EXHIBIT 10.1B
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement"), made as
of February 22, 1999 and amended and restated in its entirety as of February 5,
2002, by Xxxxx X. Xxxxxx and Xxxxxxx Xxxxxx Xxxxxx, Trustees U/A Dated 12/9/98
("Debtor") for the benefit of Verilink Corporation, a Delaware corporation
("Secured Party"), Beltech, Inc., a California corporation ("Beltech"), Xxxxx X.
Xxxxxx (the "Borrower") and Xxxxxxx Xxxxxx Xxxxxx, each an individual resident
of the State of California (together, the "Beldens") in consideration of certain
credit extended by Secured Party to the Borrower.
RECITALS:
A. Debtor and Secured Party are parties to that certain Security Agreement
dated February 22, 1999 (the "Original Pledge Agreement");
B. Debtor has pledged to Secured Party certain shares of common stock to
secure certain obligations of Borrower to Secured Party;
C. Debtor and Secured Party desire to amend the Original Pledge Agreement
in certain respects and to restate the Original Pledge Agreement, as
amended, in its entirety;
D. Beltech and the Beldens desire to become parties to the Agreement and,
in particular, to be bound by the negative pledge granted in Section 4
below.
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, the adequacy and receipt of which is hereby
acknowledged, the parties hereby amend and restate the Original Pledge Agreement
and agree as follows:
1. GRANT AND SECURITY INTEREST. Debtor hereby pledges, assigns and
grants to Secured Party a perfected, first priority security interest in all of
Debtor's right, title and interest, whether presently existing or hereafter
created or acquired, wherever located, in the property (referred to collectively
as the "Collateral") described in Exhibit A hereto.
2. OBLIGATIONS SECURED. The security interest granted hereby secures
all indebtedness and obligations of Borrower to Secured Party now existing or
hereafter arising pursuant to that certain promissory note dated February 10,
1998 in the original principal amount of $800,000, and that certain promissory
note dated February 22, 1999 in the original principal amount of $3,000,000,
both as modified by modification agreements dated as of September 22, 1999 and
February 5, 2002 (the "Modification Agreement") as the same may be renewed,
modified or extended from time to time; all costs and expenses of Secured Party,
including reasonable attorneys fees, to obtain, preserve, perfect, enforce and
defend this Agreement and maintain, preserve, collect, protect, perfect Secured
Party's interest in and realize upon the Collateral and all covenants,
agreements, representations and warranties of Debtor, Beltech and the Beldens
contained herein (collectively, the "Obligations").
3. PERFECTION AND SECURITY INTEREST. Debtor from time to time, at the
request of Secured Party, shall execute such financing statements, control
agreements, and other documents, each of which shall be in form and substance
acceptable to Secured Party, and take such actions as may be necessary or
appropriate to perfect or continue the perfection and priority of Secured
Party's security interests in the Collateral. Debtor shall promptly notify
Secured Party if Debtor changes Debtor's name or moves Debtor's principal
residence or location or the place where Debtor keeps its records from the
address set forth below. Debtor shall promptly furnish to Secured Party any
information with respect to the Collateral or the Debtor as Secured Party
reasonably may request.
4. NEGATIVE PLEDGE. Neither Debtor, Beltech, Borrower nor the Beldens
will create, assume or suffer or permit to exist any security interest, lien,
charge, encumbrance or claim on any securities issued by Verilink Corporation
and now or hereafter owned of record or beneficially by Debtor (other than the
security interest in favor of Holder granted by Debtor hereunder), Borrower,
Beltech or the Beldens, nor will any of them permit or make any sale or other
transfer or disposition of such securities unless such sale or disposition is
made in good faith to an unaffiliated, third-party, bona fide purchaser in an
arms-length transaction, and an amount equal to any net proceeds thereof is
applied to prepay the Obligations as provided in the Notes as modified by the
Modification Agreement of even date herewith.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor represents,
warrants and covenants that:
(a) TITLE. Apart from the security interest in the Collateral
granted to Secured Party hereunder, Debtor has good and valid title to the
Collateral, free and clear of any and all liens, charges, claims, security
interests, set offs, restrictions and encumbrances of any kind whatsoever. To
the extent the Collateral consists of securities, such securities are duly
authorized, validly issued, fully paid and nonassessable.
