UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 30, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-17500
VERSUS TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-2283745
(State of Incorporation) (I. R. S. Employer Identification Number)
2600 Miller Creek Road, Traverse City, Michigan 49684
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (616) 946-5868
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes ( X ) No ( )
As of May 31, 1999 the issuer had outstanding 38,506,872 shares of
common stock, par value $.01 per share.
Transitional small business disclosure format: Yes ( ) No ( X )
VERSUS TECHNOLOGY, INC.
Index to Form 10-QSB
PART I FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Balance Sheets as of April 30, 1999
(Unaudited) and October 31, 1998
Consolidated Statements of Operations for the three
and six months ended April 30, 1999 and 1998 (Unaudited)
Consolidated Statements of Cash Flows for the six
months ended April 30, 1999 and 1998 (Unaudited)
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities and Use of Proceeds
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signatures
VERSUS TECHNOLOGY, INC.
Consolidated Balance Sheets
(Unaudited)
=======================================================================
April 30, October 31
1998 1999
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 407,000 $ 698,000
Accounts receivable, net of
allowance for doubtful
accounts of $58,000 and
$60,000 393,000 517,000
Inventories - purchased parts and
Assemblies 230,000 155,000
Prepaid expenses and other
current assets 67,000 64,000
------------ ------------
Total Current Assets 1,097,000 1,434,000
============ ============
Property and Equipment, net of
accumulated depreciation of
$216,000 and $173,000 219,000 237,000
Software Development Costs, net
of accumulated amortization of
$200,000 and $163,000 400,000 437,000
Goodwill, net of accumulated
amortization of $416,000 and
$338,000 1,923,000 2,001,000
Patents and Other Intangible
Assets, net of accumulated
amortization of $662,000 and
$556,000 1,328,000 1,434,000
------------ ------------
$ 4,967,000 $ 5,543,000
============ ============
See accompanying notes to consolidated financial statements.
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Accounts payable $ 402,000 $ 453,000
Accrued expenses 96,000 119,000
Deferred revenue-customer advance
Payments 26,000 25,000
Note payable 20,000 80,000
------------ ------------
Total Liabilities 544,000 677,000
============ ============
Shareholders' Equity
Common stock, $.01 par value;
75,000,000 and 50,000,000
shares authorized; 38,497,372
and 38,362,700 shares issued
and outstanding 385,000 384,000
Additional paid-in capital 33,356,000 33,249,000
Accumulated deficit (29,158,000) (28,577,000)
Unearned compensation ( 160,000) ( 190,000)
------------ ------------
Total Shareholders' Equity 4,423,000 4,866,000
------------ ------------
$ 4,967,000 $ 5,543,000
============ ============
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC.
Consolidated Statement of Operations
(Unaudited)
===========================================================================
Three Months Ended Six Months Ended
April 30 April 30,
1999 1998 1999 1998
------------------- -------------------
Revenues $ 882,000 $ 655,000 $1,806,000 $1,253,000
Operating expenses:
Cost of revenues 318,000 321,000 632,000 640,000
Research and development 134,000 90,000 277,000 266,000
Sales and marketing 374,000 303,000 679,000 557,000
General and administrative 409,000 412,000 808,000 839,000
---------- ---------- ---------- ----------
1,235,000 1,126,000 2,396,000 2,302,000
Loss From Operations ( 353,000) ( 471,000) ( 590,000) (1,049,000)
Other Income:
Interest income 3,000 14,000 9,000 35,000
------------ ------------ ------------ ------------
Net Loss $( 350,000) $( 457,000) $( 581,000) (1,014,000)
============ ============ ============ ============
Basic and Diluted Net
Loss Per Share $( .01 ) $( .01 ) $( .02 ) $( .03 )
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC.
Consolidated Statements of Cash Flow
(Unaudited)
========================================================================
Six Months Ended April 30
1999 1998
------------ ------------
Operating activities:
Net Loss $( 581,000) $(1,014,000)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization 264,000 240,000
Amortization of unearned
Compensation 68,000 55,000
Directors' compensation 69,000 2,000
Changes in operating assets
and liabilities:
Accounts receivable 124,000 120,000
Inventories ( 75,000) 23,000
Prepaid expenses and other
current assets ( 3,000) ( 3,000)
Accounts payable ( 51,000) ( 220,000)
Accrued expenses ( 23,000) 130,000
Deferred revenues -
customer advance payments 1,000 ( 192,000)
------------ ------------
Net cash used in operating
Activities ( 207,000) ( 859,000)
------------ ------------
Investing activities:
Changes in notes receivable - 2,000
Additions to property and
Equipment ( 25,000) ( 21,000)
------------ ------------
Net cash provided by investing
Activities ( 25,000) ( 19,000)
------------ ------------
Financing activities:
Payments on notes payable ( 60,000) ( 66,000)
Issuance of common stock 1,000 1,000
------------ ------------
Net cash used in financing
Activities ( 59,000) ( 65,000)
------------ ------------
Net increase (decrease) in cash
and cash equivalents ( 291,000) ( 943,000)
Cash and cash equivalents,
beginning of period 698,000 1,871,000
------------ ------------
Cash and cash equivalents, end of
Period $ 407,000 $ 928,000
============ ============
Supplemental cash flow
information
Cash paid during the period for
Interest $ - $ 5,000
============ ===========
See accompanying notes to consolidated financial statements.
During the first six months of fiscal 1999:
The Company issued additional non-vested Employee Incentive Restricted
Stock and repurchased similar stock from terminated employees, all at
par value, pursuant to the 1996 Incentive Restricted Stock Bonus Plan.
Unearned compensation of $58,000 was recorded for the stock issued and
unearned compensation of $20,000 related to the repurchased shares was
cancelled.
The Company also issued Non Qualified Stock Options to directors
valued at $0.115 per option for accounting purposes. The options vest
after one year and are exercisable at $0.165 per share. Directors'
compensation expense relating to stock options issued during 1999 and
1998 amounted to $69,000 for the six months ended April 20, 1999.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 30, 1999 (Unaudited)
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements, which
are for interim periods, do not include all disclosures provided in
the annual consolidated financial statements. They should be read in
conjunction with the consolidated financial statements and the
footnotes thereto of Versus Technology, Inc. and subsidiary (Versus)
contained in the Annual Report on Form 10-KSB for the fiscal year
ended October 31, 1998, as filed with the Securities and Exchange
Commission. The October 31, 1998 balance sheet contained herein was
derived from audited consolidated financial statements, but does not
include all disclosures required by generally accepted accounting
principles as found in Versus' Annual Report on Form 10-KSB referenced
above.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the
financial position as of April 30, 1999, the results of operations for
the three and six months ended April 30, 1999 and 1998 and cash flows
for the six months ended April 30, 1999 and 1998. The results of
operations for the three and six months ended April 30, 1999 are not
necessarily indicative of the results to be expected for the full
year.
Note 2 Principles of Consolidation
The consolidated financial statements include the accounts of Versus
and Olmsted Engineering Co., its wholly owned subsidiary. Upon
consolidation, all significant intercompany accounts and transactions
are eliminated.
Note 3 Basic and Diluted Earnings (Loss) Per Share
Basic earnings (loss) per share is based on the weighted average
number of shares of common stock outstanding. The Company has not
included the effects of options, warrants and the outstanding shares
under its Employee Incentive Restricted Stock Bonus Plan in its
calculation of diluted earnings (loss) per share due to their anti-
dilutive effect. The resulting weighted average shares outstanding
were 38,025,106 and 38,025,106 for the three months ended April 30,
1999 and 1998 respectively and 38,025,106 and 38,025,106 for the six
months ended April 30, 1999 and 1998, respectively.
Note 4 New Accounting Standards Not Yet Adopted
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, which supersedes SFAS No.
14, Financial Reporting for Segments of a Business Enterprise. SFAS
No. 131 establishes standards for the way that public companies report
information about operating segments in annual financial statements
and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It
also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources
and in assessing performance. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997 and requires
comparative information for earlier years to be restated. Management
does not expect to change the Company's operating segment groupings
based on its analysis of the new standard. Results of operations and
financial position, however, will be unaffected by implementation of
this standard.
Note 5 Reclassifications
Certain reclassifications have been made to 1998 balances to conform
with classifications used in 1999.
Note 6 Restricted Stock Bonus Plan
During the six months ended April 30, 1999 the Company issued an
additional 152,950 and re-purchased 18,278 shares of the Company's
common stock issued pursuant to the 1996 Employee Incentive Restricted
Stock Bonus Plan. Net earned compensation for the three and six
months ended April 30, 1999 amounted to $36,000 and $68,000
respectively.
Note 7 Related Party Transactions
The Company and Olmsted moved their principal operating facilities in
December 1996 to a building which is beneficially owned by the
Company's President. The Company and Olmsted have entered into
separate five-year lease agreements calling for aggregate annual rents
of $111,000, increasing 4% annually after the first year. The Company
and Olmsted have made combined nonrefundable contributions to
leasehold improvements amounting to $130,000, in accordance with terms
of the lease agreements.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Versus Technology, Inc. ("Versus") and its wholly owned subsidiary,
Olmsted Engineering Co. ("Olmsted"), operate in two business segments:
data collection and processing and systems design and engineering
(CAD/CAM). All operations are located in one facility in Traverse
City, Michigan.
Infrared locating ("IR Locating") systems are the primary product of
Versus. The systems, which are currently installed in hospitals,
corporate facilities, government facilities and other complexes,
permit the automatic and accurate registry of location and other
business information. The system can be used to monitor the precise
location of personnel or equipment for health and safety purposes, to
control access to secured areas and to automatically record events
associated with those activities. The system consists of compact
badges, sensors, receivers and a central processing computer. Badges
can be attached to people and equipment. Each badge transmits a
unique identifying code, which is received and validated by sensors
located in each room or zone. The signals are sent to the central
processing computer which locates and identifies each badge, collects
the information in a database and provides users with a graphical
display of people and equipment locations on an ordinary computer
monitor or in report form. Optional components allow the use of an
ordinary phone switch to automatically "search and locate" personnel
and connect phone callers without human intervention. The system can
also be supplied with two-way paging eliminating the overhead noise
usually involved with broadcast paging. The entire system is based on
Versus' patented proprietary technology involving the transmission and
reception of infrared light for use in locating multiple subjects in
several areas.
