EXHIBIT 99.6
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of February 12, 2003 (this
"AGREEMENT"), is entered into by and between CLARENT CORPORATION, a Delaware
corporation ("LENDER"), and VERSO TECHNOLOGIES, INC., a Minnesota corporation
("BORROWER").
RECITALS
A. Borrower and Lender entered into an Asset Purchase Agreement , dated
as of December 13, 2002, as amended by that certain First Amendment to
the Asset Purchase Agreement dated as of February 4, 2003 (the
"PURCHASE AGREEMENT"), pursuant to which Borrower agreed to acquire
from Lender the Assets, on the terms and conditions set forth in the
Purchase Agreement.
B. Borrower has requested certain loans from Lender to enable it to
acquire the Assets. Lender has agreed to provide to Borrower the
following loans:
1. pursuant to Section 1.3(a) of the Purchase Agreement, a loan
in the maximum principal amount of $5,000,000 secured by the
Assets (to the extent such loan is made, the "PRIMARY LOAN");
and
2. pursuant to Section 1.3(d) of the Purchase Agreement, either
(a) a loan in the initial aggregate principal amount of
$1,800,000 (such initial principal amount to be decreased and
a replacement note shall be issued, if necessary, pursuant to
the First Amendment to the Asset Purchase Agreement dated as
of February 4, 2003) secured by the Assets (the "SECURED
INVENTORY LOAN") or (b) an unsecured loan in the initial
aggregate principal amount of $1,800,000 (such principal
amount to be decreased, if necessary, pursuant to the First
Amendment to the Asset Purchase Agreement dated as of
February 4, 2003) (the "UNSECURED INVENTORY LOAN"); and
3. pursuant to Section 1.3(b) of the Purchase Agreement, either
(a) a loan in the original aggregate principal amount of
$3,000,000 secured by the Assets (the "SECURED $3 MILLION
LOAN") or (b) an unsecured loan in the original aggregate
principal amount of $3,000,000 (the "UNSECURED $3 MILLION
LOAN").
This Agreement contains the terms and conditions on which Lender shall
make the Loans.
C. Borrower acknowledges and understands that Lender is relying upon the
execution, delivery and performance of this Agreement by Borrower and
upon the representations, warranties and covenants of Borrower set
forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Borrower and Lender hereby agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"$3 MILLION LOAN" means either the Secured $3 Million Loan or the
Unsecured $3 Million Loan, whichever is applicable.
1.
"$3 MILLION NOTE" means either the Secured $3 Million Note or the
Unsecured $3 Million Note, whichever is applicable.
"ACCOUNTS" means "accounts" as such term is defined in the Code, but
only to the extent that such Accounts constitute Collateral.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly owns or controls such Person, any Person that directly
or indirectly controls or is controlled by or is under common control with such
Person, and each of such Person's senior executive officers, directors and
partners.
"ASSETS" has the meaning set forth in the Purchase Agreement.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the
Northern District of California, San Francisco Division.
"BORROWING BASE" means an amount, determined on a quarterly basis,
equal to (i) (x) 50% of Borrower's net accounts receivable for the quarter for
which the determination is being made as set forth on its unaudited quarterly
balance sheet if Borrower's net accounts receivable are more than 90%
Borrower's total revenue for such quarter, (y) 65% of Borrower's net accounts
receivable for the quarter for which the determination is being made as set
forth on its unaudited quarterly balance sheet if Borrower's net accounts
receivable are less than 90% but at least 75% of Borrower's total revenue for
such quarter, or (z) 75% of Borrower's net accounts receivable for the quarter
for which the determination is being made as set forth on its unaudited
quarterly balance sheet if Borrower's net accounts receivable are less than 75%
of Borrower's total revenue for such quarter; plus (ii) 10% of Borrower's
inventory as set forth on its unaudited quarterly balance sheet for such
quarter.
"CHANGE IN CONTROL" shall mean a transaction in which any "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of a sufficient number of shares of all classes of stock then
outstanding of Borrower ordinarily entitled to vote in the election of
directors, empowering such "person" or "group" to elect a majority of the Board
of Directors of Borrower, who did not have such power before such transaction.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"CODE" means the Uniform Commercial Code as in effect in the State of
California. In the event that any or all of the attachment, perfection or
priority of Lender's security interest in any Collateral is governed by the
Commercial Code as in effect in a jurisdiction other than California, the term
"Code" shall mean the Uniform Commercial Code as in effect at such time in such
other jurisdiction.
"COLLATERAL" means the property described on EXHIBIT A attached
hereto.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of Borrower and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period and determined in conformity with GAAP.
"CONTINGENT OBLIGATION" means any direct or indirect liability,
contingent or otherwise, with respect to any indebtedness, lease, dividend,
letter of credit or other obligation of another required to be reserved or
accrued in accordance with GAAP; provided, that in no event shall Contingent
Obligation
2.
mean any trade payables, accrued expenses, liability for unearned revenue or
customer deposits, in each case arising in the ordinary course of business.
"COPYRIGHTS" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"EBITDA" means, for any period, Consolidated Net Income, PLUS the
following, to the extent deducted in calculating Consolidated Net Income: (i)
interest expense, (ii) taxes, (iii) depreciation expense, (iv) amortization
expense and (v) all extraordinary, non-recurring, non-cash or unusual losses;
MINUS all extraordinary, non-recurring, non-cash or unusual gains, to the
extent added in calculating Consolidated Net Income.
"EQUIPMENT" means all machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest, but only to the extent that such Equipment constitutes
Collateral.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 8.
"FINANCING STATEMENT" means financing statements (forms UCC-1) naming
Borrower as debtor and Lender as secured party relating to the Secured
Obligations and filed in all appropriate jurisdictions.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"INDEBTEDNESS" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including reimbursement and
other obligations with respect to surety bonds and letters of credit, (b) all
capital lease obligations and (c) all Contingent Obligations.