(b) TRANSFER OF COLLATERAL. Debtor shall not sell, assign,
transfer, encumber or otherwise dispose of any of the Collateral or any interest
therein without the prior written consent of Secured Party. If any such
encumbrance is imposed, Debtor shall give Secured Party immediate written notice
and take immediate action to discharge the same.
(c) AUTHORITY; ENFORCEABILITY. Debtor has full legal capacity,
power and authority to make, enter into and perform this Agreement and no
consent or approval of or notice to any person or entity is required in
connection with this Agreement. This Agreement is a valid, binding and
enforceable obligation of Debtor.
(d) NOTICE OF THIRD PARTY ACTIONS. Debtor shall promptly
notify Secured Party of any Event of Default or any levy, execution or
attachment against the Collateral or any other event or condition that affects
the Collateral and shall promptly take all necessary action to preserve, perfect
and protect Secured Party's first priority security interest in the Collateral.
6. POWER OF ATTORNEY. Debtor hereby appoints Secured Party and any
officer thereof as Debtor's attorney-in-fact to execute and file any writings in
connection with the Collateral, to take any other actions that are appropriate
to collect any proceeds of the Collateral and, subject to the provisions of
Section 8 below, to vote or exercise consensual rights with respect to the
Stock. This appointment shall constitute a power coupled with an interest, shall
survive the termination, death or incapacity of Debtor and shall be irrevocable
until the Obligations are paid in full.
7. EVENTS OF DEFAULT. An "Event of Default" shall occur when Debtor or
the Borrower (a) fails to pay or perform any of the Obligations (or Debtor,
Beltech, Borrower or the Beldens fails to perform any of the covenants or
agreements contained herein) when due; (b) becomes insolvent, a receiver is
appointed for any part of Debtor's or Borrower's property, Debtor or Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Debtor or Borrower or against Debtor or Borrower under any bankruptcy
or insolvency laws; or (c) sells or otherwise disposes of or encumbers all or a
substantial part of Debtor's or Borrower's assets. At any time after an Event of
Default, in addition to exercising any other rights and remedies, Secured Party
may, after consultation with Borrower as provided below: (a) sell or dispose of
the Collateral in a public or private sale as Secured Party deems appropriate
for the purposes of paying or performing the Obligations; (b) declare
immediately due and payable all of the Obligations owing to Secured Party; (c)
apply any Collateral to the Obligations in such order as Secured Party may
determine, any Stock so applied being valued at its market price on the date
Secured Party gives notice to Debtor of such application of Stock to satisfy
Obligations; (d) enter into any agreement relating to the Collateral and
exercise all voting rights to the exclusion of Debtor; (e) make any settlement
that Secured Party deems appropriate in respect of the Collateral; (f) collect
any sums payable in connection with the Collateral; and (g) make, adjust and
receive payment under insurance claims, claims for breach of warranty and the
like in connection with the Collateral.
Secured Party shall consult with Borrower regarding the exercise of
Secured Party's rights against the Collateral prior to exercising its rights, so
that Secured Party's exercise of those rights is accomplished in the best
interests of Secured Party, its stockholders, Debtor and Borrower. Secured Party
in all events shall have the rights, powers and remedies set forth above as well
as all of the rights, powers and remedies otherwise afforded to a secured
creditor under the Uniform Commercial Code of the State where the Debtor is
located.
Debtor specifically understands and agrees that any sale by Secured
Party of all or part of the Collateral pursuant to the terms of this Agreement
may be effected by Secured Party at a time or times and in a manner or manners
which could result in the proceeds of such sale being significantly and
materially less than might have been received if such sale had occurred at
different times or in different manners, and Debtor, to the fullest extent
permitted by law, hereby releases Secured Party and its officers and
representatives from and against any and all obligations and liabilities arising
out of or related to the timing or manner of any such sale.
The Collateral consisting of Stock (as defined in Exhibit A) may be not
registered or qualified under the various federal or state securities laws of
the United States, or may consist of securities the disposition of which after
default may be restricted to one or more private (instead of public) sales.