Versus' primary method of distribution of the IR product is through
resellers who install the product. Although Versus also sells directly
to end users, reseller sales are expected to contribute the majority
of Versus' future IR revenues. Currently, the healthcare market is
primarily targeted for penetration due to the technology's initial
success there and the existing interest that has developed. In
addition to the healthcare market, other applications include high
security facilities (military, governmental, etc.), correctional
institutions (prisons, guard security, etc.) and commercial security
(visitor locating, institutional access control, etc.).
Under the Olmsted name, Versus sells and maintains the ACU*CARV(R
product line, which consists of a wide range of manufacturing
solutions including software, hardware, support and shop floor
communications networks. ACU*CARV(R) is an integrated family of Computer
Aided Manufacturing ("CAM") software programs used to operate computer
numerically controlled machines mainly in the mold, die and pattern
making industries. In addition to revenues from the sale of ACU*CARV(R)
products, Versus also receives monthly maintenance and enhancement
fees from its customers who, in turn, receive technical support and
periodic update releases. Versus also develops, markets and
integrates cellular products for the security industry.
The following discussion and analysis focuses on the significant
factors which affected the Company's consolidated financial statements
during the three-and six-month periods ended April 30, 1999, with
comparisons to 1998 where appropriate. It also discusses the
Company's liquidity and capital resources. The discussion should be
read in conjunction with the consolidated financial statements and
related notes included elsewhere in this Form 10-QSB.
Results of Operations
Three Months Ended April 30, 1999 and 1998
During the second quarter of fiscal 1999, the Company launched its
disposable patient badge trademarked as the DataBand(TM). In addition to
development time spent on the DataBand(TM), effort was also devoted to
bringing ACU*CARV(R) 2000 to market. This latest release of the CAD/CAM
segment's premier product will be mass marketed and is expected to
contribute to the segment's revenues in the last half of fiscal 1999.
The Company also continued to pursue ISO certification and expansion
of its reseller group.
Second quarter revenues were $882,000 or 35% above the fiscal 1998
level of $655,000. Infrared sales of $736,000 were 72% above the same
period fiscal 1998 level of $427,000. CAD/CAM revenues were $146,000
or 36% below the $228,000 revenues generated for the same three-month
period in fiscal 1998. Reseller sales accounted for 98% of the IR
revenues for the quarter. During the quarter another reseller was
added bringing the total to seven. Negotiations were pending with
several other potential resellers. The largest decrease in CAD/CAM
revenues occurred in third party sales (down $68,000) reflecting the
Company's strategy of emphasizing its higher margin in-house products.
Maintenance and training revenues were down $12,000 from fiscal year
1998 levels while Cellular revenues were up $10,000. In May Versus
introduced ACU*CARV(R) 2000 which is expected to improve sales of the
CAD/CAM segment.
Cost of revenues as a percentage of revenues in the second quarter of
fiscal 1999 decreased to 36% from 49% for the same quarter in fiscal
1998. This decrease is attributable to the increased revenue levels
and lower IR component manufacturing costs due to product improvements
and larger production runs.
Research and development expenses at $134,000 were $44,000 higher than
the three months ended April 30, 1998. 1999 expenses reflect
additional costs expended to develop the DataBand(TM), IR/RF Badge and
ACU*CARV(R) 2000.
Sales and marketing expenses for the second quarter of fiscal 1999
increased to $374,000 or 23% higher than the $303,000 for the three
months ended April 30, 1998. The increased expenses reflect added
sales staff and increased trade show expenses for both business
segments.
General and administrative expenses of $409,000 were 1% below the
$412,000 level for the three months ended April 30, 1998.
In the second quarter of fiscal 1999, other income, net decreased
$11,000, or 79%, from 1998 levels due to the decrease in interest
earned on lower cash levels.
Six Months Ended April 30, 1999 and 1998
First half revenues were $1,806,000 or 44% above the fiscal 1998 level
of $1,253,000. Infrared sales of $1,503,000 were 88% above the same
period fiscal 1998 level of $801,000. Resellers accounted for 95% of
total IR revenues. CAD/CAM revenues were $303,000, compared to the
$452,000 revenues generated for the same six-month period in fiscal
1998. Third party revenues decreased $119,000, maintenance decreased
$22,000 and in-house software decreased $15,000. Cellular revenues
were $19,000 above fiscal 1998 levels.
Cost of revenues as a percentage of revenues in the first six months
of fiscal 1999 decreased to 35% from 51% for the same period in fiscal
1998. This decrease is attributable to the increased revenue levels,
lower IR component manufacturing costs, and reduced third party costs
associated with the revenue decrease in those products.
Research and development expenses of $277,000 were $11,000 higher than
the first half of fiscal 1998. 1999 expenses reflect additional
expenditures on development of the DataBand(TM), IR/RF Badge, and
ACU*CARV(R) 2000.
Sales and marketing expenses for the six months ended April 30, 1999
increased to $679,000 or 22% higher than the same period in fiscal
1998. The increased expenses reflect increased sales staff and
increased trade show expenses as the sales group attended four major
shows in the first six months of fiscal 1999.
General and administrative expenses of $808,000 were 4% lower than the
$839,000 level for the same period in fiscal 1998. Major expense
decreases were insurance ($22,000) and professional fees
($44,000)offset partially by an increase in director expenses.
In the first half of fiscal 1999, other income, net decreased $26,000,
or 74% from 1998 levels due to the decrease in interest earned on
lower cash levels.
Liquidity and Capital Resources
As of April 30, 1999 cash on hand was $407,000. During the six months
ended April 30, 1999, Versus relied on cash proceeds generated from a
private placement of common stock in August 1996 which generated net
proceeds of approximately $5.2 million. The total decrease in cash
was $291,000 compared to $943,000 in the same six-month period in
1998.
Operating activities (including working capital) consumed $207,000 in
cash in the first six months of 1999 compared to $859,000 in the same
period in 1998. Increased sales volumes and improved gross margins
were the primary reasons for the improvement. Versus invested $25,000
in capital assets during the first half of 1999 compared to $21,000 in
the prior year.
During the first six months of 1999 $60,000 of the note payable was
retired compared to $66,000 in 1998. The note is expected to be paid
in full in June 1999.
Effective May 31, 1999 the Company issued in a private placement
transaction, secured convertible debentures in the amount of
$1,550,000. Included in the nine registered debenture holders were a
director of Versus, a key employee of Versus, and a limited liability
company of which another Versus director is the managing partner. The
proceeds of this funding will be used for working capital and the
DataBand(TM) product launch.
Management believes the combination of cash balances remaining from
the 1996 private placement and the cash expected to be generated
during fiscal 1999 from operations, combined with the proceeds of the
debentures will be sufficient to meet projected cash needs for
operations and new product developments over the next six months.
Year 2000 Readiness Disclosure
Versus has conducted a comprehensive review of its internal computer
systems and its products to identify the systems that could be
affected by the Y2K issue and has identified no problem areas. Versus
believes there are no material problems, if any, in its infrastructure
and facilities. Versus presently believes that, with no modifications
to existing software, the Y2K issue will not pose any operational
problems for Versus' software products, its computer systems or those
of its customers relating to the use of its products.
Versus has contacted and received assurances from vendors and
suppliers as to their state of readiness for Y2K. Versus believes
that current material vendors and suppliers are or will become Y2K
compliant or that pre-qualified replacement vendors and suppliers will
be utilized instead. Versus is in the process of contacting its major
customers and is not currently aware of any Y2K issues facing said
customers. Management has not fully evaluated the impact, if any, Y2K
problems of its major customers may have on Versus' future operational
results or financial condition.
Versus' hardware components contain no embedded elements that are date
driven. Versus conducted in-house testing of its components utilizing
British Standards Institution protocol. Y2K issues identified as a
result of this testing have been corrected. At this time, the
reasonably likely worst-case scenario would be that one of our vendors
would encounter difficulties in production rendering it unable to meet
delivery schedules. Versus may consider increasing inventories
towards the end of 1999 to lessen the possible impact of such an
occurrence.
Because no problems have been identified to date, Versus has not found
it necessary to expend any cash resources on the Y2K issue. The
current estimated total expense for Versus to become Year 2000 ready
is $30,000. The $30,000 amount is an estimate of the total value of
internal staff resources that will be required to accomplish Y2K
readiness and added time to rewrite software involved. The estimate
details are:
Staff expenses $20,000
Software Enhancement expenses $10,000
Of the $30,000 estimate, $28,000 has been expended as of June 11,
1999.
SAFE HARBOR PROVISION
This document may contain forward-looking statements relating to
future events, such as the development of new products, the
commencement of production or the future financial performance of the
Company. These statements fall within the meaning of forward looking
information as defined in the Private Securities Litigation Reform Act
of 1995. These statements are subject to a number of important risks
and uncertainties that could cause actual results to differ materially
including, but not limited to, economic, competitive, governmental and
technological factors affecting the Company's markets and market
growth rates, products and their rate of commercialization, services,
prices and adequacy of financing and other factors described in the
Company's most recent annual report on Form 10-KSB filed with the
Securities and Exchange Commission, which can be reviewed at
http://www.sec.gov. The Company undertakes no obligation to update,
amend or clarify forward-looking statements, whether as a result of
new information, future events or otherwise.
PART II OTHER INFORMATION
Item 1 Legal Proceedings
The company is not presently engaged in any legal proceedings.
Item 2 Changes in Securities and Use of Proceeds
(c) On April 23, 1999 the Board of Directors approved the sale of
9,500 shares of Versus' common stock to two employees under the
1996 Incentive Restricted Stock Bonus Plan (the "Plan") at a
price of $.01 per share. Under the Plan, if, on or before three
years from the date the shares were issued, the employment of the
employee by Versus terminates, the employee must resell all or a
percentage of the shares transferred to Versus for $0.01 per
share. These sales were made pursuant to the exemption afforded
by Section 4(2) - Transactions by an issuer not involving a
public offering.
