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EXHIBIT 10.40
NOTE MODIFICATION AGREEMENT
This agreement is entered into this 22nd day of September, 1999,
between Verilink Corporation ("Verilink") and Xxxxx X. Xxxxxx ("Xxxxxx").
WHEREAS, Belden is indebted to Verilink pursuant the following
Promissory Notes:
(a) Promissory Note dated February 10, 1998, in the principal amount of
$800,000, plus accrued interest as of September 1, 1999, of $269,978.52, which
is secured by a pledge of 130,398 shares of Verilink common stock ("Note 1");
(b) Promissory Note dated January 1, 1999, in the principal amount of
$1,000,000, plus accrued interest as of September 1, 1999, of $44,664.78, which
is unsecured ("Note 2"); and
(c) Promissory Note dated February 22, 1999, in the principal amount of
$2,513,173.00, plus accrued interest as of September 1, 1999, of 45,990.75,
which note is secured by a pledge of Xxxxxx'x general partnership interest in
Baytech Associates, a California General partnership ("Note 3"). In addition,
Xxxxxx'x liability under Note 3 includes a Promissory Note payable to CivicBank
of Commerce in the principal amount of $500,000, which note is guaranteed by
Verilink.
WHEREAS, Xxxxxx has agreed to provide additional security for the
foregoing notes, in consideration of a modification of their terms,
NOW THEREFORE, the parties agree as follows:
1. Note 1. Note 1 shall be paid in six (6) quarterly installments
of $115,000, commencing on September 30, 2000, and ending on
December 31, 2001, and one installment on March 31, 2002, of
$110,000, plus all accrued but then unpaid interest on Note 1.
2. Note 2. Principal and accrued interest of Note 2 shall be paid
in full on or before June 30, 2000; provided however, that if
Baytech sells one or both of its properties located at 000
Xxxxxxx Xxxxx and 000 Xxxxxxx Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx,
Belden shall pay to Verilink the lesser of one-half of
Baytech's interest in the net proceeds of such sale, or
$500,000.
3. Note 3. Note 3 shall be paid in six (6) quarterly installments
of $360,000, commencing on September 30, 2000, and ending on
December 31, 2001, and one installment on March 31, 2002, of
$339,085.88, plus accrued but then unpaid interest on Note 3.
In addition, on or before March 31, 2002, Belden shall repay
all principal
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and accrued interest due under the CivicBank Note. Until such
CivicBank Note is paid in full, Verilink shall maintain its
guaranty of that Note.
4. Additional Security. Xxxxxx shall secure Notes 1 and 3 by a
pledge of 1,800,000 shares of Common Stock of Verilink and
Note 2 by a pledge of Xxxxxx'x general partnership in Baytech.
All pledges shall be made pursuant to the Security Agreement
between Xxxxxx and Verilink, dated February 22, 1999 (the
"Security Agreement"). Verilink and Xxxxxx agree that in the
event of default by Belden under Note 1, Note 2, or Note 3, or
in the event that Baytech is unable to sell either or both of
its properties by June 30, 2000, Verilink shall not exercise
its rights as a secured creditor without first consulting with
Xxxxxx so that Verilink's resort to its security is
accomplished in the best interests of Verilink, its
stockholders and Xxxxxx. Xxxxxx and Verilink shall meet
quarterly to discuss the adequacy of the security for Notes 1,
2, and 3, and if appropriate, Verilink shall release excess
collateral to Xxxxxx.
5. Further Assurances. Xxxxxx and Verilink shall take such action
and execute such documents as may be required or appropriate
to carry out the intent and purposes of this agreement.
6. Binding Effect. Except as set forth above, Notes 1, 2, and 3
and the Security Agreement shall remain in full force and
effect.
VERILINK CORPORATION
By: /s/ XXXX X. XXXXX /s/ XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx
Title: CFO
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