Debtor understands that upon such disposition, Secured Party may approach only a
restricted number of potential purchasers and further understands that a sale
under such circumstances may yield a lower price for the Stock than if the Stock
were registered and qualified pursuant to federal and state securities laws or
otherwise sold on the open market. Debtor, therefore, agrees that:
(a) if Secured Party shall, pursuant to the terms of this
Agreement, sell or cause the Stock or any portion thereof to be sold at
a private sale, Secured Party shall have the right to rely upon the
advice and opinion of any national brokerage or investment firm and/or
counsel of its choosing (but shall not be obligated to seek such advice
and the failure to do so shall not be considered in determining the
commercial reasonableness of such action) as to the best manner in
which to expose the Stock for sale and as to the best price reasonably
obtainable at the private sale thereof; and
(b) that such reliance shall be conclusive evidence that
Secured Party has handled such disposition in a commercially reasonable
manner.
8. VOTING RIGHTS. Debtor shall have the right to exercise all voting
and other consensual rights with respect to the Stock until such time as an
Event of Default shall have occurred and Secured Party shall have given written
notice to Debtor that Debtor's rights to vote the Stock are terminated, at which
time Secured Party shall become entitled to vote the Stock. For so long as
Debtor shall have the right to vote the Stock, Debtor shall not vote the Stock
in a manner that would be adverse to Secured Party's security interest in the
Stock or Secured Party's rights under this Agreement.
9. ADDITIONAL ACTIONS AND DOCUMENTS. At the request of Secured Party
from time to time, Debtor, Borrower, Beltech and the Beldens shall execute and
deliver such further writings, documents and instruments and shall take such
further actions, including the filing of financing statements and amendments
thereto, all at Debtor's expense, as may be required or appropriate to carry out
the intent and purposes of this Agreement.
10. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
11. AMENDMENTS, WAIVERS AND CONSENTS; TIME. This Agreement shall not be
changed or modified, in whole or in part, except by supplemental agreement
signed by the parties. Any party may waive compliance by any other party of any
of the covenants or conditions of this Agreement, but no waiver shall be binding
unless executed in writing by the party making the waiver. No waiver of any of
the provisions of this Agreement shall be deemed, or shall constitute, a waiver
of any other portion, whether or not similar, nor shall any waiver constitute a
continuing waiver. Any consent under this Agreement shall be in writing and
shall be effective only to the extent specifically set forth in such writing.
For the protection of all parties, amendments, waiver and consents that are not
in writing may be enforced only if they are detrimentally relied upon and proved
by clear and convincing evidence (other than any alleged reliance). Time is of
the essence of this Agreement.
12. NOTICE. Any notice, instrument or communication required or
permitted to be given under this Agreement to any party shall be in writing and
shall be deemed given when actually received or, if earlier, five days after
deposit in the United States Mail by certified or express mail, return receipt
requested, postage prepaid, addressed to the principal office of such party or
to such other address as such party may request by written notice. The parties'
principal offices are present located at the addresses set forth below their
signatures.
13. ATTORNEYS' FEES. The prevailing party shall be entitled to recover
a reasonable allowance for attorneys' fees and litigation expenses in addition
to court costs in any suit, action, counterclaim or arbitration brought to
enforce the Obligations or this Agreement. "Prevailing Party" within the meaning
of this paragraph includes, without limitation, a party who agrees to dismiss an
action or proceeding upon the other's payment of the sums allegedly due or
performance of the covenants allegedly breached, or who obtains substantially
the relief sought by it.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO ANY CONFLICTS OR
CHOICE OF LAW RULE OR PRINCIPLE THAT MIGHT OTHERWISE REFER CONSTRUCTION OR
INTERPRETATION OF THIS MODIFICATION TO THE SUBSTANTIVE LAW OF ANOTHER
JURISDICTION.
15. WAIVER. (a) No delay of Secured Party in exercising any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. No waiver by Secured Party of any right
hereunder or of any default by Debtor shall be binding upon Secured Party unless
in writing, and no failure by Secured Party to exercise any power or right
hereunder or waiver of any default by Debtor shall operate as a waiver of any
other or further exercise of such right or power or of any further default. Each
right, power and remedy of Secured Party as provided for herein, or which shall
now or hereafter exist at law or in equity or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by Secured Party of
any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by Secured Party of any or all other such rights,
powers or remedies.
