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                                                                     EXHIBIT 4.3

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
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. ZZ-7

Dated:   January 30, 2001

         Verso Technologies, Inc., a Minnesota corporation (the "Company"),
hereby certifies that, for value received, BAY HARBOR INVESTMENTS, INC. or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of 472,689 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 $2.00 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 any time and from time to time from and
after the date hereof and through and including the fifth anniversary of the
date hereof (the "Expiration Date").

         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.

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         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
11. 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
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 Purchase
Agreement among the Company and the Holder dated as of January 18, 2001, as
amended (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 6:30 P.M., New York City time, at any time and
from time to time on or after the date hereof to and including the Expiration
Date. At 6:30 P.M., New York City 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 12 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 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

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transferable without volume restrictions pursuant to Rule 144(k) 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 holder of record of such Warrant Shares as of the Date of Exercise of
this Warrant. The Company shall, upon request of the Holder, if available, use
its best efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.

                  (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 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

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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.

                  (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, 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 holders
of this Warrant) evidences of its indebtedness or assets 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

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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 examines 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"),
entitling any 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 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

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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 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, 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.

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                  (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

                                    (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 each Holder at their last addresses
as they shall appear upon the Warrant Register, at least twenty 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

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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 in one of the following manners:

                  (a)      Cash Exercise. The Holder may deliver immediately
available funds; or

                  (b)      Cashless Exercise. In the event, but only in such
event, that on or after the Effective Date (as defined in the Warrant Reg Rights
Agreement referred to in the Purchase Agreement) a Registration Statement
covering the resale of the Warrant Shares has not been declared effective, then
the Holder may surrender this Warrant to the Company together with a notice of
cashless exercise, in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:

                                    X = Y [(A-B)/A]

         where:

                                    X = the number of Warrant Shares to be
                                    issued to the Holder.

                                    Y = the number of Warrant Shares with
                                    respect to which this Warrant is being
                                    exercised.

                                    A = the average of the closing sale prices
                                    of the Common Stock for the five (5) trading
                                    days immediately prior to (but not
                                    including) the Date of Exercise.

                                    B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.

         8A.      Redemption of Warrants

         (a)      This Warrant may be redeemed at the option of the Company, in
whole or in part on a pro-rata basis, at any time if, at the time notice of such
redemption is given by the

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Company as provided in Section 8A(b) the Daily Price has exceeded $4.00 for the
fifteen consecutive trading days immediately preceding the date of such notice,
at a price equal to $.05 per Warrant (the "Redemption Price"). For the purpose
of the foregoing sentence, the term "Daily Price" shall mean, for any relevant
day, the closing bid price on that day as reported by the principal exchange or
quotation system on which prices for the Common Stock are reported. On the
redemption date the holders of record of redeemed Warrants shall be entitled to
payment of the Redemption Price upon surrender of such redeemed Warrants to the
Company.

                  (b)      Notice of redemption of Warrants shall be given at
least 45 days prior to the redemption date by mailing, by registered or
certified mail, return receipt requested, a copy of such notice to the holders
of record of Warrants at their respective addresses appearing on the books or
transfer records of the Company.

                  (c)      If at any time during the 45 day period referred to
in Section 8A(b) a registration statement with respect to the sale of the shares
of Common Stock underlying the Warrants shall not be in effect the notice of
redemption shall be deemed to be null and void ab initio.

         9.       Certain Exercise Restrictions.

                  (a)      A Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon such exercise and held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Company the number of shares of Common Stock it may
hold at the time of an exercise hereunder, unless the exercise at issue would
result in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular exercise hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be the responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount hereunder,
the Company shall notify the Holder of this fact and shall honor the exercise
for the maximum portion of this Warrant permitted to be exercised on such Date
of Exercise in accordance with the periods described herein and, at the option
of the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder)

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upon not less than sixty-one days prior notice to the Company. Other Holders
shall be unaffected by any such waiver.