On April 23, 1999, the Board of Directors awarded incentive stock
options to purchase 44,125 shares of Versus' common stock to key
employees of the Company (including two of its officers) under
the 1996 Employee Incentive Stock Option Plan. The options vest
over a five-year period and are exercisable for ten years from
the date of the grant at $0.17 per share, which was the then
current fair market value. These awards were made pursuant to
the exemption afforded by Section 4(2) - Transactions by an
issuer not involving a public offering. The options granted to
officers were as follows:
Andrea Beadle Corporate Secretary 18,000 shares
Robert Butler Chief Accounting Officer 2,875 shares
On April 23, 1999, the Board of Directors awarded incentive stock
options to purchase 56,780 shares of Versus' common stock to
thirteen employees under the 1999 Employee Incentive Stock Option
Plan. The options vest over a five-year period and are
exercisable for ten years from the date of the grant at $0.17 per
share, which was the then current fair market value. These
awards were made pursuant to the exemption afforded by Section
4(2) - Transactions by an issuer not involving a public offering.
On April 23, 1999 the Board approved a motion granting each
outside director options to purchase 73,000 shares of the
Company's common stock and inside directors (i.e., those employed
by the Company) options to purchase 36,000. The options awarded
vest after one year and are exercisable over a five-year period
at a price of $0.165 per share, which was the then current fair
market value.
Item 4 Submission of Matters to a Vote of Security Holders
The following directors were elected at the 1999 Annual Meeting of
Shareholders of Versus Technology, Inc. held on Friday April 23, 1999:
Samuel Davis, Julian C. Schroeder, Gary T. Gaisser and David L. Gray.
Total shares voted were 31,145,289 (81%). The tabulation of
votes was as follows:
FOR WITHHELD/AGAINST
Samuel Davis 27,847,201 3,298,088
Julian C. Schroeder 27,853,451 3,291,838
Gary T. Gaisser 28,013,451 3,131,838
David L. Gray 28,290,951 2,854,338
At that same meeting the shareholders also approved a motion to amend
the Company's Certificate of Incorporation approving a reverse stock
split of 10:1 and also approved the creation of the 1999 Employee
Incentive Stock Option Plan (3,200,000 shares reserved). The
tabulation of results was:
FOR WITHHELD/AGAINST
Reverse Stock Split 22,237,165 8,908,124
1999 Employee Incentive
Stock Option Plan 16,075,940 5,405,810
The Board of Directors has decided to take no immediate action
regarding the reverse stock split at this time.
Item 5 Other Information
At the April 23, 1999 Board of Directors meeting Mr. James D. Ross,
J.D. was appointed to the Company's Board of Directors.
Effective May 31, 1999, the Company issued $1,550,000 in Prime Rate
Secured Convertible Debentures, due April 30, 2004. Interest is
payable quarterly on the first days of August, November, February and
May. The Debentures may be redeemed by the Company at any time after
October 31, 2001 or when the price of the Company's common stock is
quoted at $0.50 per share for 14 continuous days subject to minimum
average volume tests being met in the previous 90 days. The
debentures may be converted by the holder at any time at an initial
conversion ratio of four shares per dollar held. The conversion ratio
is adjustable for future stock changes and mergers.
The debentures are secured by a first priority security interest in
all of the Company's assets.
The debentures are transferable to qualified investors. Shares issued
on conversion will bear a restrictive legend.
The Company also entered into a Registration Rights Agreement relative
to the debentures issued wherein it agreed:
(a) At any time after six months from the debenture's issue date but
not later than five years from the time any stock is issued on
conversion, to effect a registration under the Securities Act,
provided, it receives a written request from Investors owning 50%
or more of the Registrable Securities outstanding at the time as
a result of conversion.
(b) To notify the Investors of any other registrations it intends to
effect (except registrations solely for shares in connection with
an employee benefit plan or a merger or consolidation) allowing
them to "piggy back" on such alternate registration.
(c) Registration expenses will be paid by the Company.
Item 6 Exhibits and Reports on Form 8-K
Exhibit 4 (k) Versus Technology, Inc. Prime Rate Secured
Convertible Debenture (Specimen)
(l) Registration Rights Agreement
Exhibit 27 - Financial Data Schedule
Exhibit 99 (a) Press Release - Versus Technology Reports Record
Sales at Annual Shareholders' Meeting
(b) Press Release - Versus Technology Issues $1.5 Million
in Convertible Debentures.
There were no reports on Form 8-K during the six months ended April
30, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
VERSUS TECHNOLOGY, INC.
By: /s/ Robert Butler By: /s/ Gary T. Gaisser
----------------- -------------------
Robert Butler Gary T. Gaisser
Controller and Chief President and Chief
Accounting Officer Executive Officer
(Principal Accounting (Principal Executive
Officer) Officer)
Dated: June 14, 1999
Exhibit 4(k)
"SPECIMEN"
VERSUS TECHNOLOGY, INC. PRIME RATE SECURED CONVERTIBLE DEBENTURE
DUE APRIL 30, 2004
Debenture No. __ May 31, 1999 $______________
Versus Technology, Inc., a Delaware corporation (the "Corporation"), for
value received, promises to pay to the order of ________ (the
"Registered Holder") on April 30, 2004 (the "Due Date"), (unless this
Debenture shall have been sooner called for redemption as herein
provided), upon presentation of this Debenture, _____ Dollars ($__)
(the "Principal Amount") and to pay interest on the outstanding
Principal Amount at the prime rate of interest as announced and
published by the Empire National Bank of Traverse City, Michigan ("Prime
Rate") as effective on the date hereof. The interest rate shall be
adjusted after July 31, 1999 to equal the Prime Rate in effect on August
1, November 1, February 1, and May 1 of each year during which any
Principal Amount remains outstanding hereunder.
The Corporation further covenants, promises and agrees as follows:
1. Interest. Interest which shall accrue on the outstanding Principal
Amount shall be payable in quarter-annual installments on the
first days of August, November, February and May in each and every
calendar year until the entire outstanding Principal Amount and
all accrued and unpaid interest shall have been paid in full. If
this Debenture shall be issued on a date other than the first day
of May, the interest payable shall be prorated upon the number of
days of such quarter annual interest period during which this
Debenture shall have been issued and outstanding. All accrued and
unpaid interest, all outstanding Principal Amount, and all other
amounts payable under this Debenture shall in any event be due and
payable in full on the Due Date. All payments of principal and
interest or principal or interest shall be made at ___ or at such
other place as may be designated in writing by the Registered
Holder hereof. Interest will be computed on the basis of the
actual number of days elapsed in a year of 360 days.
2. Redemption.
2.1 Subject to the Registered Holder's right to convert this
Debenture pursuant to Section 3 hereof, this Debenture is
subject to redemption, at the option of the Corporation, in
whole or in part, and without penalty or premium, prior to
the Due Date at any time and from time to time after the
earlier of: (i) October 31, 2001, or (ii) the date, after the
date hereof, on which the closing market price of the
Corporation's common shares of stock as quoted on the OTC
Bulletin Board has been $.50 or more for 14 continuous days
under circumstances where such shares have traded at a level
at least equal to the average daily volume for the preceding
90 days during 12 of the 14 days and the Corporation has
reasonably determined that, after giving effect to the
redemption or conversion, it is probable the Corporation will
qualify to be admitted for quotation on the NASDAQ SmallCap
Market as stated in the then-current NASD Manual.
2.2 The Corporation may exercise its right to redeem this
Debenture prior to maturity by giving notice (the "Redemption
Notice") thereof to the Registered Holder of this Debenture
as it appears on the books of the Corporation, which notice
shall specify the terms of redemption (including the place at
which the Registered Holder of the Debenture may obtain
payment), the principal amount of the Debenture to be
redeemed (the "Redemption Amount"), and shall fix an
effective date for redemption (the "Redemption Date"), which
date shall not be less than 90 days nor more than 120 days
after the date of the Redemption Notice; provided, however,
that commencing 30 days following the giving of the
Redemption Notice, no interest shall accrue or be payable on
the outstanding Principal Amount.
2.3 Upon the written request of the Registered Holders of 50% or
more in Principal Amount of all outstanding Debentures of
this issue any proposed redemption by the Corporation shall
be proportionately equal to all Registered Holders.
2.4 On the Redemption Date, the Corporation shall pay all accrued
and unpaid interest on the Debenture up to and including the
Redemption Date, plus the Redemption Amount, (the "Final
Payment") to the Registered Holder hereof. Alternatively, on
the Redemption Date the Corporation may deposit the Final
Payment with a national bank (the "Bank") as a trust fund for
the benefit of the Registered Holder(s) of the Debenture,
with irrevocable instructions and authority to the Bank to
pay the Final Payment to the Registered Holder upon
notification from the Corporation that such Registered Holder
has surrendered his Debenture to the Corporation as required
by the Corporation. As of the date of the making of such
deposit, and upon notice to the Registered Holder that such
deposit has been made for such Registered Holder's benefit,
the Bank is authorized and directed promptly to prepare and
file any UCC termination statements or other notices or
documents necessary to terminate of record the liens or
security interests contemplated by Section 5 of this
Debenture, and the deposit in the hands of the Bank shall
constitute full payment of the Debenture, the intent being
that from and after the date of the deposit and such notice
the Debenture so called for redemption shall stand as
redeemed and shall be deemed to be no longer outstanding, and
the Registered Holder(s) thereof shall have no rights with
respect thereto except the right to receive from the Bank the
Final Payment, without interest, upon surrender of the
Debenture applicable thereto. Any moneys remaining unclaimed
at the expiration of two years following the date of the
deposit, and after the Registered Holder has been given at
least 3 notices of the making of the deposit, shall
thereafter be returned to the Corporation upon its request,
whereupon the Registered Holder of the Debenture shall have
no further rights whatsoever.
3. Conversion.
3.1 The Registered Holder of this Debenture shall have the right
and option at any time prior to the Redemption Date (but no
more frequently than once within any period of six
consecutive months), to convert all or any part of the
outstanding Principal Amount of this Debenture or any
replacement Debenture into such number of fully paid and
nonassessable shares of Common Stock of the Corporation (the
"Common Stock") as shall be provided herein.