(b) Debtor further waives notice of the creation, advance,
increase, existence, extension or renewal of, and of any indulgence with respect
to, the Obligations; waives presentment, demand, notice of dishonor, and
protest; waives notice of the amount of the Obligations outstanding at any time,
notice of any change in financial condition of any person liable for the
Obligations or any part thereof, notice of any Event of Default, and all other
notices respecting the Obligations; and agrees that maturity of the Obligations
and any part thereof may be accelerated, extended or renewed one or more times
by Secured Party in its discretion, without notice to Debtor. Debtor waives any
right to require that any action be brought against any other person or to
require that resort be had to any other security for the Obligations. Debtor
further waives any right of subrogation or to enforce any right of action
against Borrower, Beltech or the Beldens until the Obligations are paid in full.
16. COUNTERPARTS. This Agreement may be executed in counterparts,
including facsimiles thereof, each of which shall constitute an original and all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be
duly executed and delivered as of the date first written above.
SECURED PARTY:
Verilink Corporation
By: /s/ Xxxxxx Xxxxxxx
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Title: Chairman of the Board of Directors
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Address: 000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
DEBTOR:
Xxxxx X. Xxxxxx and Xxxxxxx Xxxxxx Xxxxxx,
Trustees U/A Dated 12/9/98
/s/ Xxxxx X. Xxxxxx, Trustee
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Xxxxx X. Xxxxxx, Trustee
/s/ Xxxxxxx Xxxxxx Xxxxxx, Trustee
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Xxxxxxx Xxxxxx Xxxxxx, Trustee
Address: 000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
BELTECH
Beltech, Inc.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
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Title: President
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Address:
X.X. Xxx 000
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000 Xxxxx Xxxx.
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Xxxxx 000
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Xxxxxxx Xxxxxxx, XX 00000
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Signature Page 1 of 2
BORROWER:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Address: 000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
BELDENS:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
/s/ Xxxxxxx Xxxxxx Xxxxxx
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Xxxxxxx Xxxxxx Xxxxxx
Address: 000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Signature Page 2 of 2
EXHIBIT A
COLLATERAL. The security interest is granted in the following collateral (the
"Collateral"):
A. DESCRIPTION OF COLLATERAL. The shares of common stock of Verilink
Corporation listed on Exhibit A-1 attached hereto and incorporated by reference
herein, as amended from time to time, now or hereafter held in the possession of
Secured Party or its bailee, together with any and all security entitlements,
investment property, certificated or uncertificated securities, documents,
instruments, general intangibles, deposit accounts, supporting obligations,
payment intangibles, and cash hereafter delivered to Secured Party or held in
any securities account or deposit account over which Secured Party has control
in substitution therefor or in addition thereto (collectively, the "Stock").
B. PROCEEDS. All additions, substitutions and replacements for and
proceeds of the above Stock (including all income and benefits resulting from
any of the above, such as dividends or other distributions payable or
distributable in cash, property or stock; interest, premium and principal
payments; redemption proceeds and subscription rights; and shares or other
proceeds of conversions or splits of any securities in the Collateral). Any
security entitlements, investment property, certificated or uncertificated
securities, documents, instruments, general intangibles, supporting obligations,
payment intangibles, and cash received by Debtor or held in any deposit account,
which shall comprise such additions, substitutions and replacements for, or
proceeds of, the Collateral, shall be held in trust for Secured Party shall be
delivered immediately to Secured Party, its bailee, or deposited in a deposit
account or a securities account over which Secured Party has control. Any cash
proceeds shall be held in trust for Secured Party and shall be delivered
immediately to Secured Party, its bailee, or deposited in a deposit account over
which Secured Party has control or a securities account over which Secured Party
has control.
EXHIBIT A-1
Certificate No. No. of Shares
--------------- --------------
469 500,000
FBU 0297 100,000
FBU 1158 109,240
FBU 1220 85,000
FBU 0772 47,500
FBU 0305 49,540
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Total No. of Shares 891,280
