<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
DIGITAL LIGHTWAVE, INC.
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
Common Stock, $.0001 par value
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
253855 10 0
- --------------------------------------------------------------------------------
(CUSIP NUMBER)
Robert E. Freitas, Esq.
Orrick, Herrington & Sutcliffe LLP
1020 Marsh Road
Menlo Park, CA 94025
- --------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS)
December 31, 1999
--------------------------------------------------------------
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on following pages)
- ---------------------------
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect for the subject class of securities and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the act (however, see the
Notes).
<PAGE> 2
CUSIP NO. SCHEDULE
253855 10 0 13D
- --------------------
---------------------------------------------------------------------
(1) NAMES OF REPORTING PERSONS Dr. Bryan J. Zwan
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
---------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
---------------------------------------------------------------------
(3) SEC USE ONLY
---------------------------------------------------------------------
(4) SOURCE OF FUNDS PF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
---------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION United States
---------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER 18,991,750
(Subject to the Memorandum of Understanding
described in Item 4(d). 1,000,000 of which
shares are subject to a Forward Sale Agreement
and Pledge Agreement. See Item 4(a). 2,000,000
of which shares are subject to a legal dispute.
See Item 6.)
--------------------------------------------------------
OWNED (8) SHARED VOTING POWER 37,500
--------------------------------------------------------
BY EACH REPORTING (9) SOLE DISPOSITIVE POWER 18,991,750
(1,000,000 of which shares are subject to a
Forward Sale Agreement and Pledge Agreement. See
Item 4(a). 2,000,000 of which shares are subject
to a legal dispute. See Item 6.)
--------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 37,500
--------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON 19,029,250
---------------------------------------------------------------------
(12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
---------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 70.4%
---------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON IN
---------------------------------------------------------------------
2
<PAGE> 3
CUSIP NO. SCHEDULE
253855 10 0 13D
- --------------------
---------------------------------------------------------------------
(1) NAMES OF REPORTING PERSONS ZG Nevada Limited Partnership
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
---------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
---------------------------------------------------------------------
(3) SEC USE ONLY
---------------------------------------------------------------------
(4) SOURCE OF FUNDS OO
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
---------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Nevada
---------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER 15,991,750
(Subject to the Memorandum of Understanding
described in Item 4(d).)
--------------------------------------------------------
OWNED (8) SHARED VOTING POWER 0
--------------------------------------------------------
BY EACH REPORTING (9) SOLE DISPOSITIVE POWER 15,991,750
--------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 0
--------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON 15,991,750
---------------------------------------------------------------------
(12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
---------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 59.2%
---------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON PN
---------------------------------------------------------------------
3
<PAGE> 4
CUSIP NO. SCHEDULE
253855 10 0 13D
- --------------------
---------------------------------------------------------------------
(1) NAMES OF REPORTING PERSONS ZG Nevada Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
---------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
---------------------------------------------------------------------
(3) SEC USE ONLY
---------------------------------------------------------------------
(4) SOURCE OF FUNDS 00
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
---------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Nevada
---------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER 15,991,750
(Subject to the Memorandum of Understanding
described in Item 4(d).)
--------------------------------------------------------
OWNED (8) SHARED VOTING POWER 0
--------------------------------------------------------
BY EACH REPORTING (9) SOLE DISPOSITIVE POWER 15,991,750
--------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 0
--------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON 15,991,750
---------------------------------------------------------------------
(12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
---------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 59.2%
---------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON CO
---------------------------------------------------------------------
4
<PAGE> 5
ITEM 1. SECURITY AND ISSUER
-------------------
This Amendment No. 1 to Schedule 13D ("Amendment") relates to the Common
Stock, $.0001 par value per share ("Common Stock") of Digital Lightwave, Inc.
(the "Issuer"). The principal executive offices of the Issuer are located at
15550 Lightwave Drive, Clearwater, Florida, 33760.
ITEM 2. IDENTITY AND BACKGROUND
-----------------------
(A, B, C AND F) This Amendment is being filed by (i) Dr. Bryan J. Zwan,
(ii) ZG Nevada Limited Partnership, a limited partnership formed under the laws
of the State of Nevada ("ZG Partnership") and (iii) ZG Nevada, Inc. a Nevada
corporation ("ZG Inc."). ZG Inc. is the sole general partner of ZG Partnership
and Dr. Zwan is the sole limited partner of ZG Partnership. Dr. Zwan is the sole
shareholder and executive officer of ZG Inc. Dr. Zwan and Monte L. Miller are
the directors of ZG Inc.