3.2 The Registered Holder of this Debenture may exercise the
conversion right provided in this Section 3 by giving written
notice (the "Conversion Notice") to the Corporation of the
exercise of such right. The Conversion Notice shall be
accompanied by the sole original of this Debenture, and shall
state the outstanding Principal Amount desired to be
converted by the Registered Holder, which shall be not less
than $100,000 and shall be in multiples of $25,000. The
number of shares of Common Stock that shall be issuable to
the Registered Holder upon conversion of the Debenture shall
equal the outstanding Principal Amount to be converted,
multiplied by the Conversion Factor as defined and determined
in accordance with Section 4 in effect on the date the
Conversion Notice is received by the Corporation.
3.3 Conversion shall be deemed to have been effected on the date
the Conversion Notice is received by the Corporation (the
"Conversion Date"). As promptly as practicable (and in any
event within 45 days) after the Conversion Date, the
Corporation shall issue and deliver by hand against a signed
receipt therefor or by United States registered mail, return
receipt requested, to the address designated by the
Registered Holder of this Debenture in the Conversion Notice,
a stock certificate or stock certificates of the Corporation
representing the number of shares of Common Stock to which
such Registered Holder is entitled, together with payment of
all interest accrued and unpaid on the outstanding portion of
the Principal Amount of the Debenture being converted on the
Conversion Date up to and including the Conversion Date, cash
in lieu of any fractional share to which such Registered
Holder would otherwise be entitled, and a replacement
Debenture representing the principal amount of the
surrendered Debenture that was not converted.
4. Conversion Factor.
4.1. Initial Conversion Factor. On the date hereof, the
Conversion Factor shall equal four (i.e., the Registered
Holder shall receive four shares of Common Stock for each
dollar of outstanding Principal Amount converted into Common
Stock pursuant to this Debenture) provided, however, that the
Conversion Factor shall be subject to adjustment in
accordance with and at the times provided in this Section 4.
4.2. Adjustments.
4.2.1. Stock changes. If, at any time or from time to
time the Corporation, by stock dividend, stock split,
subdivision, reverse split, consolidation, reclassification
of shares, or other similar structural change, changes as a
whole its outstanding Common Stock into a different number
or class of shares, then, immediately upon the occurrence of
the change:
(i) the class of shares into which the Common Stock has
been changed shall replace the Common Stock, for the
purposes of this Debenture and the terms and
conditions hereof, so that the Registered Holder of
this Debenture shall be entitled to receive, and shall
receive upon exercise of the conversion rights of this
Debenture, shares of the class of stock into which the
Common Stock had been changed;
(ii) the number of shares to be issued to the Registered
Holder upon exercise of the conversion rights under
this Debenture shall be proportionately adjusted (for
example, if the outstanding Common Stock of the
Corporation is converted into X stock at the rate of
one (1) share of Common Stock into three (3) shares of
X stock, and prior to the change the Registered Holder
of this Debenture was entitled, upon conversion of
this Debenture, to receive one hundred shares of
Common Stock, then the Registered Holder shall, after
the change, be entitled to receive three hundred
shares of X stock for the total same converted
Principal Amount that the Registered Holder had to
convert prior to the change to receive the one hundred
shares of Common Stock); and
(iii) the Conversion Factor shall be proportionately
adjusted. (In the above example, the Conversion Factor
would be increased by 300%).
Irrespective of any adjustment or change in the number or class of
shares to be issued upon the exercise of the conversion rights under
this or any other Debenture of like tenor, or in the Conversion
Factor, this Debenture, as well as any other convertible debenture of
like tenor, may continue to express the Conversion Factor and the
number and class of shares to be issued upon exercise of the
conversion rights under this Debenture as the Conversion Factor and
the number and class of shares to be issued upon exercise of the
conversion rights of this Debenture as the same were expressed in this
Debenture when it was initially issued.
4.2.2 Effect of merger. If at any time while this
Debenture is outstanding another corporation merges with or
into the Corporation, the Registered Holder or Registered
Holders of this Debenture shall be entitled, immediately
after the merger becomes effective and upon exercise of the
conversion rights under this Debenture, to obtain the same
number of shares of Common Stock of the Corporation (or
shares into which the Common Stock has been changed as
provided in Section 4.2.1) to which the Registered Holder or
Registered Holders of this Debenture were entitled upon the
exercise of conversion rights to obtain immediately before
the merger became effective. The Corporation shall take any
and all steps necessary in connection with the merger to
assure that sufficient shares of Common Stock to satisfy all
conversion and purchase rights represented by outstanding
convertible securities, options and warrants, including this
Debenture, are available so that these convertible
securities, options and warrants, including this Debenture,
may be honored and performed by the Corporation as promised.
4.3 Notice of Adjustment. Whenever the Conversion Factor shall be
adjusted as provided in Section 4 hereof, the Corporation
shall prepare and send to the Registered Holder of this
Debenture a statement, signed by the chief financial officer
of the Corporation, showing in detail the facts requiring
such adjustment and the Conversion Factor that shall be in
effect after such adjustment.
4.4 Notice of Adjustment Events. In the event the Corporation
shall propose to take any action of the types described in
Section 4.2 hereof, the Corporation shall give notice to the
Registered Holder(s) of this Debenture, which notice shall
specify the record date, if any, with respect to any such
action and the date on which such action is to take place.
Such notice shall be given on or prior to the earlier of ten
(10) days prior to the record date or the date on which such
action shall be taken. Such notice shall also set forth such
facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the
Conversion Factor and the number, kind or class of shares or
other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable
upon conversion of this Debenture. Failure to give notice in
accordance with this Section 4.4 shall not render such action
ultra vires, illegal, or invalid.
4.5 Taxes. The Corporation shall pay all documentary, stamp or
other transactional taxes and charges attributable to the
issuance or delivery of shares of stock of the Corporation
upon conversion; provided, however, that the Corporation
shall not be required to pay any taxes which may be payable
in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other
than that of the Registered Holder of this Debenture.
4.6 Reservation of Shares. The Corporation shall at all times
reserve and keep available, free from preemptive rights,
authorized but unissued or treasury shares of Common Stock
sufficient to effect the conversion of this Debenture in
full.
4.7 Fractional Shares. The Corporation shall not be required
upon the conversion of this Debenture to issue any
fractional shares, but shall pay in cash an amount
determined by multiplying the fraction to which the
Registered Holder is entitled by the Fair Market Value of
the Common Stock on the Conversion Date. Should the Common
Stock then be traded on an Exchange or quoted on a quotation
system for which a last sale reporting system is in effect,
the reported last sale on the exercise date shall be deemed
to be such Fair Market Value. If the Common Stock is quoted
on a quotation system without last sale reporting, the Fair
Market Value shall be deemed to be the highest bid price of
any broker/dealer regularly making a market in the Common
Stock on the Conversion Date. In all other cases Fair
Market Value shall be as determined in good faith by the
Corporation.
4.8 Certain Requirements for Transfer and Conversion.
4.8.1 In the absence of an effective Registration
Statement under the Securities Act of 1933, as amended (the
"Act"), it shall be a condition to any transfer or any
conversion of this Debenture that the Corporation shall have
received, at the time of such transfer or conversion: (i) A
representation in writing from the proposed transferee that
the Debenture is being transferred or the Common Stock to be
issued pursuant to exercise of the conversion rights hereof
is being acquired for investment and not with a view to any
sale or distribution thereof which would constitute or
result in a violation of the Act; (ii) such other assurances
as are reasonably satisfactory to the Corporation that the
transaction will not result in a violation of state or
federal securities laws.
4.8.2 Each certificate representing the Debenture or
the shares of Common Stock issued on conversion of this
Debenture shall bear a legend substantially in the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF VERSUS TECHNOLOGY, INC.
(THE "CORPORATION") THAT THIS SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY:
(1) TO THE CORPORATION (UPON REPURCHASE THEREOF
OR OTHERWISE), (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT, PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT,
AS THE SAME MAY BE AMENDED FROM TIME TO TIME,
PROVIDED THAT THE CONDITIONS OF REGULATION S FOR
RESALES HAVE BEEN SATISFIED, (4) PURSUANT TO AN
EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH
RULE 144 (IF AVAILABLE) UNDER THE SECURITIES ACT,
AS THE SAME MAY BE AMENDED FROM TIME TO TIME, (5)
IN RELIANCE ON ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
AND SUBJECT TO THE RECEIPT BY THE CORPORATION OF
AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE
SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH CASE IN ACCORDANCE WITH APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES.
Upon passage of the requisite holding period, the Registered
Holder may request that a replacement security be issued which
does not contain such legend; and if the Registered Holder is
then entitled under the applicable securities laws to receive
such replacement security, upon surrender to the Corporation of
the security containing such legend the Corporation shall issue
and deliver a replacement security, without the legend, to the
Registered Holder.
5. Grant of Security Interest. To secure payment of the Principal
Amount and all accrued and unpaid Interest thereon under this
Debenture, the Corporation hereby grants to the class of
Registered Holders of outstanding Debentures of this issue, with
each Registered Holder to have proportionate, non-exclusive rights
to the collateral security, a first priority security interest in
and to all the Corporation's assets, including, without
limitation, Accounts, Deposits, General Intangibles (including
contract rights, patents, trademarks, copyrights and all other
intellectual property), Inventory, and Equipment, as defined by
the Uniform Commercial Code of the State of Michigan, whether now
owned or subsequently acquired, together with all additions,
substitutions or replacements, and the proceeds from the sale or
other disposition thereof. The Corporation shall promptly sign
and file a financing statement with the Michigan Secretary of
State to perfect under Article 9 of the Uniform Commercial Code of
the State of Michigan the security interests granted hereunder and
shall take all such further actions as may be necessary or
advisable to cause the security interest herein granted to become
and remain a first priority perfected security interest in and to
all such Corporation assets under the laws of Michigan and of the
United States, except the Corporation shall not be required to
perfect liens or security interests against motor vehicles or
other assets governed by certificates of title or otherwise not
material to the Corporation's operations as a whole. With respect
to its infrared technology patents and patent applications, (and
with respect to contract rights pertaining to certain other
infrared patents under which the Corporation has an exclusive
license) the Corporation shall prepare and file with the United
States Patent and Trademark Office appropriate documentation to
perfect the first priority security interests granted in this
Debenture.
