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EXHIBIT 99.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is dated as of July 27, 2001
between XXXXXXXX.XXX SOFTWARE, INC., a Georgia corporation with its principal
office at 0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000-0000
("Pledgee"), and VERSO TECHNOLOGIES, INC., a Minnesota corporation with its
principal office at 000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000
("Pledgor").
WITNESSETH:
WHEREAS, Pledgor has filed with the Secretary of State of the State of
Minnesota a Statement of Rights with respect to Pledgor's Series B Preferred
Stock (the "Statement of Rights"), pursuant to which Pledgor is obligated to,
among other things, redeem the Series B Preferred Stock upon receipt of written
notice from the holders thereof on or after January 1, 2002 (the "Mandatory
Redemption Obligation");
WHEREAS, Pledgee is a holder of shares of Pledgor's Series B Preferred
Stock; and
WHEREAS, subject to the terms and conditions hereof, Pledgor and
Pledgee desire to enter into this Agreement, and Pledgor desires to grant to
Pledgee a second-priority security interest in the shares of capital stock of
NACT Telecommunications, Inc., a wholly-owned subsidiary of Pledgor, owned by
Pledgor (the "Stock") to secure the Mandatory Redemption Obligation;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and in order to secure the performance of the
Mandatory Redemption Obligation, the parties hereto agree as follows:
SECTION 1. PLEDGE. As collateral security for the due and
punctual performance of the Mandatory Redemption Obligation, subject to the
terms and conditions of that certain Subordination Agreement dated as of the
date hereof (the "Subordination Agreement") among Pledgor, Pledgee and PNC
Bank, National Association (the "Agent"), in its capacity as administrative and
collateral agent under that certain Revolving Credit and Security Agreement
dated March 14, 2000, as amended, among Agent, the various lenders from time to
time a party thereto, Pledgor and the various other borrowers thereunder, as
the same may hereafter be amended, superseded or replaced (the "PNC Credit
Agreement"), and all related waivers and consents, pursuant to which Pledgee
has agreed to subordinate its security interest in the Collateral to the
security interest of the Agent and the other lenders party to the PNC Credit
Agreement, Pledgor hereby pledges, hypothecates, transfers, sets over, delivers
and assigns unto Pledgee, and hereby grants Pledgee a security interest in the
following:
(a) the Stock and the certificates representing the Stock, and
all cash, securities and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
all or any portion of the Stock; and
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(b) all securities hereafter delivered to Pledgee by Pledgor in
substitution for or in addition to any of the foregoing, all certificates and
instruments representing or evidencing such securities, together with all
interest, cash, securities and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for
or on conversion of any or all thereof (all such Stock, indebtedness, shares,
certificates, interest, cash, securities, proceeds and other property received,
receivable or otherwise distributed in respect of any or all thereof being
included within the definition of "Collateral" for purposes of this Agreement).
TO HAVE AND TO HOLD the Collateral, together with all rights, titles,
interests, privileges and preferences appertaining or incidental thereto, unto
Pledgee, its successors and assigns, forever, subject, however, to the terms,
covenants and conditions hereinafter set forth and the terms, covenants and
conditions of the Subordination Agreement.
SECTION 2. INDEBTEDNESS AND OBLIGATIONS SECURED. This Agreement
and the Collateral secure performance of the Mandatory Repayment Obligation
with respect to the shares of Series B Preferred Stock held by Pledgee only.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Pledgor hereby
represents and warrants that as of the date hereof Pledgor is the holder of
record of all of the Stock; Pledgor has good, right and lawful authority to
enter into this Agreement and to pledge the Collateral in the manner hereby
done or contemplated and will defend its title thereto against the claims of
all persons whomsoever; except for the rights granted pursuant to the
Subordination Agreement and the security interest granted pursuant to the PNC
Credit Agreement, there are no liens, claims, pledges, security interests,
encumbrances or rights of third parties whatsoever with respect to the
Collateral; this Agreement has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of Pledgor, enforceable in
accordance with its terms; and no consent or approval of any court,
governmental body or regulatory authority (federal, state or local) is or was
necessary to the validity of the pledge granted hereby.
SECTION 4. APPOINTMENT OF AGENTS; REGISTRATION IN NOMINEE NAME.