Dr. Zwan's address is c/o Orrick, Herrington & Sutcliffe LLP, 1020
Marsh Road, Menlo Park, California 94025, Attn: Robert E. Freitas, Esq. Dr.
Zwan's principal occupation is corporate director and investor. Dr. Zwan is a
United States citizen. The principal business of ZG Partnership is investing.
The principal office of ZG Partnership is Suite 850, 101 Convention Center
Drive, Las Vegas, Nevada 89109. The principal business of ZG Inc. is investing.
The principal office of ZG Inc. is Suite 850, 101 Convention Center Drive, Las
Vegas, Nevada 89109. Mr. Miller is the President of Nevada Holding Services,
Inc., a corporate service provider. Mr. Miller's address is Suite 850, 101
Convention Center Drive, Las Vegas, Nevada 89109. Mr. Miller is a United States
citizen.
(D AND E) During the last five years, none of Dr. Zwan, ZG Partnership,
ZG Inc. nor Mr. Miller has been (i) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors); or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities law or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
-------------------------------------------------
On December 31, 1999, Dr. Zwan transferred 991,750 shares of Common
Stock to ZG Partnership for tax and estate planning reasons. The transfer from
Dr. Zwan to ZG Partnership was a partnership capital contribution by Dr. Zwan.
On December 31, 1999, Dr. Zwan transferred 37,500 shares of Common Stock to the
Bryan J. and June B. Zwan Foundation, Inc. (the "Foundation"), as a charitable
contribution. See Item 5(c).
5
<PAGE> 6
ITEM 4. PURPOSE OF THE TRANSACTION
--------------------------
Dr. Zwan transferred the 991,570 shares to ZG Partnership for tax and
estate planning reasons. Dr. Zwan transferred the 37,500 shares to the
Foundation as a charitable contribution.
(a) On December 8, 1999, Dr. Zwan entered into a forward sale agreement
(the "Agreement") relating to up to 1,000,000 shares (the "Base
Amount") of Common Stock. The Agreement provides that Dr. Zwan will
deliver on December 8, 2004 (the "Maturity Date") a number of shares of
Common Stock (or, at the option of Dr. Zwan, the cash equivalent of
such shares) equal to the product of (1) the Base Amount and (2) the
Exchange Rate, which will be determined as follows:
(i) If the average closing price (the "Maturity Price")
of the Common Stock on the 20 trading days beginning
30 trading days prior to the Maturity Date is less
than or equal to $31.5505 (the "Issue Price"), the
Exchange Rate will be one;
(ii) If the Maturity Price is greater than the Issue Price
but less than $37.8606 (the "Threshold Price"), the
Exchange Rate will be equal to the Issue Price
divided by the Maturity Price; and
(iii) If the Maturity Price is equal to or greater than the
Threshold Price, the Exchange Rate will be .8333.
Pursuant to the Agreement, Dr. Zwan received a purchase price
of $23,790,580. In connection with the Agreement, Dr. Zwan entered
into the SAILS Pledge Agreement (the "Pledge Agreement") dated
December 8, 1999 among Dr. Zwan, CSFB SAILS Corp. and Credit Suisse
First Boston Corporation. Up to 1,000,000 shares of the Common Stock
beneficially owned by Dr. Zwan are subject to the Pledge Agreement.
See Item 7 below.
Except as noted above with respect to the shares of Common Stock, none
of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any plans or
proposals that relate to or would result in the acquisition by any
person of additional securities of the Issuer, or the disposition of
securities of the Issuer (See Item 6);
(b) None of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any
plans or proposals that relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Issuer or any of its subsidiaries;
(c) None of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any
plans or proposals that relate to or would result in a sale or transfer
of a material amount of assets of the Issuer or of any of its
subsidiaries;
6
<PAGE> 7
(d) On October 14, 1999, the Issuer and Dr. Zwan, the Issuer's majority
stockholder and a director, entered into a Memorandum of Understanding
pursuant to which the parties agreed, among other things, that (i) the
size of the board of directors will be increased from four to five
members, (ii) two new outside directors will be appointed to the board
of directors upon the approval of Dr. Zwan and a majority of the
current board of directors, (iii) Mr. William Seifert, a current
outside director, will step down, (iv) Dr. Zwan shall vote his shares
of Common Stock at the Issuer's annual meeting in the year 2000 in
favor of the election of Messrs. Hamilton, Chastelet and Zwan and the
new directors if appointed prior to the year 2000 meeting, and (v) the
Issuer will enter into agreements containing provisions with respect
to change of control, severance and non-compete with current senior
management.