"INTELLECTUAL PROPERTY" means, collectively, all of Borrower's
Copyrights, Trademarks and Patents, but only to the extent that such
Copyrights, Trademarks and Patents constitute Collateral.
"INSOLVENCY PROCEEDING" means any action, suit, case or proceeding
commenced by or against Borrower or any Subsidiary for the appointment of a
receiver for Borrower, any Subsidiary, any of Borrower's property or any
property of any Subsidiary, for an order for relief under any chapter of the
United States bankruptcy code, as an assignment for the benefit of creditors or
for any relief under any other insolvency law relating to the readjustment,
reorganization, composition or extension of debts owed by Borrower or any
Subsidiary.
"INVENTORY" means "inventory" as such term is defined in the Code, but
only to the extent that such Inventory constitutes Collateral.
"INVENTORY LOAN" means either the Secured Inventory Loan or the
Unsecured Inventory Loan, whichever is applicable.
"INVENTORY NOTE" means either the Secured Inventory Note or the
Unsecured Inventory Note, whichever is applicable.
3.
"INVESTMENT" means any beneficial ownership of less than all of the
equity interests of (including stock, partnership interest or other securities)
any Person, or any loan, advance or capital contribution to any Person.
"IP SECURITY AGREEMENT" means that certain Intellectual Property
Security Agreement, dated as of the date hereof, by and between Lender and
Borrower.
"LENDER EXPENSES" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
enforcement of the Loan Documents and all of Lender's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including reasonable fees and expenses of appeal or review, or those
incurred in any Insolvency Proceeding), whether or not a suit is brought.
"LIEN" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"LOANS" means the $3 Million Loan, the Primary Loan and the Inventory
Loan.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
IP Security Agreement, the Financing Statement and any other agreement entered
into between Borrower and Lender in connection with this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations or condition (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole.
"NOTES" means, individually and collectively, the Inventory Note, the
$3 Million Note and the Primary Note.
"OBLIGATIONS" means, individually and collectively, the Secured
Obligations and the Unsecured Obligations.
"PATENTS" means all patents, patent applications and like protections
including improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" means:
(a) All Senior Indebtedness;
(b) Trade debt incurred in the ordinary course of
business;
(c) (i) While any of the Secured Obligations remain
outstanding, Indebtedness subordinated to the
Secured Obligations on terms satisfactory to Lender,
in its reasonable discretion, and (ii) upon the
indefeasible payment in full of the Secured
Obligations, Indebtedness which, by its terms, is
subordinated to the Obligations, provided, that, at
least 30 days prior to the incurrence of such
Indebtedness, Borrower provides Lender with written
notice thereof;
(d) Indebtedness existing on the date hereof and
disclosed on the Schedule; and
4.
(e) On and after the later to occur of the payment in
full of (i) the Primary Note or (ii) the Inventory
Note, Indebtedness of a Person that becomes a
Subsidiary after the date hereof, provided that each
of the following conditions is met: (i) such
Indebtedness will not cause Borrower to exceed the
Senior Indebtedness Cap, and (ii) immediately before
and after giving effect to the acquisition of such
Person by Borrower, no Event of Default shall have
occurred and be continuing.
"PERMITTED LIENS" means:
(a) Liens that secure Senior Indebtedness;
(b) Liens that constitute purchase money security
interests;
(c) Liens for taxes not yet payable or Liens for taxes
being contested in good faith by appropriate
proceedings with adequate reserves under GAAP;
(d) Liens of materialmen, mechanics, warehousemen,
carriers and other similar Liens arising in the
ordinary course of business;
(e) Liens incurred in connection with Senior
Indebtedness;
(f) Liens incurred in connection with Indebtedness
permitted pursuant to clause (d) of the definition
of "Permitted Indebtedness";
(g) Liens in favor of customs and revenue authorities
which secure payment of customs duties in connection
with the importation of goods; and
(h) Liens consented to by Lender, which consent shall
not be unreasonably withheld, delayed or
conditioned.
"PERSON" means any individual, corporation, general partnership,
limited partnership, limited liability company, trust, association, firm,
organization, company, business, entity, union, society or governmental body.
"PRIMARY LOAN" has the meaning set forth in Recital B.
"PRIMARY NOTE" means a promissory note evidencing the Primary Loan in
substantially the same form as EXHIBIT D attached hereto.
"PURCHASE AGREEMENT" has the meaning set forth in Recital A.
"QUALIFIED FINANCING" means a financing in which Borrower receives,
immediately upon the closing of such financing, net cash funded proceeds of not
less than $5,000,000; it being understood that in no event shall the first
$5,000,000 of Senior Indebtedness be deemed "net cash funded proceeds" for
purposes of this definition.
"SCHEDULE" means the Schedule of Exceptions attached hereto.
"SECURED $3 MILLION LOAN" has the meaning set forth in Recital B.
5.
"SECURED $3 MILLION NOTE" means a promissory note evidencing the
Secured $3 Million Loan in substantially the same form as EXHIBIT B-1 attached
hereto.
"SECURED INVENTORY LOAN" has the meaning set forth in Recital B.
"SECURED INVENTORY NOTE" means a promissory note evidencing the
Secured Inventory Loan in substantially the same form as EXHIBIT C-1 attached
hereto.
"SECURED LOANS" means, individually and collectively, (i) the Primary
Loan, (ii) the Secured $3 Million Loan and (iii) the Secured Inventory Note.
"SECURED NOTES" means, individually and collectively, the Primary
Note, the Secured Inventory Note, and, if applicable, the Secured $3 Million
Note, to the extent it is secured.
