EXHIBIT 99.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of April 25, 2002 (this "Agreement"),
is by and between VERSO TECHNOLOGIES, INC., a Minnesota corporation with its
chief executive office and principal place of business located at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Debtor"), and WA TELCOM
PRODUCTS CO., INC., a Delaware corporation (the "Secured Party").
WHEREAS, pursuant to Section 1.2(c) of that certain Stock Purchase
Agreement, dated as of July 4, 2001, by and among the Debtor and the Secured
Party, as amended by that certain Closing Agreement, dated as of July 27, 2001
(as so amended, the "Purchase Agreement"), on March 31, 2002, the Debtor shall
pay to the Secured Party the Deferred Amount (as defined in the Purchase
Agreement);
WHEREAS, it is proposed that the Debtor's obligation to pay the
Deferred Amount be restructured pursuant to the terms and conditions of that
certain Convertible Secured Convertible Promissory Note (the "Note"), dated as
of the date hereof; and
WHEREAS, it is a condition to the Secured Party's willingness to agree
to a restructuring of the Deferred Amount that the Debtor executes and delivers
this Agreement;
NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the Debtor, the Debtor hereby agrees with the Secured
Party as follows:
SECTION 1. DEFINITIONS.
(a) For the purposes of this Agreement:
"APPLICABLE LAW" means all applicable provisions of constitutions,
statutes, laws, rules, regulations and orders of all governmental bodies and
all orders, rulings and decrees of all courts and arbitrators.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which banks in Atlanta, Georgia are authorized or required by law to
close.
"COLLATERAL" means the following properties, assets and rights of the
Debtor, wherever located, whether now owned or hereafter acquired or arising,
and all proceeds and products thereof: all personal and fixture property of
every kind and nature, including, without limitation, all goods (including
inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts (including health-care insurance
receivables), chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced by a
writing), commercial tort claims, securities of United States Persons and all
other investment property, supporting obligations, any other contract rights or
rights to
the payment of money, insurance claims and proceeds, tort claims, and all
general intangibles (including, without limitation, all payment intangibles and
Debtor's copyrights, copyright registrations, trademarks, registered
trademarks, trademark applications, service marks, registered service marks,
service ▇▇▇▇ applications, trade names, patents, and patent applications set
forth on Schedule 1 attached hereto and all goodwill associated with the
foregoing).
"DEFAULT" means any of the events specified in the definition of Event
of Default, whether or not there has been satisfied any requirement for giving
of notice, lapse of time or the happening of any other condition.
"EVENT OF DEFAULT" means (a) a breach by the Debtor of any of its
representations or warranties contained herein which has had, or would
reasonable be expected to have, a Material Adverse Effect, and such breach is
not cured within ten (10) days after the Debtor's receipt of written notice of
such breach, (b) a material breach by the Debtor of any of its covenants or
agreements contained herein, and such breach is not cured within ten (10) days
after the Debtor's receipt of written notice of such breach or (c) the
occurrence of an Event of Default under, and as defined in, any of the other
Transaction Documents.
"GUARANTORS" means NACT Telecommunications, Inc. and ▇▇▇▇▇▇▇▇.▇▇▇
Software, Inc.
"KNOWLEDGE OF THE DEBTOR" means the actual knowledge of the Chief
Executive Officer, Chief Financial Officer or Chief Operating Officer of the
Debtor.
"LIEN", as applied to the property of any Person, means any security
interest, lien, encumbrance, mortgage, deed to secure debt, deed of trust,
pledge, charge, conditional sale or other title retention agreement, or other
encumbrance of any kind covering any property of such Person, or upon the
income or profits therefrom or any agreement to convey any of the foregoing or
any other agreement or interest covering the property of a Person which is
intended to provide collateral security for the obligation of such Person.
"MATERIAL ADVERSE EFFECT" means (i) an material impairment of the
Debtor's ability to perform any of the Obligations or of the Secured Party's
ability to enforce any of the Obligations or to realize upon the Collateral,
(ii) a material impairment of the value of the Collateral or the amount the
Secured Party would be likely to receive in a liquidation of such Collateral,
or (iii) a material impairment of the priority of the Liens in favor of the
Secured Party created hereby.
"OBLIGATIONS" means, individually and collectively:
(i) all obligations of the Debtor to pay all
indebtedness evidenced by, and in accordance with, the Note and the other
obligations of the Debtor or any Guarantor as set forth in any Transaction
Document; and
(ii) all renewals, substitutions, modifications,
extensions and supplements to any of the foregoing.