Except as noted above in this subsection (d), none of Dr. Zwan, ZG
Partnership nor ZG Inc. presently has any plans or proposals that
relate to or would result in any change in the present board of
directors or management of the Issuer, including any plans or proposals
to change the number or term of directors or to fill any existing
vacancies on the board;
(e) None of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any
plans or proposals that relate to or would result in any material
change in the present capitalization or dividend policy of the Issuer;
(f) None of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any
plans or proposals that relate to or would result in any material
change in the Issuer's business or corporate structure;
(g) None of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any
plans or proposals that relate to or would result in any change in the
Issuer's charter, bylaws or instruments corresponding thereto or other
actions which may impede the acquisition of control of the Issuer by
any person;
(h) None of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any
plans or proposals that relate to or would cause a class of securities
of the Issuer to be delisted from a national securities exchange or to
cease to be authorized to be quoted in the inter-dealer quotation
system of a registered national securities association;
(i) None of Dr. Zwan, ZG Partnership nor ZG Inc. presently has any
plans or proposals that relate to or would cause a class of equity
securities of the Issuer to become eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Act of
1933, as amended;
(j) Except as set forth above, none of Dr. Zwan, ZG Partnership nor ZG
Inc. presently has any plans or proposals that relate to any action
similar to any of those enumerated above.
7
<PAGE> 8
To the knowledge of Dr. Zwan, ZG Partnership and ZG Inc., Mr. Miller
has no plans or proposals relating to any of the foregoing.
ITEM 5. INTEREST IN SECURITIES OF ISSUER
--------------------------------
(a) Dr. Zwan may be deemed to be the beneficial owner of 19,029,250
shares (including the 1,000,000 shares of Common Stock subject to the Agreement
described in Item 4 (a) above and 2,000,000 shares of Common Stock subject to a
legal dispute described in Item 6 below) or 70.4% of the outstanding shares of
Common Stock (based on the Issuer's Form 10-Q for the quarter ended September
30, 1999). Each of ZG Partnership and ZG Inc. may be deemed to be the beneficial
owner of 15,991,750 shares or 59.2% of the outstanding shares of Common Stock of
the Issuer.
To the knowledge of Dr. Zwan, ZG Inc. and ZG Partnership, Mr. Miller
does not beneficially own any securities of the Issuer.
(b) Number of shares as to which such Reporting Person has:
(i) Sole power to vote or direct the vote:
Dr. Zwan has sole power to vote or direct the vote of
18,991,750 shares of Common Stock. (Subject to the
Memorandum of Understanding. See Item 4(d) above. In
addition, 1,000,000 of such shares are subject to the
Agreement and the Pledge Agreement described in Item
4(a) above and 2,000,000 of such shares are subject
to a legal dispute described in Item 6 below). Each
of ZG Partnership and ZG Inc. has sole power
to vote or direct the vote of 15,991,750 shares of
Common Stock. (Subject to the Memorandum of
Understanding. See Item 4(d) above.)
(ii) Shared power to vote or direct the vote:
37,500 shares of Common Stock are held by the
Foundation. Each of Dr. Zwan and his spouse is a
director of the Foundation. The Foundation has three
directors.
(iii) Sole power to dispose or to direct the disposition
of:
Dr. Zwan has the sole power to dispose or to direct
the disposition of 18,991,750 shares of Common Stock
(1,000,000 of such shares are subject to the
Agreement and the Pledge Agreement described in Item
4(a) above and 2,000,000 of such shares are subject
to a legal dispute described in Item 6 below). Each
of ZG Partners and ZG Inc. has sole power to dispose
or direct the disposition of 15,991,750 shares of
Common Stock.
(iv) Shared power to dispose or to direct the disposition
of:
37,500 shares of Common Stock are held by the
Foundation. Each of Dr. Zwan and his spouse is a
director of the Foundation. The Foundation has three
directors.
8
<PAGE> 9
(c) Transactions not previously reported on Schedule 13D:
Dr. Zwan transferred 991,750 shares of Common Stock held individually
to ZG Partnership as a partnership capital contribution on December 31, 1999
for tax and estate planning reasons.
Dr. Zwan transferred 37,500 shares of Common stock held individually
to the Foundation on December 31, 1999 as a charitable contribution.
