EXHIBIT 99.9
UNSECURED SUBORDINATED PROMISSORY NOTE
(UNSECURED INVENTORY NOTE)
$1,800,000 February 12, 2003
Redwood City, California
FOR VALUE RECEIVED, VERSO TECHNOLOGIES, INC., a Minnesota corporation
("BORROWER"), hereby unconditionally promises to pay to the order of CLARENT
CORPORATION, a Delaware corporation ("LENDER"), in lawful money of the United
States of America and in immediately available funds, the principal sum of One
Million Eight Hundred Thousand Dollars ($1,800,000) (the "LOAN") on the dates
and in the manner set forth below.
This Unsecured Subordinated Promissory Note (this "NOTE") is the
Unsecured Inventory Note referred to, and defined in, and is executed and
delivered in connection with, that certain Loan and Security Agreement dated as
of the date hereof, by and between Borrower and Lender (as the same may be
amended, supplemented, restated or otherwise modified from time to time, the
"LOAN AGREEMENT"). Additional rights of Lender are set forth in the Loan
Agreement. All capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Loan Agreement.
1. PRINCIPAL REPAYMENT. The outstanding principal amount of the
Loan shall be due and payable in the amounts set forth below, within three (3)
business days of the dates set forth below. Notwithstanding the foregoing, the
total amount outstanding hereunder shall be immediately due and payable upon the
occurrence of a Change in Control.
REPAYMENT DATE REPAYMENT AMOUNT
May 13, 2003 $300,000
August 13, 2003 $500,000
November 13, 2003 $500,000
February 13, 2004 $500,000
Borrower's payment obligations under this Note are subject to the right of set
off pursuant to the First Amendment to the Asset Purchase Agreement dated as of
February 4, 2003.
2. NO INTEREST. Borrower shall not pay interest on the
outstanding principal amount of the Loan, unless and until Borrower shall fail
to make a principal payment when due, at which time the Loan shall accrue
interest at the rate of twelve percent (12%) per annum, or the maximum rate
permissible by law (which, under the laws of the State of California, shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less. Such interest shall be due monthly in arrears on the
15th day of each month.
3. PLACE OF PAYMENT. All amounts payable hereunder shall be
payable at the office of Lender, 000 Xxxxxxxxxx Xxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx
00000, unless another place of payment shall be specified in writing by Xxxxxx.
4. DEFAULT. Each of the following events shall be an "EVENT OF
DEFAULT" hereunder:
1.
(A) Borrower fails to pay any of the principal
amount due under this Note on the date the same becomes due and payable or any
accrued interest or other amounts due under this Note on the date the same
becomes due and payable;
(B) Borrower files any petition or action for
relief under any bankruptcy, reorganization, insolvency or moratorium law or any
other law for the relief of, or relating to, debtors, now or hereafter in
effect, or makes any assignment for the benefit of creditors or takes any
corporate action in furtherance of any of the foregoing; or
(C) An involuntary petition is filed against
Xxxxxxxx (unless such petition is dismissed or discharged within sixty (60)
days) under any bankruptcy statute now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody or control of any property of
Xxxxxxxx.
(D) An "Event of Default" occurs under the Loan
Agreement.
Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder shall, at the option of
Xxxxxx, and, in the case of an Event of Default pursuant to (B) or (C) above,
automatically, be immediately due, payable and collectible by Lender pursuant to
the Loan Agreement and applicable law.
5. SUBORDINATION. The indebtedness evidenced by this Note is
hereby subordinated in right of payment to the prior payment in full of the
Senior Indebtedness, but only to the extent and in the manner expressly
hereinafter set forth. Xxxxxx acknowledges and agrees that the indebtedness
represented hereby and the exercise of Xxxxxx's rights and remedies under this
Note shall be subject to the terms and conditions of the Subordination
Agreement.