6. Representations, Warranties and Covenants. The Corporation
represents and warrants to and covenants with the Registered
Holder:
6.1 Organization; Good Standing; Qualification. The Corporation
is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, has
all requisite corporate power and authority to own and
operate its properties and assets and to carry on its
business as now conducted and as proposed to be conducted,
to execute and deliver this Debenture, and to carry out its
provisions. The Corporation is duly qualified to transact
business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material
adverse effect on its business, properties, prospects or
financial condition;
6.2 Authorization. All corporate action on the part of the
Corporation, its officers, directors, and stockholders
necessary for the authorization, execution and delivery of
this Debenture, and the performance of all obligations of
the Corporation hereunder has been taken. This Debenture
constitutes a valid and legally binding obligation of the
Corporation, enforceable in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights
generally (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or
other equitable remedies, (iii) with respect to foreign
laws and regulations, such representations are made only to
the best of the Corporation's knowledge and (iv) no
representation is made regarding the effect of laws relating
to competition, antitrust or intellectual property rights;
6.3 Valid Issuance of Common Stock. The Common Stock, if and
when issued pursuant to this Debenture, will be duly and
validly issued, fully paid, and non-assessable, and will be
free of restrictions on transfer other than restrictions on
transfer as referenced in this Debenture and under
applicable State and Federal securities laws;
6.4 Governmental Consents. No consent, approval, qualification,
order or authorization of, or filing with, any local, State,
or Federal governmental authority is required on the part of
the Corporation in connection with the Corporation's valid
execution, delivery or performance of this Debenture or the
offer, sale or issuance of the Common Stock by the
Corporation, except (i) the filings referred to in Section 5
of this Debenture, and (ii) such filings as have been made
prior to the issuance of this Debenture, except that any
notice of sale required to be filed with the Securities and
Exchange Commission under the Act, or such post-Closing
filings as may be required under applicable State securities
laws, which will be timely filed by the Corporation within
the applicable periods therefor;
6.5 SEC Filings and Available Public Information. The
Corporation has filed, and shall file in a timely manner all
documents and reports it is required to file with the
Securities and Exchange Commission. Such documents and
reports contain no misstatements of any material fact, and
do not omit any material fact which if not stated would
render such reports or documents misleading.
6.6 Ownership. The Corporation is and at all times during the
term of this Debenture will be the unconditional legal and
beneficial owner of the collateral.
6.7 No Conflict. The Corporation's execution, delivery, and
performance of this Debenture do not and will not conflict
with any law, rule, regulation, order, indenture, agreement,
or undertaking to which the Corporation is a party or by
which the Corporation is bound or affected and will not
result in the creation or imposition of any lien, security
interest, claim, or encumbrance of any kind under any such
indenture, agreement, or undertaking.
6.8 Location. The Corporation shall not, without the prior
written consent of the Registered Holders of 50% or more in
Principal Amount of all outstanding Debentures of this issue,
remove any of the collateral from the Corporation's place of
business in Traverse City, Michigan except in the ordinary
course of the Corporation's business and shall not in any
event remove any of the collateral from the state of
Michigan.
6.9 No Other Liens. The Corporation shall not, without the
prior written consent of the Registered Holders of 50% or
more in Principal Amount of all outstanding Debentures of
this issue, create, permit or grant any lien, security
interest, mortgage or encumbrance of any kind on any of the
collateral or otherwise pledge any of the collateral except
for (i) the security interest provided by this Debenture and
(ii) purchase money security interests in fixed assets
created contemporaneously with the acquisition of such
assets for the purpose of acquiring such assets (for not
more than the purchase price of such assets) in an amount
not exceeding $100,000 in the case of any single transaction
or $250,000 in the aggregate.
6.10 Records. The Corporation shall maintain complete and
accurate records pertaining to the collateral at 2600 Miller
Creek Road, Traverse City, Michigan 49684, or at such other
address as the Corporation notifies the Registered Holder(s)
in writing. Upon the written reasonable request of the
Registered Holders of 50% or more in Principal Amount of all
outstanding Debentures of this issue the Corporation shall
make those records available for inspection by or provide
copies of such records to the Registered Holder(s) upon
request.
6.11 Insurance. The Corporation shall maintain adequate
insurance on the collateral as is customary in the industry
in which it is engaged. Upon the reasonable written request
of the Registered Holders of 50% or more in Principal Amount
of all outstanding Debentures of this issue, the Corporation
shall furnish to the Registered Holder(s) written proof of
such insurance. The insurance shall not be subject to
cancellation or reduction in coverage without thirty (30)
days' prior written notice to the Registered Holder(s).
6.12 Taxes. The Corporation shall pay promptly when due all
taxes and assessments upon the collateral or for its use or
operation, except for taxes and assessments contested in
good faith by appropriate procedures.
6.13 Preservation of Property. The Corporation shall take all
actions necessary to maintain, preserve, protect, and keep
all collateral in good working order and salable condition
and only use the collateral lawfully and as permitted by the
Corporation's insurance policies. Upon the reasonable
written request of the Registered Holders of 50% or more in
Principal Amount of all outstanding Debentures of this issue
a representative of the Registered Holder may inspect the
collateral provided an appointment is made and any
disruption to the Corporation's business is kept to a
minimum.
6.14 No Sale. Without the prior written consent of the
Registered Holders of 50% or more in Principal Amount of all
outstanding Debentures of this issue the Corporation shall
not sell, transfer, lease, or otherwise dispose of any
collateral other than in the ordinary course of the
Corporation's business.
7. Exchange of Debentures. Upon the surrender by the Registered
Holder of any Debenture or Debentures, properly endorsed, to the
Corporation at the principal office of the Corporation, the
Corporation will, subject to other provisions of this Debenture,
issue and deliver to or upon the order of such Registered Holder,
at the Corporation's expense, a new Debenture or Debenture of
like tenor, in the name of such Registered Holder or as such
Registered Holder (upon payment by such Registered Holder of any
applicable transfer taxes) may direct.
8. Replacement of Debentures. Upon receipt of evidence reasonably
satisfactory to the Corporation of the loss, theft, destruction
or mutilation of this Debenture and (in the case of loss, theft
or destruction) upon delivery of an indemnity agreement (with
surety if reasonably required in an amount reasonably
satisfactory to the Corporation), or in the case of mutilation,
upon surrender and cancellation of this Debenture, the
Corporation will issue, in lieu thereof, a new Debenture of like
tenor.
9. Default.
9.1 The entire unpaid balance of the Principal Amount and all
interest accrued and unpaid on this Debenture shall be and
become immediately due and payable upon the occurrence of any
of the following events (a "Default Event"):
9.1.1 The non-payment by the Corporation when due of
principal and interest or principal or interest as provided
in this Debenture which has continued unpaid beyond a grace
period of 5 days following the Corporation's receipt of
written demand for payment from the Registered Holder(s) of
this Debenture; or
9.1.2 If the Corporation (i) dissolves or terminates its
existence or applies for or consents to the appointment of,
or if there shall be a taking of possession by, a receiver,
custodian, trustee or liquidator for the Corporation or any
of its property; (ii) becomes generally unable to pay its
debts as they become due; (iii) makes a general assignment
for the benefit of creditors or becomes insolvent; (iv) files
or is served with any petition for relief under the
Bankruptcy Code or any similar federal or state statute; (v)
has any judgment entered against it in excess of $200,000 in
any one instance or in the aggregate during any consecutive
twelve (12)-month period or has any attachment or levy made
to or against any of its property or assets; (vi) defaults
with respect to any evidence of indebtedness or liability for
borrowed money, or any such indebtedness shall not be paid as
and when due and payable; or (vii) has assessed or imposed
against it, or if there shall exist, any general or specific
lien for any federal, state or local taxes or charges against
any of its property or assets; or (viii) substantially fails
to perform or observe any material term, covenant or
condition contained in this Debenture, or has made any
material misrepresentation of fact as stated in this
Debenture; or (ix) any loss, theft, deterioration, or
impairment of any material part of the collateral causing the
collateral, in the reasonable judgment of the Registered
Holders of 50% or more in Principal Amount of all outstanding
Debentures of this issue, to become unsatisfactory as to its
character or value; and the Corporation fails to cure items
(i) - (ix) within 10 days following delivery of a written
demand to cure, signed by the Registered Holders of 50% or
more in Principal Amount of all outstanding Debentures of
this issue; or
9.1.3 Any failure by the Corporation to issue and
deliver shares of Common Stock as provided herein upon
conversion of this Debenture; or
9.1.4 There has occurred, without the written consent of
the Registered Holder(s) of 50% or more in Principal Amount
of all outstanding Debentures of this issue, a "Change in
Control of the Corporation." For purposes of this document,
a "Change in Control of the Corporation" shall mean a
change in control of a nature that would be required to be
reported in accordance with the rules promulgated under the
Securities Exchange Act of 1934, as amended ("the Exchange
Act"); provided that, without limitation, such a change in
control shall be deemed to have occurred if any "person" (as
such term is used in Section 13(d) and 14(d) of the Exchange
Act as in effect on the date hereof) other than the
Corporation or any "person" who on the date hereof is a
director or officer of the Corporation or whose shares of
Corporation stock are treated as "beneficially owned" (as
defined in Rule 13d-3 under the Exchange Act, as in effect
on the date hereof) by any such director or officer, is or
becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 40% or more of
the combined voting power of the Corporation's then
outstanding securities.
9.2 Upon the occurrence of any Default Event the Registered
Holder hereof shall have all of the rights, powers and
remedies provided for in this Debenture or now or hereafter
existing at law or in equity or by statute, including Article
9 of the Uniform Commercial Code, (subject always to the
terms of this Debenture) all of which shall be cumulative and
concurrent, and the exercise or beginning of the exercise by
the Registered Holder hereof of any one or more of such
rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Registered Holder
hereof of any or all such other rights, powers or remedies.
The Corporation shall pay all costs and expenses (including,
without limitation, reasonable attorneys fees and expenses)
incurred by the Registered Holder after the occurrence of a
Default Event in connection with the collection of this
Debenture or the enforcement of its rights under this
Debenture, whether or not legal proceedings are commenced.
These costs and expenses include, without limitation, any
costs or expenses incurred by the Registered Holder in any
bankruptcy, insolvency or similar proceeding.
