EXHIBIT 99.1
SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE (this "Agreement") is
entered into this 29th day of March, 2002, by and between WA TELCOM PRODUCTS
CO., INC., a Delaware corporation ("WATP"), and VERSO TECHNOLOGIES, INC., a
Minnesota corporation ("Verso").
WITNESSETH:
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as
of July 4, 2001, by and among WATP and Verso, as amended by that certain
Closing Agreement, dated as of July 27, 2001 (as so amended, the "Purchase
Agreement"), Verso purchased from WATP all of the issued and outstanding
capital stock of NACT Telecommunications, Inc. ("NACT");
WHEREAS, Section 1.2(c) of the Purchase Agreement provides that on
March 31, 2002, Verso shall pay to WATP an amount equal to the sum of
$5,339,830 (less certain amounts as set forth in such Section) plus interest
thereon as calculated pursuant to the Purchase Agreement (such aggregate amount
to be paid to WATP being referred to as the "Deferred Amount");
WHEREAS, in a letter to WATP dated August 8, 2001 (the
"Indemnification Notice"), Verso asserted its right to indemnification under
the Purchase Agreement with respect to the matters set forth in the
Indemnification Notice;
WHEREAS, on October 23, 2001, Verso filed a Complaint against WATP in
the United States Bankruptcy Court for the Northern District of Illinois,
Eastern Division (the "Court"), commencing Adversary Proceeding No. 01-A-01131
(the "Verso Complaint") seeking damages for an alleged breach by WATP of the
Purchase Agreement; and
WHEREAS, WATP and Verso desire to set forth herein the terms and
conditions of a restructuring of the Deferred Amount and a release by Verso of
any and all claims, obligations and liabilities arising under or in connection
with the Purchase Agreement, including, without limitation, the matters
described in the Indemnification Notice and the Verso Complaint;
NOW, THEREFORE, in consideration of the mutual terms and conditions
contained herein and other valuable consideration, the receipt and adequacy of
which the parties hereby acknowledge, the parties hereto agree as follows:
SECTION 1. RESTRUCTURING OF DEFERRED AMOUNT.
(a) Verso's obligation to pay the Deferred Amount is
hereby deferred until the earlier to occur of (i) the Closing Date (as defined
herein) and (ii) the termination of this Agreement pursuant to Section 11
hereof. As of the Closing Date, Verso's obligation to pay to WATP the Deferred
Amount shall be restructured pursuant to the terms and conditions of a
Convertible Secured Promissory Note substantially in the form attached hereto
as Exhibit A ("Note"), in the aggregate principal amount of $4,250,000,
together with interested accrued
thereon (such principal amount, interest accrued thereon and any other amounts
owed pursuant to the Note being referred to as the "Restructured Deferred
Amount"). Verso's obligation to pay the Restructured Deferred Amount and to
perform its other obligations set forth in the Note shall be secured by, among
other things, the following instruments: (i) a Security Agreement between Verso
and WATP substantially in the form attached hereto as Exhibit B (the "Parent
Security Agreement"); (ii) a Pledge Agreement between Verso and WATP
substantially in the form attached hereto as Exhibit C (the "Pledge
Agreement"); (iii) a Guaranty by NACT and Xxxxxxxx.xxx Software, Inc.
("Telemate") in favor of WATP substantially in the form attached hereto as
Exhibit D (the "Guaranty"); (iv) a Security Agreement between NACT, Telemate
and WATP substantially in the form attached hereto as Exhibit E (the
"Subsidiary Security Agreement"); and (v) a Control Agreement between WATP,
Silicon Valley Bank, Verso, NACT and Telemate substantially in the form
attached hereto as Exhibit F (the "Control Agreement") (this Agreement, the
Note, the Parent Security Agreement, the Pledge Agreement, the Guaranty, the
Subsidiary Security Agreement and the Control Agreement being referred to as
the "Transaction Documents"). WATP acknowledges and agrees that the exercise of
its rights and remedies under the Note, the Parent Security Agreement, the
Pledge Agreement, the Guaranty, the Subsidiary Security Agreement and the
Control Agreement shall be subject to that certain Subordination Agreement, by
and among Verso, NACT, Telemate, WATP and Silicon Valley Bank substantially in
the form attached hereto as Exhibit G (the "Subordination Agreement").
