EXHIBIT 10.1A
SECOND NOTE MODIFICATION AGREEMENT
THIS SECOND NOTE MODIFICATION AGREEMENT (this "Modification") is made
as of and effective as of the 5th day of February, 2002, by and among ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (the "Borrower"), and VERILINK CORPORATION, a Delaware corporation (the
"Holder").
STATEMENT OF FACTS
The Holder made an initial loan to the Borrower in the original
principal amount of $800,000 evidenced by the Borrower's Promissory Note payable
to the order of the Holder dated February 10, 1998 (the "Original Note").
Subsequently, the Holder made a loan to the Borrower in the original principal
amount of $3,000,000 evidenced by the Borrower's Promissory Note payable to the
order of the Holder dated February 22, 1999 (the "Subsequent Note," the Original
Note and the Subsequent Note being collectively referred to herein as the
"Notes"). The Notes are secured by the pledge to the Holder of certain
securities owned beneficially and of record by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, Trustees U/A Dated December 12, 1998 (the "Pledgor").
The Notes were previously modified by note modification agreements
dated September 22, 1999 which extended the maturity dates of the Notes through
March 31, 2002 and provided for quarterly payments of principal and interest.
The March 31, 2001 through December 31, 2001 quarterly payments have not been
paid.
Borrower desires to further modify the Notes to defer the quarterly
payments due in March, June, September and December of 2001 and March of 2002
and to pay the Notes in a single installment of principal and accrued interest
on March 31, 2003, subject to mandatory prepayments of the Notes upon
disposition of certain securities which are subject to a negative pledge in
favor of Holder.
Borrower has requested that the Holder consent to the modification of
the Notes, and the Holder is willing to modify the Notes, subject to the terms
and conditions of this Modification.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements contained herein, $10.00 and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties do hereby
agree as follows:
STATEMENT OF TERMS
1. DEFINITIONS. All capitalized terms used in this Modification but not
otherwise defined or limited herein shall have the meanings set forth in the
Notes, as amended hereby.
2. AMENDMENTS TO NOTES. Subject to the fulfillment of the conditions
precedent to the effectiveness of this Modification which are set forth below,
the parties hereby agree as follows:
(a) Each of the Notes as heretofore modified is hereby further
modified by deleting the requirement for payment of quarterly installments of
principal and interest for the quarters ended March through December 2001 and
the final installment on March 31, 2002.
(b) Each of the Notes is hereby further modified to provide
that the outstanding principal balance of each of the Notes, together with all
accrued and unpaid interest, shall be due and payable in full in a single
installment on March 31, 2003.
(c) Each of the Notes is hereby further modified to provide
that Borrower shall make a mandatory prepayment of the Notes on the date of any
sale or other disposition by Borrower, the Pledgor or Beltech, Inc., a
California corporation ("Beltech") of any securities which are pledged as
collateral or subject to the negative pledge in favor of Holder under the
Amended and Restated Security Agreement ("Pledge Agreement") dated as of
February 5, 2002 among Borrower, Pledgor, Beltech and Holder, the terms of which
are incorporated by reference herein. Each mandatory prepayment shall be in an
amount equal to the proceeds received by such party in connection with such sale
or disposition, net of reasonable and customary third party expenses of sale.
Mandatory prepayments resulting from any sale or other disposition of securities
pledged as collateral under the Pledge Agreement shall be applied first against
the Original Note's principal balance, then against accrued interest on the
Original Note, and upon payment of the Original Note in full shall be applied
against the outstanding principal balance of the Subsequent Note and accrued
interest thereon until the Subsequent Note is paid in full. If the Collateral
Market Value does not exceed the outstanding principal and interest balance of
the Original Note at the time of a mandatory prepayment resulting from a sale or
other disposition of securities subject to the negative pledge pursuant to the
Pledge Agreement, then such mandatory prepayment shall also be applied first
against the Original Note's principal balance, then against accrued interest on
the Original Note, and upon payment of the Original Note in full shall be
applied against the outstanding principal balance of the Subsequent Note and
accrued interest thereon until the Subsequent Note is paid in full. If the
Collateral Market Value exceeds the outstanding principal and interest balance
of the Original Note at the time of a mandatory prepayment resulting from a sale
or other disposition of securities subject to the negative pledge pursuant to
the Pledge Agreement, then such mandatory prepayment be applied first against
the principal balance then against accrued interest on either the Original Note
or the Subsequent Note, or a combination thereof, at the election of Borrower.
If Borrower notifies Holder that Borrower seeks to use the securities that are
pledged as Collateral or subject to the negative pledge in favor of Holder under
the Pledge Agreement to pay or fund the payment of the Notes, the parties shall
cooperate in good faith to facilitate the Borrower's use of such securities to
pay or fund the payment of the Notes subject to applicable law and regulations.