                  (b)      A Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon such exercise and held by such Holder after application of this Section.
Since the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder, unless
the exercise at issue would result in the issuance of shares of Common Stock in
excess of 9.999% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular exercise hereunder and to the extent that the Holder determines that
the limitation contained in this Section applies, the determination of which
portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that, without regard to any other shares
that the Holder or its affiliates may beneficially own, would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and, at the option of the Holder, either keep
the portion of the Warrant tendered for exercise in excess of the permitted
amount hereunder for future exercises or return such excess portion of the
Warrant to the Holder. The provisions of this Section may be waived by a Holder
(but only as to itself and not to any other Holder) upon not less than sixty-one
days prior notice to the Company. Other Holders shall be unaffected by any such
waiver.

         10.      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.

         11.      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 6:30 p.m. (New York City 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
Section later than 6:30 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 business day following
the date of mailing, if sent

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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.
                                       400 Galleria Parkway, Suite 300
                                       Atlanta, GA 30339
                                       Facsimile No.: (678) 589-3750
                                       Attn: Chief Financial Officer

         With copies to:               Rogers & Hardin LLP
                                       2700 International Tower
                                       229 Peachtree Street, N.E.
                                       Atlanta, GA 30303
                                       Facsimile No.: (404) 525-2224
                                       Attn: Steven E. Fox, Esq.

         If to a Purchaser:            To the address set forth under such
                                       Purchaser's name on the signature pages
                                       to the Purchase Agreement.

         12.      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.

         13.      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 only in writing signed by the Company and the Holder and
their successors and assigns.

                  (b)      Subject to Section 13(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

                                       11
<PAGE>   12

New York, 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 New York, borough of
Manhattan, 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, 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

                  (f)      reasonable substitute therefor, and upon so agreeing,
shall incorporate such substitute provision in this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

                                       12
<PAGE>   13

         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                                       VERSO TECHNOLOGIES, INC.

                                       By: /s/ Juliet M. Reising
                                          -------------------------------------
                                          Name:  Juliet M. Reising
                                          Title: Executive Vice President and
                                                 Chief Financial Officer

                                       By: /s/ Steven A. Odom
                                          -------------------------------------
                                          Name:  Steven A. Odom
                                          Title: Chairman and Chief Executive
                                                 Officer

<PAGE>   14

                          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, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, 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)

         The undersigned hereby covenants and agrees that the undersigned (i)
will not sell or otherwise dispose of the shares of Common Stock to be delivered
pursuant to this Exercise Notice (the "Shares") except pursuant to an effective
registration statement (the "Registration Statement") under the Securities Act
of 1933, as amended (the "Act"), (ii) will sell the Shares only in accordance
with the Plan of Distribution set forth in the prospectus forming a part of the
Registration Statement (the ("Prospectus"), (iii) will comply with the
requirements of the Act when selling or otherwise disposing of the Shares,
including, but not limited to, the prospectus delivery requirements of the Act,
(iv) will not sell or otherwise dispose of, and will return immediately to the
Company for the purpose of placing a restrictive legend thereon, the Shares (and
any certificates representing the Shares, if applicable) upon notice from the
Company that the Prospectus may not be used for the sale of the Shares, and (v)
will 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 Act and Section 20 of the Securities Exchange Act of 1934, as
amended), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent permitted by applicable law, from

<PAGE>   15

and against all Losses (as defined in the Registration Rights Agreement dated
January 30, 2001 by and between the Company and the investors signatory thereto)
arising out of or based upon any breach by the undersigned of any of the
covenants contained herein.

         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)

<PAGE>   16

                               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:

----------------------------------------<PAGE>   1
                                                                     EXHIBIT 4.4

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.