(b) On April 1, 2002, Verso shall pay to WATP
$1,500,000.00 (the "Advance Amount") by wire transfer of immediately available
federal funds to an account designated by WATP. In the event that this
Agreement is terminated pursuant to Section 11 hereof, the Advance Amount shall
be applied by WATP to, and shall reduce the outstanding amount of, the Deferred
Amount. In the event that the Closing occurs, the Advance Amount shall be
applied by WATP to, and shall constitute full payment by Verso of, the payment
obligation of Verso set forth in Section 1(b)(i) of the Note.
SECTION 2. SATISFACTION OF DEFERRED AMOUNT. WATP acknowledges
and agrees that payment by Verso of the Restructured Deferred Amount pursuant
to the terms and conditions of the Note and the performance by Verso of all of
its obligations set forth therein shall be in full, complete and final
satisfaction of the Deferred Amount.
SECTION 3. RELEASE AND COVENANT NOT TO ASSERT RIGHTS.
(a) In consideration of the mutual promises and
covenants contained herein, effective as of the Closing Date, Verso, on its own
behalf and on behalf of any and all of its respective affiliates, subsidiaries,
successors and assigns, hereby irrevocably and forever releases and discharges
WATP and its affiliates, subsidiaries, officers, directors and employees from
and of any and all liabilities, claims, obligations, causes of action, costs
(including attorneys' fees) and demands of every kind and nature whatsoever,
whether asserted or unasserted, known or unknown, arising out of or related to
the Purchase Agreement or the transactions contemplated thereby, including,
without limitation, the matters set forth in the Verso Complaint and the
Indemnification Notice; provided, however, that nothing herein shall release or
discharge WATP from any obligation under this Agreement or any of the other
Transaction Documents to which it is a party.
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(b) Effective as of the Closing Date, Verso, on its own
behalf and on behalf of any and all of its respective affiliates, subsidiaries,
successors and assigns, hereby forever agrees and covenants to refrain and
forbear from asserting, commencing, instituting or prosecuting any lawsuit,
action, claim or right to setoff or deduction based on, arising out of or
related to the Purchase Agreement or the transactions contemplated thereby;
provided, however, that nothing herein shall prohibit Verso, NACT or Telemate
from asserting, commencing, instituting or prosecuting any lawsuit, action or
claim based on, arising out of or related to any Transaction Document to which
it is a party.
(c) In consideration of the mutual promises and
covenants contained herein, effective as of the Closing Date, WATP, on its own
behalf and on behalf of any and all of its respective affiliates, subsidiaries,
successors and assigns, hereby irrevocably and forever releases and discharges
Verso and its affiliates, subsidiaries, officers, directors and employees from
and of any and all liabilities, claims, obligations, causes of action, costs
(including attorneys' fees) and demands of every kind and nature whatsoever,
whether asserted or unasserted, known or unknown, arising out of or related to
the Purchase Agreement or the transactions contemplated thereby; provided,
however, that nothing herein shall release or discharge Verso or NACT from
their respective covenants, agreements or obligations set forth in Sections
4.10(c) or 4.13 of the Purchase Agreement; and provided, further, that nothing
herein shall release or discharge Verso, NACT or Telemate from any obligation
under any Transaction Document to which it is a party.
