Chief Executive Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF INVESTOR TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
[INVESTOR]
By:_____________________________________
Name:
Title:
Address for Notice:
Facsimile No.:
Attn:
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, donees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:
- ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- to cover short sales made after the date that this Registration Statement
is declared effective by the Securities and Exchange Commission;
- broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the Shares owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell shares of Common Stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
Upon the Company being notified in writing by a Selling Stockholder
that any material arrangement has been entered into with a broker-dealer for the
sale of Common Stock through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing (i) the name of each such Selling
Stockholder and of the participating broker-dealer(s), (ii) the number of shares
involved, (iii) the price at which such the shares of Common Stock were sold,
(iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this prospectus, and (vi) other facts material to the transaction.
In addition, upon the Company being notified in writing by a Selling Stockholder
that a donee or pledge intends to sell more than 500 shares of Common Stock, a
supplement to this prospectus will be filed if then required in accordance with
applicable securities law.
The Selling Stockholders also may transfer the shares of Common Stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, that can be attributed to the
sale of Securities will be paid by the Selling Stockholder and/or the
purchasers.
Each Selling Stockholder has represented and warranted to the Company
that, at the time it acquired the securities subject to this Registration
Statement, it did not have any agreement or understanding, directly or
indirectly, with any person to distribute any of such securities. The Company
has advised each Selling Stockholder that it may not use shares registered on
this Registration Statement to cover short sales of our Common Stock made prior
to the date on which this Registration Statement was declared effective by the
Securities and Exchange Commission.
The Company is required to pay all fees and expenses incident to the
registration of the shares, but the Company will not receive any proceeds from
the sale of the Common Stock. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