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"PERMITTED LIENS" means:
(i) Liens securing taxes, assessments and other
governmental charges or levies not yet due and payable or the claims of, or
obligations owing to, materialmen, mechanics, carriers, warehousemen or
landlords for labor, materials, supplies or rentals incurred in the ordinary
course of business but not yet due and payable;
(ii) Liens consisting of deposits or pledges made, in the
ordinary course of business, in connection with, or to secure payment of,
obligations under workmen's compensation, unemployment insurance or similar
legislation;
(iii) Liens consisting of encumbrances in the nature of
zoning restrictions, easements, and rights or restrictions of record on the use
of real property, which in the sole judgment of the Secured Party do not
materially detract from the value of such property or impair the use thereof in
the business of the Debtor;
(iv) Liens in favor of Silicon Valley Bank created
pursuant to that certain Loan and Security Agreement, dated December 14, 2001,
between the Debtor, the Guarantors and Silicon Valley Bank and the other
agreements, documents and instruments executed and delivered in connection
therewith;
(v) Liens in favor of the Secured Party; and
(vi) Purchase money security interests and Liens to
secure the Debtor's performance of equipment leases arising in the ordinary
course of business.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"SVB CONTROL AGREEMENT" means that certain Control Agreement, of even
date herewith, between Silicon Valley Bank, the Secured Party, the Debtor and
the Guarantors.
"TRANSACTION DOCUMENTS" means (i) that certain Settlement Agreement
and General Release, dated as of March 29, 2002, between the Debtor and the
Secured Party, (ii) the Note, (iii) this Agreement, (iv) that certain Guaranty,
dated as of the date hereof, by the Guarantors in favor of the Secured Party,
(v) that certain Security Agreement, dated as of the date hereof, between the
Guarantors and the Secured Party, and (vi) that certain Pledge Agreement, dated
as of the date hereof, between the Debtor and the Secured Party.
"UCC" means the Uniform Commercial Code of the State of Georgia, as in
effect from time to time.
(b) Unless otherwise set forth herein to the contrary, all terms
not otherwise defined herein and which are defined in the UCC are used herein
with the meanings ascribed to them in the UCC. However, if a term is defined in
Article 9 of the UCC
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differently than in another Article of the UCC, the term has the meaning
specified in Article 9 of the UCC.
SECTION 2. GRANT OF SECURITY. To secure the prompt and complete
payment, observance and performance when due (whether at stated maturity, by
acceleration or otherwise) of all of the Obligations, the Debtor hereby
collaterally assigns and pledges to the Secured Party, and grants to the
Secured Party a security interest and lien in and to, the Collateral. The
security interest granted herein shall be second in priority only to (i) the
Lien in favor of Silicon Valley Bank created pursuant to that certain Loan and
Security Agreement, dated December 14, 2001 (the "SVB Loan Agreement"), between
the Debtor, the Guarantors and Silicon Valley Bank and the other agreements,
documents and instruments executed and delivered in connection therewith (the
loan evidenced by such agreements, documents and instruments, as such loan may
be amended, modified, restated, extended, increased, renewed or supplemented
from time to time; being referred to as the "SVB Loan") and (ii) the Lien in
favor of a replacement lender created pursuant to a refinancing of the SVB
Loan, provided that such refinancing is on terms substantially similar to the
SVB Loan. The Secured Party acknowledges that the attachment of its security
interest in any commercial tort claim as original collateral is subject to the
Debtor's compliance with Section 4(a).
SECTION 3. AUTHORIZATION TO FILE FINANCING STATEMENTS. The
Debtor hereby irrevocably authorizes the Secured Party at any time and from
time to time to file in any Uniform Commercial Code jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Collateral
(i) as all assets of the Debtor or words of similar effect, regardless of
whether any particular asset comprised in the Collateral falls within the scope
of Article 9 of the UCC or Article 9 of the Uniform Commercial Code of such
other jurisdiction, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) contain any other information required by part 5 of
Article 9 of the UCC or the analogous part of Article 9 of the Uniform
Commercial Code of such other jurisdiction for the sufficiency or filing office
acceptance of any financing statement or amendment. The Debtor agrees to
furnish any such information to the Secured Party promptly upon request.