(d) Effective as of the Closing Date, WATP, on its own
behalf and on behalf of any and all of its respective affiliates, subsidiaries,
successors and assigns, hereby forever agrees and covenants to refrain and
forebear from asserting, commencing, instituting or prosecuting any lawsuit,
action, claim or right to setoff or deduction based on, arising out of or
related to the Purchase Agreement or the transactions contemplated thereby;
provided, however, that nothing herein shall prohibit WATP from asserting,
commencing, instituting or prosecuting any lawsuit, action or claim based on,
arising out of or related to any Transaction Document or any breach by Verso or
NACT of any of their respective covenants, agreements or obligations set forth
in Sections 4.10(c) or 4.13 of the Purchase Agreement.
SECTION 4. DISMISSAL OF COMPLAINT. Verso shall, immediately
following the Closing Date, dismiss with prejudice the Verso Complaint.
SECTION 5. ADMISSION OF LIABILITY. The parties acknowledge and
agree that nothing herein shall be construed as an admission by WATP of
violation of any law or breach of any agreement or duty, and any such liability
is expressly denied.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF VERSO. Verso
hereby represents and warrants to WATP as follows:
(a) Verso is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota.
(b) Verso has the right, power and capacity to execute,
deliver and perform this Agreement and the other Transaction Documents to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by
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Verso of this Agreement and the other Transaction Documents to which it is a
party, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate
action on the part of Verso. This Agreement has been, and the other Transaction
Documents to which Verso is a party will be, duly and validly executed and
delivered by Verso and constitute Verso's legal, valid and binding obligation,
enforceable in accordance with its and their terms.
(c) The execution and delivery of this Agreement by
Verso and the other Transaction Documents to which it is a party, the
consummation by Verso of the transactions contemplated herein and therein, and
the performance of the covenants and agreements of Verso contained herein and
therein will not, with or without the giving of notice or the lapse of time, or
both, (i) violate or conflict with any of the provisions of the articles of
incorporation or bylaws of Verso, (ii) violate, conflict with or result in a
breach or default under or cause termination of any term or condition of any
mortgage, indenture, contract, license, permit, instrument or other agreement
to which Verso is a party or by which Verso or any of its assets may be bound
or (iii) violate any provision of law, statute, rule, regulation, court order,
judgment or decree, or ruling of any governmental authority, to which Verso is
a party or by which Verso or any of its assets may be bound.
(d) The following is a list of every entity in which
Verso owns at least fifty percent (50%) of the outstanding equity, directly or
indirectly: NACT; Telemate; Victory Fax Communications, Inc.; Eltrax
International, Inc.; MessageClick, Inc.; World Access U.K. Limited; Eltrax
Hospitality Technologies PTE Ltd.; Eltrax (Malaysia) SBD.BHD; Eltrax
Hospitality Scandinavia, AS; Eltrax (Australia) Pty. Ltd.; Eltrax Hospitality
Ltd.; Eltrax Holdings, AG; Eltrax AG; and Eltrax Hospitality U.K. Ltd.
(e) Each of Verso, NACT and Telemate is able to pay its
debts as they become due in the ordinary course and each of Verso's, NACT's and
Telemate's total assets are greater than its total liabilities.
(f) None of Verso, NACT or Telemate has any intent to
file any voluntary petition in bankruptcy under any chapter of the Bankruptcy
Code (as defined below) or in any manner to seek relief, protection,
reorganization, liquidation, dissolution or similar relief for debtors under
any local, state, federal or other insolvency laws or laws providing for relief
of debtors, or in equity, and Verso has no intent to directly or indirectly
cause either NACT or Telemate to file any such petition or seek any such
relief.
(g) Any shares of common stock of Verso issued to WATP
pursuant to the terms and conditions of the Note shall be, when issued, duly
and validly issued, fully-paid and non-assessable.