                                                              NEW YORK, NEW YORK
                                                                 OCTOBER 6, 2000
                                                     (REISSUED JANUARY 30, 2001)
NO. 6
                                    $500,000

                            VERSO TECHNOLOGIES, INC.
                        [FORMERLY, ELTRAX SYSTEMS, INC.]
                           5.00% CONVERTIBLE DEBENTURE
                               DUE OCTOBER 5, 2001

         THIS DEBENTURE is one of a series of duly authorized and issued
debentures of VERSO TECHNOLOGIES, INC. (FORMERLY, ELTRAX SYSTEMS, INC.), a
Minnesota corporation, having a principal place of business at 400 Galleria
Parkway, Suite 300, Atlanta, Georgia 30339 (the "Company"), designated as its
5.00% Convertible Debentures, in the aggregate principal amount of Seven Million
Dollars ($7,000,000) (the "Debentures").

         FOR VALUE RECEIVED, the Company promises to pay to the order of Strong
River Investment, Inc., or its registered assigns (the "Holder"), the principal
sum of Five Hundred Thousand Dollars ($500,000), on October 5, 2001 or such
earlier date as the Debentures are required or permitted to be repaid as
provided hereunder (the "Maturity Date") and to pay interest thereon at the rate
of 5.00% 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 of twelve thirty-day months and shall accrue daily (but compound annually)
commencing on the Original Issue Date (as defined in Section 7) 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 7) in whose
name this Debenture is

<PAGE>   2

registered on the records of the Company regarding registration and transfers of
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 accrue daily, from the date such interest is due hereunder
through and including the date of payment), payable in cash.

         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 7) 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, any Debentures, free of
any claim of subordination, by the fifth Business Day (as defined in Section 6)
following the date the same shall become due and payable (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 7) or any other
Debenture (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 shall
commence, or there shall be commenced against the Company or any such
subsidiary, a case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the

                                       2
<PAGE>   3

Company commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect relating to
the Company or any subsidiary thereof or there is commenced against the Company
or any subsidiary thereof any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of sixty days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is entered; or the Company
or any subsidiary thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues undischarged or
unstayed for a period of sixty days; or the Company or any subsidiary thereof
makes a general assignment for the benefit of creditors; or the Company shall
fail to pay, or shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Company or any subsidiary
thereof shall by any act or failure to act expressly indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or other
action is taken by the Company or any subsidiary thereof for the purpose of
effecting any of the foregoing;

                           (iv)     the Company shall default in any of its
payment obligations under any other Debenture of 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;

                           (v)      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;

                           (vi)     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 6));

                           (vii)    an Underlying Shares Registration Statement
shall not have been declared effective by the Commission (as defined in Section
6) on or prior to the 175th day after the Original Issue Date;

                                       3
<PAGE>   4

                           (viii)   if, during the Effectiveness Period (as
defined in the Registration Rights Agreement (as defined in Section 8)), the
effectiveness of the Underlying Shares Registration Statement lapses for any
reason or the Holder shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under an Underlying Shares
Registration Statement, in either case, for an aggregate of more of than sixty
Trading Days (which need not be consecutive Trading Days) in any twelve month
period;

                           (ix)     an Event (as defined in the Registration
Rights Agreement) shall not have been cured to the reasonable satisfaction of
the Holder prior to the expiration of thirty days from the Event Date (as
defined in the Registration Rights Agreement) relating thereto (other than an
Event resulting from a failure of an Underlying Shares Registration Statement to
be declared effective by the Commission on or prior to the 175th day after the
Original Issue Date, which shall be covered by Section 3(a)(vii));

                           (x)      the Company shall fail for any reason to
deliver certificates to a Holder prior to the seventh (7th) Trading Day after a
Delivery Date (as defined in Section 4(e)) pursuant to and in accordance with
Section 4(b) 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;
or