(d) For purposes hereof, "Collateral Market Value" as of any
date shall mean the product of (i) the number of shares of Common Stock of
Verilink Corporation (the "Common Stock") then pledged as collateral pursuant to
the Pledge Agreement, multiplied by (ii) the average of the daily closing prices
per share of Common Stock for the 10 consecutive trading days immediately
preceding such date as reported on the principal trading market for the Common
Stock, as adjusted to reflect any stock dividends, sub-divisions, combinations
or reclassifications of the Common Stock. The closing price shall be the last
reported sale price, regular way, or if no such sales are reported on such day
or closing sale prices are not reported for the Common Stock, then the average
of the closing bid and asked price as reported in the principal consolidated
transaction reporting system for the principal trading market on which the
Common Stock is traded or listed, or such other system then in use. If the
Common Stock is not listed or traded on an established trading market, or not
the subject of available bid and asked prices or quotes, then the fair market
value per share of Common Stock, as determined in good faith by the Board of
Directors of Borrower, shall be deemed to be the average of the daily closing
prices for purposes of clause (ii) above.
(e) Each of the Notes is hereby further modified to provide
that Borrower may at any time or times voluntarily prepay (from funds other than
those described in (c) above) all or any portion of each of the Notes, without
premium or penalty. A voluntary prepayment shall include accrued interest
through the date of prepayment on the amount of principal being voluntarily
prepaid. Borrower shall provide written notice to the Holder designating the
Note or Notes against which the prepayment shall be applied.
3. NO OTHER AMENDMENTS. Except for the amendments expressly set forth
and referred to herein, each of the Notes remains unchanged and in full force
and effect. Nothing in this Modification is intended, or shall be construed, to
constitute a novation or an accord and satisfaction of any of the Borrower's
indebtedness owed to the Holder, or to modify, affect or impair the Holder's
rights under or the perfection or continuity of the security interests in,
security titles to or other liens on any collateral securing the Notes.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. To induce the
Holder to enter into this Modification, the Borrower does hereby warrant,
represent and covenant to the Holder that: (a) the outstanding principal balance
of the Original Note is $570,000.00 at January 31, 2002 and that accrued and
unpaid interest thereon totals $400,901.34 at January 31, 2002; (b) the
outstanding principal balance of the Subsequent Note is $1,793,173.00 at January
31, 2002 and that accrued and unpaid interest thereon totals $399,568.18 at
January 31, 2002; (c) no Default or Event of Default has occurred and is or will
be continuing as of this date under the Notes after giving effect to the
amendments contained in this Modification; (d) Borrower has the legal capacity
and power to execute, deliver and perform his obligations under this
Modification, and this Modification is and the Notes, as amended hereby, remain
the legal, valid and binding obligation of Borrower enforceable against him in
accordance with their respective terms; and (e) if requested by the Holder at
any time, the Borrower will cause to be delivered to the Holder a duly executed
reaffirmation and confirmation of each of the obligations of Borrower, Pledgor
and Beltech under the Pledge Agreement.
5. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS MODIFICATION. The
effectiveness of this Modification and the amendments provided herein are
subject to the fulfillment of the following conditions precedent:
(a) the Holder shall have received one or more counterparts of
this Modification duly executed by the Borrower;
(b) the Holder shall have received from the Pledgor the duly
executed Pledge Agreement, as amended and restated this date, pursuant to which
Pledgor shall have granted to the Holder a first priority security interest in
and to the collateral pledged thereunder (the "Pledged Collateral"), and
Borrower, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and Beltech shall have agreed to the negative
pledge of securities of Holder;
(c) the Holder shall have received from the Pledgor the
original share certificates evidencing the Pledged Collateral, together with
duly executed stock powers, in blank, or a control agreement in form and
substance acceptable to the Holder in its reasonable judgment with respect to
any account in which the shares may be placed;
(d) each and every representation and warranty of the Borrower
set forth in Section 4 above shall be true and correct in all material respects
as of the date of, and after giving effect to, this Modification; and
(e) there shall not exist as of the date of, and after giving
effect to, this Modification any Default or Event of Default under the Notes as
amended by this Modification.
6. COUNTERPARTS. This Modification may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
when taken together shall constitute one and the same instrument.
7. GOVERNING LAW. THIS MODIFICATION 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.
8. TIME OF ESSENCE. Time is of the essence of this Modification.
IN WITNESS WHEREOF, the parties hereto have caused this Modification to
be duly executed, sealed and delivered as of the day and year specified at the
beginning hereof.
BORROWER:
/S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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HOLDER:
VERILINK CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title Chairman of the Board of Directors
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[CORPORATE SEAL]