(d) Except as described in Item 4(a) and in this Item 5, no other
person is known to Dr. Zwan, ZG Partnership or ZG Inc. to have the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, any shares of Common Stock beneficially owned by Dr. Zwan, ZG
Partnership or ZG Inc.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERTAKINGS OR RELATIONSHIPS WITH RESPECT TO
----------------------------------------------------------------------
SECURITIES OF THE ISSUER.
-------------------------
Forward Sale Agreement
On December 8, 1999, Dr. Zwan entered into the Agreement relating to
up to 1,000,000 shares of Common Stock, as described in Item 4(a) above.
9
<PAGE> 10
Pledge Agreement
On December 8, 1999, Dr. Zwan entered into the Pledge Agreement in
favor of CSFB SAILS Corp. to secure the performance by Dr. Zwan of his
obligations under the Agreement. Up to 1,000,000 shares of the Common Stock
beneficially owned by Dr. Zwan are subject to the Pledge Agreement. See Item 7
below.
Legal Dispute
Up to 2,000,000 shares of Common Stock beneficially owned by Dr. Zwan
are subject to a legal dispute between Dr. Zwan and H. Brian Haney and HBH
Assets, Ltd. over the validity of an option which if valid could entitle HBH
Assets, Ltd., as assignee, to purchase such shares upon exercise of the option
during the option term.
Dr. Zwan believes that the disputed option is invalid and believes
that Mr. Haney's and HBH Assets' claims are without merit. Dr. Zwan has
defended, and intends to continue to vigorously defend, against the claims in
the legal dispute. However, in the event H. Brian Haney and HBH Assets, Ltd.
prevailed on their claims in the legal dispute and if the court made an order
for specific performance of the disputed option, HBH Assets, Ltd., as
assignee, could exercise the option for some or all of such 2,000,000 shares
of Common Stock.
Memorandum of Understanding
See Item 4(d) above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
--------------------------------
The following documents are filed as exhibits hereto:
1. Joint Filing Agreement between Bryan J. Zwan, ZG Nevada Limited
Partnership and ZG Nevada, Inc.
2. SAILS Mandatorily Exchangeable Securities Contract, dated as of
December 8, 1999, among Bryan J. Zwan, CSFB SAILS Corp. and Credit Suisse First
Boston Corporation.
3. SAILS Pledge Agreement dated December 8, 1999 among Bryan J. Zwan,
CSFB SAILS Corp. and Credit Suisse First Boston Corporation.
4. Memorandum of Understanding dated October 14, 1999 by and between
Digital Lightwave, Inc. and Bryan J. Zwan.
10
<PAGE> 11
After reasonable inquiry and to the best of the undersigned's knowledge
and belief, the undersigned hereby certify that the information set forth in
this statement is true, complete and correct.
Dated: January 10, 2000 BRYAN J. ZWAN.
By: /s/ Bryan J. Zwan
-------------------------------
Name: Bryan J. Zwan
Dated: January 10, 2000 ZG NEVADA LIMITED PARTNERSHIP
By: ZG Nevada, Inc., as
General Partner
By: /s/ Bryan J. Zwan
-------------------------------
Name: Bryan J. Zwan
Title: President
Dated: January 10, 2000 ZG NEVADA, INC.
By: /s/ Bryan J. Zwan
-------------------------------
Name: Bryan J. Zwan
Title: President
11
<PAGE> 12
EXHIBIT INDEX
---------------
Exhibit
Sequentially
Numbered Page
---------------
1. Joint Filing Agreement between Bryan J. Zwan, ZG
Nevada Limited Partnership and ZG Nevada, Inc.
2. SAILS Mandatorily Exchangeable Securities Contract,
dated as of December 8, 1999, among Bryan J. Zwan,
CSFB SAILS Corp. and Credit Suisse First Boston
Corporation.
3. SAILS Pledge Agreement dated as of December 8, 1999,
among Bryan J. Zwan, CSFB SAILS Corp. and Credit
Suisse First Boston Corporation.
4. Memorandum of Understanding dated October 14, 1999 by
and between Digital Lightwave, Inc. and Bryan J.
Zwan.
12
<PAGE> 1
Exhibit 1
JOINT FILING AGREEMENT
----------------------
In accordance with Rule 13d-1(k) under the Securities Exchange Act of
1934, as amended, the persons named below agree to the joint filing on behalf of
each of them of the Schedule 13D to which this Agreement is an exhibit (and any
further amendment filed by them) with respect to the shares of Common Stock,
$.0001 par value, of Digital Lightwave, Inc..
This agreement may be executed simultaneously in any number of
counterparts, all of which together shall constitute one and the same
instrument.
