Document:

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                                                                    EXHIBIT 10.2

         PURCHASE AGREEMENT dated as of December 31, 2000 by and between Verso
Technologies, Inc., a Minnesota corporation (formerly known as Eltrax System,
Inc.) (the "Company"), and those persons signatory hereto (each such person
being called a "Purchaser" and all such persons, collectively called the
"Purchasers").

         WHEREAS the Company and the Purchasers are parties to a Convertible
Debenture Purchase Agreement dated as of July 27, 2000, (the "DP Agreement");
and

         WHEREAS pursuant to the DP Agreement, the Purchasers have purchased in
the aggregate $7,000,000 of the Company's 5.00% Convertible Debentures (the "Old
Debentures").

         NOW, THEREFORE, the parties hereby agree as follows:

                                    ARTICLE 1

         1.1      General. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the DP Agreement.

         1.2      Repurchase of Old Debentures. (a) The Company may repurchase
at its sole election up to $5 million of Old Debentures by advising the
Purchaser in writing of its election to purchase such Old Debentures which
notice may be given at any time prior to January 10, 2001, (the "Repurchase
Notice"). The Repurchase Notice shall contain the amount of the Old Debentures
to be repurchased, which amount must be at least $1 million but in no event
greater than $5 million (the principal amount of the Old Debentures to be
repurchased is hereinafter called the "Repurchased Principal"). One-half of the
aggregate of the Old Debentures to be repurchased shall be repurchased from each
Purchaser.

                  (b)      The closing of the repurchase of the Old Debentures
(the "Repurchase Closing") shall take place at the offices of Morse, Zelnick,
Rose & Lander, LLP, 450 Park Avenue, New York, N.Y. 10022 on February 5, 2001
(the "Repurchase Date").

                  (c)      At the Repurchase Closing, the parties shall deliver
or shall cause to be delivered the following: (1) each Purchaser shall deliver
to the Company Old Debentures representing no less than the aggregate principal
amount of Old Debentures to be repurchased from such Purchaser, and (2) the
Company shall deliver to each Purchaser (i) an amount equal to 100% of the
principal amount of the Old Debentures to be repurchased from such Purchaser
plus all accrued and unpaid interest with respect thereto in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by each Purchaser for such purpose (ii) to the extent that the
principal amount of the Old Debentures delivered to the Company shall be in
excess of the principal amount of the Old Debentures to be purchased from such
Purchaser, debentures in a form identical to the Old Debentures except that the

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principal amount thereof shall be equal to such excess and (iii) a legal opinion
of Rogers & Hardin LLP outside counsel to the Company, in the form of Exhibit A.

         1.3      Conversion Price of Old Debentures. (a) If the Repurchased
Principal shall exceed $4.2 Million, then the conversion price of the Old
Debentures shall be fixed at a price equal to the lesser of (i) the "Adjusted
Conversion Price" (as determined as provided in Section 1.3(b)) and (ii) the
conversion price of the Old Debentures outstanding immediately following the
Repurchase Closing, and all such outstanding Old Debentures shall be amended to
reflect such adjustment.

                  (b)      The "Adjusted Conversion Price" shall be equal to (i)
the average closing bid price of a share of common stock of the Company as
reported on the NASDAQ National Market for the ten Trading Days preceding the
Repurchase Date, multiplied by (ii) 85%.

         1.4      Termination. If the Company shall not have given the
Repurchase Notice to the Purchasers, by January 10, 2001, this Agreement shall
terminate and be of no further force and effect.

         1.5      Commitment to Purchase Additional Debentures. The Purchasers
hereby agree with the Company that subject to the provisions of this Agreement,
they shall severally and not jointly, purchase from the Company that amount of
the Company's Series A 5.00% Convertible Debentures, which shall be in Form of
Exhibit B annexed hereto (the "Debentures") as shall in the aggregate be equal
to the Repurchased Principal (the "Commitment Amount").

         1.6      Purchase and Sale of Additional Debentures. At any time after
the Repurchase Date to and including the 365th day after the Repurchase Date
(such period being called the "Put Period"), the Company may notify the
Purchasers in writing that it wishes to issue and sell to the Purchasers exactly
$1,000,000 of its Debentures (a "Put Notice"), provided that after the Company
has sold Debentures to the Purchasers that equal that portion of the Commitment
Amount that is evenly divisible by $1,000,000, then the Company may notify the
Purchaser in writing that it wishes to issue and sell to the Purchasers
Debentures in an amount not less than the remainder of the Commitment Amount.
Within 10 days of the receipt by the Purchasers of the first Put Notice (the
"Initial Put Notice"), the Purchasers may advise the Company that they wish to
purchase up to $1,000,000 of additional Debentures in which event such amount of
additional Debentures shall be sold to the Purchasers at the Initial Closing (as
defined below). Each Purchaser shall purchase 50% of such Debentures. The
Debentures to be sold pursuant to the Initial Put Notice are hereinafter called
the "Initial Tranche Debentures". Any Debentures to be sold pursuant to any
other Put Notice (an "Additional Put Notice") are hereinafter called "Additional
Tranche Debentures".

         1.7      The Initial Tranche Closing. The closing of the purchase and
sale of the Initial Tranche Debentures (the "Initial Closing") shall take place
at the offices of Morse Zelnick Rose & Lander LLP ("MZRL"), 450 Park Avenue,
Suite 902, New York, New York 10022,

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on the fifteenth Trading Day following the giving of the Initial Put Notice. The
date of the Initial Closing is hereinafter referred to as the ("Initial Closing
Date"). At the Initial Closing, the parties shall deliver or shall cause to be
delivered the following: (a) the Company shall deliver to each Purchaser (i)
Debentures in the aggregate principal amount of 50% of the Initial Tranche
Debentures, which Debentures shall be dated the Initial Closing Date, and shall
mature one year after the Initial Closing Date and shall be registered in the
name of such Purchaser, (ii) Common Stock purchase warrants, in the form of
Exhibit C, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire such number of shares of Common Stock
as is equal to 20% of the shares of Common Stock into which the Initial Tranche
Debentures acquired by such Purchaser are initially convertible, at a price per
share equal to 110% of the initial Conversion Price of the Initial Tranche
Debentures (the "Initial Warrants"), (iii) a legal opinion of Rogers & Hardin
LLP outside counsel to the Company, in the form of Exhibit D, (iv) an executed
Registration Rights Agreement, dated the Initial Closing Date, among the Company
and the Purchasers, in the form of Exhibit E (the "Registration Rights
Agreement"), and (v) Transfer Agent Instructions, in the form of Exhibit F,
delivered to and acknowledged by the Company's transfer agent (the "Transfer
Agent Instructions"); and (b) each Purchaser shall deliver to the Company (i) an
amount equal to principal amount of the Initial Tranche Debentures being
purchased by such Purchaser in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose, and (ii) an executed Registration Rights Agreement.