(h) Verso has filed all reports required to be filed by
it, since December 31, 2000, with the Securities and Exchange Commission (the
"SEC") pursuant to the Securities Exchange Act of 1934, as amended, or with the
NASDAQ Stock Market (collectively, the "Public Filings"). None of the Public
Filings, as of their respective dates (or, if amended or superseded by a filing
prior to the date hereof, then on the date of such filing), contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein
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or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and each such Public Filings
conformed, in all material respects, with all of the statutes and published
rules and regulation enforced or promulgated by the regulatory authority or
exchange with which they were filed.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF WATP. WATP hereby
represents and warrants to Verso as follows:
(a) WATP is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) Subject to entry of the Final Order (as defined
below), WATP has the right, power and capacity to execute, deliver and perform
this Agreement and the other Transaction Documents to which WATP is a party and
to consummate the transactions contemplated hereby and thereby. Subject to
entry of the Final Order, the execution, delivery and performance of this
Agreement and the other Transaction Documents to which WATP is a party, and the
consummation of the transactions contemplated hereby and thereby, have been
duly and validly authorized by all necessary corporate action on the part of
WATP. Subject to entry of the Final Order, this Agreement has been, and the
other Transaction Documents to which WATP is a party shall be, duly and validly
executed and delivered by WATP and constitute WATP's legal, valid and binding
obligation, enforceable in accordance with its and their terms.
(c) Subject to entry of the Final Order, the execution
and delivery by WATP of this Agreement and the other Transaction Documents to
which WATP is a party, the consummation of the transactions contemplated herein
and therein by WATP, and the performance of the covenants and agreements of
WATP will not, with or without the giving of notice or the lapse of time, or
both (i) violate or conflict with any of the provisions of the certificate of
incorporation or bylaws of WATP, (ii) violate, conflict with or result in a
breach or default under or cause termination of any term or condition of any
mortgage, indenture, contract, license, permit, instrument or other agreement
to which WATP is a party or by which WATP or any of its assets may be bound or
(iii) violate any provision of law, statute, rule, regulation, court order,
judgment or decree, or ruling of any governmental authority, to which WATP is a
party or by which WATP or any of its assets may be bound.
SECTION 8. MOTION FOR BANKRUPTCY APPROVAL; FINAL ORDER. As soon
as reasonably practicable after the date hereof, WATP shall file with the Court
a motion (the "Motion") to approve the execution, delivery and performance by
WATP of this Agreement pursuant to Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy
Code, 11 U.S.C. xx.xx. 101 et seq., as amended (the "Bankruptcy Code"). This
Agreement is and shall be expressly subject to approval by the Court under
Bankruptcy Code ss. 363, and if for any reason whatsoever such approval is not
obtained, then this Agreement shall be null and void and of no further force or
effect.
SECTION 9. CLOSING. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place on the date
that is two (2) business days following the date upon which the last of the
conditions set forth in Section 10 is satisfied or waived, or on
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such other date as may be agreed upon by WATP and Verso (the date of the
Closing being referred to as the "Closing Date").
SECTION 10. CONDITIONS PRECEDENT TO OBLIGATIONS.
(a) Conditions to Obligations of WATP. The obligation of
WATP to effect the transactions contemplated hereby shall be subject to the
satisfaction (or waiver by WATP) of the following conditions:
(i) Each of the representations and warranties
of Verso contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of such date and Verso shall have performed and complied in all
respects with the respective covenants and agreements to be performed by it at
or prior to the Closing Date.
(ii) Verso shall have executed and delivered to
WATP the Note, the Pledge Agreement, the Parent Security Agreement, the Control
Agreement and the Subordination Agreement.
(iii) Each of NACT and Telemate shall have
executed and delivered to WATP the Guaranty, the Subsidiary Security Agreement,
the Control Agreement and the Subordination Agreement.
(iv) The Court shall have entered an order
approving the transactions provided for in this Agreement (the "Final Order"),
which order shall be in form and substance consistent with this Agreement and
reasonably acceptable to WATP, and the Final Order shall not have been
reversed, stayed, modified or amended in any material respects prior to the
Closing Date. Without limiting the foregoing, the Final Order shall expressly
(A) approve the terms and conditions of this Agreement pursuant to Bankruptcy
Code ss. 363 and (B) contain a finding that the notice given in the bankruptcy
case of WATP with respect to the hearing on the Motion was proper, timely,
adequate and sufficient notice of the Motion under the circumstances.