SECTION 4. OTHER ACTIONS. Further to insure the attachment,
perfection and priority of, and the ability of the Secured Party to enforce,
the Secured Party's security interest in the Collateral, the Debtor agrees, in
each case at the Debtor's own expense, to take the following actions with
respect to the following Collateral:
(a) Commercial Tort Claims. If the Debtor shall at any time hold
or acquire a commercial tort claim, the Debtor shall immediately notify the
Secured Party in a writing signed by the Debtor of the brief details thereof
and grant to the Secured Party in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance satisfactory to the Secured Party.
(b) Actions as to any and all Collateral. The Debtor agrees to
take any other action reasonably requested by the Secured Party to insure the
attachment, perfection and,
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priority of, and the ability of the Secured Party to enforce, the Secured
Party's security interest in any and all of the Collateral.
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING LEGAL
STATUS. The Debtor represents and warrants to the Secured Party as follows: (a)
the correct corporate name of the Debtor is set forth in the first paragraph of
this Agreement, and the Debtor does not conduct and, during the five-year
period immediately preceding the date of this Agreement, has not conducted,
business under any trade name other than as set forth on Schedule 5 attached
hereto, (b) the Internal Revenue Service taxpayer identification number of the
Debtor is ▇▇-▇▇▇▇▇▇▇, (c) the Debtor is a corporation of the type, and is
organized in the jurisdiction, set forth in the introductory paragraph hereof,
and (d) the Debtor's place of business is accurately set forth in the
introductory paragraph hereof and except as set forth on Schedule 5 attached
hereto, the Debtor has no other place of business.
SECTION 6. COVENANTS REGARDING LEGAL STATUS. The Debtor
covenants with the Secured Party as follows: (a) without providing at least 15
Business Days prior written notice to the Secured Party, the Debtor will not
change its name, its place of business or, if more than one, chief executive
office, or its mailing address or organizational identification number if it
has one, and (b) without providing at least 15 Business Days prior written
notice to the Secured Party, the Debtor will not change its type of
organization, jurisdiction of organization or other legal structure.
SECTION 7. REPRESENTATIONS AND WARRANTIES REGARDING COLLATERAL,
ETC. The Debtor further represents and warrants to the Secured Party as
follows: (a) the Debtor is the owner of the Collateral pledged by it, free from
any Lien, except for Permitted Liens, (b) none of the Collateral pledged by it
constitutes or is the proceeds of "farm products" as defined in ss.
9-102(a)(34) of the UCC, (c) none of the account debtors or other persons
obligated on any of the Collateral pledged by it is a governmental authority
covered by the Federal Assignment of Claims Act or like federal, state or local
statute or rule in respect of such Collateral, (d) the Debtor does not hold any
commercial tort claim, and (e) to the best of the Debtor's knowledge, the
Debtor has at all times operated its business in compliance in all material
respects with all Applicable Laws.
SECTION 8. COVENANTS REGARDING COLLATERAL GENERALLY. The Debtor
further covenants with the Secured Party as follows: (a) the Collateral, to the
extent not delivered to the Secured Party pursuant to Section 4 and except as
permitted by Section 8(h) below, will be kept at the Debtor's place of business
as set forth in the first paragraph hereof or those locations listed in
Schedule 5 hereto, and the Debtor will not remove the Collateral from such
locations without providing at least fifteen (15) Business Days prior written
notice to the Secured Party, (b) except for the security interest herein
granted and Permitted Liens, the Debtor shall be the owner of the Collateral
free from any Lien and the Debtor shall defend the same against all claims and
demands of all persons at any time claiming the same or any interests therein
adverse to the Secured Party, (c) other than Permitted Liens, the Debtor shall
not pledge, mortgage or create, or suffer to exist any Lien in the Collateral
in favor of any Person other than the Secured Party, (d) the Debtor shall keep
the Collateral in good order and repair and will not use the same in
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violation of any Applicable Law or any policy of insurance thereon, (e) the
Debtor shall permit the Secured Party, or its designee, to inspect the
Collateral at any reasonable time upon reasonable prior notice, wherever
located, (f) the Debtor will promptly pay when due all taxes, assessments,
governmental charges and levies upon the Collateral or incurred in connection
with the use or operation of the Collateral or incurred in connection
therewith, (g) the Debtor shall continue to operate its business in compliance
in all material respects with all Applicable Laws, (h) the Debtor shall not