"SECURED OBLIGATIONS" means all debt, principal, interest, Lender
Expenses and other amounts owed to Lender by Borrower at any time in connection
with the applicable Secured Notes (with respect to the $3 Million Note only, to
the extent, and only to the extent, that the Secured $3 Million Note is secured
in accordance with this Agreement), including any interest that accrues after
the commencement of an Insolvency Proceeding.
"SENIOR CREDITOR" means any holder of any Senior Indebtedness.
"SENIOR INDEBTEDNESS" means (i) the principal of, and premium, if any,
and interest on all Indebtedness of Borrower for monies borrowed, including
commercial paper and accounts receivable sold or assigned by Borrower, and (ii)
the principal of, and premium, if any, and interest on any indebtedness or
obligations of a Subsidiary of the kinds described in clause (i), above, which
are assumed or guaranteed in any manner by Borrower, as any of such
Indebtedness, obligations or liabilities described in the foregoing clauses (i)
or (ii) may be amended, modified, restated, replaced, extended, refinanced,
renewed or supplemented from time to time, and "Senior Indebtedness" shall
include all Indebtedness, liabilities, debts and obligations of Borrower to
Silicon Valley Bank (or such other bank or financial institution that may
participate in or provide financing in lieu of Silicon Valley Bank, "PRIMARY
LENDER") under that certain Loan and Security Agreement, dated as of December
14, 2001, among Borrower, Nact Telecommunications, Inc., Xxxxxxxx.Xxx Software,
Inc. and the Primary Lender, as amended, including all principal, interest,
charges, fees and other expenses due and owing thereunder, provided, that in no
event shall "Senior Indebtedness" ever exceed the Senior Indebtedness Cap.
"SENIOR INDEBTEDNESS CAP" means $10,000,000
(a) MINUS the principal amount of the Primary Note then
outstanding,
(b) PLUS all interest, fees and expenses charged by
Borrower's Primary Lender under any applicable
agreement,
(c) PLUS, on and after the later to occur of the payment
in full of (i) the Primary Note or (ii) the
Inventory Note, an amount equal to the greater of
(A) four (4) times Borrower's EBITDA, calculated on
a trailing 12-month basis, minus $10,000,000, or (B)
any increase in the Borrowing Base, in each of the
foregoing cases, measured at the end of each
calendar quarter, beginning with the quarter ending
March 31, 2003; it being understood that no increase
to the Senior Indebtedness Cap shall take effect
until the end of the second calendar quarter, or
June 30, 2003.
6.
"SUBORDINATION AGREEMENT" has the meaning assigned to such term in
Section 9.7.
"SUBSIDIARY" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers
or trustees of the entity, at the time as of which any determination is being
made, is owned by Borrower, either directly or through an Affiliate, if any.
"TRADEMARKS" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
"UNQUALIFIED FINANCING" means any financing other than a Qualified
Financing; it being understood that in no event shall the first $5,000,000 of
Senior Indebtedness be deemed to comprise an Unqualified Financing for purposes
of this definition.
"UNSECURED $3 MILLION LOAN" has the meaning set forth in Recital B.
"UNSECURED $3 MILLION NOTE" means a promissory note evidencing the
Unsecured $3 Million Loan in substantially the same form as EXHIBIT B-2
attached hereto.
"UNSECURED INVENTORY LOAN" has the meaning set forth in Recital B.
"UNSECURED INVENTORY NOTE" means a promissory note evidencing the
Unsecured Inventory Loan in substantially the same form as EXHIBIT C-2 attached
hereto.
"UNSECURED LOANS" means, individually and collectively, the Unsecured
$3 Million Loan and the Unsecured Inventory Loan.
"UNSECURED NOTES" means, individually and collectively, the Unsecured
$3 Million Note and the Unsecured Inventory Note.
"UNSECURED OBLIGATIONS" means all debt, principal, interest, Lender
Expenses and other amounts owed to Lender by Borrower at any time in connection
with the applicable Unsecured Notes, including any interest that accrues after
the commencement of an Insolvency Proceeding.
2. LOANS.
2.1 AMOUNT AND MATURITY. Subject to the terms and
conditions set forth herein, Lender shall advance to Borrower the Primary Loan,
the Inventory Loan and the $3 Million Loan in accordance with the terms and
conditions set forth in the Primary Note, the Inventory Note and the $3 Million
Note, respectively. The aggregate outstanding principal balance of the Primary
Loan, the Inventory Loan and the $3 Million Loan, plus all accrued and unpaid
interest thereon, shall be due and payable in full in immediately available
funds on the maturity dates set forth in the Primary Note, the Inventory Note
and the $3 Million Loan, respectively.
2.2 INTEREST. The Primary Loan, the Inventory Loan and
the $3 Million Loan shall bear interest on the sum of the unpaid principal
balance thereof on each day until such Loan shall have been fully repaid at the
per annum rates and to the extent set forth in the Primary Note, Inventory Note
and $3 Million Note, respectively.
7.
2.3 PRINCIPAL REPAYMENT. Principal and interest on the
Primary Loan, the Inventory Loan and the $3 Million Loan shall be due and
payable in accordance with the terms and conditions set forth in the Primary
Note, Inventory Note and $3 Million Note, respectively.
2.4 MANDATORY PREPAYMENT. Borrower shall cause the
proceeds of any Qualified Financing or Unqualified Financing (less reasonable
closing costs not to exceed $500,000) to be paid directly to Lender for
repayment of the outstanding principal amount of, and accrued interest on, the
Primary Note, until paid in full.