5.1 INSOLVENCY PROCEEDINGS. If there shall occur
any receivership, insolvency, assignment for the benefit of creditors,
bankruptcy, reorganization, or arrangements with creditors (whether or not
pursuant to bankruptcy or other insolvency laws), sale of all or substantially
all of the assets, dissolution, liquidation, or any other marshaling of the
assets and liabilities of Borrower, (a) no amount shall be paid by Borrower in
respect of the principal of, interest on or other amounts due with respect to
this Note at the time outstanding, unless and until the principal of and
interest on the Senior Indebtedness then outstanding shall be paid in full, and
(b) no claim or proof of claim shall be filed by or on behalf of Lender which
shall assert any right to receive any payments in respect of the principal of
and interest on this Note, except subject to the payment in full of the
principal of and interest on all of the Senior Indebtedness then outstanding.
5.2 FURTHER ASSURANCES. By acceptance of this
Note, Xxxxxx agrees to execute and deliver customary forms of subordination
agreements requested from time to time by the Senior Creditors and Borrower may
require that Lender execute such forms of subordination agreement, provided that
in each case, such forms shall not impose on Lender terms less favorable than
those provided in the Subordination Agreement.
5.3 OTHER INDEBTEDNESS. Indebtedness of Borrower
that does not constitute Senior Indebtedness shall not be senior in any respect
to the indebtedness represented by this Note.
5.4 SUBROGATION. Subject to the payment in full
of the Senior Indebtedness, Lender shall be subrogated to the rights of the
Senior Creditors (to the extent of the payments or distributions made to such
Senior Creditors pursuant to the provisions of this SECTION 5) to receive
payments and distributions of assets of Borrower applicable to the Senior
Indebtedness. No such payments or
2.
distributions applicable to the Senior Indebtedness shall, as between Borrower
and its creditors, other than the Senior Creditors and Lender, be deemed to be a
payment by Borrower to or on account of this Note; and for purposes of such
subrogation, no payments or distributions to the Senior Creditors to which
Lender would be entitled except for the provisions of this SECTION 5 shall, as
between Borrower and its creditors, other than the Senior Creditors and Lender,
be deemed to be a payment by Borrower to or on account of the Senior
Indebtedness.
5.5 NO IMPAIRMENT. Subject to the rights, if
any, of the Senior Creditors under this SECTION 5 to receive payments otherwise
payable or deliverable to Lender, nothing contained in this SECTION 5 shall
impair, as between Borrower and Lender, the obligation of Borrower, subject to
the terms and conditions hereof, to pay to Lender the principal hereof and
interest hereon as and when the same become due and payable, or shall prevent
Lender, upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.
5.6 RELIANCE OF SENIOR CREDITORS. Lender, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each Senior Creditor, and each such Senior Creditor shall be
deemed conclusively to have relied on such subordination provisions in
continuing to hold, such Senior Indebtedness.
6. WAIVER. Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred, including, without limitation, reasonable
attorneys' fees, costs and other expenses. The right to plead any and all
statutes of limitations as a defense to any demands hereunder is hereby waived
to the full extent permitted by law.
7. CHOICE OF LAW AND VENUE. This Note 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 Note is brought or
otherwise initiated, the venue therefor will be the Bankruptcy Court. Borrower
and Xxxxxx hereby expressly and irrevocably consent and submit to the
jurisdiction of the Bankruptcy Court.
8. SUCCESSORS AND ASSIGNS. The provisions of this Note shall
inure to the benefit of and be binding on any successor to Xxxxxxxx and shall
extend to any holder hereof; provided, however, that neither this Note nor any
rights hereunder may be assigned by Xxxxxxxx. Lender may assign its rights under
this Note at any time, in whole or in part, to any third party, without consent
from, or notice to, Borrower.
[THE SIGNATURE PAGE FOLLOWS.]
3.
BORROWER: VERSO TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Printed Name: Xxxxxx X. Xxxxxxx
Title: EVP and CFO
LENDER: CLARENT CORPORATION
By: /s/ X. X. Xxxx
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Printed Name: Xxxxx X. Xxxx
Title: President
4.