sell, transfer or otherwise dispose, or offer to sell, transfer or otherwise
dispose, of the Collateral or any interest therein except for (i) sales and
leases of inventory in the ordinary course of business and (ii) so long as no
Event of Default has occurred and is continuing, sales or other dispositions of
obsolescent items of equipment in the ordinary course of business consistent
with past practices and (i) the Debtor shall take all actions necessary to
properly maintain all applications, registrations, patents or patent
applications on its copyrights, trademarks, service marks, patents and
inventions. The Debtor further covenants that it shall not open or maintain any
"deposit account" (as defined in Article 9 of the UCC) with any bank or
financial institution other than Silicon Valley Bank or the banks and financial
institutions set forth on Schedule 8 attached hereto (any such other bank or
financial institution being referred to as an "Other Bank") unless (x) the
Secured Party consents in advance to the opening or maintenance of a deposit
account with such Other Bank or (y) prior to the opening or maintenance of a
deposit account with such Other Bank, the Secured Party and such Other Bank
enter into a control agreement with respect to such deposit account
satisfactory in form and substance to the Secured Party. Notwithstanding the
foregoing, in the event that Silicon Valley Bank terminates the SVB Control
Agreement at any time following the maturity of the SVB Loan or the termination
of the SVB Loan Agreement, then Verso shall, within thirty (30) days following
the termination of the SVB Control Agreement, transfer all funds in every
deposit account maintained by Silicon Valley Bank to a bank or financial
institution which, within such thirty (30) day period, enters into a control
agreement with the Secured Party satisfactory in form and substance to the
Secured Party.
SECTION 9. INSURANCE. The Debtor shall at all times maintain
insurance on the Collateral against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards and risks as the Secured
Party shall reasonably specify, shall be in such minimum amounts, contain such
terms and be issued under policies by insurers, in each case, reasonably
acceptable to the Secured Party. All premiums on such insurance shall be paid
by the Debtor and certified copies of the policies, or other evidence of
insurance reasonably acceptable to the Secured Party, shall be delivered to the
Secured Party promptly upon the Secured Party's reasonable request. All
insurance policies required under this Section shall contain standard lender's
loss payable clauses, naming the Secured Party, as loss payee, and providing
that: (i) no such insurance shall be affected by any act or neglect of the
insured or owner of the property described in such policy, subject to policy
terms and conditions; and (ii) such policies and loss payable clauses may not
be canceled, materially amended or terminated with respect to the Secured Party
unless at least thirty (30) (or in the case of a material amendment or
termination, ten (10)) days' prior written notice is given to the Secured
Party.
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SECTION 10. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF
COLLATERAL.
(a) Expenses Incurred by Secured Party. In the Secured Party's
reasonable discretion, if the Debtor fails to do so, the Secured Party may
discharge taxes and other encumbrances at any time levied or placed on any of
the Collateral (other than Permitted Liens), maintain any of the Collateral,
make repairs thereto and pay any necessary filing fees or insurance premiums.
The Debtor agrees to reimburse the Secured Party on demand for all expenditures
so made. The Secured Party shall have no obligation to the Debtor or any other
person to make any such expenditures, nor shall the making thereof be construed
as a waiver or cure of any Default or Event of Default.
(b) Secured Party's Obligations and Duties. Anything herein to
the contrary notwithstanding, the Debtor shall remain obligated and liable
under each contract or agreement comprised in the Collateral to be observed or
performed by the Debtor thereunder. The Secured Party shall not have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Secured Party of any
payment relating to any of the Collateral, nor shall the Secured Party be
obligated in any manner to perform any of the obligations of the Debtor under
or pursuant to any such contract or agreement, to make inquiry as to the nature
or sufficiency of any payment received by the Secured Party in respect of the
Collateral or as to the sufficiency of any performance by any party under any
such contract or agreement, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to the Secured Party or to which the Secured Party may be
entitled at any time or times. The Secured Party's sole duty with respect to
the custody, safe keeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC, shall be to deal with such
Collateral in the same manner as the Secured Party deals with similar property
for its own account.