3. CONDITIONS PRECEDENT TO LOANS.
3.1 CONDITIONS PRECEDENT TO SECURED LOANS. The
obligation of Lender to make the applicable Secured Loans is subject to the
condition precedent that Lender shall have received, in form and substance
satisfactory to Lender, each of the following:
(A) each of the Secured Notes, duly executed by
Borrower, as applicable;
(B) the IP Security Agreement, duly executed by
Borrower; and
(C) the Financing Statement.
3.2 CONDITIONS PRECEDENT TO UNSECURED LOANS. The
obligation of Lender to make the applicable Unsecured Loans is subject to the
condition precedent that Lender shall have received each of the applicable
Unsecured Notes, duly executed by Borrower.
3.3 CONDITIONS PRECEDENT TO ALL LOANS. In addition to
the foregoing conditions precedent, the obligation of Lender to make the Loans
is subject to the condition precedent that Lender shall have received, in form
and substance satisfactory to Lender, each of the following:
(A) this Agreement, duly executed by Borrower;
(B) the Purchase Agreement, duly executed by
Borrower;
(C) an officer's certificate of Borrower with
respect to its articles of incorporation and bylaws, resolutions authorizing
the execution and delivery of this Agreement and the other Loan Documents, and
incumbency;
(D) to the extent required, consent to the
consummation and performance of the transactions contemplated by the Loan
Documents from existing lenders and lessors, including Silicon Valley Bank;
(E) evidence that all UCC-1 financing
statements filed by WA Telcom Products Co., Inc. against Borrower have been
terminated; and
(F) such other documents, and completion of
such other matters, as Lender may reasonably deem necessary or appropriate.
4. CREATION OF SECURITY INTEREST WITH RESPECT TO OBLIGATIONS.
8.
The provisions of this Article 4 shall apply only if Lender
makes a Secured Loan to Borrower.
4.1 GRANT OF SECURITY INTEREST. Borrower grants and
pledges to Lender a continuing security interest in all Collateral to secure
prompt repayment of the Secured Obligations and to secure prompt performance by
Borrower of each of its covenants and duties under the applicable Secured
Notes. Such security interest constitutes a valid security interest in such
Collateral, junior only to the security interest granted by Borrower in
connection with the Senior Indebtedness.
4.2 AUTHORIZATION TO FILE; DELIVERY OF ADDITIONAL
DOCUMENTATION REQUIRED. Borrower authorizes Lender to file financing statements
without notice to Borrower, with all appropriate jurisdictions, in order to
perfect or protect Lender's security interests in the Collateral. Borrower
shall execute and deliver to Lender all documents that Lender may reasonably
request, in form satisfactory to Lender, to perfect and continue perfected
Lender's security interests in the Collateral and in order to fully consummate
all of the transactions contemplated under the Loan Documents to the extent
such transactions relate to the applicable Secured Notes.
4.3 TERMINATION OF SECURITY INTERESTS. The security
interests granted hereunder shall terminate upon the indefeasible payment in
full of the Secured Obligations. Notwithstanding the foregoing, the security
interests securing the Secured $3 Million Loan shall terminate if the Primary
Loan is indefeasibly paid in full on or before the six-month anniversary of the
Closing Date. If the Primary Loan is not indefeasibly paid in full on or before
the six-month anniversary of the Closing Date, then the security interests
securing the Secured $3 Million Loan shall terminate upon the later to occur of
the indefeasible payment in full of (a) the Primary Note and (b) the Inventory
Note. Borrower shall be responsible for any costs relating to any such
termination.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and
each Subsidiary is a corporation duly existing under the laws of its state of
incorporation and qualified and licensed to do business in any state in which
the conduct of its business or its ownership of property requires that it be so
qualified, except where the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution,
delivery and performance of the Loan Documents are within Borrower's powers,
have been duly authorized and are not in conflict with nor constitute a breach
of any provision contained in Borrower's articles of incorporation or bylaws,
nor will they constitute an event of default under any material agreement by
which Borrower is bound. Borrower is not in default under any agreement by
which it is bound.
5.3 LITIGATION. Except as disclosed in the Purchaser SEC
Documents (as defined in the Purchase Agreement), there are no actions or
proceedings pending by or against Borrower or any Subsidiary before any court
or administrative agency in which an adverse decision could reasonably be
expected to have a Material Adverse Effect.
5.4 SOLVENCY; PAYMENT OF DEBTS. Borrower is able to pay
its debts (including trade debts) as they mature; the fair saleable value of
Borrower's assets (including goodwill minus disposition costs) exceeds the fair
value of its liabilities; and Borrower is not left with unreasonably small
capital after the transactions contemplated by this Agreement.
9.
5.5 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE; STATES IN
WHICH QUALIFIED TO DO BUSINESS. Except as set forth on the Schedule, Borrower
has not done business under any name other than that specified on the signature
page hereof. The chief executive office of Borrower is located at the address
indicated in Section 10 hereof. All jurisdictions in which Borrower is or has
been qualified to do business or has or has had an address within the last five
years are set forth on the Schedule.
5.6 COMPLIANCE WITH LAWS AND REGULATIONS. Borrower and
each Subsidiary have met the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. No event has occurred resulting
from Borrower's failure to comply with ERISA that is reasonably likely to
result in Borrower's incurring any liability that could have a Material Adverse
Effect. Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied in all material
respects with all the provisions of the Federal Fair Labor Standards Act.
Borrower is in compliance with all environmental laws, regulations and
ordinances except where the failure to comply is not reasonably likely to have
a Material Adverse Effect. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect. Borrower and each Subsidiary have filed or caused to be filed
all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein except those being
contested in good faith with adequate reserves under GAAP.
5.7 GOVERNMENT CONSENTS. Borrower and each Subsidiary
have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all governmental
authorities that are necessary for the continued operation of Borrower's
business as currently conducted, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Effect.