         1.8      Additional Closings. (a) Subject to the terms and conditions
set forth in this Agreement, the Company shall have during the Put Period the
right to deliver to the Purchasers an Additional Put Notice, requiring the
Purchasers to purchase (severally, and not jointly) Additional Tranche
Debentures. An Additional Put Notice may be delivered no earlier than the 35th
Trading Day after the date of the most recent sale of Debentures to the
Purchasers pursuant to this Agreement, unless otherwise consented to by the
Purchasers in writing. Notwithstanding anything to the contrary that may be
contained herein, in no event shall the Purchasers be required to purchase in
the aggregate Debentures in excess of the Commitment Amount and any Put Notice
given after the purchase of Debentures by the Purchasers in an aggregate amount
equal to the Commitment Amount shall be null and void ab initio.

                  (b)      The closing of the purchase and sale of any
Additional Tranche Debentures (an "Additional Closing") shall take place at the
offices of Morse Zelnick Rose & Lander LLP ("MZRL"), 450 Park Avenue, Suite 902,
New York, New York 10022, on the fifteenth Trading Day following the giving of
an Additional Put Notice. The date of each such Additional Closing is
hereinafter referred to as (an "Additional Closing Date"). At each Additional
Closing, the parties shall deliver or shall cause to be delivered the following:
(a) the Company shall deliver to each Purchaser (i) Debentures in the aggregate
principal amount of 50% of such Additional Tranche Debentures, which Debentures
shall be dated such Additional Closing Date, and shall mature one year after
such Additional Closing Date and shall be registered in the name of such
Purchaser, (ii) Common Stock purchase warrants, in the form of Exhibit C,
registered in the name of such Purchaser, pursuant to which such Purchaser shall
have the right to acquire such number of shares of Common Stock as is equal to
20% of the

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shares of Common Stock into which such Additional Tranche Debentures acquired by
such Purchaser are initially convertible, at a price per share equal to 110% of
the initial Conversion Price of such Additional Tranche Debentures
(collectively, the "Additional Warrants"), and (b) each Purchaser shall deliver
to the Company an amount equal to principal amount of the Additional Tranche
Debentures being purchased by such Purchaser in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose.

         1.9      Certain Defined Terms. For purposes of this Agreement,
"Business Day," "Commission," "Conversion Price," "Effective Date," "Exchange
Date," "Original Issue Date," "Person," "Trading Day" and "Underlying Shares
Registration Statement" shall have the meanings set forth in the Debentures. The
Initial Warrants and Additional Warrants are collectively referred to as the
"Warrants."

                                    ARTICLE 2

                         REPRESENTATIONS AND WARRANTIES

         2.1      Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each Purchaser:

                  (a)      Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Minnesota with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is
an entity, duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the Company
and the Subsidiaries is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not be reasonably expected to, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Securities (as
defined below) or any of this Agreement, the Registration Rights Agreement, the
Debenture or the Transfer Agent Instructions (collectively, the "Transaction
Documents"), (y) have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").

                  (b)      Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of

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the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and no
further action is required by the Company. Each of the Transaction Documents has
been duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity) and
except to the extent that rights to indemnification and contribution contained
in this Agreement may be limited by federal or state securities laws on public
policy relating thereto. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, by-laws or other charter or organizational documents.

                  (c)      Capitalization. The number and type of authorized,
issued and outstanding capital stock of the Company is set forth in Schedule
2.1(c). Except as disclosed in Schedule 2.1(c), the Company owns all of the
capital stock of each Subsidiary. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of securities of the Company or
any Subsidiary entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company or any Subsidiary by virtue of any
of the Transaction Documents. Except as a result of the purchase and sale of the
Debentures and the Warrants and except as disclosed in Schedule 2.1(c), there
are no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.

                  (d)      Issuance of the Debentures and the Warrants. The
Debentures and the Warrants will be duly and validly issued, free and clear of
all liens, encumbrances and rights of first refusal of any kind (collectively,
"Liens"). On the date hereof and on each Closing Date, the Company will have
(and will, at all times while Debentures and Warrants are outstanding, maintain)
an adequate reserve of duly authorized shares of Common Stock, reserved for
issuance to the holders of such Debentures and Warrants, to enable it to perform
its conversion, exercise and other obligations thereunder. The shares of Common
Stock issuable upon conversion of the Debentures and upon exercise of the
Warrants are collectively referred to herein as the "Underlying Shares." The
Debentures, the Warrants and the Underlying Shares are collectively referred to
herein as, the "Securities." When issued in accordance with the Debentures and
the Warrants, the Underlying Shares will be duly authorized, validly issued,
fully paid and nonassessable, and free and clear of all Liens.

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                  (e)      No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not reasonably be expected to, individually or
in the aggregate, have or result in a Material Adverse Effect. The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, could not reasonably be expected to have or
result in a Material Adverse Effect.

                  (f)      Filings, Consents and Approvals. Neither the Company
nor any Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Commission of the registration statement meeting
the requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchasers (the "Underlying Shares
Registration Statement"), (iii) applicable Blue Sky filings, (iv) the consent of
the "Lenders" under the Revolving Credit and Security Agreement dated March 14,
2000, among Company, the other borrowers from time to time party thereto, the
various lenders who are or may become parties thereto as lenders ("Lenders"),
and PNC Bank, National Association, in its capacity as administrative and
collateral agent for the Lenders (together with its successors in such capacity,
"Agent") (as at any time amended, the "PNC Agreement"), and (v) in all other
cases where the failure to obtain such consent, waiver, authorization or order,
or to give such notice or make such filing or registration could not reasonably
be expected to have or result in, individually or in the aggregate, a Material
Adverse Effect (collectively, the "Required Approvals").

                  (g)      Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which

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(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could reasonably be
expected to, individually or in the aggregate, have or result in a Material
Adverse Effect.

                  (h)      No Default or Violation. Except for the Company's
failure to achieve the net cash flow required by the PNC Agreement for each of
the first, second and third quarter of fiscal 2000, neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, could
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgment or order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not reasonably be expected to, individually or in the aggregate,
have or result in a Material Adverse Effect.

                  (i)      Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.

                  (j)      SEC Documents; Financial Statements. The Company has
filed all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials, together with the Registration Statement on
Form S-4 dated August 29, 2000, being collectively referred to herein as the
"SEC Documents" and, together with the Schedules to this Agreement the
"Disclosure Materials") on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Documents prior to the expiration
of any such extension. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Documents as
required under the Exchange Act. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with

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respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the consolidated financial position
of the Company and its Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since December 31, 1999, except as specifically disclosed in the Disclosure
Materials or Schedule 2.1(j), (a) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements, including the
notes thereto, pursuant to GAAP or required to be disclosed in filings made with
the Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans with respect to its capital stock, stock purchase plan and earnout
agreements with acquired companies), or purchased or redeemed (or made any
agreements to purchase or redeem) any shares of its capital stock.

                  (k)      Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  (l)      Certain Fees. No fees or commissions will be payable
by the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.