Subject to the terms of the Subordination Agreement, Pledgee shall have the
right to appoint one or more agents for the purpose of retaining physical
possession of the certificates or instruments representing or evidencing the
Collateral, which certificates or instruments may be held (in the discretion of
the Pledgee) in the name of Pledgor, endorsed or assigned in blank or in favor
of Pledgee, or in the name of Pledgee or any agent appointed by Pledgee to
retain physical possession of such certificates or instruments, or in the name
of any nominee of Pledgee or any such agent. In addition, but subject to the
terms of the Subordination Agreement, Pledgee shall at all times have the right
to exchange certificates or instruments representing or evidencing Collateral
for certificates or instruments of smaller or larger denominations. Pledgor
hereby agrees that any registrar or transfer agent for any securities included
in the Collateral shall be entitled to rely on the provisions of this Section
as conclusive evidence of the authority of Pledgee to effect re-registration of
any such securities in the name of Pledgee or that of its agents or its or
their nominees or to exchange certificates or instruments representing or
evidencing such Collateral for certificates or instruments of smaller or larger
denominations, notwithstanding any notice or direction to such registrar or
transfer agent from Pledgor to the contrary.
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SECTION 5. VOTING RIGHTS; DIVIDENDS, ETC.
(a) Pledgor shall be entitled to exercise any and all voting or
consensual rights and powers relating or pertaining to the Collateral or any
part thereof for the term of this Agreement.
(b) So long as no Event of Default (as hereinafter defined) shall
have occurred and be continuing, (i) Pledgee shall not be entitled to receive
and retain any cash dividends or distributions declared and paid or distributed
in the ordinary course of business in respect of the Collateral; and (ii)
Pledgee shall not be entitled to receive and retain any stock or liquidating
dividends, distributions and property, returns of capital or other
distributions made on or in respect of the Collateral, whether resulting from a
subdivision, combination or reclassification of the Collateral or received in
exchange for or on conversion of Collateral or any part thereof or as a result
of any merger, consolidation, acquisition or other exchange of assets to which
Pledgor may be a party or otherwise. Pledgee shall execute and deliver (or
cause to be executed and delivered) to Pledgor all such proxies, powers of
attorney, dividend orders and other instruments as Pledgor may request for the
purpose of enabling Pledgor to exercise the rights and powers that Pledgor is
entitled to exercise pursuant to this Section 5(b).
(c) Upon the occurrence and during the continuance of an Event of
Default, and subject to the terms of the Subordination Agreement, all
restrictions on Pledgee's right to exercise the rights and powers described in
Section 5(b) above, shall cease, and all such rights shall thereupon become
vested in Pledgee, who shall have the sole and exclusive right and authority to
exercise such rights and powers; provided, however, that no such rights and
powers shall vest in Pledgee unless and until Pledgee shall have given written
notice to Pledgor of Pledgee's intention to exercise such rights and powers.
Any and all money and other property paid over to or received by Pledgee
pursuant to the provisions of this Section 5 shall be retained by Pledgee as
additional Collateral hereunder and shall be applied in accordance with the
provisions hereof.
SECTION 6. EVENTS OF DEFAULT. The occurrence and
continuation of any of the following events shall constitute an event of
default (an "Event of Default") under this Agreement:
(a) failure of Pledgor to effect the Mandatory Redemption
Obligation in accordance with the terms of the Statement of Rights; and
(b) any default in the due observance or performance of any term,
covenant, warranty, agreement or condition contained in this Agreement, which
default continues for fifteen (15) business days after Pledgee gives notice of
such failure to Pledgor.
SECTION 7. REMEDIES UPON DEFAULT. Upon the occurrence and
during the continuance of an Event of Default hereunder, subject to the terms
of the Subordination Agreement, Pledgee may, without being required to give any
notice to the Pledgor other than as required in paragraph (b) below, and in
addition to the exercise by Pledgee of its rights and remedies under any other
Section of this Agreement, under the Statement of Rights, or otherwise
available to it at law or in equity:
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(a) apply the cash (if any) then held by it as Collateral
hereunder to effect Pledgor's Mandatory Redemption Obligation; and
(b) if there shall be no such cash or the cash so applied shall
be insufficient to effect the Mandatory Redemption Obligation in full, exercise
all the rights and remedies of a secured party under the Uniform Commercial
Code in effect in the State of Georgia at that time and sell (in compliance
with applicable securities laws) the Collateral, or any part thereof, at public
or private sale, at any broker's board, upon any securities exchange, at
Pledgee's offices or elsewhere, for cash, upon credit or for future delivery,
as Pledgee may deem appropriate in the circumstances and commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Collateral. In that connection, Pledgee shall have the right, subject to
the terms of the Subordination Agreement, to impose such limitations and
restrictions on the sale of the Collateral as Pledgee may deem to be necessary
or appropriate to comply with any law, rule or regulation (federal, state or
local) having applicability to the sale, including, without limitation,
restrictions on the number and qualifications of the offerees and requirements
for any necessary governmental approvals, and Pledgee shall be authorized at
any such sale (if it deems it advisable to do so) to restrict the prospective
offerees or purchasers to persons who will represent and agree that they are
purchasing securities included in the Collateral for their own account and not
with a view to the distribution or sale thereof in violation of applicable
securities laws. Upon consummation of any such sale, Pledgee shall have the
right, subject to the terms of the Subordination Agreement, to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of Pledgor, and Pledgor hereby waives (to
the extent permitted by law) all rights of redemption, stay or appraisal that
it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. To the extent that notice of sale
shall be required to be given by law, Pledgee shall give Pledgor at least 10
calendar days' prior written notice of Pledgee's intention to make any public
or private sale of such Collateral. Such notice shall state the time and place
fixed for sale and the Collateral, or portion thereof, to be offered for sale.