10. Waiver. No failure or delay by the Registered Holder hereof to
insist upon the strict performance of any term of this Debenture
or to exercise any right, power, or remedy consequent upon a
default hereunder shall constitute a waiver of any such term or of
any such breach, or preclude the Registered Holder hereof from
exercising any such right, power, or remedy at any later time or
times. By accepting payment after the due date of any amount
payable under this Debenture, the Registered Holder hereof shall
not be deemed to waive the right either to require payment when
due of all other amounts payable under this Debenture, or to
declare a default for failure to effect such payment of any such
other amount. The failure of the Registered Holder of this
Debenture to give notice of any failure or breach of the
Corporation under this Debenture shall not constitute a waiver of
any right or remedy in respect of such continuing failure or
breach or any subsequent failure or breach.
11. Transfer. This Debenture shall be transferred on the books of the
Corporation only by the Registered Holder hereof or by his
attorney duly authorized in writing or by delivery to the
Corporation of a duly executed Assignment substantially in the
form attached hereto as Exhibit A. The Corporation shall be
entitled to treat any Registered Holder of record of the Debenture
as the holder in fact thereof and shall not be bound to recognize
any equitable or other claim to or interest in this Debenture in
the name of any other person, whether or not it shall have express
or other notice thereof.
12. Notices. All notices and other communications from the
Corporation to the Registered Holder of this Debenture shall be
mailed by first-class certified or registered mail, postage
prepaid, to the address furnished to the Corporation in writing
by the last Registered Holder of this Debenture who shall have
furnished an address to the Corporation in writing. All notices
and other communications from the Registered Holder of this
Debenture or in connection herewith to the Corporation shall be
mailed by first-class certified or registered mail, postage
prepaid, to the Corporation at its principal office set forth
below. If the Corporation should at any time change the location
of its principal office to a place other than as set forth below,
it shall give prompt written notice to the Registered Holder of
this Debenture and thereafter all references in this Debenture to
the location of its principal office at the particular time shall
be as so specified in such notice.
Versus Technology, Inc.
Attention: Controller
2600 Miller Creek Road
Traverse City, Michigan 49684
13. No Rights as Stockholder, etc. Until the exercise of the
conversion rights of the Registered Holder of this Debenture, the
holder of this Debenture shall not have or exercise any rights by
virtue hereof as a stockholder of the Corporation.
14. Forbearance from Suit or Adverse Action. No holder of this
Debenture may institute any suit or proceeding, or take any
action as a secured party against the property of the Corporation
pursuant to this Debenture unless the Registered Holders of 50%
or more in Principal Amount of all outstanding Debentures of this
issue join in the suit, action or proceeding, except that this
Section 14 shall not apply to a particular Registered Holder if a
Default Event stated in Section 9.1.1 or Section 9.1.3 affects a
such Registered Holder proportionately differently from the
Registered Holder(s) of 50% or more in Principal Amount of all
outstanding Debentures of this issue.
15. Agreement of Registered Holder. The Registered Holder or
Registered Holders of this Debenture, by the acceptance hereof,
and as part of the consideration for this Debenture, in all
respects agree to be governed by the terms of this Debenture and
the documents associated herewith.
16. Registration Rights Agreement. The form of Registration Rights
Agreement attached hereto is incorporated herein by reference.
The holders of the Common Stock issued pursuant to the conversion
rights of a Debenture of this issue shall have the rights
accorded to them as stated in said Registration Rights Agreement.
17. Miscellaneous. PRIVATE This Debenture shall inure to the
benefit of and be binding upon the heirs, personal
representatives, successors and assigns of the respective parties
hereto. This Debenture constitutes and fully integrates the
entire understanding between the parties hereto, and is intended
to supersede and cancel all prior written or oral understandings
between them dealing with the subject matter hereof. This
Debenture may not be changed orally, but only in writing, signed
by the party against whom enforcement of any waiver, change,
amendment, modification, extension or discharge is sought. No
other warranties, representations or covenants exist that are not
herein contained. For each term and pronoun used in this
Debenture, the singular number includes the plural number, and
vice versa, and any gender, whether masculine, feminine, or
neuter, includes the other genders, as appropriate and as the
context may reasonably require. The invalidity of any paragraph,
provision or part hereof shall not affect the validity of any
other paragraph, provision or part hereof. This Debenture shall
be construed as a whole and in accordance with its fair meaning.
Captions, if any, and organization are for convenience and shall
not be used in construing its meaning. Each party shall, upon
reasonable request, execute and deliver such other and further
documents as may be necessary and proper to effectuate this
Debenture. This Debenture shall be interpreted and enforced in
accordance with the laws of the State of Michigan, excluding any
conflicts-of-law rule or law which refers to the laws of another
jurisdiction. In the event of litigation arising under or in
connection herewith, each party consents to the exclusive in
personam jurisdiction of the state courts of the State of
Michigan, with venue in Traverse City, Michigan, and the
nonprevailing party agrees to pay the prevailing party's actual
attorney's fees and expenses in connection with any such
litigation, in addition to any costs, remedies or damages the
court may award. This Debenture constitutes the jointly bargained
agreement of the parties, and the construction of this Debenture
shall not be altered or influenced by the fact or presumption that
one party had a greater or lesser hand in drafting this Debenture.
If the date for performance of any act hereunder falls on a
Saturday, Sunday, or legal holiday, then the time for performance
thereof shall be deemed extended to the next successive business
day. Whenever it is provided in this Debenture that days be
counted, the first day to be counted shall be the day following
the date on which the event causing the period to commence occurs.
This Debenture is intended solely for the benefit of the parties
hereto and their successors, heirs and assigns, and may not be
relied upon or enforced by any third party beneficiary.
IN WITNESS WHEREOF, the Corporation has caused this Debenture to be duly
executed under its corporate seal.
VERSUS TECHNOLOGY, INC.
ATTEST: BY:
_______________________________ _______________________________
Andrea Beadle, Secretary Gary T. Gaisser, President
Exhibit A
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns to the Secured
Convertible Debenture of Versus Technology, Inc., No. _____ and hereby
irrevocably appoints ______________, Attorney, to transfer said Debenture on
the books of the within named corporation, with full power of substitution in
the premises.
WITNESS my hand and seal this _____day of_________,_____.
_____________________________ (SEAL)
_____________________________ (SEAL)
WITNESS:
___________________
___________________
State of________________)
County of_______________)
Subscribed and sworn before me, a notary public, on this ____ day of _____,__
______________________
Notary Public
My commission expires: _________
Exhibit 4(l)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 31st day of May, 1999,
between VERSUS TECHNOLOGY, INC., a Delaware corporation (the
"Corporation"), and the persons set forth on Schedule A hereto (the
"Investors").
W I T N E S S E T H
WHEREAS, the Corporation agreed to provide the Investors with
registration rights as set forth herein as further consideration for
the purchase by the Investors of up to [$3,000,000] in aggregate
principal amount of Secured Convertible Debentures (the "Debentures")
of the Corporation closing as of the date of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereof, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
Affiliate and Associate: Such terms shall have the respective
meanings assigned to them pursuant to Rule 12b-2 under the
Exchange Act.
Commission: The United States Securities and Exchange Commission
and any successor federal agency having similar powers.
Exchange Act: The Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations
thereunder, all as at the time in effect.
Person: An individual, partnership, joint venture, corporation,
trust, unincorporated organization or the government or any
department or agency thereof.
Registrable Securities: All of the Corporation's restricted
Common Stock, $.01 par value ("Common Stock") issuable or issued
by the Corporation upon conversion of the Debentures by the
Investors in the initial aggregate share amount set forth on
Exhibit A and subject to adjustment as set forth in the
Debentures.
Registration Expenses: Except as otherwise specifically provided
herein, all of the Corporation's out-of-pocket expenses, without
limitation as to amount, incident to the Corporation's
performance of or compliance with Section 2 herein, including,
without limitation, all fees and expenses, outside messenger and
delivery expenses, the fees and disbursements of counsel for the
Corporation and of its independent public accountant, and any
fees and disbursements of underwriters customarily paid by
issuers or sellers of securities and the expenses of one firm of
attorneys (selected by those Investors collectively owning 50% or
more of the Registrable Securities) who shall represent the
Investors. Registration Expenses shall not include any
underwriter's discounts, commissions or transfer taxes paid by
the Investors.
Securities Act: The Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations
thereunder, all as at the time in effect.
2. Registration
2.1 Registration on Request (Demand Registration). (a) Request.
At any time more than six (6) months after the date hereof
and no later than five (5) years from the time any shares of
Common Stock are issued upon the exercise of conversion
rights under the Debentures, upon the written request of
Investors owning fifty percent or more of the Registrable
Securities outstanding at that time as a result of
conversion or 3,000,000 shares of Registrable Securities
(subject to adjustment as provided in the Debentures)
outstanding at that time as a result of conversion,
whichever number is higher, that the Corporation effect the
registration under the Securities Act of all or part of each
Investor's Registrable Securities specifying the intended
method or methods of disposition thereof, the Corporation
will use its best efforts to effect the registration under
the Securities Act of such securities to permit their
disposition (in accordance with the intended methods thereof
as aforesaid) and keep such registration effective for a
period of not less than nine (9) months, provided that if
such registration may then be effected by the Corporation on
Form S-3 or any successor Form of registration, then the
Corporation shall keep such registration effective until the
later of nine months or until the Registrable Securities may
be sold publicly pursuant to Rule 144(k) promulgated under
the Securities Act by persons who are not affiliates of the
Corporation. The Corporation shall be obligated to effect
only one registration under this Section 2.1 on Forms S-1 or
S-2 (or their equivalent successor forms) and no more than
three registration statements on Form S-3 (or its equivalent
successor forms) per calendar year. If a registration fails
to become or remain effective for any reason then such
registration shall not be counted as a demand registration
under this Section 2.1
(b) Registration Statement Form. Registrations under this
Section 2.1 shall be on an appropriate registration form of
the Commission as determined by the Corporation and shall
permit the disposition of the Registrable Securities in
accordance with the intended method or methods of
disposition specified in the Investors' request for such
registration.