SECTION 11. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS
OBLIGATED ON COLLATERAL. The Debtor shall, at the request and option of the
Secured Party during a continuance of an Event of Default, notify account
debtors and other persons obligated on any of the Collateral of the security
interest of the Secured Party in any account, chattel paper, general
intangible, instrument or other Collateral and that payment thereof is to be
made directly to the Secured Party, or to any financial institution designated
by the Secured Party as the Secured Party's agent therefor, and the Secured
Party may itself, if an Event of Default shall have occurred and be continuing,
without notice to or demand upon the Debtor, so notify account debtors and
other persons obligated on Collateral. After the making of such a request or
the giving of any such notification, the Debtor shall hold any proceeds of
collection of accounts, chattel paper, general intangibles, instruments and
other Collateral received by the Debtor as trustee for the Secured Party,
without commingling the same with other funds of the Debtor and shall turn the
same over to the Secured Party in the identical form received, together with
any necessary endorsements or assignments. The Secured Party shall apply the
proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by the Secured Party to the
Obligations, such proceeds to be immediately credited after
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final payment in cash or other immediately available funds of the items giving
rise to them.
SECTION 12. POWER OF ATTORNEY.
(a) Appointment and Powers of Secured Party. The Debtor hereby
irrevocably constitutes and appoints the Secured Party, and any officer of the
Secured Party, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Debtor or in such Person's own name, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments that may be necessary or useful
to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorney the power and right, on
behalf of the Debtor, without notice to or assent by the Debtor, to do the
following: (i) during the continuance of an Event of Default, generally to
sell, transfer, pledge, make any agreement with respect to or otherwise dispose
of or deal with any of the Collateral in such manner as is consistent with the
UCC and as fully and completely as though the Secured Party were the absolute
owner thereof for all purposes, and to do, at the Debtor's expense, at any
time, or from time to time, all acts and things which the Secured Party deems
necessary or advisable to protect, preserve or realize upon the Collateral and
the Secured Party's security interest therein, in order to effect the intent of
this Agreement, all no less fully and effectively as such Debtor might do,
including, without limitation, (A) the filing and prosecuting of registration
and transfer applications with the appropriate federal, state or local agencies
or authorities with respect to trademarks, copyrights and patentable inventions
and processes, (B) upon written notice to the Debtor, the exercise of voting
rights with respect to voting securities, which rights may be exercised, if the
Secured Party so elects, with a view to causing the liquidation of assets of
the issuer of any such securities and (C) the execution, delivery and
recording, in connection with any sale or other disposition of any Collateral,
of the endorsements, assignments or other instruments of conveyance or transfer
with respect to such Collateral; and (ii) to the extent that the Debtor's
authorization given in Section 3 is not sufficient, to file such financing
statements with respect hereto, with or without the Debtor's signature, or a
photocopy of this Agreement in substitution for a financing statement, as the
Secured Party may deem appropriate and to execute in the Debtor's name such
financing statements and amendments thereto and continuation statements which
may require the Debtor's signature.
(b) Ratification by the Debtor. To the extent permitted by
Applicable Law, the Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done in accordance with the terms and by virtue
hereof. This power of attorney is a power coupled with an interest and is
irrevocable.
(c) No Duty on Secured Party. The powers conferred on the Secured
Party hereunder are solely to protect the interests of the Secured Party in the
Collateral and shall not impose any duty upon the Secured Party to exercise any
such powers. The Secured Party shall be accountable only for the amounts that
it actually receives as a result of the exercise of such powers, and neither it
nor any of its officers, directors,
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employees of the Secured Party shall be responsible to the Debtor for any act
or failure to act, except for the such Person's own gross negligence or willful
misconduct.
SECTION 13. RIGHTS AND REMEDIES. Promptly upon Knowledge of the
Debtor of the occurrence of any Default or Event of Default, the Debtor shall
notify the Secured Party in writing thereof, which notice shall set forth the
details of each Default or Event of Default and the actions, if any, being
taken or proposed to be taken with respect thereto. During the continuance of
an Event of Default, the Secured Party, without any other notice to or demand
upon the Debtor, shall have in any jurisdiction in which enforcement hereof is
sought, in addition to all other rights and remedies, the rights and remedies
of a secured party under the UCC and any additional rights and remedies as may
be provided to a secured party in any jurisdiction in which Collateral is
located or enforcement is sought, including, without limitation, the right to
take possession of the Collateral, and for that purpose the Secured Party may,
so far as the Debtor can give authority therefor, enter upon any premises on
which the Collateral may be situated and remove the same therefrom. The Secured
Party may in its discretion require the Debtor to assemble all or any part of
the Collateral at such location or locations within the jurisdiction(s) of the
Debtor's principal office(s) or at such other locations as the Secured Party
may reasonably designate. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Secured Party shall give to the Debtor at least five (5) Business
Days prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made. The Debtor hereby acknowledges that five (5)
Business Days prior written notice of such sale or sales shall be reasonable
notice. In addition, the Debtor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Secured Party's
rights and remedies hereunder, including, without limitation, its right
following an Event of Default to take immediate possession of the Collateral
and to exercise its rights and remedies with respect thereto. The Secured Party
acknowledges and agrees that the exercise of its rights and remedies under this
Agreement is subject to that certain Subordination Agreement, dated as of the
date hereof, by and between the Debtor, the Guarantors, the Secured Party and
Silicon Valley Bank.