Dated: January 10, 2000 BRYAN J. ZWAN.
By: /s/ Bryan J. Zwan
-------------------------------
Name: Bryan J. Zwan
Dated: January 10, 2000 ZG NEVADA LIMITED PARTNERSHIP
By: ZG Nevada, Inc., as
General Partner
By: /s/ Bryan J. Zwan
-------------------------------
Name: Bryan J. Zwan
Title: President
Dated: January 10, 2000 ZG NEVADA, INC.
By: /s/ Bryan J. Zwan
-------------------------------
Name: Bryan J. Zwan
Title: President
<PAGE> 1
EXHIBIT 2
SAILS MANDATORILY EXCHANGEABLE SECURITIES CONTRACT
dated as of
December 8, 1999
among
BRYAN J. ZWAN,
CSFB SAILS CORP.
and
CREDIT SUISSE FIRST BOSTON CORPORATION, as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS
SECTION 1.1. Definitions 1
ARTICLE 2 SALE AND PURCHASE
SECTION 2.1. Sale and Purchase 6
SECTION 2.2. Purchase Price 6
SECTION 2.3. Payment for and Delivery of Contract Shares 6
SECTION 2.4. Cash Settlement Option 7
ARTICLE 3 TERMINATION BY SELLER
SECTION 3.1. Termination by Seller 7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER 8
SECTION 4.1. Representations and Warranties of Seller 8
ARTICLE 5 CONDITIONS TO BUYER'S OBLIGATIONS 10
SECTION 5.1. Conditions 10
ARTICLE 6 COVENANTS
SECTION 6.1. Taxes 11
SECTION 6.2. Forward Contract 12
SECTION 6.3. Notices 12
SECTION 6.4. Further Assurances 12
SECTION 6.5. Securities Contract 13
SECTION 6.6. Sales of Common Stock 13
ARTICLE 7 ADJUSTMENTS
SECTION 7.1. Dilution Adjustments 13
SECTION 7.2. Reorganization Events 15
SECTION 7.3. Provisions Relating to Reorganization Events and Spin-Offs 16
SECTION 7.4. Termination and Payment 16
ARTICLE 8 ACCELERATION
SECTION 8.1. Acceleration 17
ARTICLE 9 MISCELLANEOUS
SECTION 9.1. Notices 19
SECTION 9.2. Governing Law; Submission to Jurisdiction; Severability; Waiver of Jury Trial 20
SECTION 9.3. Confidentiality 20
SECTION 9.4. Entire Agreement 21
SECTION 9.5. Amendments, Waivers 21
SECTION 9.6. No Third Party Rights, Successors and Assigns 21
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 9.7. Calculation Agent 21
SECTION 9.8. Set-off 22
SECTION 9.9. Matters Related to Credit Suisse First Boston Corporation, as Agent 22
SECTION 9.10. Counterparts 23
SECTION 9.11. Limited Recourse 23
</TABLE>
<PAGE> 4
SAILS MANDATORILY EXCHANGEABLE SECURITIES CONTRACT
THIS AGREEMENT is made as of this 8th day of December, 1999 among BRYAN
J. ZWAN ("SELLER"), CREDIT SUISSE FIRST BOSTON CORPORATION, as agent (the
"AGENT") hereunder, and CSFB SAILS CORP. ("BUYER").
WHEREAS, Seller owns shares of common stock, par value $0. 0001 per
share, of Digital Lightwave, Inc., a Delaware corporation (the "ISSUER"), or
security entitlements in respect thereof (the "COMMON STOCK");
WHEREAS, Seller has agreed, pursuant to the Pledge Agreement (as
defined herein), to grant Buyer a security interest in certain shares of Common
Stock to secure the obligations of Seller hereunder;
WHEREAS, Seller and Buyer are willing to sell and purchase such shares
of Common Stock at the time and on the terms set forth herein;
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. As used herein, the following words and
phrases shall have the following meanings:
"ACCELERATION AMOUNT" has the meaning provided in Section 8.01.
"ACCELERATION AMOUNT NOTICE" has the meaning provided in Section 8.01.
"ACCELERATION DATE" has the meaning provided in Section 8.01.
"ACCELERATION DELIVERY DATE" has the meaning provided in Section 8.01.
"ACCELERATION EVENT" has the meaning provided in Section 8.01.
"ACQUIRING CORPORATION" has the meaning provided in Section 7.02.
<PAGE> 5
"BANKRUPTCY CODE" has the meaning provided in Section 6.05.