(c) Expenses. The Corporation will pay all Registration
Expenses in connection with any registration of the
Registrable Securities.
2.2 Incidental Registration (Piggyback Registration). (a)
Notice and Request. If the Corporation at any time proposes
to register any of its securities under the Securities Act
(except registrations solely for registration of shares in
connection with an employee benefit plan or a merger or
consolidation), whether or not for sale for its own account,
it will each such time give prompt written notice, making
reference to this Section of this Registration Rights
Agreement, to the Investors of its intention to do so. Upon
the written request of any Investor within 30 days after the
receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by the
Investor, the Corporation will use its best efforts to
effect the registration under the Securities Act of all
Registrable Securities which the Corporation has been so
requested to register by the Investor as part of the
incidental registration, provided that if the Corporation
shall determine for any reason not to register or to delay
registration of such securities the Corporation may, at its
election, give written notice of such determination to the
Investors, and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its
obligation to register any Registrable Securities in
connection with such registration, without prejudice,
however, to the rights of the Investors to request that such
registration be effected as a registration under Section
2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected
under this Section 2.2 shall relieve the Corporation of its
obligation to effect any registration upon request under
Section 2.1. The Registration Expenses of the Investors
shall be paid by the Corporation.
(b) Underwriters Cutback. If, in any incidental
registration referred to in Section 2.2(a) above, the
managing underwriter or underwriters thereof shall advise
the Corporation in writing that in its or their reasonable
opinion the number of securities proposed to be sold in such
registration exceeds the number that can be sold in such
offering without having a material effect on the success of
the offering (including, without limitation, an impact on
the selling price or the number of shares that any
participant may sell), the Corporation will include in such
registration only the number of securities that, in the
reasonable opinion of such underwriter or underwriters can
be sold without having a material adverse effect on the
success of the offering as follows: (i) first, all of the
shares to be issued and sold by the Corporation and (ii)
second, the Registrable Securities requested to be included
in such registration by the Investors and any other Person
pro rata on the basis of the aggregate number of shares
requested to be included.
(c) Purchases and Sales of Shares of Common Stock during
Registration Process. The Investors participating in any
incidental registration of Registrable Securities agree to
execute and deliver in connection with any such registration
an agreement in form and substance reasonably satisfactory
to the Corporation and the Investors prohibiting the
Investors from effecting purchases and/or sales or
distributions of securities of the Corporation of the same
class as the Registrable Securities so registered, including
but not limited to a sale pursuant to Rule 144 under the
Securities Act (except as part of such underwritten
offering), during such periods, if any, as are required
under Regulation M promulgated under the Exchange Act and
such other customary periods as are reasonably requested by
the Corporation and/or the underwriter(s).
2.3 Registration Procedures. Whenever the Corporation is
required to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections
2.1 and 2.2, it shall, as expeditiously as possible:
(a) prepare and (within 90 days after a request for
registration is given to the Corporation or as soon
thereafter as possible) file with the Commission a
registration statement with respect to such Registrable
Securities and use its best efforts to cause such
registration statement to become and remain effective;
(b) prepare and file with the Commission such amendments
and supplements to the registration statement and prospectus
used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act for at least nine (9)
months if under 2.1 and at least 90 days if under 2.2;
(c) promptly furnish to each Investor participating such
number of conformed copies of such registration statement
and of each amendment and supplement thereto (in each case
including all exhibits), such number of copies of the
prospectus contained in such registration statement
(including each preliminary prospectus and any prospectus
supplement) and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the require-
ments of the Securities Act, and such other documents, as
such Investor may reasonably request;
(d) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statements under such other securities or blue
sky laws of such jurisdictions where an exemption is not
available and as the Investors participating shall
reasonably request, to keep such registration or
qualification in effect for so long as such registration
statement remains in effect, and take any other action which
may be reasonably necessary or advisable to enable the
Investors participating to consummate the disposition in
such jurisdictions of the securities owned by them, except
that the Corporation shall not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for
the requirements of this subdivision (iv) be obligated to be
so qualified or to consent to general service of process in
any such jurisdiction; and
(e) promptly notify each Investor participating, at any
time when a prospectus forming a part of such registration
statement is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in such
registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of
the circumstances under which they were made, and at the
request of the participating Investors promptly prepare and
furnish to the participating Investors a reasonable number
of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances
under which they are made.
(f) Promptly notify all Investors in writing of a requested
registration request under Section 2.1 and promptly notify
participating Investors after it shall receive notice
thereof of the time when any registration statement has
become effective, or a supplement to any prospectus forming
a part of such registration statement has been filed.
2.4 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants. The obligations of the
Corporation to use its reasonable efforts to cause the
Registrable Securities to be registered under the Securities
Act are subject to each of the following limitations,
conditions and qualifications.
(a) Year End Financials. The Corporation shall not be
obligated to file any registration statement pursuant to
Section 2.1 hereof at any time if the Corporation would be
required to include financial statements audited as of any
date other than the end of its fiscal year unless the reason
for such audit is due to the Corporation's failure or
refusal to properly comply with Section 3.
(b) The Corporation shall be entitled to postpone for a
reasonable period of time the filing of any registration
statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 if the Corporation determines, in
its reasonable judgment, that such registration and offering
would interfere with any financing, acquisition, corporate
reorganization or other proposed material transaction
involving the Corporation or any of its Affiliates or that
it would require the Corporation to disclose material non-
public information that it deems advisable not to disclose
and promptly gives the Investor written notice of and the
bases for such determination; provided, however, that such
restriction shall be effective for a period not to exceed 30
days and the Corporation may only institute such restriction
once during any twelve month period. Further, the
Corporation shall have the right to require each Investor
participating in a registration under Section 2.1 to refrain
from selling securities in a public offering for a period of
up to 90 days during the effectiveness of any registration
statement if the Corporation shall reasonably determine that
such sale would interfere with any transaction involving the
Corporation as described above or that such registration
would require disclosure of such material non-public
information; provided that Investors shall not be restricted
from effecting transactions to a greater degree than any
similar restriction to which any other holder of shares of
the Corporation's Common Stock are subject. If pursuant to
the preceding sentence the Corporation has required the
Investor to discontinue the sale of securities during the
effectiveness of a registration statement, then the period
of time any such registration statement must be kept
effective pursuant to Section 2.3(b) hereof shall be
extended for a period equal to the length of such
discontinuance.
(c) If the Investor proposes that the sale of Registrable
Securities pursuant to Section 2.1 hereof be an underwritten
offering, the Corporation shall have the right to approve
the choice of underwriters who undertake such offering.
2.5 Indemnification. (a) Indemnification by the Corporation.
The Corporation will, and hereby does, indemnify and hold
harmless, each Investor, its members, directors and
officers, any underwriter and each other Person, if any, who
controls any Investor or any such underwriter, (each, an
"Indemnified Party") from and against any losses, claims,
damages or liabilities, to which any Indemnified Party may
become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities arise
out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
registration statement filed under the Securities Act or any
prospectus contained therein, or any omission or alleged
omissions to state therein a material fact required to be
stated therein or necessary to make the statements therein
in light of the circumstances in which they were made not
misleading, and the Corporation will reimburse each
Indemnified Party for any legal or any other expenses
reasonably incurred by them in connection with investigating
or defending any such loss, claim or liability or action or
proceeding in respect thereof; provided that the Corporation
shall not be liable in any such case to an Indemnified Party
to the extent that any such loss, claim, damage, liability
or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such registration statement or any such
prospectus, in reliance upon and in conformity with written
information furnished to the Corporation by or on behalf of
such Indemnified Party, specifically stating that it is for
use in the preparation thereof; and provided, further, that
the Corporation shall not be liable in any case to the
extent that such loss, claim, damage, liability or expense
arises out of an untrue or alleged untrue statement or
omission or alleged omission in a prospectus, if such
statement or omission is corrected in an amendment or
supplement to the prospectus and the Investor thereafter
fails to deliver such prospectus as amended or supplemented
prior to or concurrently with the sale of the Registrable
Securities. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf
of any Indemnified Party and shall survive the transfer of
such securities by the Investor.
(b) Indemnification by the Investors. The Corporation may
require, as a condition to including any Registrable
Securities in any registration statement filed pursuant to
Section 2.1 or 2.2, that the Corporation shall have received
an undertaking satisfactory in all respects to it from each
Investor participating, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in
subdivision (a) of this Section 2.5) the Corporation, each
director of the Corporation, each officer of the Corporation
and each other person, if any, who control the Corporation
within the meaning of the Securities Act, with respect to
any statement or alleged statement in or omission or alleged
omission from such registration statement or any prospectus
contained therein, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and
in strict conformity with written information furnished to
the Corporation by the Investor specifically for use in the
preparation of such registration statement or prospectus.
Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the
Corporation or any such director, officer or controlling
person and shall survive the transfer of such securities by
the Investor.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of actual notice of the commencement of
any action or proceeding involving a claim referred to in
the preceding subdivisions of this Section 2.5, such
indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice
to the latter of the commencement of such action, provided
that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this
Section 3.6, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it
may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall be liable for
any settlement of any action or proceeding effected without
its written consent. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to
that specified in the preceding subdivisions of this Section
2.5 (with appropriate modifications) shall be given by the
Corporation and the Investors with respect to any required
registration or other qualification of securities under any
Federal or state law or regulation of any governmental
authority other than the Securities Act.
3. Reporting Requirements Under the Exchange Act. The
Corporation shall timely file such information, documents
and reports as the Commission may require or prescribe under
either Section 13 or 15(d) (whichever is applicable) of the
Exchange Act. The Corporation shall thereafter, whenever
reasonably requested by any Investor, notify such Investor
in writing whether the Corporation has, as of the date
specified by such Investor, complied with the Exchange Act
reporting requirements to which it is subject for a period
prior to such date as shall be specified by such Investor.
The Corporation acknowledges and agrees that the purposes of
the requirements contained in this Section 3 are: (i) to
enable any such Investor to comply with the current public
information requirement contained in Paragraph (b) of
Rule 144 under the Securities Act should such Investor ever
wish to dispose of any of the securities of the Corporation
acquired by it without registration under the Securities Act
in reliance upon Rule 144 (or any equivalent successor
provision); and (ii) to qualify the Corporation for the use
of registration statements on Form S-3, or its equivalent
successor form, with respect to secondary distributions. In
addition, the Corporation shall take such other reasonable
measures and file such other information, documents and
reports as shall hereafter be required by the Commission as
a condition to the availability of Rule 144 under the
Securities Act (or any equivalent successor provision).