5.8 INBOUND LICENSES. Borrower is not a party to, nor is
bound by, any license or other agreement that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower's interest in such
license or agreement or any other property (to the extent that such license or
agreement constitutes Collateral).
5.9 QUALIFIED FINANCINGS AND UNQUALIFIED FINANCINGS.
From the date of the Purchase Agreement through and until the date hereof,
Borrower has delivered to Lender all amounts made available to it in connection
with any Qualified Financing or Unqualified Financing (less reasonable closing
costs not to exceed $500,000) to the extent such amount was equal to or less
than $5,000,000.
5.10 CURRENT INDEBTEDNESS. As of the date hereof, the
total amount of Borrower's Senior Indebtedness does not exceed the Senior
Indebtedness Cap.
5.11 NO DEFAULT UNDER SENIOR INDEBTEDNESS. No "event of
default" exists under any agreement or document constituting Senior
Indebtedness.
5.12 FULL DISCLOSURE. No representation, warranty or
other statement made by Borrower in any certificate or written statement
furnished to Lender pursuant to the Loan Agreement
10.
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates
or statements not misleading.
6. AFFIRMATIVE COVENANTS.
6.1 GOOD STANDING AND GOVERNMENT COMPLIANCE. Until
satisfaction in full of all outstanding Obligations, Borrower shall maintain
its and each of its Subsidiaries' corporate existence in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Until satisfaction
in full of all outstanding Obligations, Borrower shall comply, and shall cause
each Subsidiary to comply, with all statutes, laws, ordinances and government
rules and regulations to which it is subject, the failure to comply with which
could reasonably be expected to have a Material Adverse Effect, and shall
maintain, and shall cause each of its Subsidiaries to maintain, in force all
licenses, approvals and agreements, the loss of which could reasonably be
expected to have a Material Adverse Effect, or a material adverse effect on the
Collateral or the priority of Lender's Lien on the Collateral.
6.2 TAXES. Until satisfaction in full of all outstanding
Obligations, Borrower shall make, and cause each Subsidiary to make, due and
timely payment or deposit of all material federal, state and local taxes,
assessments or contributions required of it by law, including those laws
concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will
execute and deliver to Lender, on its reasonable request, proof satisfactory to
Lender indicating that Borrower or a Subsidiary has made such payments or
deposits and any appropriate certificates attesting to the payment or deposit
thereof.
6.3 INSURANCE.
(A) Until satisfaction in full of all
outstanding Secured Obligations, Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain liability and other insurance in amounts and of a type that are
customary to businesses similar to Borrower's.
(B) Upon Lender's request and until
satisfaction in full of all outstanding Secured Obligations, Borrower shall
deliver to Lender certified copies of the policies of insurance and evidence of
all premium payments. If an Event of Default has occurred and is continuing,
all proceeds payable under any casualty policy shall, at Lender's option and
subject to the rights of any Senior Creditor, be payable to Lender to be
applied toward the Secured Obligations.
6.4 FURTHER ASSURANCES. At any time and from time to
time until satisfaction in full of all outstanding Obligations, Borrower shall
execute and deliver such further instruments and take such further action as
may be reasonably requested by Lender to effect the purposes of the Loan
Documents.
6.5 REPORTING REQUIREMENTS. Borrower will deliver to
Lender, no later than 40 calendar days after the last day of each calendar
quarter, a Compliance Report in the form of EXHIBIT E. In addition, Borrower
will notify Lender immediately of the occurrence of an "event of default" under
any agreement or document constituting Senior Indebtedness.
11.
7. NEGATIVE COVENANTS. Borrower covenants and agrees that until
satisfaction in full of the Obligations, Borrower will not do any of the
following without the prior written consent of Lender, which consent shall not
be unreasonably withheld, delayed or conditioned, except as set forth below:
(A) convey, sell, lease, transfer or otherwise
dispose of (collectively, to "TRANSFER"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than (i) Inventory
and licenses in the ordinary course of its business, (ii) such surplus or
excess property disclosed on the Schedule and (iii) Transfers of property which
do not exceed $250,000 in the aggregate in any calendar year;
(B) without at least thirty (30) days prior
written notice to Lender, relocate its chief executive office, its principal
place of business, any office in which it maintains books or records relating
to Collateral or any office or facility at which Collateral is located;
(C) without at least thirty (30) days prior
written notice to Lender, change its jurisdiction of incorporation, its
corporate name, any trade name or corporate structure;
(D) without at least thirty (30) days prior
written notice to Lender, change its federal taxpayer identification number;
(E) merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other Person, or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the capital stock or property of another Person, except where each of the
following conditions is met:
(I) no Event of Default exists or
would exist immediately after giving effect to any such transaction;
(II) Borrower is the continuing or
surviving company and no Change of Control shall occur as a result of such
transaction; and
(III) such transaction would not result
in a decrease of more than 10% of Borrower's consolidated EBITDA.
For purposes of clause (iii) above, and to
the extent Borrower is relying on debt financing to consummate any such
transaction, then, for purposes of calculating the Senior Indebtedness Cap,
Borrower may include the target company's EBITDA (as adjusted on a pro forma
basis to eliminate any reasonably expected cost reductions to be made in
connection with such transaction, but only to the extent such pro forma
adjustments are commercially reasonable) and trade accounts receivable in such
calculation, but only to the extent that (A) Borrower has a reasonable, good
faith belief that such target company's EBITDA and trade accounts receivable
shall continue at their then-current levels and (B) Borrower complies with
Section 7(f);
(F) create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, provided, that to the extent Borrower has
the right to incur additional Senior Indebtedness based on an increase in the
Senior Indebtedness Cap, then Borrower shall deliver to Lender, prior to the
date of the incurrence of such Permitted Indebtedness, a certificate signed by
the chief financial officer of Borrower, containing the calculations on which
the amount of such Permitted Indebtedness was determined, together with the
amount of, and lending institution providing, such Permitted Indebtedness;
12.