                  (m)      [INTENTIONALLY OMITTED]

                  (n)      Seniority. Except as disclosed in Schedule 2.1(n), as
of the date of this Agreement, no indebtedness of the Company could be Senior
Indebtedness as defined in Section 11 of the Debenture.

                  (o)      Listing and Maintenance Requirements. The Company has
not, in the twelve months preceding the date hereof, received written notice
from any stock exchange, market or trading facility on which the Common Stock is
or has been listed (or on which it has been quoted) to the effect that the
Company is not in compliance with the listing or

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maintenance requirements of such exchange, market or trading facility. The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.

                  (p)      Patents and Trademarks. The Company and its
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and rights which are necessary or material for use in connection with
their respective businesses as described in the SEC Documents, except where the
failure to so have could not have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or its Subsidiaries violates or infringes upon the rights of any Person.
To the best knowledge of the Company, all such Intellectual Property Rights are
enforceable, and there is no existing infringement by another Person of any of
the Intellectual Property Rights.

                  (q)      Registration Rights; Rights of Participation. Except
as set forth on Schedule 6(b) to the Registration Rights Agreement, the Company
has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which have
not been satisfied. No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.

                  (r)      Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents and are operating their
respective businesses in compliance with the terms thereof, except where the
failure to possess such permits or operate their business could not,
individually or in the aggregate, reasonably be expected to have or result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.

                  (s)      Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens, [except for Liens of the Agent and Cereus] and Liens that do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and its Subsidiaries are in compliance in all
material respects.

                  (t)      Absence of Certain Proceedings. Except as described
in the SEC Documents, (i) neither the Company nor any Subsidiary, nor any
director or officer thereof, is

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or has been the subject of any Action involving (A) a claim of violation of or
liability under federal or state securities laws or (B) a claim of breach of
fiduciary duty; (ii) the Company does not have pending before the Commission any
request for confidential treatment of information, and the Company has no
knowledge of any expected such request that could be made prior to the Effective
Date; and (iii) there has not been, and to the best of the Company's knowledge,
there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company.

                  (u)      Labor Relations. Except as disclosed in Schedule
2.1(u), no material labor problem exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company.

                  (v)      Non-Public Information. The Company confirms that
neither it nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information with respect to the
Company that constitutes or might constitute material non-public information.
The Company understands and confirms that the Purchasers shall be relying on the
foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

         2.2      Representations and Warranties of the Purchasers. Each
Purchaser hereby for itself and for no other Purchaser, represents and warrants
to the Company as follows:

                  (a)      Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of this Agreement and the Registration Rights Agreement and the
consummation by it of the transaction contemplated hereby and thereby, including
purchase by such Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed by such Purchaser,
and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity) and
except to the extent that rights to indemnification and contribution contained
in this Agreement may be limited by federal or state securities laws on public
policy relating thereto.

                                       10
<PAGE>   11

                  (b)      Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of the Registration Rights Agreement to sell or otherwise dispose of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business. Such Purchaser
does not have any agreement or understanding, directly or indirectly, with any
Person to distribute the Securities.

                  (c)      Purchaser Status. At the time such Purchaser was
offered the Securities, it was, at the date hereof it is, and on each Closing
Date and on each exercise date under the Warrant it will be an "accredited
investor" as defined in Rule 501(a) under the Securities Act.

                  (d)      Experience of such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Securities,
and has so evaluated the merits and risks of such investment.

                  (e)      Ability of such Purchaser to Bear Risk of Investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and is able to afford a complete loss of such investment.

                  (f)      Access to Information. Such Purchaser acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.

                  (g)      Reliance. Such Purchaser understands and acknowledges
that (i) the Securities are being offered and sold to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of such
exemption depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations, and such Purchaser hereby
consents to such reliance.

                                       11
<PAGE>   12

                  (h)      Limitation. The Company acknowledges and agrees that
no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
this Section 2.2.

                                    ARTICLE 3

                         OTHER AGREEMENTS OF THE PARTIES

         3.1      Transfer Restrictions.

                  (a)      Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act, or pursuant to an
available exemption from or in a transaction not subject to the registration
requirements of the Securities Act, and in compliance with any applicable
federal and state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company,
except as otherwise set forth herein, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, such counsel and the form and substance of which opinion shall be
reasonably satisfactory to counsel for the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. Notwithstanding the foregoing, the Company, without requiring a
legal opinion as described in the immediately preceding sentence, hereby
consents to and agrees to register on the books of the Company and with any
transfer agent for the securities of the Company any transfer of Securities by a
Purchaser to an Affiliate (as such term is defined in Rule 501(a) under the
Securities Act) of such Purchaser or to one or more funds or managed accounts
under common management with such Purchaser, and any transfer among any such
Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.

                  (b)      The Purchasers agree to the imprinting, so long as is
required by Section 3.1(c), of the following legend on the Securities:

         NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
         SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE 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

                                       12
<PAGE>   13

         REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
         ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

                  (c)      Underlying Shares shall not contain the legend set
forth above nor any other legend if the conversion of Debentures or exercise of
the Warrants occurs at any time while an Underlying Shares Registration
Statement for the applicable Underlying Shares is effective under the Securities
Act or, in the event there is not an effective Underlying Shares Registration
Statement, at such time, in the opinion of counsel to the Company, such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the Effective Date. The Company agrees that, in the event any Underlying Shares
are issued with a legend in accordance with this Section 3.1(b), it will, within
three Trading Days after request therefor by a Purchaser, provide such Purchaser
with a certificate or certificates representing such Underlying Shares, free
from such legend at such time as such legend would not have been required under
this Section 3.1(b) had such issuance occurred on the date of such request. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company, which enlarges the restrictions of transfer set
forth in this Section.

         3.2      Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Debentures and (ii)
exercise of the Warrants will result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Underlying Shares
upon (x) conversion of the Debentures and (y) exercise of the Warrants is
unconditional and absolute, subject to the limitations set forth in the
Debentures or in the Warrants, regardless of the effect of any such dilution.

         3.3      Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including causing its attorneys to render and deliver any legal opinion required
in order to permit a Purchaser to sell Underlying Shares under Rule 144 upon
notice of an intention to sell or other form of notice having a similar effect.
Upon the request of any such Person, the Company shall deliver to such Person a
written certification of a duly authorized officer as to whether it has complied
with such requirements.

                                       13
<PAGE>   14

         3.4      Integration. The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that could be integrated with the
offer or sale of the Securities in a manner that could require the registration
under the Securities Act of the sale of the Securities to the Purchasers.