"BASE AMOUNT" has the meaning provided in Section 2.01.
"BUSINESS DAY" means any day on which commercial banks are open for
business in New York City.
"CALCULATION AGENT" means Credit Suisse Financial Products.
"CASH SETTLEMENT AMOUNT" means an amount of cash equal to the product
of the Maturity Price and the number of shares of Common Stock equal to the
product of (i) the Base Amount and (ii) the Exchange Rate.
"CLOSING PRICE" of any security on any date of determination means the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such security on the Exchange for the regular trading session on
such date or, if such security is not listed on a national securities exchange
or quoted on a national automated quotation system, the last quoted bid price
for such security in the over-the-counter market for the regular trading session
for such date, as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of such
security on such date as determined by the Calculation Agent.
"COLLATERAL ACCOUNT" has the meaning provided in the Pledge Agreement.
"CONTRACT SHARE AMOUNT" has the meaning provided in Section 2.03(b).
"CONTRACT SHARES" has the meaning provided in Section 2.03(b).
"CUSTODIAN" has the meaning provided in the Pledge Agreement.
"EXCHANGE" means, at any time, the principal national securities
exchange or automated quotation system, if any, on which the Common Stock is
listed or quoted at such time.
"EXCHANGE BUSINESS DAY" means any day that is (or, but for the
occurrence of a Market Disruption Event, would have been) a trading day on the
Exchange, other than a day on which trading on the Exchange is scheduled to
close prior to its regular weekday closing time.
"EXCHANGE RATE" has the meaning provided in Section 2.03(c).
"FREE STOCK" means Common Stock that is not subject to any Transfer
Restrictions (other than Transfer Restrictions arising solely from the fact that
2
<PAGE> 6
Seller is an "affiliate", within the meaning of Rule 144 under the Securities
Act, of the Issuer) in the hands of Seller immediately prior to delivery to
Buyer hereunder and would not upon delivery to Buyer be subject to any Transfer
Restrictions in the hands of Buyer.
"ISSUE PRICE" has the meaning provided in Section 2.03(c).
"LIEN" means any lien, mortgage, security interest, pledge, charge or
encumbrance of any kind.
"MARKET DISRUPTION EVENT" means the occurrence or the existence on any
Exchange Business Day during the one-half hour period ending at the close of
trading on the relevant exchange of any suspension of or limitation in trading
(by reason of movements in price exceeding limits permitted by the relevant
exchange or otherwise) in the Common Stock or in listed options on the Common
Stock, if any, if, in the determination of the Calculation Agent, such
suspension or limitation is material.
"MARKET VALUE" means, as of any date with respect to any share of
Common Stock, the Closing Price per share of Common Stock for the Exchange
Business Day prior to such date.
"MARKETABLE SECURITIES" means shares of common stock of a
Publicly-Traded Entity that are not subject to any Transfer Restrictions.
"MATURITY DATE" means December 8, 2004.
"MATURITY PRICE" means the average of the Closing Prices per share of
the Common Stock on the 20 Trading Days beginning 30 Exchange Business Days
immediately prior to the Maturity Date; provided that if there are not 20
Trading Days during the period beginning 30 Exchange Business Days immediately
prior to the Maturity Date and ending on the Exchange Business Day immediately
prior to the Maturity Date, the Maturity Price shall be the market value of one
share of Common Stock during such period as determined by the Calculation Agent.
"NEW COMMON STOCK" has the meaning provided in Section 7.01(c).
"NON-STOCK CONSIDERATION" has the meaning provided in Section 7.02.
"OPTIONAL TERMINATION DATE" has the meaning provided in Section 3.01.
"ORIGINAL COMMON STOCK" has the meaning provided in Section 7.01(c).
"PAYMENT DATE" has the meaning provided in Section 2.03(a).
3
<PAGE> 7
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PLEDGE AGREEMENT" means the SAILS Pledge Agreement dated as of the
date hereof among Seller, Buyer and the Agent, as amended from time to time.
"POTENTIAL ADJUSTMENT EVENT" has the meaning provided in Section 7.01.