(G) so long as any of the Secured Obligations
remain outstanding, create, incur, assume or allow any Lien with respect to any
of its property, except for Permitted Liens, or assign or otherwise convey any
right to receive income, or permit any of its Subsidiaries so to do, other than
in the ordinary course of business;
(H) pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock;
(I) subject to the limitations set forth in
Section 7(e), directly or indirectly acquire or own, or make any Investment in
or to any Person, or permit any of its Subsidiaries so to do, in excess of
$500,000 in the aggregate in any calendar year;
(J) directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower, or permit any
of its Subsidiaries so to do, other than arm's length transactions on terms no
less favorable than those available to unrelated third parties and otherwise
permitted hereunder;
(K) so long as any of the Secured Obligations
remain outstanding, store the Inventory or the Equipment with a bailee,
warehouseman or similar party unless Lender or a Senior Creditor has received a
pledge of the warehouse receipt covering such Inventory, unless waived by all
Senior Creditors (excluding Lender);
(L) so long as any of the Secured Obligations
remain outstanding, keep the Inventory and Equipment at a location other than
as set forth in on the Schedule, except for Inventory sold in the ordinary
course of business;
(M) become or be controlled by an "investment
company," within the meaning of the Investment Company Act of 1940, or become
principally engaged in, or undertake as one of its important activities, the
business of extending credit for the purpose of purchasing or carrying margin
stock, or use the proceeds of the Loan for such purpose;
(N) fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur, fail to comply with the Federal Fair Labor
Standards Act or violate any law or regulation, which violation could
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Lender's Lien on the Collateral;
(O) enter into any Qualified Financing or
Unqualified Financing without the ability or right to deliver the net proceeds
thereof to Lender in the manner set forth in Section 2.4;
(P) use any portion of the debt or equity
obtained through any Qualified Financing or Unqualified Financing (less
reasonable closing costs not to exceed $500,000) for any purpose other than to
repay the Primary Note until the outstanding principal amount of, and accrued
interest on, the Primary Note are paid in full; or
(Q) permit any of its Subsidiaries to do any of
the foregoing.
8. EVENTS OF DEFAULT.
13.
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay any of the
Obligations when due;
8.2 COVENANT DEFAULT. If Borrower fails to perform any
obligation under Article 6 and the same is not cured within five (5) business
days thereafter, or violates any of the covenants contained in Article 7 of
this Agreement, or fails or neglects to perform or observe any other material
term, provision, condition or covenant contained in this Agreement, in any of
the other Loan Documents or in any other agreement between Borrower and Lender;
8.3 PURCHASE AGREEMENT. If there occurs a default on the
part of Borrower under the Purchase Agreement;
8.4 CHANGE IN CONTROL. If there occurs a Change in
Control;
8.5 MATERIAL ADVERSE EFFECT. If an event occurs that has
a Material Adverse Effect;
8.6 ATTACHMENT. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within ten days,
or if Borrower is enjoined, restrained, or in any way prevented by court order
from continuing to conduct all or any material part of its business affairs, or
if a judgment or other claim becomes a lien or encumbrance upon any material
portion of Borrower's assets, or if a notice of lien, levy, or assessment is
filed of record with respect to any of Borrower's assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten days after Borrower receives notice thereof;
8.7 INSOLVENCY. If (a) Borrower or any of its
Subsidiaries becomes insolvent, or (b) an Insolvency Proceeding is commenced by
Borrower or any of its Subsidiaries, or (c) an Insolvency Proceeding is
commenced against Borrower or any of its Subsidiaries and is not dismissed
within sixty (60) days thereafter;
8.8 OTHER AGREEMENTS. If there is a default in any
agreement to which Borrower is a party with a third party or parties pursuant
to which such third party or parties accelerate the maturity of any
Indebtedness in an amount in excess of $300,000 and such acceleration is not
rescinded or annulled within any applicable cure period; or
8.9 MISREPRESENTATIONS. If any material
misrepresentation or material misstatement exists now or hereafter in any
warranty or representation set forth herein or in any certificate delivered to
Lender pursuant to this Agreement or to induce Lender to enter into this
Agreement or any other Loan Document.
9. LENDER'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence of an Event
of Default, and subject to the rights of any Senior Creditor, Lender may, at
its election, without notice of its election and without demand, do any one or
more of the following, all of which are authorized by Borrower:
14.
(A) Declare all Obligations, whether evidenced
by this Agreement, any of the Notes, the other Loan Documents, or otherwise,
immediately due and payable (provided that upon the occurrence of an Event of
Default described in Section 8.7, all Obligations shall become immediately due
and payable without any action by Lender);
(B) Make such payments and do such acts as
Lender considers necessary or reasonable to protect its security interest in
the Collateral. Borrower agrees to assemble the Collateral if Lender so
requires, and to make the Collateral available to Lender as Lender may
designate. Borrower authorizes Lender to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest or compromise any encumbrance,
charge or Lien, which in Lender's determination appears to be prior or superior
to its security interest and to pay all expenses incurred in connection
therewith. With respect to any of Borrower's owned premises, Borrower hereby
grants Lender a license to enter into possession of such premises and to occupy
the same, without charge, in order to exercise any of Lender's rights or
remedies provided herein, at law, in equity or otherwise;
(C) Settle or adjust disputes and claims
directly with Account debtors for amounts, upon terms and in whatever order
that Lender reasonably considers advisable (but only to the extent that such
Accounts constitute Collateral);
(D) Set off and apply to the Obligations any
and all indebtedness at any time owing to Borrower by Lender;
(E) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale and sell (in the manner
provided for herein) the Collateral. Lender is hereby granted a license or
other right, solely pursuant to the provisions of this Section 9.1, to use,
without charge, the Intellectual Property, or any property of a similar nature,
as it pertains to the Collateral, in completing production of, advertising for
sale and selling any Collateral and, in connection with Lender's exercise of
its rights under this Section 9.1, Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit;
(F) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrower's
premises) as Lender determines is commercially reasonable, and apply any
proceeds to the Obligations in whatever manner or order Lender deems
appropriate; and
(G) Credit bid and purchase at any public sale.