         3.5      Increase in Authorized Shares. If on any date the Company
could be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from issuing the sum of (a) 175% of the number
of Underlying Shares as would then be issuable upon a conversion in full of the
Debentures, and (b) the number of Underlying Shares issuable upon exercise in
full of the Warrants (the "Current Required Minimum"), in either case, due to
the unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate of incorporation to
increase the number of shares of Common Stock which the Company is authorized to
issue to at least such number of shares as reasonably requested by the
Purchasers in order to provide for such number of authorized and unissued shares
of Common Stock to enable the Company to comply with its issuance, conversion,
exercise and reservation of shares obligations as set forth in this Agreement,
the Debentures and the Warrants (the sum of (x) the number of shares of Common
Stock then outstanding plus all shares of Common Stock issuable upon exercise of
all outstanding options, warrants and convertible instruments, and (y) the
Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the earlier to occur of (x)
the 25th day after the date on which the Commission shall have indicated that
they approve of or have no further comments on the preliminary proxy materials
to be delivered by the Company to its shareholders in connection with the
meeting contemplated by this Section and (y) the 90th day after request by a
holder of a conversion or other issuance that could require the actions
contemplated in this Section) and (c) within two Business Days of obtaining such
stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.

         3.6      Reservation and Listing of Underlying Shares.

                  (a)      The Company shall (i) in the time and manner required
by any national securities exchange, market, trading or quotation facility on
which the Common Stock is then traded, prepare and file with such national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed for trading an additional shares listing application
covering a number of shares of Common Stock which is not less than the Current
Required Minimum, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing on any such national securities exchange or
market or trading or quotation facility on which the Common Stock is then listed
as soon as possible thereafter, and (iii) provide to the Purchasers evidence of
such listing, and the Company shall maintain the

                                       14
<PAGE>   15

listing of its Common Stock thereon. If the number of Underlying Shares issuable
upon conversion in full of the then outstanding Debentures and upon exercise of
the then unexercised portion of the Warrants exceeds 85% of the number of
Underlying Shares previously listed on account thereof with any such required
exchanges, then the Company shall take the necessary actions to list immediately
a number of Underlying Shares as equals no less than the then Current Required
Minimum.

                  (b)      The Company shall maintain a reserve of shares of
Common Stock for issuance upon conversion of the Debentures in full and upon
exercise in full of the Warrants in accordance with this Agreement, the
Debentures and the Warrants, respectively, in such amount as may be required to
fulfill its obligations in full under the Transaction Documents, which reserve
shall equal no less than the then Current Required Minimum.

         3.7      Conversion and Exercise Procedures. The Transfer Agent
Instructions, Conversion Notice (as defined in the Debentures) and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the conversion of the Debentures and exercise of the Warrants,
including the form of legal opinion, if necessary, that shall be rendered to the
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to convert their Debentures and
exercise their Warrants.

         3.8      Conversion and Exercise Obligations of the Company. The
Company shall honor conversions of the Debentures and exercises of the Warrants
and shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debentures and the Warrants.

         3.9      Right of First Refusal; Participation Right; Subsequent
Registrations.

                  (a)      Commencing on the date hereof and for a period of
120-Trading Days after the Effective Date, provided that such 120-Trading Day
period shall be extended for the number of Trading Days during such period (A)
in which trading in the Common Stock is suspended by The Nasdaq Stock Market or
such market or quotation system on which the Common Stock is then listed, or (B)
during which the Underlying Shares Registration Statement is not effective, or
(C) during which the prospectus included in the Underlying Shares Registration
Statement may not be used by the holders thereof for the resale of Underlying
Shares (the "Investment Restriction Period"), the Purchasers shall have the
right to co-invest (the "Co-Investment Right") on the same terms and conditions
in any transaction intended to be exempt or not subject to registration under
the Securities Act in which the Company shall, directly or indirectly, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
offer, sale or grant of any option to purchase or otherwise dispose of) any of
its or its Affiliates' equity or equity-equivalent securities, including the
issuance of any debt or other instrument at any time over the life thereof
convertible into or exchangeable for Common Stock (a "Subsequent Placement").
Notwithstanding the foregoing, the following transactions shall not constitute a
Subsequent Placement: (i) the issuance of shares of Common Stock upon conversion
of the Debentures or upon the exercise of the Warrants in accordance

                                       15
<PAGE>   16

with their respective terms; (ii) the issuance of shares of Common Stock upon
the exercise of outstanding options or warrants to purchase shares of Common
Stock; (iii) the issuance of any options or warrants to purchase Common Stock to
employees, officers or directors of, or consultants to, the Company pursuant to
any stock option or stock purchase plan or agreements approved by the Company's
Board of Directors; (iv) the issuance of shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock to any bank lender
(including the issuance of warrants contemplated on Schedule 2.1(c) hereto as
item (4) under the section titled "Options and Warrants") or other Person in
satisfaction of amounts owing to such Person; or (v) the issuance of shares of
Common Stock or options or warrants to purchase Common Stock pursuant to the
Cereus Merger. The Company shall give promptly to the Purchasers written notice
of any Subsequent Placement, which notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement (the "Subsequent Placement
Notice"). The Purchasers' Co-Investment Right shall terminate unless the
Purchasers notify the Company of their intention to purchase the securities
proposed to be sold in the Subsequent Placement on the terms set forth in the
Subsequent Placement Notice by 6:30 p.m. New York City time by the seventh
Trading Day after their receipt of such Subsequent Placement Notice. The
Co-Investment Right shall be allocated among the Purchasers on a pro rata basis
by reference to aggregate principal amount of the Debentures purchased by such
Purchaser under this Agreement, or in such other manner as the Purchasers shall
determine.

                  (b)      Notwithstanding anything to the contrary contained
herein, if a Subsequent Placement provides for the (i) sale of shares of Common
Stock at a per share purchase price less than 85% of the fair market value of
such shares on the date of sale, and/or (ii) sale of any security convertible
into or exchangeable for shares of Common Stock including any securities which
provide for any adjustments to the conversion or exchange ratio (including
"reset" provisions), as the case may be (other than adjustments occasioned by
stock dividends or a combination, subdivision or reclassification of outstanding
shares of Common Stock) ("First Refusal Convertible Securities"), and the per
share purchase price to be paid for the Common Stock issuable pursuant to such
First Refusal Convertible Securities is, or could be, less than 85% of the fair
market value of such shares on the date the First Refusal Convertible Security
is first issued, then, and in such event, the Purchasers shall have a right of
first refusal with respect to such financing and the Subsequent Placement Notice
shall describe in reasonable detail the proposed terms of such Subsequent
Placement, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Placement is proposed to be effected and shall annex
thereto the proposed form of documentation. The Purchasers shall notify the
Company by 6:30 p.m. New York City time by the seventh Trading Day after its
receipt of the Subsequent Placement Notice of its willingness to provide (or to
cause its designee to provide), in accordance with the terms set forth in the
Subsequent Placement Notice and pursuant to the proposed form of documentation
(subject to reasonable modifications), financing to the Company. If the
Purchasers notify the Company of their willingness to provide the proposed
financing, the parties shall act and negotiate in good faith to cause a closing
of the proposed financing to be effected on or before the twelfth Trading Day
after the Purchasers receipt of the Subsequent Placement Notice. Commencing upon
its delivery of the Subsequent Placement Notice, the Company shall act in good
faith and shall provide Purchasers with timely responses to any business
inquiries necessary for its evaluation of the proposed financing. Further,