                           (xi)     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 (and, at the Holder's option, all other Debentures then
held by such Holder), 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 sum of (i) the Mandatory Prepayment Amount (as
defined in Section 7) plus (ii) the product of (A) the number of Underlying
Shares issued in respect of conversions hereunder within thirty (30) days of the
date of a declaration of an Event of Default and then held by the Holder and (B)
the closing sales price of the Common Stock as reported by Bloomberg L.P. (or
the successor to its function of reporting share prices) on the date prepayment
is due or the date the full prepayment price is paid, whichever is greater.
Interest shall accrue on the prepayment amount hereunder from the seventh
Business Day after such amount is due (being the date of an Event of Default)
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. All Debentures and Underlying Shares 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 Holder at any
time

                                       4
<PAGE>   5

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 Debentures to be converted. Each 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 "Holder Conversion Date"). If no
Holder Conversion Date is specified in a Holder Conversion Notice, the Holder
Conversion Date shall be the date that such Holder Conversion Notice is deemed
delivered hereunder. Subject to Section 4(b), each Holder Conversion Notice,
once given, shall be irrevocable. If the Holder is converting less than all of
the principal amount represented by the Debenture(s) tendered by the Holder with
the Holder 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.

                  (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 (i) the closing sales price of the Common
Stock as reported by Bloomberg L.P. (or any successor to its function of
reporting share prices) exceeds $6.72 (subject to equitable adjustment in the
event of stock splits and similar events) for twenty consecutive Trading Days
following the date on which an Underlying Shares Registration Statement shall
have first been declared effective by the Securities and Exchange Commission
(the "Effective Date"), (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 during the entire
twenty Trading Day period and on the Company Conversion Date (as defined below)
or Underlying Shares may be sold by the Holder subject to such conversion
without volume limitation under Rule 144(k) promulgated under the Securities Act
on the Company Conversion Date, (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, (v) such conversion
would not result in a violation of Section 4d(i), (ii) or (iii), and (vi) the
Company shall not have been more than three Trading Days late in delivering any
conversion shares pursuant to Section 4(e).

                                       5
<PAGE>   6

                           (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 Notice"). 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 three 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 (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) .000139 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) after the Effective Date (as defined in Section 7) such shares
of Common Stock (x) are not registered for resale pursuant to an effective
Underlying Shares Registration Statement and (y) may not be sold without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act (as
defined in Section 7), as determined by counsel to the Company pursuant to a
written opinion letter, addressed to the

                                       6
<PAGE>   7
Company's transfer agent in the form and substance reasonably acceptable to the
applicable Holder and such transfer agent; (3) the Common Stock is not listed or
quoted for trading on the NASDAQ or on a Subsequent Market; or (4) the issuance
of such shares of Common Stock would result in a violation of Sections 4(d)(i),
(ii) or (iii), 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 ten 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) .000139 and
(y) the number of days for which such principal amount was outstanding, less any
interest previously paid in cash.

                  (d)      Certain Conversion Restrictions.

                           (i)      A Holder may not convert Debentures to the
extent such conversion would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 4.999% of
the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of the Debentures held by such Holder after application
of this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the issuance of shares
of Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Debentures
that, without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than sixty-one days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.

                           (ii)     A Holder may not convert Debentures to the
extent such conversion would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of
the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of the Debentures held by such Holder after application
of this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of a conversion

                                       7
<PAGE>   8

hereunder, unless the conversion at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Debentures
that, without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than sixty-one days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.

                           (iii)    If the Common Stock is then listed for
trading on the NASDAQ National Market or the Nasdaq SmallCap Market and the
Company has not obtained the Shareholder Approval (as defined below), then the
Company is precluded from issuing at a Conversion Price or, with respect to the
Warrants 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 first 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 5,160,577
shares of Common Stock (the "Issuable Maximum") upon conversion of the
Debentures and exercise of the Warrants (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 first closing of 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 shareholders (the
"Shareholder 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 requesting a conversion 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 the Debentures and as
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 Warrants (but only those shares issued at an exercise price
less than the Market Price). With respect to the principal amount of Debentures
tendered for conversion at issue for which a conversion in accordance with the
Conversion Price would, when aggregated with all shares of Common