Any such sale shall be held at such time or times within ordinary business
hours and at such place or places as Pledgee may fix in the notice of such
sale. At any such sale, the Collateral, or portion thereof, to be sold may be
sold in one lot as an entirety or in separate parcels, as Pledgee may (in its
sole and absolute discretion) determine; and Pledgee may itself bid (which bid
may be in whole or in part in the form of cancellation of the payment
obligation required by the Mandatory Redemption Obligation) for and purchase
the whole or any part of the Collateral and shall be entitled, for purposes of
bidding and making settlement or payment of the purchase price for all any
portion of the Collateral sold at such sale, to use and apply the payment
obligations under the Mandatory Redemption Obligation owed to Pledgee as a
credit on account of the purchase of any Collateral payable by Pledgee at such
sale. Pledgee shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given. Pledgee may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the same
was so adjourned. In case sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by
Pledgee until the sale price is paid by the purchaser or purchasers thereof,
but Pledgee shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in
case of any such failure,
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such Collateral may be sold again upon like notice. As an alternative to
exercising the power of sale herein conferred upon it, Pledgee may, subject to
the terms of the Subordination Agreement, proceed by a suit or suits at law or
in equity to foreclose this Agreement and sell the Collateral, or any portion
thereof, pursuant to a judgment or decree of a court or courts of competent
jurisdiction.
SECTION 8. APPLICATION OF PROCEEDS OF SALE; DEFICIENCY,
ACKNOWLEDGEMENT. (a) The proceeds of sale of Collateral sold pursuant to
Section 7 hereof shall be applied by Pledgee as follows:
FIRST: to the payment of the costs and expenses of such sale,
including the out-of-pocket expenses of Pledgee and the reasonable fees and
out-of-pocket expenses of counsel employed in connection therewith, and to the
payment of all loans or advances made by Pledgee for the account of Pledgor and
the payment of all costs and expenses incurred by Pledgee in connection with
the administration and enforcement of this Agreement, as well as any
indemnities payable by Pledgor hereunder, to the extent that such loans,
advances, costs, expenses and indemnities shall not have been previously
reimbursed or paid to Pledgee;
SECOND: to the payment of all payment obligations of Pledgor pursuant
to the Mandatory Redemption Obligation; and
THIRD: the balance (if any) of such proceeds shall be paid to Pledgor
or as a court of competent jurisdiction may direct.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Pledgee may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who
will agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices and
on terms less favorable to Pledgee than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that Pledgee
shall have no obligation to delay the sale of any Collateral for the period of
time necessary to permit the issuer thereof to register it for a form of public
sale requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would agree to do so.
SECTION 9. PLEDGEE APPOINTED ATTORNEY-IN-FACT. Subject to the
terms of the Subordination Agreement, Pledgor hereby appoints Pledgee as
Pledgor's attorney-in-fact, with full power of substitution, for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any agreement or instrument on behalf of Pledgor that Pledgee may
deem necessary or advisable to accomplish the purposes hereof, which
appointment is coupled with an interest and is irrevocable. Without limiting
the generality of the foregoing, Pledgor agrees and understands that Pledgee
shall have the right and power, subject to the terms of the Subordination
Agreement, to receive, endorse and collect all checks and other orders for the
payment of money made payable to the Pledgor representing any dividend,
principal or
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interest payment or other distribution payable or distributable in respect of
the Collateral or any part thereof and to give full discharge for the same.
SECTION 10. RESPONSIBILITY OF PLEDGEE; CARE OF COLLATERAL.
Neither Pledgee, nor any director, officer, employee or agent of Pledgee, shall
be liable for any action taken or omitted to be taken by it or them relative to
this Agreement or any of the Collateral except for its or their gross
negligence or willful misconduct, and Pledgee shall not be liable for any
action or omission to act on the part of any agent appointed by Pledgee to act
hereunder or with respect to the Collateral (or any part thereof), selected by
Pledgee with reasonable care. Notwithstanding the provisions of Section 5(c)
hereof, Pledgee shall have no duty to exercise any voting or any other
consensual rights and powers becoming vested in Pledgee with respect to the
Collateral or any part thereof, to exercise any right to redeem, convert or
exchange any securities included in the Collateral, to enforce or see to the
payment of any dividend, principal or interest or any other distribution
payable or distributable on or with respect to the Collateral or any part
thereof or otherwise to preserve any rights in respect of the Collateral
against any third parties, and Pledgee shall not be liable or accountable to
Pledgor in respect of any of the foregoing. Pledgee shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Pledgee shall take such action for such purpose as Pledgor may request in
writing, but the failure of Pledgee to take any action requested by Pledgor
shall not, in and of itself, be deemed to constitute a failure on the part of
Pledgee to exercise reasonable care in respect of the custody and preservation
of the Collateral or any part thereof.