                                       16
<PAGE>   17

commencing upon its delivery of the Subsequent Placement Notice, the Company
shall act in good faith, and shall cause its legal and accounting professionals
to act in a commercially reasonable manner, each under the circumstances, to
facilitate closing the proposed financing in a timely manner. The time for
closing shall be extended beyond the twelfth Trading Date after the Purchasers
receipt of the Subsequent Placement Notice by such period of delay which is
solely attributable to the failure of the Company or its professionals to act in
the manner prescribed by the foregoing sentences. If the Purchasers shall fail
to notify the Company of their intention to effect such financing within such
time period, the Company may effect such Subsequent Placement substantially upon
the terms and to the Persons (or Affiliates of such Persons) set forth in the
Subsequent Placement Notice; provided that the Company shall provide the
Purchasers with a second Subsequent Placement Notice, and the Purchasers shall
again have the right of first refusal set forth above in this paragraph (b), if
the Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Placement Notice within thirty Trading Days after the date of the
initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Purchaser shall be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
equal to such Purchaser's pro-rata portion of the aggregate principal amount of
Debentures purchased by such Purchaser under this Agreement, but the Company
shall not be required to accept financing from the Purchasers in an amount less
than or in excess of the aggregate amount set forth in the Subsequent Placement
Notice.

                  (c)      Except as set forth on Schedule 3.9(c), the Company
shall not for a period of 60-Trading Days after the Effective Date, provided
that such 60-Trading Day period shall be extended for the number of Trading Days
during such period (A) in which trading in the Common Stock is suspended by The
Nasdaq Stock Market or such market or quotation system on which the Common Stock
is then listed, or (B) during which the Underlying Shares Registration Statement
is not effective, or (C) during which the prospectus included in the Underlying
Shares Registration Statement may not be used by the holders thereof for the
resale of Underlying Shares (the "Registration Restriction Period", without the
prior written consent of the Purchasers, permit to be filed a registration
statement which seeks to register "Discount Shares" (as hereinafter defined).
Notwithstanding the foregoing, on or after the tenth Trading Day preceding the
expiration of the Registration Restriction Period the Company may file a
registration statement covering Discount Shares, provided that such registration
statement shall not be declared effective by the SEC prior to the expiration of
the Registration Restriction Period. The term "Discount Shares" shall mean (i)
Common Stock, the purchase price per share of which on the date of sale was less
than 75% of the fair market value of such shares on such date, or (ii) First
Refusal Convertible Securities where the purchase price to be paid for the
Common Stock issuable pursuant to such First Refusal Convertible Securities is,
or could be, less than 75% of the fair market value of such shares on the date
the First Refusal Convertible Security was first issued.

         3.10     Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) within one Business Day of the date hereof, issue a press release
reasonably acceptable to the

                                       17
<PAGE>   18

Purchasers disclosing the transactions contemplated hereby, (ii) within one
Business Day of the giving of the Repurchase Notice issue a press release with
respect thereto, (iii) file with the Commission a Report on Form 8-K disclosing
the transactions contemplated hereby within ten Business Days after the
Repurchase Closing Date (including this Agreement, the form of Warrant and the
Registration Rights Agreement as exhibits thereto), and (iv) timely file with
the Commission a Form D promulgated under the Securities Act as required under
Regulation D promulgated under the Securities Act and provide a copy thereof to
the Purchasers promptly after the filing thereof. The Company shall, no less
than one Business Day prior to the filing of any disclosure required by clauses
(ii), (iii) and (iv) above, provide a copy thereof to the Purchasers. Such
filings will not be made without the consent of the Purchasers, not to be
unreasonably withheld or delayed. The Company and the Purchasers shall consult
with each other in issuing any other press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby, and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law or stock market
regulations, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.

         3.11     Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and not for
the satisfaction of any portion of the Company's debt (other than pursuant to
the PNC Agreement and payment of (a) trade payables in the ordinary course of
the Company's business and consistent with prior practices or (b) capital lease
obligations).

         3.12     Reimbursement. If any Purchaser, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the reasonable cost of any investigation and preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which a Purchaser is a named party, the Company will pay such Purchaser the
charges, as reasonably determined by such Purchaser, for the time of any
officers or employees of such Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearings, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs

                                       18
<PAGE>   19

and personal representatives of the Company, the Purchasers and any such
Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or entity in connection with the transactions contemplated by this
Agreement.

         3.13     Certain Trading Restrictions. (a) Each Purchaser agrees that
it will not enter into and will not encourage or assist others into entering on
its behalf into any Short Sales (as hereinafter defined) or have other Persons
do so on their behalf for so long as its holds Debentures. For purposes hereof,
a "Short Sale" by a Purchaser shall mean a sale of Common Stock by a Purchaser
that is marked as a short sale and that is made at a time when there is no
equivalent offsetting long position in the Common Stock held by such Purchaser.
For purposes of determining whether there is an equivalent offsetting long
position in the Common Stock held by a Purchaser, on any date of computation,
Underlying Shares that would be issuable upon the conversion in full of the
Debentures or exercise in full of the Warrants held by such Purchaser shall be
deemed to be held long by such Purchaser.

                  (b)      The Company shall not issue or sell any of the
principal amount of the Debentures to any Person other than the Purchasers.

         3.14     No Dividends. So long as any amount remains outstanding under
any Debenture, the Company shall not pay any dividend on account of any
outstanding capital stock, except dividends paid in shares of the Company's
capital stock.

                                    ARTICLE 4

                                   CONDITIONS

         4.1      Conditions Precedent to the Obligation to Sell and Purchase
Old Debentures. (a) The obligation of each Purchaser to sell the Old Debentures
and the obligation of the Company to acquire the Old Debentures at the
Repurchase Closing is subject to the satisfaction (or waiver by such party), at
or before the Repurchase Date of each of the following conditions:

                  (i)      No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

                  (ii)     The Lenders shall have agreed in writing that the
subordination provisions of the Old Debentures to be repaid shall not apply to
such repayment.

                                       19
<PAGE>   20

                           (b)      In addition to the conditions set forth in
Section 4.1 (a), the obligation of each Purchaser to sell the Old Debentures at
the Repurchase Closing is subject to the satisfaction (or waiver by such
Purchaser) at or before the Repurchase Date of each of the following conditions:

                  (i)      Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
shall be true and correct in all material respects as of the date when made and
as of the Repurchase Date as though made on and as of such date;

                  (ii)     Delivery of Closing Items. The Company shall have
delivered to the Purchasers all of the items required to have been delivered by
the Company under Section 1.2 (c) on or before the Repurchase Date;

         4.2      Conditions Precedent to the Obligation of the Purchasers to
Purchase Debentures and Warrants. The obligation of each Purchaser to acquire
Debentures and Warrants at the Initial Closing or at an Additional Closing (each
being hereinafter called a "Closing") is subject to the satisfaction by the
Company or waiver by such Purchaser, at or before the Initial Closing Date, or
an Additional Closing Date, as the case may be (each being hereinafter called a
"Closing Date") of each of the following conditions:

                  (i)      Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
shall be true and correct in all material respects as of the date when made and
as of such Closing Date as though made on and as of such date;

                  (ii)     Delivery of Closing Items. The Company shall have
delivered to the Purchasers all of the items required to have been delivered by
the Company pursuant hereto or before such Closing Date;

                  (iii)    No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

                  (iv)     Adverse Changes. Since the date of execution of this
Agreement, no event or series of events which reasonably could be expected to
have or result in a Material Adverse Effect shall have occurred;

                  (v)      No Suspensions of Trading in Common Stock; Listing.
The trading in the Common Stock shall not have been suspended by the Commission
or on The Nasdaq Stock Market (except for any suspensions of trading of not more
than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the

                                       20
<PAGE>   21

date of execution of this Agreement, and the Common Stock shall have been at all
times since such date been listed for trading on The Nasdaq Stock Market; and

                  (vi)     Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to such Closing Date;

                  (vii)    Change of Control. No Change of Control in the
Company shall have occurred. "Change of Control" 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
in excess of 50% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity in which the Company is not the
surviving legal entity, consolidation or sale of all or substantially all 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).

                  (viii)   Performance of Conversion and Exercise Obligations.
The Company shall have delivered Underlying Shares upon conversion, if any, of
the Debentures and the Old Debentures and exercise, if any, of the Warrants and
those warrants issued to the Purchasers pursuant to the DP Agreement in
accordance with their respective terms.

                  (ix)     Closing Threshold. For the twenty Trading Days
immediately preceding such Closing Date, the average daily trading volume of the
Common Stock on the NASDAQ National Market as reported by Bloomberg LP, shall be
at least 120,000 shares and the closing bid price of a share of common stock of
the Company as reported on the NASDAQ National Market for each of the Fifteen
Trading Days preceding the Initial Put Notice or additional Put Notice which
apply to such Closing shall not have been less than $1.50 nor greater than
$5.00.

                  (x)      Shareholder Approval. No approval of the shareholders
of the Company shall be required under the rules of the Nasdaq Stock Market in
order to issue 130% of the Underlying Shares issuable upon the conversion in
full of the Debentures issuable at such Closing.

                  (xi)     Issuance of Debentures and Warrants. The Company
shall have reserved for issuance to the Purchasers upon the conversion of the
Debentures and the exercise of the Warrants a number of shares of Common Stock
equal to no less than the sum of 175% of the shares of Common Stock which would
be issuable upon conversion in full of such Debentures, assuming that such
conversion occurred at the Conversion Price on such Closing Date and the
exercise in full of the Warrants.

                                       21
<PAGE>   22

                  (xii)    S-3 Registration Statement. With respect to an
Additional Closing (but not with respect to the Initial Closing) the Underlying
Shares Registration Statement shall have been effective for at least thirty five
Trading Days.

         4.3      Conditions Precedent to the Obligation of the Company to sell
Debentures and Warrants at the Closings. The obligation of the Company to sell
Debentures and Warrants at the Closings is subject to the satisfaction by the
Purchaser or waiver by the Company, at or before each respective Closing Date,
of each of the following conditions:

                  (i)      Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser contained herein
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made on and as of such date;

                  (ii)     Delivery of Closing Items. The Purchaser shall have
delivered to the Purchasers all of the items required to have been delivered by
the Purchaser pursuant hereto on or before such Closing Date.

                  (iii)    No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.

                                    ARTICLE 5

                                  MISCELLANEOUS

         5.1      Fees and Expenses. Simultaneously with the execution of this
Agreement, the Company shall reimburse the Purchasers for their legal fees and
expenses incurred in connection with the preparation and negotiation of the
Transaction Documents by paying to MZRL $25,000 for the preparation and
negotiation of the Transaction Documents. The Purchasers shall pay MZRL's fees
and expenses in connection with each Closing in an amount not to exceed $2,500
per Closing. Other than the amount contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.

         5.2      Entire Agreement; Amendments. The Transaction Documents,
together with the Exhibits and Schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.

                                       22
<PAGE>   23

         5.3      Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 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 Agreement 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 by U.S.
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:

         If to the Company:            Verso Technologies, Inc.
                                       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
                                       hereto.

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

         5.4      Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.

         5.5      Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

                                       23
<PAGE>   24

         5.6      Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers.

         5.7      No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

         5.8      Governing Law. The corporate laws of the State of Minnesota
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of 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 (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

         5.9      Waiver of Jury Trial. The Company and the Purchasers each
waive their respective rights to a trial by jury of any claim or cause of action
based upon or arising out of or related to this Agreement, the Transaction
Documents, or the transactions contemplated hereby or thereby, in any action,
proceeding or other litigation of any type brought by any of the parties against
any other party, related person, or assignee, whether with respect to contract
claims, tort claims, or otherwise. The Company and the Purchasers each agree
that any such claim or cause of action shall be tried by a court trial without a
jury. Without limiting the foregoing, the parties further agree that their
respective right to a trial by jury is waived by operation of this section as to
any action, counterclaim or other proceeding which seeks, in whole or in part,
to challenge the validity or enforceability of this Agreement or any Transaction
Document or any provisions hereof or thereof. This waiver shall apply to any
subsequent amendments, renewals, supplements or modifications to this Agreement
and the Transaction Documents.

         5.10     Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery, exercise
and conversion (as the case may be) of the Warrants and the Debentures for a
period of three years from the last Closing Date.

                                       24
<PAGE>   25

         5.11     Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

         5.12     Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby, and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.

         5.13     Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.

         5.14     Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
                             SIGNATURE PAGES FOLLOW]

                                       25
<PAGE>   26

         IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

                                       VERSO TECHNOLOGIES, INC.

                                       By: /s/ 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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

<PAGE>   27

                                       STRONG RIVER INVESTMENTS, INC.

                                       By: /s/ Kenneth L. Henderson
                                          -------------------------------------
                                          Name:  Kenneth L. Henderson
                                          Title: Attorney-in-fact

Address for Notice:                c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                   Vanterpool Plaza, 2nd Floor
                                   Wickhams Cay I, Road Town
                                   Tortola, British Virgin Islands

With copies to:                    Morse Zelnick Rose & Lander LLP
                                   450 Park Avenue, Suite 902
                                   New York, New York 10022
                                   Facsimile No.: (212) 838-9190
                                   Attn: Kenneth S. Rose, Esq.

<PAGE>   28

                                       BAY HARBOR INVESTMENTS, INC.

                                       By: /s/ Kenneth L. Henderson
                                          -------------------------------------
                                          Name:  Kenneth L. Henderson
                                          Title: Attorney-in-fact

Address for Notice:                c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                   Vanterpool Plaza, 2nd Floor
                                   Wickhams Cay I, Road Town
                                   Tortola, British Virgin Islands

With copies to:                    Morse Zelnick Rose & Lander LLP
                                   450 Park Avenue, Suite 902
                                   New York, New York 10022
                                   Facsimile No.: (212) 838-9190
                                   Attn: Kenneth S. Rose, Esq.<PAGE>   1
                                                                    EXHIBIT 10.3

                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of January 30, 2001, among Verso Technologies, Inc., a Minnesota
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").

