Exhibit 99.5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of March 25, 2002, between Visual
Networks, Inc., a Delaware corporation (the "PARENT"), Visual Networks
Operations, Inc., a Delaware corporation ("VNO"), Visual Networks Investments,
Inc. a California corporation ("VNI"), Visual Networks Technologies, Inc., a
California corporation ("VNT"), Visual Networks of Texas, LP, a Texas
corporation ("VISUAL TEXAS"), Inverse Network Technology, a California
corporation ("INVERSE"), and Avesta Technologies, Inc., a Delaware corporation
("AVESTA"), (each of VNI, VNO, VNT, Visual Texas, Inverse and Avesta, a
"SUBSIDIARY" and, together with Parent, the "DEBTORS") and the investors
signatory hereto (each investor including their respective successors,
endorsees, transferees and assigns, a "SECURED PARTY", and collectively, the
"SECURED PARTIES").
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase Agreement, dated the date
hereof between the Parent and the Secured Parties (the "PURCHASE AGREEMENT"),
the Secured Parties have agreed to extend certain loans to the Parent which
shall be evidenced by the issuance to the Secured Parties to a senior secured
convertible debentures, due March 25, 2006 (the "DEBENTURES"); and
WHEREAS, in order to induce the Secured Parties to enter into the
Purchase Agreement, the Debtors have agreed to execute and deliver to the
Secured Parties this Agreement and a separate security agreement with respect to
the Debtors' intellectual property ("IP SECURITY AGREEMENT") for the benefit of
the Secured Parties and to grant to it a first priority security interest in
certain property of the Debtors to secure the prompt payment, performance and
discharge in full of all of the Parent's obligations under the Debentures, this
Agreement and the IP Security Agreement.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1. Terms used but not otherwise
defined in this Agreement that are defined in Article 9 of the UCC (such as
"general intangibles" and "proceeds") shall have the respective meanings given
such terms in Article 9 of the UCC.
(a) "ACCOUNTS" shall mean all present and future rights of the Debtors to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
(b) "AGENT" means Smithfield Fiduciary LLC. as agent for each of the Secured
Parties pursuant to this Agreement and the IP Security Agreement, or such other
Person as shall have been subsequently appointed as a successor agent pursuant
to this Agreement.
(c) "COLLATERAL" means the collateral in which the Secured Parties are granted a
first priority security interest by this Agreement and which shall include the
following, whether presently owned or existing or hereafter acquired or coming
into existence, and all additions and accessions thereto and all substitutions
and replacements thereof, and all proceeds, products and Accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort claims in
connection therewith:
(i) All Goods of the Debtors, including, without limitations, all
machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents representing the
same, all additions and accessions thereto, replacements therefor, all parts
therefor, and all substitutes for any of the foregoing and all other items used
and useful in connection with the Debtors' businesses and all improvements
thereto (collectively, the "EQUIPMENT"); and
(ii) All Inventory of the Debtors; and
(iii) All of the Debtors' contract rights and general intangibles,
including, without limitation, all partnership interests, stock or other
securities, licenses, distribution and other agreements, computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, copyrights, deposit accounts,
and income tax refunds (collectively, the "GENERAL INTANGIBLES"); and
(iv) All Accounts of the Debtors including all insurance proceeds, and
rights to refunds or indemnification whatsoever owing, together with all
instruments, all documents of title representing any of the foregoing, all
rights in any merchandising, goods, equipment, motor vehicles and trucks which
any of the same may represent, and all right, title, security and guaranties
with respect to each Receivable, including any right of stoppage in transit; and
(v) All of the Debtors' documents, instruments and chattel paper, files,
records, books of account, business papers, computer programs and the products
and proceeds of all of the foregoing Collateral set forth in clauses (i)-(iv)
above.
(d) "OBLIGATIONS" means all of the Debtors' obligations under this Agreement,
the Debentures and the IP Security Agreement, in each case, whether now or
hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time.
(e) "UCC" means the Uniform Commercial Code and/or any other applicable law of
each jurisdiction in which any Debtor is incorporated or organized (including,
without limitation the State of Delaware, the State of Texas and the State of
California) and any jurisdiction as to any Collateral located therein.