                                       8
<PAGE>   9

Stock previously issued on account of conversions of Debentures and payment of
interest thereon and upon exercise of Warrants (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 converting Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Shareholder 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
shareholders of the Company in connection with the Shareholder Approval
contemplated hereby and (y) the 90th day after such request (such date the
"Approval Date"), or (2) pay cash to the converting Holder in an amount equal to
the Mandatory Prepayment Amount for the Excess Principal. If the converting
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
Shareholder 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 converting 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 converting Holder, accruing daily
from the Conversion Date until such amount, plus all such interest thereon, is
paid in full. In the event there is more than one holder of Debentures, the
Issuable Maximum applicable to each Debenture shall be determined pro rata by
reference to the percentage of the principal amount of all Debentures held by
such Holder, provided that if one or more Debentures shall have been prepaid or
converted without having been issued its pro rata allocated portion of the
Issuable Maximum such unissued shares shall be allocated pro rata to the
remaining Holders. 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 Shareholder Approval.
Shares delivered on account of conversion hereunder and not held by the Holder
or its affiliates may cast votes on the matter of Shareholder 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 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 or in the event that the Holder does not execute and deliver
to the Company by fax the undertaking set forth in the Company Conversion Notice
within two Trading Days after a Company Conversion Date (provided that in such
event, the Company shall cause any legend to be removed immediately upon receipt
of such undertaking)) representing the number of shares of Common Stock being
acquired upon the conversion of Debentures, (B) Debentures in a principal amount
equal to the principal amount of Debentures not converted, and (C) a bank check
in the amount of accrued and unpaid

                                       9
<PAGE>   10

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 Debentures until Debentures are delivered for conversion
to the Company, or the Holder notifies the Company that such Debentures have
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 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 applicable 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 Debentures 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 such 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 a
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 such 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 Holders 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 Debentures or as payment of
interest thereon by the Delivery Date, the Holder may, by notice to the Company,
require the Company to issue shares of Common Stock pursuant to Section 4(c),
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 such Holder demand. Any such shares will be subject to the
provision 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 to 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

                                       10
<PAGE>   11

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 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 the
Debentures on any Conversion Date (the "Conversion Price") shall equal $1.19,
subject to adjustment as provided for in subsection (i) through (ix) below.

                  (i)      If the Company, at any time while any Debentures are
         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 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 any Debentures are
         outstanding, shall issue rights, options or warrants to all holders of
         Common Stock (and not to Holders) 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

                                       11
<PAGE>   12
         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 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 on or after January 30, 2001 while any Debentures are
         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"),
         entitling any Person to acquire shares of Common Stock at a price per
         share (such price per share being hereinafter called the "New PPS")
         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
         reduced to the New PPS. Such adjustment shall be made whenever such
         shares of Common Stock or Common Stock Equivalents are issued. 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.

                  (iv)     If the Company, at any time while Debentures are
         outstanding, shall distribute to all holders of Common Stock (and not
         to Holders) 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 Debentures shall thereafter be

                                       12
<PAGE>   13

         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 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 Holders shall
         have the right thereafter to, at their 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
         Holders of the Debentures 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 its outstanding principal amount of Debentures, 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 each 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

                                       13
<PAGE>   14

         dividend on or a redemption of the Common Stock; (C) 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; (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; (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 the Debentures, and shall
         cause to be mailed to the Holders at their last addresses as they shall
         appear upon the stock books of the Company, at least twenty 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. Holders are entitled to convert Debentures 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 then fair market
         value) in one or a series of related transactions, a 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 Debentures 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 such 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 Debentures
         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

                                       14
<PAGE>   15

         aggregate stated value or in such face amount, as the case may be,
         equal to the aggregate principal amount of Debentures then held by such
         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 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 a Holder of
         Debentures set forth herein and the agreements pursuant to which the
         Debentures were 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 Holders 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 the Debentures and payment of
interest on the Debentures, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holders, 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(b)) upon the conversion of the
outstanding principal amount of the Debentures 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.