Any deficiency in the Secured Obligations that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 POWER OF ATTORNEY. Effective only during the
existence of an Event of Default, and subject to the rights of any Senior
Creditor, Borrower hereby irrevocably appoints Lender (and any of Lender's
designated officers or employees) as Borrower's true and lawful attorney to:
(a) send requests for verification of Accounts or notify account debtors of
Lender's security interest in the Accounts (but only to the extent that such
Accounts constitute Collateral); (b) endorse Borrower's name on any checks or
other forms of payment or security that may come into Lender's possession; (c)
sign Borrower's name on any invoice or xxxx of lading relating to any Account,
drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts and notices to account debtors; (d) dispose of any
Collateral; (e) make, settle and adjust all claims under and decisions with
respect to Borrower's policies of insurance; (f) settle and adjust disputes and
claims respecting the accounts directly with account
15.
debtors, for amounts and upon terms which Lender determines to be reasonable;
(g) to amend or otherwise modify, in its sole discretion, the IP Security
Agreement, without first obtaining Borrower's approval of or signature to such
amendment or modification; (h) to transfer the Intellectual Property into the
name of Lender or a third party to the extent permitted under the Code; and (i)
to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral; provided
that Lender may exercise such power of attorney to sign the name of Borrower on
any of the documents described in Section 4.3 regardless of whether an Event of
Default has occurred. The appointment of Lender as Borrower's attorney-in-fact,
and each and every one of Lender's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully satisfied
and performed.
9.3 LENDER EXPENSES. If Borrower fails to pay any
amounts or furnish any required proof of payment due to third persons or
entities, as required under the terms of this Agreement, then Lender may do any
or all of the following after reasonable notice to Borrower: (a) make payment
of the same or any part thereof; or (b) obtain and maintain insurance policies
of the type discussed in Section 6.3, and take any action with respect to such
policies as Lender deems prudent. Any amounts so paid or deposited by Lender
shall constitute Lender Expenses, shall be immediately due and payable, shall
bear interest at the then applicable rate hereinabove provided and, if the
Loans hereunder are Secured Loans, shall be secured by the Collateral. Any
payments made by Lender shall not constitute an agreement by Lender to make
similar payments in the future or a waiver by Lender of any Event of Default
under this Agreement.
9.4 LENDER'S LIABILITY FOR COLLATERAL. So long as Lender
complies with the Code, Lender shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency or other Person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.5 REMEDIES CUMULATIVE. Lender's rights and remedies
under this Agreement, the Loan Documents and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Lender shall constitute a waiver, election or acquiescence by it. No
waiver by Lender shall be effective unless made in a written document signed on
behalf of Lender and then shall be effective only in the specific instance and
for the specific purpose for which it was given.
9.6 DEMAND; PROTEST. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment and notice of any default.
9.7 SUBORDINATION AGREEMENT. Concurrent with the
execution of this Agreement, Lender and Borrower shall enter into a
subordination agreement with Silicon Valley Bank in substantially the form
attached hereto as EXHIBIT F (as the same may be amended from time to time, the
"SUBORDINATION AGREEMENT"), and Lender acknowledges and agrees that the
Indebtedness incurred by Borrower hereunder in favor of Lender, and Lender's
rights and remedies hereunder in respect thereof, shall be subject to the terms
of the Subordination Agreement.
10. NOTICES.
16.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents, which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by facsimile to Borrower or to Lender, as the case may be, at its
addresses set forth below:
If to Borrower: VERSO TECHNOLOGIES, INC.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Hardin LLP
2700 International Tower
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxx and Xxxxxx X. Hussle
Facsimile: (000) 000-0000
If to Lender: CLARENT CORPORATION
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Legal Department
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx and
Xxxxxxxx Xxxxxx XxXxxxx
Facsimile: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE. This Agreement will be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of law). If any
legal proceeding or other legal action relating to this Agreement is brought or
otherwise initiated, the venue therefor will be the Bankruptcy Court. Borrower
and Lender hereby expressly and irrevocably consent and submit to the
jurisdiction of the Bankruptcy Court.
17.
12. GENERAL PROVISIONS.
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of the respective successors and permitted assigns of
each of the parties; provided, however, that neither this Agreement or the
other Loan Documents, nor any rights hereunder or thereunder, may be assigned
by Borrower. Lender may assign its rights under any and all of the Loan
Documents, in whole or in part, to any one or more third parties, without
consent from, or notice to, Borrower.
12.2 INDEMNIFICATION. Borrower shall defend, indemnify
and hold harmless Lender and its officers, employees and agents against: (a)
all obligations, demands, claims and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by this Agreement;
and (b) all losses or Lender Expenses in any way suffered, incurred or paid by
Lender as a result of or in any way arising out of, following, or consequential
to transactions between Lender and Borrower whether under this Agreement, or
otherwise (including reasonable attorneys' fees and expenses), except for
losses caused by Lender's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. In the event that any
provision of this Agreement, or the application of such provision to any Person
or set of circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable, will
not be affected and will continue to be valid and enforceable to the fullest
extent permitted by law.