2. GRANT OF SECURITY INTEREST. As an inducement for the Secured Parties to enter
into the Purchase Agreement and to secure the complete and timely payment,
performance and discharge IN full, as the case may be, of all of the
Obligations, the Debtors hereby, unconditionally and irrevocably, pledge, grant
and hypothecate to the Secured Parties, a continuing first priority security
interest in, a first lien upon and a right of set-off against all of the
Debtors' right, title and interest of whatsoever kind and nature in and to the
Collateral (the "Security Interest").
3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE DEBTORS.
The Debtors jointly and severally represent and warrant to, and covenant and
agree with, the Secured Parties as follows:
(a) Each Debtor has the requisite corporate power and authority to enter into
this Agreement and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by each Debtor of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of such Debtor and no further action is required by such Debtor.
(b) Each Debtor represents and warrants that it has no place of business or
offices where its respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants) or places where
Collateral is stored or located, except as set forth on SCHEDULE A attached
hereto;
(c) Except for the Security Interest and as set forth in SCHEDULE 3(C) hereto,
each Debtor is the sole owner of the Collateral (except for non-exclusive
licenses granted by the Debtors in the ordinary course of business), free and
clear of any liens, security interests, encumbrances, rights or claims, and is
fully authorized to grant the Security Interest in and to pledge the Collateral.
There is not on file in any governmental or regulatory authority, agency or
recording office an effective financing statement, security agreement, license
or transfer or any notice of any of the foregoing (other than those that have
been filed in favor of the Secured Parties pursuant to this Agreement) covering
or affecting any of the Collateral. So long as this Agreement shall be in
effect, the Debtors shall not execute and shall not knowingly permit to be on
file in any such office or agency any such financing statement or other document
or instrument (except to the extent filed or recorded in favor of the Secured
Parties pursuant to the terms of this Agreement).
(d) No part of the Collateral has been judged invalid or unenforceable. No
written claim has been received that any Collateral or the Debtors' use of any
Collateral violates the rights of any third party. There has been no adverse
decision to the Debtors' claim of ownership rights in or exclusive rights to use
the Collateral in any jurisdiction or to the Debtors' right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of the Debtors, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.
(e) Each Debtor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and its Collateral
at the locations set forth on SCHEDULE A attached hereto and may not relocate
such books of account and records or tangible Collateral unless it delivers to
the Secured Parties at least 30 days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be within the United
States) and (ii) evidence that appropriate financing statements under the UCC
and other necessary documents have been filed and recorded and other steps have
been taken to perfect the Security Interest to create in favor of the Secured
Parties a valid, perfected and continuing first priority liens in the
Collateral.
(f) This Agreement creates in favor of the Secured Parties a valid security
interest in the Collateral securing the payment and performance of the
Obligations and, upon making the filings described in the immediately following
sentence, a perfected first priority security interest in such Collateral.
Except for the filing of financing statements pursuant to the UCC with the
proper filing and recording agencies in the jurisdictions indicated on SCHEDULE
B, attached hereto, no authorization or approval of or filing with or notice to
any governmental authority or regulatory body is required either (i) for the
grant by the Debtors of, or the effectiveness of, the Security Interest granted
hereby or for the execution, delivery and performance of this Agreement by the
Debtors or (ii) for the perfection of or exercise by the Secured Parties of its
rights and remedies hereunder.
(g) On the date of execution of this Agreement, the Debtors will file one or
more financing statements under the UCC with respect to the Security Interest
with the proper filing and recording agencies in the jurisdictions indicated on
SCHEDULE B, attached hereto and in such other jurisdictions as may be requested
by the Secured Parties and will deliver true and complete copies of such filings
to the Secured Parties.
(h) The execution, delivery and performance of this Agreement does not conflict
with or cause a breach or default, or an event that with or without the passage
of time or notice, shall constitute a breach or default, under any agreement to
which the Debtors are a party or by which the Debtors are bound. No consent
(including, without limitation, from stock holders or creditors of the Debtors)
is required for the Debtors to enter into and perform their obligations
hereunder.