"PUBLICLY-TRADED ENTITY" means an Acquiring Corporation or a surviving
or continuing corporation of the Issuer (or any successor) following a
Reorganization Event, or a corporation the capital stock of which is distributed
in a Spin-Off, the common stock of which is traded on any national securities
exchange or automatic interdealer quotation system in the United States;
provided that in the case of a Reorganization Event, the product of (i) the
Closing Price per share of common stock of such Acquiring Corporation or such
surviving or continuing corporation, as the case may be, on the Exchange
Business Day immediately succeeding such Reorganization Event multiplied by (ii)
the number of shares of such corporation's common stock held by non-affiliates
of such corporation shall not be less than the product of (A) the Closing Price
per share of Common Stock on the Exchange Business Day immediately preceding
such Reorganization Event and (B) the number of shares of Common Stock held by
non-affiliates of the Issuer.
"PURCHASE PRICE" has the meaning provided in Section 2.02.
"REORGANIZATION EVENT" has the meaning provided in Section 7.02.
"REORGANIZATION TERMINATION DATE" has the meaning provided in Section
7.02.
"REPLACEMENT VALUE" has the meaning provided in Section 8.01.
"RESTRICTION TERMINATION DATE" means the earliest of (i) the date three
months following the date on which Seller ceases to be an "affiliate", within
the meaning of Rule 144 under the Securities Act, of the Issuer, (ii) the
Maturity Date, (iii) the Optional Termination Date with respect to a termination
of this Agreement in whole pursuant to Section 3.01 and (iv) if this Agreement
shall terminate pursuant to Section 7.02, or if an Acceleration Date shall occur
pursuant to Article 8, the date that Buyer, in its discretion, notifies Seller
in writing that sales of Common Stock are permissible.
"SECURED PARTY" has the meaning provided in the Pledge Agreement.
4
<PAGE> 8
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPIN-OFF" has the meaning provided in Section 7.01.
"TERMINATION AMOUNT NOTICE" has the meaning provided in Section 7.04.
"THRESHOLD PRICE" has the meaning provided in Section 2.03(c).
"TRADING DAY" is defined as any Exchange Business Day on which there is
not a Market Disruption Event.
"TRANSFER RESTRICTION" means, with respect to any share of Common Stock
or item of collateral pledged under the Pledge Agreement, any condition to or
restriction on the ability of the holder thereof to sell, assign or otherwise
transfer such share of Common Stock or item of collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such share of Common Stock or item of collateral be consented to
or approved by any Person, including, without limitation, the issuer thereof or
any other obligor thereon, (ii) any limitations on the type or status, financial
or otherwise, of any purchaser, pledgee, assignee or transferee of such share of
Common Stock or item of collateral, (iii) any requirement of the delivery of any
certificate, consent, agreement, opinion of counsel, notice or any other
document of any Person to the issuer of, any other obligor on or any registrar
or transfer agent for, such share of Common Stock or item of collateral, prior
to the sale, pledge, assignment or other transfer or enforcement of such share
of Common Stock or item of collateral and (iv) any registration or qualification
requirement or prospectus delivery requirement for such share of Common Stock or
item of collateral pursuant to any federal, state or foreign securities law
(including, without limitation, any such requirement arising as a result of Rule
144 or Rule 145 under the Securities Act); provided that the required delivery
of any assignment, instruction or entitlement order from the seller, pledgor,
assignor or transferor of such share of Common Stock or item of collateral,
together with any evidence of the corporate or other authority of such Person,
shall not constitute a "TRANSFER RESTRICTION".
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
ARTICLE 2
5
<PAGE> 9
SALE AND PURCHASE
SECTION 2.1. Sale and Purchase. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees
to purchase and acquire from Seller, the number of shares of Common Stock equal
to the product of 1,000,000 (subject to reduction as provided in Section 3.01,
the "BASE AMOUNT") and the Exchange Rate.
SECTION 2.2. Purchase Price. The purchase price (the "PURCHASE PRICE")
shall be $23,790,580.00 in cash.
SECTION 2.3. Payment for and Delivery of Contract Shares. (a) Upon the
terms and subject to the conditions of this Agreement, Buyer shall deliver to
Seller the Purchase Price on December 8, 1999 (the "PAYMENT DATE") at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017, or at such other place as shall be agreed upon by Buyer and Seller, paid
in immediately available funds by wire transfer to an account designated by
Seller.