4. Limitations On Subsequent Registration Rights. From and
after the date hereof, the Corporation shall not, without
the prior written consent of Investors holding at least 50%
of the Registrable Securities enter into any agreement with
any holder or prospective holder of any securities of the
Corporation that would allow such holder or prospective
holder of any securities of the Corporation to include such
securities in any registration filed under Section 2 hereof
on a basis preferential to the Registrable Securities in
which case such shares and the Registrable Securities shall
participate in the offering pro rata.
5. Notices. All communication provided for hereunder shall be
sent by first-class mail and, if to a Investor, addressed to
it at the address set forth on Exhibit A, or to such other
address as the Investor may have designated to the
Corporation in writing, and, if to the Corporation,
addressed to it at c/o Versus Technology, Inc., 2600 Miller
Creek Road, Traverse City, MI 49684, Attention: President,
or to such other address as the Corporation may have
designated to the Investor in writing.
6. Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns including,
without limitation, transferees or assignees of Registrable
Shares.
7. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are
inserted for reference only and shall not limit or otherwise
affect the meaning hereof.
8. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties
shall be governed by, the laws of the State of Michigan,
without regard to principles of conflicts of law.
9. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed
an original, but all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
VERSUS TECHNOLOGY, INC.
By:_________________________________
Name: Gary T. Gaisser
Title: President
The Investors by their Agent-in-Fact pursuant to Subscription
Agreements signed by them
AGENT
By:__________________________________
Name: David L. Gray
Exhibit 99(a) Press Release
VERSUS TECHNOLOGY REPORTS RECORD SALES AT ANNUAL SHAREHOLDER'S MEETING
Shareholders Elect Board Members, Approve Reverse Stock Split and
Approve Employee Stock Option Plan
Traverse City, Michigan, April 28, 1999 - - Versus Technology (OTC
BB: VSTI), at its Annual Meeting of Shareholders, reported record
revenues for Fiscal 1998 and for the first quarter of Fiscal 1999.
Revenue growth of 108% over the previous year propelled Versus to a
total of $3.2 million in revenue for fiscal 1998. First quarter 1999
revenue was $924,000, a 55% increase over first quarter 1998. "Our
record 1998 performance followed by a record first quarter,
underscores our focus on our overall company strategies of continued
growth, commitment to research and development, and enhancement of our
product applications," said Gary Gaisser, President and Chief
Executive Officer. Increased revenue combined with lower
manufacturing costs drove a decrease in total costs of revenues from
78% in fiscal 1997 to 46% in fiscal 1998. Versus is a Traverse City,
Michigan based developer and manufacturer of infrared (IR) location,
data collection and communication products for healthcare and other
industries.
Shareholders elected Samuel Davis, Julian Schroeder, David Gray and
Gary Gaisser to the Board of Directors. Davis is former President and
CEO of Mt. Sinai Hospital in New York City and is currently President
of Sam Davis and Associates. Schroeder is a Director, International
Fixed Income Research, with Schroder & Co., Inc, a registered broker-
dealer. Gray is President of Tortola Enterprises, Inc., a consulting
firm that provides business management services to a diverse group of
domestic and international operating businesses.
As part of the Company's commitment to strengthening the leadership of
its Board of Directors, James D. Ross, J.D. was appointed to the
Board. "We are pleased to have Mr. Ross on the Board. His expertise
in business development, risk management, corporate strategy and his
extensive board level experience will prove to be quite an asset,"
stated Gaisser. Ross is currently the Managing Director for FIMG,
Capital Management, (Traverse City, Michigan) a major shareholder of
Versus. Previously, Ross was the Executive Vice President of Aegon,
USA, one of the top ten insurers worldwide with over $100 billion in
assets.
Versus also announced the approval of a ten-for-one reverse stock
split to be implemented at a time to be chosen at the discretion of
management. Although there can be no assurance that a listing will
occur, increasing the price of the Common Stock is one requirement for
the Company to have the Common Stock listed on the NASDAQ Small Cap
Market, which the Company believes would offer advantages to
Shareholders. "Versus' management now has the option to affect this
reverse split when it believes the split will support the strategic
goals of the Company," said Davis, Chairman of the Board of the
Directors.
Shareholders also approved the 1999 Employee Incentive Stock Option
Plan authorizing the use of stock options to provide incentives to
eligible employees of the Company. "We are pleased to be able to
offer this incentive to our employees so they continue to promote the
best interest of the Company and enhance its long-term performance,"
stated Gaisser. "It's a powerful tool to use to encourage valuable
employees to join or remain with the Company."
During the information session, Versus indicated planned revenue
growth will be generated by the new, patented infrared (IR) and radio
frequency (RF) locating products that were showcased at the annual
meeting. The IR/RF Com badge and the innovative DataBand(TM), a
disposable patient ID band, combine both infrared and radio frequency
technologies for patient and staff location to provide a mobile
communication link between patients and caregivers. "Research and
Development has been a primary focus for Versus," stated Henry
Tenarvitz, Executive Vice President of Operations. "It has enabled
the development of our new products that will enhance staff and
equipment utilization and aid in improving patient care."
Versus plans to continue with its strategic initiatives to integrate
with other healthcare information and technology providers and to
expand into new applications. "We plan to use our patented
technologies, additional applications, and an increased number of
resellers to sustain our quarter-to-quarter growth," stated Rick
Salzer, Executive Vice President of Sales and Marketing. "With all of
the financial and labor pressures the healthcare industry must deal
with, we believe this market is in need of the types of improvements
the application of our technologies can provide."
Versus Technology, Inc. (http://www.versustech.com) is a leading
provider of infrared applications and systems. It has pioneered
infrared technology for real-time, on-line locating of people and
equipment. Versus Technology's patented locating systems monitor the
precise location of people and equipment using infrared light and
networks of infrared sensors installed throughout a facility. Small,
lightweight badges worn by patients, personnel and attached to
equipment transmit a code to the sensors to provide real-time location
and other information. The systems, currently in application in
hospitals, corporate facilities, government facilities and other
complexes, locate patients, personnel or equipment for improved
workflow and other purposes.
SAFE HARBOR PROVISION
This press release may contain forward-looking statements relating to
future events, such as the development of new products, the commencement
of production or the future financial performance of the Company. These
statements fall within the meaning of forward-looking information as
defined in the Private Securities Litigation Reform Act of 1995. These
statements are subject to a number of important risks and uncertainties
that could cause actual results to differ materially including, but not
limited to, economic, competitive, governmental and technological
factors affecting the Company's markets and market growth rates,
products and their rate of commercialization, services, prices and
adequacy of financing and other factors described in the Company's most
recent annual report on Form 10-KSB filed with the Securities and
Exchange Commission, which can be reviewed at http://www.sec.gov. The
Company undertakes no obligation to update, amend or clarify forward-
looking statements, whether as a result of new information, future
events or otherwise.
Exhibit 99 (b) Press Release
VERSUS TECHNOLOGY ISSUES $1.5 MILLION IN CONVERTIBLE DEBENTURES
Funding to be used for new product launch
Traverse City, Michigan, June 8, 1999 -- Versus Technology (OTC BB:
VSTI), reported today it has completed a private placement of $1.5
million in convertible debentures to a number of investors. "The
completion of this transaction provides us with the necessary funds to
complete development of our DataBand(TM) (see release dated November 16,
1998) and accelerate its launch," said Gary Gaisser, President and
Chief Executive Officer.
The innovative DataBand(TM), which is currently in the prototype phase,
is a disposable patient ID band, combining both infrared and radio
frequency technologies for patient location to provide a mobile
communication and information link between patients and caregivers.
"Development of the DataBand(TM) has been a primary focus for Versus,"
stated Henry Tenarvitz, Executive Vice President of Operations. "The
next step is to engineer post prototype modifications and software
enhancements that will allow us to bring the DataBand(TM) to commercial
realization." Combined with the interoperability of the Versus
Information System's open platform, the DataBand(TM) is designed to
automatically and accurately provide location data to drive existing
facility-wide billing and scheduling systems.
In addition to using the added funds for product development, Versus
also expects to expand its marketing programs to ensure awareness of
all its products and, in particular, the new DataBand(TM). "Versus is
ready to capitalize on its leadership position in locating
technology," stated Rick Salzer, Executive Vice President of Sales and
Marketing. "Our unique set of capabilities puts us in a position to
provide our customers with tools to access and use information that
goes well beyond determining the location of an individual or a piece
of equipment. We can use location information to create applications
that help in asset management, security, improved patient care, and
much more."
Versus Technology, Inc. (http://www.versustech.com) is a leading
provider of infrared applications and systems. It has pioneered
infrared technology and the associated software for real-time, on-line
locating of people and equipment. Versus Technology's patented
locating systems monitor the precise location of people and equipment
using infrared light and networks of infrared sensors installed
throughout a facility. Small, lightweight badges worn by patients,
personnel and attached to equipment transmit a code to the sensors to
provide real-time location and other information. Versus systems,
currently in application in hospitals, corporate facilities,
government facilities and other complexes, locate patients, personnel
or equipment for improved workflow and other purposes.
SAFE HARBOR PROVISION
This press release may contain forward-looking statements relating to
future events, such as the development of new products, the commencement
of production or the future financial performance of the Company. These
statements fall within the meaning of forward-looking information as
defined in the Private Securities Litigation Reform Act of 1995. These
statements are subject to a number of important risks and uncertainties
that could cause actual results to differ materially including, but not
limited to, economic, competitive, governmental and technological
factors affecting the Company's markets and market growth rates,
products and their rate of commercialization, services, prices and
adequacy of financing and other factors described in the Company's most
recent annual report on Form 10-KSB filed with the Securities and
Exchange Commission, which can be reviewed at http://www.sec.gov. The
Company undertakes no obligation to update, amend or clarify forward-
looking statements, whether as a result of new information, future
events or otherwise.
# # #
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