(i) The Debtors shall at all times maintain the liens and Security Interest
provided for hereunder as valid and perfected first priority liens and security
interests in the Collateral in favor of the Secured Parties until this Agreement
and the Security Interest hereunder shall be terminated pursuant to Section 11
hereof. Each Debtor hereby agrees to defend the same against any and all
persons. Each Debtor shall safeguard and protect all Collateral for the account
of the Secured Parties. At the request of the Agent and/or the Secured Parties,
the Debtors will sign and deliver to the Secured Parties at any time or from
time to time one or more financing statements pursuant to the UCC in form
reasonably satisfactory to the Secured Parties and will pay the cost of filing
the same in all public offices wherever filing is, or is deemed by the Secured
Parties to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, the
Debtors shall pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interest hereunder, and the Debtors shall obtain and
furnish to the Secured Parties from time to time, upon demand, such releases
and/or subordinations of claims and liens which may be required to maintain the
priority of the Security Interest hereunder.
(j) Each Debtor will not transfer, pledge, hypothecate, encumber, license
(except for non-exclusive licenses granted by the Debtors in the ordinary course
of business), sell or otherwise dispose of any of the Collateral without the
prior written consent of the Secured Parties.
(k) Each Debtor shall keep and preserve its Equipment, Inventory and other
tangible Collateral in good condition, repair and order and shall not operate or
locate any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.
(l) Each Debtor shall, within ten (10) days of obtaining knowledge thereof,
advise the Agent promptly, in sufficient detail, of any substantial change in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Parties'
security interest therein.
(m) Each Debtor shall promptly execute and deliver to the Secured Parties such
further deeds, mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and take such
further action as the Secured Parties may from time to time request and may in
its sole discretion deem necessary to perfect, protect or enforce its security
interest in the Collateral including, without limitation, the IP Security
Agreement in which each the Secured Parties has been granted a security interest
hereunder, substantially in a form acceptable to the Secured Parties, which IP
Security Agreement, other than as stated therein, shall be subject to all of the
terms and conditions hereof.
(n) Each Debtor shall permit the Secured Parties and its representatives and
agents upon reasonable prior notice to inspect the Collateral at any time during
normal business hours, and to make copies of records pertaining to the
Collateral as may be requested by the Secured Parties from time to time.
(o) Each Debtor will take all steps reasonably necessary to diligently pursue
and seek to preserve, enforce and collect any rights, claims, causes of action
and accounts receivable in respect of the Collateral.
(p) Each Debtor shall promptly notify the Secured Parties in sufficient detail
upon becoming aware of any attachment, garnishment, execution or other legal
process levied against any Collateral and of any other information received by
the Debtors that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties hereunder.
(q) Each Debtor shall not use or permit any Collateral to be used unlawfully or
in violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral where
violation is reasonably likely to have a material adverse effect on the Secured
Parties' rights in the Collateral or Secured Parties' ability to foreclose on
the Collateral.
(r) Each Debtor shall notify the Agent of any change in such Debtor's name,
identity, chief place of business , chief executive office or residence within 5
days of such change.
(s) All information heretofore, herein or hereafter supplied to the Secured
Parties by or on behalf of the Debtors with respect to the Collateral is
accurate and complete in all material respects as of the date furnished.
4. DEFAULTS. The following events shall be "EVENTS OF DEFAULT":
(a) The occurrence of a Triggering Event (as defined in the Debentures)
under the Debentures;
(b) Any representation or warranty of the Debtors in this Agreement or in the IP
Security Agreement shall prove to have been incorrect in any material respect
when made; and
(c) The failure by a Debtor to observe or perform any of its obligations
hereunder or in the IP Security Agreement for ten (10) days after receipt by the
Debtor of notice of such failure from the Secured Parties.
5. DUTY TO HOLD IN TRUST. Upon the occurrence and the continuation of any Event
of Default, the Debtors shall, upon receipt by it of any revenue, income or
other sums subject to the Security Interest, whether payable pursuant to the
Debentures or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Parties and shall forthwith endorse and transfer any such sums
or instruments, or both, to the Secured Parties for application to the
satisfaction of the Obligations.
6. RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence and the continuation of
any Event of Default, the Agent (on behalf of, and for the benefit of, itself
and each of the Secured Parties) shall have the right to exercise all of the
remedies conferred hereunder, under the Debentures and under the IP Security
Agreement, and the Agent and Secured Parties shall have all the rights and
remedies of a secured party under the UCC. Without limitation, the Secured
Parties shall have the following rights and powers:
(a) The Agent shall have the right to take possession of the Collateral and, for
that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and the Debtors shall assemble the Collateral and make it available to the
Agent at places which the Agent shall reasonably select, whether at the Debtors'
premises or elsewhere, and make available to the Agent, without rent, all of the
Debtors' respective premises and facilities for the purpose of the Agent taking
possession of, removing or putting the Collateral in saleable or disposable
form.
(b) The Agent shall have the right to operate the business of the Debtors using
the Collateral and shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations,
for cash or on credit or for future delivery, in such parcel or parcels and at
such time or times and at such place or places, and upon such terms and
conditions as the Agent may deem commercially reasonable, all without (except as
shall be required by applicable statute and cannot be waived) advertisement or
demand upon or notice to the Debtors or right of redemption of the Debtors,
which are hereby expressly waived. Upon each such sale, lease, assignment or
other transfer of Collateral, the Agent may, unless prohibited by applicable law
which cannot be waived, purchase all or any part of the Collateral being sold,
free from and discharged of all trusts, claims, right of redemption and equities
of the Debtors, which are hereby waived and released.
(c) In the event that any Secured Party shall recover from the Debtors or the
Collateral more than its pro rata share of the Obligations owed to all Secured
Parties hereunder, whether by agreement, understanding or arrangement with the
Debtors or any other Person, set off or other means, such Secured Party shall
immediately deliver or pay over to the other Secured Parties their pro rata
portion of any such recovery in the form received.
(d) Agent may, at any time or times that an Event of Default exists or has
occurred and is continuing, (i) notify any or all account debtors that the
Accounts have been assigned to Secured Parties and that Secured Parties have a
security interest therein and Agent may direct any or all accounts debtors to
make payment of Accounts directly to Secured Parties, (ii) extend the time of
payment of, compromise, settle or adjust for cash, credit, return of merchandise
or otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Agent and Secured Parties shall not be liable for its failure to
collect or enforce the payment thereof nor for the negligence of its agents or
attorneys with respect thereto and (iv) take whatever other action Agent may
deem necessary or desirable for the protection of its interests. At any time
that an Event of Default exists or has occurred and is continuing, at Agent's
request, all invoices and statements sent to any account debtor shall state that
the Accounts and such other obligations have been assigned to Secured Parties
and are payable directly and only to Secured Parties and the Debtors shall
deliver to Agent such originals of documents evidencing the sale and delivery of
goods or the performance of services giving rise to any Accounts as Agent may
require.
7. APPLICATIONS OF PROCEEDS. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Agent and/or Secured Parties in
enforcing its rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations, and to
the payment of any other amounts required by applicable law, after which the
Secured Parties shall pay to the Debtors any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties is legally
entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 15% per annum or the lesser amount permitted by
applicable law (the "DEFAULT Rate"), and the reasonable fees of any attorneys
employed by the Agent and/or Secured Parties to collect such deficiency. To the
extent permitted by applicable law, each Debtor waives all claims, damages and
demands against the Secured Parties arising out of the repossession, removal,
retention or sale of the Collateral, unless due to the gross negligence or
willful misconduct of the Agent and/or Secured Parties.
8. COSTS AND EXPENSES. The Debtors agree to pay all out-of-pocket fees, costs
and expenses incurred in connection with any filing required hereunder,
including without limitation, any financing statements pursuant to the UCC,
continuation statements, partial releases and/or termination statements related
thereto or any expenses of any searches reasonably required by the Agent. The
Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Agent and/or Secured Parties might prejudice, imperil or
otherwise affect the Collateral or the Security Interest therein. The Debtors
will also, upon demand, pay to the Agent and/or Secured Parties the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, which the Agent and/or Secured
Parties may incur in connection with (i) the enforcement of this Agreement, (ii)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under the Debentures. Until so paid,
any fees payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.
9. RESPONSIBILITY FOR COLLATERAL. Each Debtor assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of such
Debtor hereunder, under the Debentures or under the IP Security Agreement shall
in no way be affected or diminished by reason of the loss, destruction, damage
or theft of any of the Collateral or its unavailability for any reason.