         This Agreement is made pursuant to the Purchase Agreement, dated as of
January 18, 2001, as amended on January 23, 2001 and as further amended on
January, 25, 2001 among the Company and the Purchasers (the "Purchase
Agreement").

         The Company and the Purchasers hereby agree as follows:

         1.       Definitions

                  Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

                  "Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.

                  "Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
government actions to close.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the Company's common stock, $.01 par
value per share, or such securities that such stock shall hereafter be
reclassified into.

                   "Effective Date" means October 30, 2001.

                  "Effectiveness Period" shall have the meaning set forth in
Section 2(a).

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Filing Date" means July 30, 2001.

<PAGE>   2

                  "Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.

                  "Indemnified Party" shall have the meaning set forth in
Section 5(c).

                  "Indemnifying Party" shall have the meaning set forth in
Section 5(c).

                  "Losses" shall have the meaning set forth in Section 5(a).

                  "Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.

                  "Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

                  "Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

                  "Registrable Securities" means the shares of Common Stock
issuable upon the exercise in full of the Repurchase Date Warrants.

                  "Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statements or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statements.

                  "Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

                  "Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

                                       2
<PAGE>   3
                  "Rule 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.

                  "Special Counsel" means one special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.

                  "Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.

         2.       Shelf Registration

                  (a)      On or prior to the Filing Date, the Company shall
prepare and file with the Commission a "Shelf" Registration Statement covering
the resale of all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith as the Holders may consent) and
shall contain (except if otherwise directed by the Holders) the "Plan of
Distribution" attached hereto as Annex A, and cause the Registration Statement
to become effective and remain effective as provided herein. The Company shall
use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the Effective Date, and shall use its best
efforts to keep such Registration Statement continuously effective under the
Securities Act until the earlier of the fifth anniversary of the Closing Date
therefor and such time as all Registrable Securities covered by such
Registration Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to
a written opinion letter to such effect, addressed and acceptable to the
Company's transfer agent and the affected Holders (the "Effectiveness Period"),
provided, that the Company shall not be deemed to have used its best efforts to
keep the Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able to
sell the Registrable Securities covered by such Registration Statement during
the Effectiveness Period, unless such action is required under applicable law or
the Company has filed a post-effective amendment to the Registration Statement
and the Commission has not declared it effective.

                  (b)      The Registration Statement shall include a number of
shares of Common Stock equal to the number of shares of Common Stock issuable
upon exercise in full of the Repurchase Date Warrants.

                                       3
<PAGE>   4
                  (c)      If (a) the Registration Statement is not filed on or
prior to the Filing Date (if the Company files such Registration Statement
without affording the Holder the opportunity to review and comment on the same
as required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (a)), or (b) the Company fails to file with the Commission
a request for acceleration in accordance with Rule 461 promulgated under the
Securities Act within five days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that the Registration
Statement will not be "reviewed," or not subject to further review, or (c) the
Registration Statement filed hereunder is not declared effective by the
Commission on or prior to the Effective Date, or (d) after the Registration
Statement is filed with and declared effective by the Commission, such
Registration Statement ceases to be effective as to all Registrable Securities
to be covered thereby at any time prior to the expiration of the Effectiveness
Period without being succeeded within ten days by an amendment to such
Registration Statement or by a subsequent Registration Statement filed with and
declared effective by the Commission, or (e) the Common Stock shall be delisted
or suspended from trading on The Nasdaq National Market ("NASDAQ") or on The New
York Stock Exchange, or Nasdaq Smallcap Market (each, a "Subsequent Market") for
more than five Trading Days (which need not be consecutive days) in any
twelve-month period, or (f) the conversion rights of the Holders pursuant to the
Debentures are suspended for any reason, or (g) an amendment to a Registration
Statement is not filed by the Company with the Commission within ten days of the
Commission's notifying the Company that such amendment is required in order for
such Registration Statement to be declared effective (any such failure or breach
being referred to as an "Event," and for purposes of clauses (a), (c), (f) the
date on which such Event occurs, or for purposes of clause (b) the date on which
such five day period is exceeded, or for purposes of clauses (d) and (g) the
date which such ten day-period is exceeded, or for purposes of clause (e) the
date on which such three day-period is exceeded, being referred to as "Event
Date"), then, on the Event Date and each monthly anniversary thereof until the
applicable Event is cured, the Company shall pay to each Holder $10,000 in cash,
as liquidated damages and not as a penalty. Notwithstanding the foregoing, (a)
in the event the Company has and continues to use its best efforts to cause the
Registration Statement to be declared effective, no liquidated damages shall be
due for periods prior to the 110th day following the Filing Date and (b) the
liquidated damages for the first monthly period after the Effective Date, or any
portion thereof, shall be at the rate of $5,000. If the Company fails to pay any
liquidated damages pursuant to this Section in full within five days after the
date payable, the Company will pay interest thereon at a rate of 18% per annum
(or such lesser maximum amount that is permitted to be paid by applicable law)
to the Holder, accruing daily from the date such liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full. The
liquidated damages pursuant to the terms hereof shall apply on a pro-rata basis
for any portion of a month prior to the cure of an Event.

                  (d)      Notwithstanding the foregoing, the Company may
suspend offers and sales or delay the effectiveness of any Registration
Statement, an aggregate of up to sixty Trading Days in any 12-month period, if
the Company's Board of Directors determines, in good faith, that such delay
would be necessary to avoid premature disclosure of any material acquisition,
disposition, business combination, or other material transaction, and such delay
or

                                       4
<PAGE>   5
suspension will not result in an Event hereunder (however, no such delay will
provide the basis for avoidance of an Event of Default under Section 3(a)(viii)
of the Debentures).

         3.       Registration Procedures

                  In connection with the Company's registration obligations
hereunder, the Company shall:

                  (a)      Not less than five Business Days prior to the filing
of the Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall, (i) furnish to the Holders and their
Special Counsel copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders and their Special
Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of Special Counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities to be covered thereby and their Special Counsel shall reasonably
object.

                  (b)      (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period; (ii)
cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424; (iii) respond as promptly as reasonably possible, and in any event
within ten days, to any comments received from the Commission with respect to
the Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
Effectiveness Period in accordance with the intended methods of disposition by
the Holders thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.

                  (c)      File additional Registration Statements if the number
of Registrable Securities to be covered by a Registration Statement at any time
exceeds 85% of the number of shares of Common Stock then registered in such
Registration Statement. The Company shall have twenty days to file such
additional Registration Statements after such requirement notice is received by
the Company (which shall be the Filing Date for such additional Registration
Statements) and the Effectiveness Date for each such additional Registration
Statement shall be the 90th day following the date of such notice.