(v) Silicon Valley Bank shall have executed and
delivered to WATP the Subordination Agreement and the Control Agreement.
(b) Conditions to Obligations of Verso. The obligation
of Verso to effect the transactions contemplated hereby shall be subject to the
satisfaction (or waiver by Verso) of the following conditions:
(i) Each of the representations and warranties
of WATP contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of such date, and WATP shall have performed and complied in all
respects with the respective covenants and agreements to be performed by it at
or prior to the Closing Date.
(ii) WATP shall have executed and delivered to
Verso or NACT and Telemate, as applicable, the Note, the Parent Security
Agreement, the Pledge Agreement, the
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Guaranty, the Subsidiary Security Agreement, the Control Agreement and the
Subordination Agreement.
(iii) The Court shall have entered the Final
Order, which order shall be in form and substance consistent with this
Agreement and reasonably acceptable to Verso, and the Final Order shall not
have been reversed, stayed, modified or amended in any material respects prior
to the Closing Date.
(iv) Silicon Valley Bank shall have executed and
delivered to Verso the Subordination Agreement and the Control Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated at any
time upon mutual written consent or by either party if the Final Order has not
been entered by May 31, 2002.
SECTION 12. MISCELLANEOUS.
(a) All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed given
when delivered personally, mailed by certified mail (postage pre-paid and
return receipt requested), sent by overnight courier service or faxed
(transmission confirmed), or otherwise actually received. All such notices and
other communications shall be delivered, mailed, couriered or faxed, (i) if to
WATP, at Resurgens Plaza, Suite 2210, 000 Xxxx Xxxxx Xxxxx Xxxx, Xxxxxxx, XX
(Facsimile No.: 404-233-2280), Attention: Xxxxxxx X. Xxxx, and (ii) if to
Verso, at 000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, XX 00000 (Facsimile No.:
678-589-3750), Attention: Xxxxxx X. Xxxx, or at such other address as WATP or
Verso may designate in writing to the other party.
(b) This Agreement shall be governed and construed in
accordance with the laws of the State of Georgia (without giving effect to
choice of law principles thereof). Each of the parties hereto irrevocably
agrees that any legal action or proceeding with respect to this Agreement or
the transactions contemplated hereby, or for recognition and enforcement of any
judgment in respect hereof, brought by any of the other parties hereto or any
of their successors or assigns shall be brought and determined in the Court and
each party hereby irrevocably submits with respect to any such action or such
proceeding for itself and in respect of its property, generally and
unconditionally, to the exclusive jurisdiction of the Court.
(c) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(d) This Agreement may be amended only by a written
instrument signed by WATP and Verso. No failure to exercise and no delay in
exercising, on the part of any party, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
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(e) All rights, covenants and agreements of the parties
contained in this Agreement shall be binding upon and inure to the benefit of
their respective successors and assigns (including, without limitation, any
trustees or liquidators). This Agreement, and the rights and obligations
hereunder, may not be assigned by either party without the prior written
consent of the other party.
(f) WATP and Verso will each bear their respective legal
and other fees and expenses in connection with the transactions contemplated
hereby.
(g) Each party hereto agrees to do all acts and to make,
execute and deliver such written instruments as shall from time to time be
reasonably necessary to carry out the terms and provisions of this Agreement.
(h) This Agreement, the other Transaction Documents, the
Subordination Agreement and the Control Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and supersede and preempt any prior written or oral agreements between the
parties hereto which may have related to the subject matter hereof in any way.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
WA TELCOM PRODUCTS CO., INC.
By: /s/ Xxxxxxx X. Xxxx
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Name: Xxxxxxx X. Xxxx
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Title: Vice President and Treasurer
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VERSO TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
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Title: Executive Vice President and CFO
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[SIGNATURE PAGE TO SETTLEMENT AGREEMENT AND GENERAL RELEASE]