SECTION 14. NO WAIVER BY SECURED PARTY, ETC. The Secured Party
shall not be deemed to have waived any of its rights and remedies in respect of
the Obligations or the Collateral unless such waiver shall be in writing and
signed by the Secured Party. No delay or omission on the part of the Secured
Party in exercising any right or remedy shall operate as a waiver of such right
or remedy or any other right or remedy. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any future
occasion. All rights and remedies of the Secured Party with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as
the Secured Party deems expedient.
SECTION 15. SURETYSHIP WAIVERS BY DEBTOR. The Debtor waives
demand, notice, protest, notice of acceptance of this Agreement, notice of
loans made, credit extended, Collateral received or delivered or other action
taken in reliance hereon and all other
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demands and notices of each description. With respect to both the Obligations
and the Collateral, the Debtor assents to any extension or postponement of the
time of payment or any other indulgence, to any substitution, exchange or
release of or failure to perfect any security interest in any Collateral, to
the addition or release of any party or person primarily or secondarily liable,
to the acceptance of partial payment thereon and the settlement, compromising
or adjusting of any thereof, all in such manner and at such time or times as
the Secured Party may deem advisable. The Secured Party shall not have any duty
as to the collection or protection of the Collateral or any income therefrom,
the preservation of rights against prior parties, or the preservation of any
rights pertaining thereto beyond any duties imposed by Applicable Law. The
Debtor further waives any and all other suretyship defenses.
SECTION 16. MARSHALLING. The Secured Party shall not be required
to marshal any present or future collateral security (including but not limited
to the Collateral) for, or other assurances of payment of, the Obligations or
any of them or to resort to such collateral security or other assurances of
payment in any particular order, and all of the rights and remedies of the
Secured Party hereunder and of the Secured Party in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising. To the extent that
it lawfully may, the Debtor hereby agrees that it will not invoke any
Applicable Law relating to the marshalling of collateral which might cause
delay in or impede the enforcement of the Secured Party's rights and remedies
under this Agreement or under any other instrument creating or evidencing any
of the Obligations or under which any of the Obligations is outstanding or by
which any of the Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, the Debtor hereby irrevocably
waives the benefits of all such laws.
SECTION 17. PROCEEDS OF DISPOSITIONS; EXPENSES. The Debtor
agrees to pay to the Secured Party on demand any and all expenses, including
attorneys' fees and disbursements, incurred or paid by the Secured Party in
protecting, preserving or enforcing the Secured Party's rights and remedies
under or in respect of any of the Obligations or any of the Collateral. After
deducting all of said expenses, the residue of any proceeds of collection or
sale or other disposition of Collateral shall, to the extent actually received
in cash, be applied to the payment of the Obligations in such order or
preference as the Secured Party may determine, proper allowance and provision
being made for any Obligations not then due. Upon the final payment and
satisfaction in full of all of the Obligations and after making any payments
required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the UCC, any excess shall
be returned to the Debtor. In the absence of final payment and satisfaction in
full of all of the Obligations, the Debtor shall remain liable for any
deficiency.
SECTION 18. OVERDUE AMOUNTS. Until paid, all amounts due and
payable by the Debtor hereunder shall be a debt secured by the Collateral and
shall bear, whether before or after judgment, interest at the rate of interest
set forth in the Note for overdue principal.
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SECTION 19. GOVERNING LAW; CONSENT TO JURISDICTION. THIS
AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 20. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or consent to any departure by the Debtor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 21. SVB LOAN AMENDMENTS. The Debtor covenants that it
shall provide the Secured Party prompt written notice of any renewal, extension
or increase of the SVB Loan or any material amendment or change to, or
modification of, the SVB Loan Agreement.