                  (d)      Notify the Holders Special Counsel as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than five
Business Days prior to such filing) and (if

                                       5
<PAGE>   6
requested by any such Person) confirm such notice in writing no later than one
Business Day following the day (i)(A) when the Commission notifies the Company
whether there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto to
Special Counsel); and (B) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in the Transaction Documents ceases to be true and correct in
all material respects; (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction,
or the initiation or threatening of any Proceeding for such purpose; and (vi) of
the occurrence of any event or passage of time that makes the financial
statements included in the Registration Statement ineligible for inclusion
therein or any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

                  (e)      Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
each Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

                  (f)      Furnish to each Holder and their Special Counsel,
without charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

                  (g)      Promptly deliver to each Holder and their Special
Counsel, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request. The Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

                                       6
<PAGE>   7
                  (h)      Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or subject the
Company to any material tax in any such jurisdiction where it is not then so
subject.

                  (i)      Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may request.

                  (j)      Upon the occurrence of any event contemplated by
Section 3(d)(vi), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to a Registration Statement or
a supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither such Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

                  (k)      Comply with all applicable rules and regulations of
the Commission in connection with its obligations hereunder.

                  (l)      The Company may require each selling Holder to
complete a selling shareholder questionnaire in reasonable and customary form
furnishing to the Company a certified statement as to the number of shares of
Common Stock beneficially owned by such Holder and such other information
reasonably necessary for the preparation of the Registration Statement and, if
requested by the Commission, the controlling person of such Holder.

         4.       Registration Expenses. All fees and expenses (other than
commissions or underwriter fees incurred by the Holder to sell its Registrable
Securities) incident to the performance of or compliance with this Agreement by
the Company shall be borne by the Company whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
NASDAQ and any Subsequent Market on which the Common Stock is then listed for
trading, and (B) in compliance with state securities or Blue Sky laws, (ii)
printing expenses (including, without limitation, expenses of

                                       7
<PAGE>   8
printing certificates for Registrable Securities), (iii) reasonable messenger,
telephone and delivery expenses, (iv) reasonable fees and disbursements of
counsel for the Company and Special Counsel for the Holders, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.

         5.       Indemnification

                  (a)      Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in such Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). The Company shall notify the Holders promptly of
the institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.

                  (b)      Indemnification by Holders. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and

                                       8
<PAGE>   9
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest extent
permitted by applicable law, from and against all Losses (as determined by a
court of competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of or based solely upon any untrue statement of a
material fact contained in such Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
such Registration Statement, such Prospectus or such form of Prospectus, or in
any amendment or supplement thereto. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

                  (c)      Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided that the failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.

                  (d)      Separate Counsel. An Indemnified Party shall have the
right to employ separate counsel in any such Proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party
has agreed in writing to pay such fees and expenses; or (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by written opinion of
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel, who shall represent all other Indemnified Parties who are
similarly situated and who can be represented

                                       9
<PAGE>   10
without conflict by such counsel, shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.

                  (e)      Fees and Expenses of Indemnified Party. All fees and
expenses of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Business Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).

                  (f)      Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public
policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms. The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 5(f) were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
5(f), no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder from
the sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation

                                       10
<PAGE>   11
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

                  (g)      Non-Exclusive Remedy. The indemnity and contribution
agreements contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.

         6.       Miscellaneous

                  (a)      Remedies. In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.

                  (b)      No Inconsistent Agreements. Neither the Company nor
any of its subsidiaries has entered, as of the date hereof, nor shall the
Company or any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as and to the extent specified in Schedule
6(b) hereto, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person.

                  (c)      No Piggyback on Registrations. Except as and to the
extent specified in Schedule 6(b) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.

                  (d)      Compliance. Each Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.

                  (e)      Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of suspension under Section 2(d) or of the occurrence of any event
of the kind described in Sections 3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or
3(d)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the

                                       11
<PAGE>   12
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

                  (f)      Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.

                  (g)      Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least two-thirds of the then
outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.

                  (h)      Notices. Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 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 the Purchase Agreement 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 by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:

                                       12
<PAGE>   13
         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 hereto.

If to any other Person who is then the registered Holder:

                  To the address of such Holder as it appears in the stock
transfer books of the Company or such other address as may be designated in
writing hereafter, in the same manner, by such Person.

                  (i)      Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder. The Company may
not assign its rights or obligations hereunder without the prior written consent
of each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.

                  (j)      Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

                  (k)      Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party 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, that such suit, action or proceeding is improper. Each

                                       13
<PAGE>   14
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.

                  (l)      Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.

                  (m)      Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

                  (n)      Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (o)      Shares Held by the Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason of
its holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.

                  (p)      Independent Nature of Purchasers' Obligations and
Rights. The obligations of each Purchaser hereunder are several and not joint
with the obligations of any other Purchaser hereunder, and neither Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

                           [SIGNATURE PAGES TO FOLLOW]

                                       14
<PAGE>   15
         IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written 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

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGES OF PURCHASER FOLLOW]

<PAGE>   16

                                       STRONG RIVER INVESTMENTS, INC.

                                       By:      /s/ Kenneth L. Henderson
                                          ------------------------------------
                                               Name: Kenneth L. Henderson
                                               Title:  Attorney-in fact

         Address for Notice:      c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                  Vanterpool Plaza, 2nd Floor
                                  Wickhams Cay I, Road Town
                                  Tortola, British Virgin Islands

         With copies to:          Morse Zelnick Rose & Lander LLP
                                  450 Park Avenue, Suite 902
                                  New York, New York 10022
                                  Facsimile No.: (212) 838-9190
                                  Attn:  Kenneth S. Rose, Esq.

                                       BAY HARBOR INVESTMENTS, INC.

                                       By:      /s/ Kenneth L. Henderson
                                             ---------------------------------
                                             Name:  Kenneth L. Henderson
                                             Title:  Attorney-in fact

         Address for Notice:      c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                  Vanterpool Plaza, 2nd Floor
                                  Wickhams Cay I, Road Town
                                  Tortola, British Virgin Islands

         With copies to:          Morse Zelnick Rose & Lander LLP
                                  450 Park Avenue, Suite 902
                                  New York, New York 10022
                                  Facsimile No.: (212) 838-9190
                                  Attn:  Kenneth S. Rose, Esq.

<PAGE>   17

                                     Annex A
                              PLAN OF DISTRIBUTION

         The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:

         -        ordinary brokerage transactions and transactions in which the
                  broker-dealer solicits purchasers;

         -        block trades in which the broker-dealer will attempt to sell
                  the shares as agent but may position and resell a portion of
                  the block as principal to facilitate the transaction;

         -        purchases by a broker-dealer as principal and resale by the
                  broker-dealer for its account;

         -        an exchange distribution in accordance with the rules of the
                  applicable exchange;

         -        privately negotiated transactions;

         -        short sales;

         -        broker-dealers may agree with the Selling Stockholders to sell
                  a specified number of such shares at a stipulated price per
                  share;

         -        a combination of any such methods of sale; and

         -        any other method permitted pursuant to applicable law.

         The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

         The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.

         Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of

<PAGE>   18
shares, from the purchaser) in amounts to be negotiated. The Selling
Stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.

         The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.

         The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00025-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00025-of-00352.parquet"}]]