10. SECURITY INTEREST ABSOLUTE. All rights of the Secured Parties and all
Obligations of the Debtors hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures, IP Security Agreement or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any change
in the time, manner or place of payment or performance of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Debentures or the IP Security Agreement or any
other agreement entered into in connection with the foregoing; (c) any exchange,
release or nonperfection of any of the Collateral, or any release or amendment
or waiver of or consent to departure from any other collateral for, or any
guaranty, or any other security, for all or any of the Obligations; (d) any
action by the Secured Parties to obtain, adjust, settle and cancel in its sole
discretion any insurance claims or matters made or arising in connection with
the Collateral; or (e) any other circumstance which might otherwise constitute
any legal or equitable defense available to the Debtors, or a discharge of all
or any part of the Security Interest granted hereby. Until the Obligations shall
have been paid and performed in full, the rights of the Secured Parties shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. Each Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Parties, then, in any such event, the Debtors'
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor waives all right
to require the Secured Parties to proceed against any other person or to apply
any Collateral which the Secured Parties may hold at any time, or to marshal
assets, or to pursue any other remedy. Each Debtor waives any defense arising by
reason of the application of the statute of limitations to any obligation
secured hereby.
11. TERM OF AGREEMENT. This Agreement and the Security Interest shall terminate
on the earlier of (i) the Parent's Adjusted EBIDTA (as defined in the
Debentures) for the fiscal year ending December 31, 2002 is greater than
$2,750,000 (as reflected in the 2002 Annual Report (as defined in the
Debentures)) and (ii) the date on which all payments under the Debentures have
been made in full or otherwise converted pursuant to the terms thereof and all
other Obligations have been paid or discharged. Upon such termination, the
Secured Parties, at the request and at the expense of the Debtors, will join in
executing any termination statement with respect to any financing statement
executed and filed pursuant to this Agreement.
12. POWER OF ATTORNEY; FURTHER ASSURANCES. (a) Each Debtor authorizes the
Secured Parties, and does hereby make, constitute and appoint it, and its
respective officers, agents, successors or assigns with full power of
substitution, as the Debtors' true and lawful attorney-in-fact, with power, in
its own name or in the name of the Debtors, to, after the occurrence and during
the continuance of an Event of Default, (i) endorse any notes, checks, drafts,
money orders, or other instruments of payment (including payments payable under
or in respect of any policy of insurance) in respect of the Collateral that may
come into possession of the Secured Parties; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or express xxxx,
xxxx of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge taxes, liens,
security interests or other encumbrances at any time levied or placed on or
threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and xxx for monies due in respect of the Collateral; and (v)
generally, to do, at the option of the Secured Parties, and at the Debtors'
expense, at any time, or from time to time, all acts and things which the
Secured Parties deems necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement, the Debentures and the IP Security Agreement all as
fully and effectually as the Debtors might or could do; and each Debtor hereby
ratifies all that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding.
(b) On a continuing basis, each Debtor will make, execute, acknowledge, deliver,
file and record, as the case may be, with the proper filing and recording
agencies in any jurisdiction, including, without limitation, the jurisdictions
indicated on SCHEDULE B, attached hereto, all such instruments, and take all
such action as may reasonably be deemed necessary or advisable, or as reasonably
requested by the Secured Parties, to perfect the Security Interest granted
hereunder and otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to the Secured Parties the grant or perfection of
a first priority security interest in all the Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured Parties as such Debtor's
attorney-in-fact, with full authority in the place and stead of such Debtor and
in the name of such Debtor, from time to time in the Secured Parties'
discretion, to take any action and to execute any instrument which the Secured
Parties may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of such Debtor where permitted by law.