SECTION 11. EXPENSES. Subject to the terms of the Subordination
Agreement, Pledgor agrees to pay Pledgee, upon its demand, all of Pledgee's
out-of-pocket expenses (including its reasonable attorneys' fees) incurred in
connection with the administration or enforcement of this Agreement, the care
and custody of the Collateral (or any part thereof), the registration,
re-registration or transfer of the Collateral (or any part thereof) and the
sale or collection of the Collateral (or any part thereof). Should Pledgor fail
to do any act or thing that Pledgor has covenanted to do hereunder, or should
any representation or warranty on the part of Pledgor contained herein be
breached, Pledgee may (but shall not be obligated to), subject to the terms of
the Subordination Agreement, do the same or cause it to be done, or remedy any
such breach, and there shall be added to the liabilities of Pledgor hereunder,
the cost or expense to Pledgee in so doing, and any and all amounts expended by
Pledgee in taking any such action shall be repayable to it by Pledgor upon
Pledgee's demand.
SECTION 12. NO WAIVER; CUMULATIVE REMEDIES. No failure on the
part of Pledgee to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy by Pledgee preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All remedies of Pledgee hereunder are cumulative and are not exclusive
of any other remedies available to Pledgee at law or in equity.
SECTION 13. TERMINATION AND PARTIAL RELEASE OF COLLATERAL. This
Agreement shall terminate when the Mandatory Redemption Obligation secured
hereby has been fully performed or otherwise discharged or is no longer
effective, at which time Pledgee shall reassign and redeliver (or cause to be
reassigned or redelivered) to Pledgor, or to such person or persons as Pledgor
shall designate, against receipt, such of the Collateral (if any) as shall not
have been sold
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or otherwise applied by Pledgee pursuant to the terms hereof and as shall still
be held by it hereunder, together with appropriate instruments of assignment
and release.
SECTION 14. NOTICES. Any notice or communication required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to whom
notice is to be given, and on the fifth calendar day after mailing if deposited
in a regularly maintained receptacle for United States mail to the party to
whom notice is to be given, by certified or registered mail, postage prepaid,
and properly addressed to the address reflected in such party's books and
records or to such other address as hereafter shall be designated in writing by
any party to all other parties.
SECTION 15. FURTHER ASSURANCES. Pledgor agrees to do such
further acts and things, and to execute and deliver such agreements and
instruments, including, without limitation, financing statements and stock and
bond powers, as Pledgee may at any time request in connection with the
administration or enforcement of this Agreement or related to the Collateral or
any part thereof or in order better to assure and confirm unto Pledgee its
rights, powers and remedies hereunder.
SECTION 16. BINDING AGREEMENT; ASSIGNMENT. This Agreement, and
the terms, covenants and conditions hereof, shall be binding upon and inure to
the benefit of the parties hereto, and their respective successors and assigns,
except that Pledgor shall not be permitted to assign this Agreement or any
interest in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by Pledgee as collateral under this Agreement, without
the prior written consent of Pledgee.
SECTION 17. MISCELLANEOUS. Neither this Agreement nor any
provisions hereof may be amended, modified, waived, discharged or terminated,
nor may any of the Collateral be released or the pledge or the security
interest created hereby extended, except by an instrument in writing signed on
behalf of the party to be charged. The Section headings used herein are for
convenience of reference only and shall not define or limit the provisions of
this Agreement. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original and both of which together shall constitute
the Agreement.
SECTION 18. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO
HAVE BEEN MADE IN THE STATE OF GEORGIA AND SHALL BE INTERPRETED, AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS
OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAWS).
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IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered by their respective authorized
representatives as of the date first above written.
VERSO TECHNOLOGIES, INC., Pledgor
By: /s/ Xxxxxx X. Xxxxxxx
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Its: Executive Vice President and
Chief Financial Officer
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Address:
000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
XXXXXXXX.XXX SOFTWARE, INC., Pledgee
By: /s/ Xxxxx Xxx Xxxx
----------------------------------------
Its: Chief Financial Officer
---------------------------------------
Address:
0000 Xxxxxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Chief Financial Officer
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