                                       15
<PAGE>   16

         (i)      The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
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 of such Debentures so converted 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 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 the Debentures 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; or (ii) in any
case where the shares of Common Stock or the Common Stock Equivalents are issued
or issuable (A) upon conversions of the Debentures, (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 Holders 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 400 Galleria Parkway, Suite 300, Atlanta, GA 30339, Facsimile
No.: (678) 589-3780, attention Chief Financial Officer, or such other address or
facsimile number as the Company may specify for such purposes by notice to the
Holders delivered in accordance with this Section, with a copy to (other than
for Conversion Notices) to Jaffe, Raitt, Heuer & Weiss P.C., One Woodward
Avenue, Suite 2400, Detroit, MI 48226. 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 each Holder at the facsimile telephone number or address
of such Holder appearing on the books of the Company, 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 6:30 p.m. (New York City
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 6:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) 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.

                                       16
<PAGE>   17

         Section 5. [Intentionally omitted].

         Section 6. 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 now or hereafter issued under the terms set forth herein. As long as
there are Debentures outstanding, the Company shall not and shall cause it
subsidiaries not to, without the consent of the Holders, (i) amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holders (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. The Company may not prepay principal amount under the Debentures
without the consent of the Holders.

         Section 7. 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 New York are authorized or required
by law or other government action to close.

                  "Cereus Merger" means the consummation of the transactions
contemplated by the Merger Agreement.

                  "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 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.

                                       17
<PAGE>   18
                  "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
greater of (A) 120% of the principal amount of Debentures to be prepaid, plus
all accrued and unpaid interest thereon, and (B) the principal amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon, divided
by the Conversion Price on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is
paid in full, whichever is less, multiplied by the closing sales price of the
Common Stock as reported by Bloomberg L.P. (or the successor to its function of
reporting share prices) on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise becomes due or (y) the date the Mandatory Prepayment
Amount is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of such principal amount.
Notwithstanding the foregoing, if the event giving rise to the obligation to pay
any Mandatory Prepayment Amount shall be a merger or business combination or
sale that would constitute a Change of Control Transaction, then (x) if the
consideration to be received by the Holder were it to participate in such
transaction would result in a premium of 20% or more above the outstanding
Debenture principal amount and interest hereunder, clause (A) in this definition
shall be deleted for such purposes and (y) if the consideration to be received
by the Holder were it to participate in such transaction would result in a
premium of 10% to 19.99% above the outstanding Debenture principal amount and
interest hereunder, clause (A) in this definition shall equal 110%.

                  "Merger Agreement" means the Agreement and Plan of Merger
dated as of June 12, 2000 by and among the Company and Cereus Technology
Partners, Inc.

                  "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 a 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

                                       18
<PAGE>   19

Appraiser selected in good faith by the Holders of a majority in interest of the
principal amount of Debentures then outstanding.

                  "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 Purchase
Agreement, dated July 27, 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 July 27, 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.

                  "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 a The Nasdaq NMS, or (b) if the shares of Common Stock are
not listed on The Nasdaq NMS, 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 in the event that
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 Debentures 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 resale of the Underlying
Shares and naming the Holder as a "selling stockholder" thereunder.

         Section 8. 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.

                                       19
<PAGE>   20
         Section 9. 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 a 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 10. 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 11. (a) Subject to the provisions of this Section 11 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 11(c) hereof,
(i) 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,
including, without limitation, any Put Prepayment Amount, and (ii) 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), including, without limitation, any Put Prepayment Amount, 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 Default or 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 other than as expressly permitted in this Section
11, Holder shall forthwith deliver same to

                                       20
<PAGE>   21

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 11 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 11 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 11 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 11, 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 or any property of

                                       21
<PAGE>   22

any subsidiary of Company, for an order for relief under any chapter of the
United States bankruptcy code, as an 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 all indebtedness,
liabilities, debit balances, covenants and duties at any time or times owed by
Company or its subsidiaries to Holder, whether direct or indirect, absolute or
contingent, secured or unsecured, primary or secondary, joint or several,
liquidated or unliquidated, due or to become due, now existing or