13. AGENT.
(a) ACTIONS The Agent shall at all times act upon and in accordance with written
instructions received from a Majority-in-Interest (as defined below) time to
time. The Agent shall be deemed to be authorized on behalf of each Secured Party
to act on behalf of such Secured Party under this Agreement and the IP Security
Agreement and, in the absence of written instructions from a
Majority-in-Interest (with respect to which the Agent agrees that it will,
subject to the last two sentences of this Section, comply, except as otherwise
advised by counsel), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto. The
Agent shall have no duty to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement IP Security Agreement by the
Debtors. By accepting their Debentures each Secured Party shall be deemed to
have agreed to indemnify the Agent (which agreement shall survive any
termination of such Secured Party's percentage), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement, the Debentures and the IP Security
Agreement, including the reimbursement of the Agent for all out-of-pocket
expenses (including attorneys' fees) incurred by the Agent hereunder or in
connection herewith or in enforcing the Obligations of the Debtors under this
Agreement, the Debentures or the IP Security Agreement, in all cases as to which
the Agent is not reimbursed by the Debtors; PROVIDED that no Secured Party shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements determined by a court of competent jurisdiction in a final
proceeding to have resulted solely from the Agent's gross negligence or willful
misconduct. The Agent shall not be required to take any action hereunder, under
the Debentures or under IP Security Agreement, or to prosecute or defend any
suit in respect of this Agreement or under the Debentures or under IP Security
Agreement, unless the Agent is indemnified to its reasonable satisfaction by the
Secured Parties against loss, costs, liability and expense. If any indemnity in
favor of the Agent shall become impaired, it may call for additional indemnity
and cease to do the acts indemnified against until such additional indemnity is
given.
(b) EXCULPATION. Neither the Agent nor any of its directors, officers, partners,
members, shareholders, employees or agents shall be liable to any Secured Party
for any action taken or omitted to be taken by it under this Agreement, the
Debentures or the IP Security Agreement, or in connection herewith or therewith,
except for its own willful misconduct or gross negligence or be responsible for
the consequences of any error in judgement. Neither the Agent nor any of its
directors, officers, partners, members, shareholders, employees or agents has
any fiduciary relationship with any Secured Party by virtue of this Agreement or
the IP Security Agreement. The Agent shall not be responsible to any Secured
Party for any recitals, statements, representations or warranties herein or in
any certificate or other document delivered in connection herewith or for the
authorization, execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, or sufficiency this Agreement, the Debentures or the
IP Security Agreement, the financial condition of the Debtors or the condition
or value of any of the Collateral, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Debentures or the IP Security Agreement, the
financial condition of the Debtors or the existence or possible existence of any
default or event of default. The Agent shall be entitled to rely upon advice of
counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which it believes to be genuine and to have presented by a
proper person.
(c) OBLIGATIONS HELD BY THE AGENT. The Agent shall have the same rights and
powers with respect to any Debentures held by it or any of its affiliates, as
any Secured Party and may exercise the same as if it were not the Agent. Each of
the Debtors and the Secured Parties hereby waives, and each successor to any
Secured Party shall be deemed to waive, any right to disqualify any Secured
Party from serving as the Agent or any claim against that Secured Party for
serving as Agent.
(d) COPIES, ETC. The Agent shall give prompt notice to each Secured Party of
each notice or request required or permitted to be given to the Agent by the
Debtors pursuant to the terms of this Agreement. The Agent will distribute to
each Secured Party each instrument and other agreement received for its account
and copies of all other communications received by the Agent from a Debtor for
distribution to the Secured Parties by the Agent in accordance with the terms of
this Agreement. Notwithstanding anything herein contained to the contrary, all
notices to and communications with the Debtors under this Agreement shall be
effected by the Secured Parties through the Agent.
(e) RESIGNATION OF AGENT. The Agent may resign as such at any time upon at least
thirty (30) days' prior notice to the Debtors and all the Secured Parties, such
resignation not to be effective until a successor Agent is in place. If the
Agent at any time shall resign, a Majority-in-Interest may jointly appoint
another Secured Party as a successor Agent which shall thereupon become the
Agent hereunder. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such successor Agent
may reasonably request, and shall thereupon succeed to and become vested with
all rights, powers, privileges, and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement.
(f) REPLACEMENT OF AGENT. A Majority-in-Interest may at any time and for any
reason replace the Agent with a successor Agent jointly selected by them, upon
at least ten days written notice to the Debtors and the other Secured Parties.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall be entitled to receive from the terminated Agent such
documents of transfer and assignment as such successor Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of the retiring Agent, and the terminated Agent
shall be discharged from its duties and obligations under this Agreement.
14. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by the nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:
If to the Debtors: Visual Networks, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attn: Chief Financial Officer
With a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
If to the Secured Parties: To the address set forth under such Secured Parties'
name on the signature pages hereto.
15. OTHER SECURITY. To the extent that the Obligations are now or hereafter
secured by property other than the Collateral or by the guarantee, endorsement
or property of any other person, firm, corporation or other entity, then the
Secured Parties shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties' rights and
remedies hereunder.
16. ACTIONS BY SECURED PARTIES. Any action required or permitted hereunder to be
taken by or on behalf of the Secured Parties shall, for such action to be valid,
require the approval of the Majority-in-Interest prior to the taking of such
action. If the consent, approval or disapproval of the Secured Parties is
required or permitted pursuant to this Agreement, such consent, approval or
disapproval shall only be valid if given by the Majority-in-Interest.
"Majority-in-Interest" means the Secured Party or Secured Parties (as the case
may be) holding in excess of two-thirds of the outstanding aggregate principal
amount under the Debentures, determined on a cumulative basis.
17. MISCELLANEOUS.
(a) No course of dealing between the Debtors and the Secured Parties, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Parties, any right, power or privilege hereunder, under the Debentures shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby, by the Debentures, by the IP Security
Agreement or by any other agreements, instruments or documents or by law shall
be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the parties with respect
to the subject matter hereof and is intended to supersede all prior
negotiations, understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the Debtors and the Secured Parties then holding
two-thirds of the outstanding aggregate principal amount of the Debentures. Any
waivers or consents to departures from the provisions hereof may be given only
by the party against whom enforcement of any such waiver is sought or in favor
of whom any such consent is sought.
(d) In the event that any provision of this Agreement is held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, unless such
provision is narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this Agreement shall
be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default or right, whether of the same or similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the benefit of each
party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h) This Agreement shall be construed in accordance with the laws of the State
of New York, except to the extent the validity, perfection or enforcement of a
security interest hereunder in respect of any particular Collateral which are
governed by a jurisdiction other than the State of New York in which case such
law shall govern. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of any New York State or United States Federal court
sitting in New York county over any action or proceeding arising out of or
relating to this Agreement, and the parties hereto hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court. The parties hereto agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. The parties hereto further waive any objection to venue in the
State of New York and any objection to an action or proceeding in the State of
New York on the basis of forum non convenient.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY
HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY
ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL FOLLOWING
SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT, NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS AND
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF A LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(j) This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
VISUAL NETWORKS, INC.
By: /S/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
VISUAL NETWORKS OPERATIONS, INC.
By: /S/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
VISUAL NETWORKS INVESTMENTS, INC.
By: /S/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
VISUAL NETWORKS TECHNOLOGIES, INC.
By: /S/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
VISUAL NETWORKS OF TEXAS, LP
By: /S/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
INVERSE NETWORK TECHNOLOGY
By: /S/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
AVESTA TECHNOLOGIES, INC.
By: /S/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
PINE RIDGE FINANCIAL, INC.
By: /S/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx
Attorney-in-fact
Address for Notice:
c/x Xxxxxxx Capital Corp.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Avi Vigder and Eldad Gal
With a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
& Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
SMITHFIELD FIDUCIARY LLC
By: /S/ Xxx Xxxxxx
Name: Xxx Xxxxxx
Title: Authorized Signatory
Address for Notice:
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Xxx X. Xxxxxx and Xxxx X. Chill
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By: /S/ Xxxxx Greenhouse
Name: Xxxxx Greenhouse
Title: Managing Director
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
By: /S/ Xxxxx Greenhouse
Name: Xxxxx Greenhouse
Title: Managing Director
Address for Notice:
Special Situations Funds
000 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
With Copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.(000) 000-0000
Attn.: Xxxx X. Xxxxxxxx, Esq.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
PEQUOT SCOUT FUND, L.P.
By: /S/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Senior Vice President
Pequot Capital Management, Inc.
Its Investment Manager
Address for notice:
c/o Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
PEQUOT NAVIGATOR OFFSHORE, INC.
By: /S/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Senior Vice President
Pequot Capital Management, Inc.
Its Investment Manager
Address for notice:
c/o Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