12.5 AMENDMENTS IN WRITING. This Agreement may not be
amended, modified, altered or supplemented except by means of a written
instrument executed on behalf of Lender and Borrower.
12.6 INTERPRETATION OF AGREEMENT.
(A) Lender and Borrower each acknowledges that it has
participated in the drafting of this Agreement, and any applicable rule of
construction to the effect that ambiguities are to be resolved against the
drafting party will not be applied in connection with the construction or
interpretation of this Agreement.
(B) Whenever required by the context hereof, the
singular number will include the plural, and vice versa; the masculine gender
will include the feminine and neuter genders; and the neuter gender will
include the masculine and feminine genders.
(C) As used in this Agreement, the words "include" and
"including," and variations thereof, will not be deemed to be terms of
limitation, and will be deemed to be followed by the words "without
limitation."
(D) Unless the context otherwise requires, references in
this Agreement to "Sections," "Schedules" and "Exhibits" are intended to refer
to Sections of, and Schedules and Exhibits to, this Agreement.
18.
(E) The bold-faced headings contained in this Agreement
are for convenience of reference only, will not be deemed to be a part of this
Agreement and will not be referred to in connection with the construction or
interpretation of this Agreement.
12.7 COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which will constitute an original and all of
which, when taken together, will constitute one agreement.
12.8 SURVIVAL. All covenants, representations and
warranties made in this Agreement shall continue in full force and effect so
long as any Obligations remain outstanding. The obligations of Borrower to
indemnify Lender with respect to the expenses, damages, losses, costs and
liabilities described in Section 12.2 shall survive until all applicable
statutes of limitation periods with respect to actions that may be brought
against Lender have run.
[THE SIGNATURE PAGE FOLLOWS.]
19.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
VERSO TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxx
----------------------------------
Name: Xxxxxx X. Xxxx
----------------------------------
Title: Chairman and CEO
----------------------------------
CLARENT CORPORATION
By: /s/ X. X. Xxxx
----------------------------------
Name: Xxxxx X. Xxxx
----------------------------------
Title: President
----------------------------------
EXHIBIT A
COLLATERAL DESCRIPTION
"COLLATERAL" means:
A. The following personal property of Borrower, but only to the extent
that such personal property falls within the definition of "Assets":
1. all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), contract
rights, deposit accounts, documents (including negotiable documents), equipment
(including all accessions and additions thereto), general intangibles
(including payment intangibles), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale or
lease or to be furnished under a contract of service, and including returns and
repossessions), commercial tort claims, investment property (including
securities and securities entitlements), letters of credit, letter of credit
rights, supporting obligations, rights to payment for money or funds advanced
or sold and money;
2. all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter
arising, in the United States of America or in any foreign jurisdiction,
obtained or to be obtained on or in connection with any of the forgoing, or any
parts thereof or any underlying or component elements of any of the forgoing,
together with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of Lender to xxx in its own
name and/or in the name of the Borrower for past, present and future
infringements of copyright;
3. all trademarks, service marks, trade names and service names
and the goodwill associated therewith, together with the right to trademark and
all rights to renew or extend such trademarks and the right (but not the
obligation) of Lender to xxx in its own name and/or in the name of the Borrower
for past, present and future infringements of trademark;
4. all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including the
inventions and improvements described and claimed therein, (ii) licenses
pertaining to any patent whether Borrower is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including damages
and payments for past, present or future infringements thereof, (iv) rights
(but not obligations) to xxx in the name of Borrower and/or in the name of
Lender for past, present and future infringements thereof, (v) rights
corresponding thereto throughout the world in all jurisdictions in which such
patents have been issued or applied for and (vi) reissues, divisions,
continuations, renewals, extensions and continuations-in-part with respect to
any of the foregoing;
5. all (i) computer programs and supporting information provided
in connection with a transaction relating to the program and (ii) computer
programs embedded in goods and any supporting information provided in
connection with a transaction relating to the program whether or not the
program is associated with the goods in such a manner that it customarily is
considered part of the goods, and whether or not, by becoming the owner of the
goods, a person acquires a right to use the program in connection with the
goods, and whether or not the program is embedded in goods that consist solely
of the medium in which the program is embedded;
6. all of Borrower's books and records with respect to any of
the foregoing, and the computers and equipment containing said books and
records; and
7. all products and proceeds of or pertaining to the above,
including cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by Borrower.
B. All proceeds of any Qualified Financing or Unqualified Financing (less
reasonable closing costs not to exceed $500,000) and all products and proceeds
thereof, including cash or other property recovered by a bankruptcy trustee or
otherwise as a preferential transfer by Borrower.
The terms above have the meanings assigned to them in Division 9 (or, absent
definition in Division 9, in any other Division) of the Code.
EXHIBIT E
COMPLIANCE REPORT
In connection with that certain Loan and Security Agreement, dated as
of _____________, 2003, by and between VERSO TECHNOLOGIES, INC. ("BORROWER")
and CLARENT CORPORATION ("LENDER") (the "LOAN AGREEMENT"), Borrower hereby
represents and warrants to Lender as follows:
1. other than the representation set forth in the last sentence
of Section 5.5, all representations and warranties made by
Borrower in the Loan Agreement are true and correct in all
material respects on and as of the date hereof, except those
representations and warranties that speak as of a particular
date, which shall be true and correct as of such date;
2. Borrower is in complete compliance with all covenants
contained in the Loan Agreement on and as of the date hereof;
3. no Event of Default (as defined in the Loan Agreement) exists
on and as of the date hereof and the Borrower has no reason
to believe that an Event of Default will exist during the
following reporting period; and
4. the undersigned has the authority to execute this Compliance
Report by and on behalf of Borrower.
Dated:
-----------------
VERSO TECHNOLOGIES, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