                                       22
<PAGE>   23

hereafter arising, including, without limitation, (i) all liabilities of Company
to Holder under this Debenture, the Purchase Agreement or the Registration
Rights Agreement, (ii) any debt, liability or obligation owing by Company to any
other Person which Holder may have obtained by assignment, pledge, purchase or
otherwise, (iii) all interest, fees, charges, expenses and attorneys' fees for
which Company is now or hereafter becomes liable to pay to Holder under any
agreement or by law, and (iv) any renewals, extensions or refinancings of any of
the foregoing.

         Section 12. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, 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, 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 13. 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 14. 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 15. 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]

                                       23
<PAGE>   24

         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:      /s/ Juliet M. Reising
                                      -----------------------------------------
                                      Name:     Juliet M. Reising
                                      Title:    Executive Vice President and
                                                Chief Financial Officer

Attest:

By:      /s/ Steven A. Odom
     ---------------------------------------
     Name:     Steven A. Odom
     Title:    Chief Executive Officer

                                       24
<PAGE>   25
                                    EXHIBIT A
                            HOLDER 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.

The undersigned hereby covenants and agrees that the undersigned (i) will not
sell or otherwise dispose of the shares of Common Stock to be delivered pursuant
to this Conversion Notice (the "Shares") except pursuant to an effective
registration statement (the "Registration Statement") under the Securities Act
of 1933, as amended (the "Act"), (ii) will sell the Shares only in accordance
with the Plan of Distribution set forth in the prospectus forming a part of the
Registration Statement (the ("Prospectus"), (iii) will comply with the
requirements of the Act when selling or otherwise disposing of the Shares,
including, but not limited to, the prospectus delivery requirements of the Act,
(iv) will not sell or otherwise dispose of, and will return immediately to the
Company for the purpose of placing a restrictive legend thereon, the Shares (and
any certificates representing the Shares, if applicable) upon notice from the
Company that the Prospectus may not be used for the sale of the Shares, and (v)
will 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 Act and Section 20 of the Securities Exchange Act of 1934, as
amended), 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 defined in the Registration Rights Agreement dated July 27, 2000 by
and between the Company and the investors signatory thereto) arising out of or
based upon any breach by the undersigned of any of the covenants contained
herein.

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

<PAGE>   26

                                    EXHIBIT B

                            COMPANY CONVERSION NOTICE

(To be Executed by the Company to Require Conversion of
Debentures)

The undersigned authorized officer of the 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
Dentures 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

         In order to induce the Company to issue shares without restrictive
legend, the undersigned hereby covenants and agrees that the undersigned (i)
will not sell or otherwise dispose of the shares of Common Stock to be delivered
pursuant to this Conversion Notice (the "Shares") except pursuant to an
effective registration statement (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), (ii) will sell the Shares only
in accordance with the Plan of Distribution set forth in the prospectus forming
a part of the Registration Statement (the ("Prospectus"), (iii) will comply with
the requirements of the Act when selling or otherwise disposing of the Shares,
including, but not limited to, the prospectus delivery requirements of the Act,
(iv) will not sell or otherwise dispose of, and will return immediately to the
Company for the purpose of placing a restrictive legend thereon, the

                                       2
<PAGE>   27
Shares (and any certificates representing the Shares, if applicable) upon notice
from the Company that the Prospectus may not be used for the sale of the Shares,
and (v) will 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 Act and Section 20 of the Securities Exchange Act of 1934,
as amended), 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 defined in the Registration Rights Agreement dated July
27, 2000 by and between the Company and the investors signatory thereto) arising
out of or based upon any breach by the undersigned of any of the covenants
contained herein.

                                    ------------------------------------
                                    Signature

                                    ------------------------------------
                                    Name

                                       3

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