SECTION 22. NOTICES. Unless otherwise provided herein,
communications provided for hereunder shall be in writing and shall be mailed,
couriered, telecopied or delivered, to any party at its address for notices set
forth in the Note, or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and other communications to the Debtor or the Secured Party shall be
deemed given when delivered personally, mailed by certified mail (postage
pre-paid and return receipt requested), sent by overnight courier service or
faxed (transmission confirmed), or otherwise actually received.
SECTION 23. SEVERABILITY. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
SECTION 24. INDEMNIFICATION. The Debtor agrees to indemnify and
hold the Secured Party harmless from and against any claim, loss, damage,
action, cause of action, liability, cost and expense or suit of any kind or
nature whatsoever (collectively, "Losses"), brought against or incurred by the
Secured Party, in any manner arising out of or, directly or indirectly, related
to or connected with any action taken by the Secured Party pursuant to the
terms of this Agreement; provided, however, the Debtor shall not be liable to
the Secured Party for any Losses to the extent such Losses result from the
negligence or willful misconduct of the Secured Party.
SECTION 25. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which,
taken together, shall constitute but one and the same instrument.
-11-
SECTION 26. MISCELLANEOUS. The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof. All Schedules attached hereto are incorporated herein and made a part
hereof. This Agreement and all rights and obligations hereunder shall be
binding upon the Debtor and its successors and assigns (including, without
limitation, trustees and liquidators), and shall inure to the benefit of the
Secured Party and its successors and assigns (including, without limitation,
trustees and liquidators). If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby, and this Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Debtor acknowledges receipt of a copy of this Agreement.
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-12-
IN WITNESS WHEREOF, each of the Secured Party and the Debtor has
caused this Agreement to be duly executed and delivered under seal by its duly
authorized officer as of the day first above written.
VERSO TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: EVP and CFO
-------------------------------------
WA TELCOM PRODUCTS CO., INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Title: Vice President and Treasurer
-------------------------------------
SCHEDULE 1
VERSO TECHNOLOGIES, INC.
-----------------------------------------------------------------------------------------------------------------------------
PATENT SERIAL/APPLICATION NUMBER FILING DATE
-----------------------------------------------------------------------------------------------------------------------------
Encoding method and related systems PN/4,645,916 9/9/1983
and product
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
TRADEMARK/ SERIAL/APPLICATION FILING DATE STATUS
SERVICE ▇▇▇▇ (U.S.) NUMBER
-----------------------------------------------------------------------------------------------------------------------------
Verso Technologies, Inc. (Drawing) Serial Number 2/14/2002 Pending
78108879
-----------------------------------------------------------------------------------------------------------------------------
Verso Technologies, Inc. Serial Number 2/14/2002 Pending
78108888
-----------------------------------------------------------------------------------------------------------------------------
The Migration Solution Serial Number 76301471 8/17/2001 Pending
-----------------------------------------------------------------------------------------------------------------------------
The Migration Platform Serial Number 8/17/2001 Pending
76301470
-----------------------------------------------------------------------------------------------------------------------------
Packet7 76227733 3/21/2001 Abandoned: Applicant
failed to respond to an
Office action (2/25/2002)
-----------------------------------------------------------------------------------------------------------------------------
Eltrax Systems N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------------
Cereus Serial Number 3/24/2000 Pending
76009869
-----------------------------------------------------------------------------------------------------------------------------
Communication Through Collaboration Serial Number 3/24/2000 Abandoned: Applicant
76008617 failed to respond to an
Office action (3/13/2002)
-----------------------------------------------------------------------------------------------------------------------------
IMessaging Serial Number 2/10/2000 Application suspended
75915659 8/5/2001
-----------------------------------------------------------------------------------------------------------------------------
JumpStart Serial Number 3/24/2000 Pending
76009857
-----------------------------------------------------------------------------------------------------------------------------
SCHEDULE 5
VERSO TECHNOLOGIES, INC.
(A) TRADE NAMES USED BY COMPANY DURING FIVE-YEAR PERIOD PRECEDING
THE DATE OF THIS AGREEMENT:
Eltrax Systems, Inc. 8/1/84 to 9/29/00
(D) PLACES OF BUSINESS:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Reading Regional Airport Industrial Park
Reading, PA
Northpark Town Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Northpark Town Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇
SCHEDULE 8
First Union National Bank
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Cereus Technology Partners 210211230206939