(b) On the Maturity Date, Seller agrees, subject to Section 2.04, to
deliver to Buyer (i) a number of shares of Free Stock (the "CONTRACT SHARES")
equal to the product (the "CONTRACT SHARE AMOUNT"), rounded down to the nearest
whole number, of (A) the Base Amount and (B) the Exchange Rate and (ii) cash in
an amount equal to the value (based on the Maturity Price) of any fractional
share not delivered as a result of such rounding. If (x) by 10:00 A.M., New York
City time on the Maturity Date, Seller has not otherwise effected such delivery
of Common Stock or delivered cash in lieu thereof pursuant to Section 2.04 and
(y) the Common Stock then held by or on behalf of Secured Party as collateral
under the Pledge Agreement is Free Stock, then (i) Seller shall be deemed not to
have elected to deliver cash in lieu of shares of Free Stock pursuant to Section
2.04 (notwithstanding any notice by Seller to the contrary) and (ii) the
delivery provided by this Section 2.03(b) shall be effected by delivery to Buyer
from the Collateral Account in the manner set forth in the Pledge Agreement of a
number of shares of Free Stock then held by or on behalf of Secured Party as
collateral under the Pledge Agreement equal to the number thereof required to be
delivered by Seller to Buyer pursuant to this Section 2.03(b); provided that,
notwithstanding the foregoing and without limiting the generality of Section
8.01, if Seller gives notice of Seller's election to deliver cash in lieu of
shares of Free Stock on the Maturity Date pursuant to Section 2.04 and fails to
deliver the Cash Settlement Amount on the Maturity Date as provided in Section
2.04, Seller shall be in breach of this Agreement and shall be liable to Buyer
for any damages suffered by Buyer as a result of such breach, including without
limitation damages suffered in connection with any decrease in the Closing Price
per share of
6
<PAGE> 10
Common Stock subsequent to the 30th Exchange Business Day immediately preceding
the Maturity Date.
(c) The "EXCHANGE RATE" shall be determined by the Calculation Agent
in accordance with the following formula, and is subject to adjustment as a
result of certain events as provided in Article 7 and as provided in Section
5(i) of the Pledge Agreement: (i) if the Maturity Price is less than $37.8606
(the "THRESHOLD PRICE") but greater than $31.5505 (the "ISSUE PRICE"), the
Exchange Rate shall be a ratio (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next lower
1/10,000th) equal to the Issue Price divided by the Maturity Price, (ii) if the
Maturity Price is equal to or greater than the Threshold Price, the Exchange
Rate shall be 0.8333 and (iii) if the Maturity Price is equal to or less than
the Issue Price, the Exchange Rate shall be one (1).
SECTION 2.4. Cash Settlement Option. Seller may, upon written notice
delivered to Buyer at least 35 Exchange Business Days prior to the Maturity
Date, elect to deliver the Cash Settlement Amount to Buyer on the Maturity Date
by wire transfer of immediately available funds to an account designated by
Buyer, in lieu of the shares of Common Stock to be delivered on the Maturity
Date pursuant to Section 2.03(b).
ARTICLE 3
TERMINATION BY SELLER
SECTION 3.1. Termination by Seller. Seller may terminate this Agreement
in whole or in part upon 35 Exchange Business Days' prior written notice to
Buyer (the termination date specified in such notice, the "OPTIONAL TERMINATION
DATE"). If Seller terminates this Agreement in whole, Seller shall make a cash
payment, by wire transfer of immediately available funds to an account
designated by Buyer, to Buyer on the Optional Termination Date in an amount
equal to the Replacement Value (calculated in the manner set forth in Section
8.01 as if the Optional Termination Date were the Acceleration Date). If Seller
terminates this Agreement in part, Seller shall specify the number of shares of
Common Stock with respect to which this Agreement is to be terminated and (i)
Seller shall make a cash payment, by wire transfer of immediately available
funds to an account designated by Buyer, to Buyer on the Optional Termination
Date in an amount equal to the Replacement Value (calculated in the manner set
forth in Section 8.01 as if the Optional Termination Date were the Acceleration
Date; provided that for purposes of such calculation, the Base Amount shall be
deemed to be such
7
<PAGE> 11
number of shares of Common Stock with respect to which this Agreement is to be
terminated) and (ii) the Base Amount shall be reduced by such number of shares
of Common Stock with respect to which this Agreement is to be terminated.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 4.1. Representations and Warranties of Seller. Seller
represents and warrants to Buyer that:
(a) Seller is residing in the State of Florida.
(b) The execution and delivery of this Agreement and the
Pledge Agreement and the performance by Seller of Seller's obligations
hereunder and thereunder do not violate or conflict with any law
applicable to Seller, any order or judgment of any court or other
agency of government applicable to Seller or any of Seller's assets or
any contractual restriction binding on or affecting Seller or any of
Seller's assets.
(c) All government and other consents that are required to
have been obtained by Seller with respect to this Agreement or the
Pledge Agreement have been obtained and are in full force and effect
and all conditions of any such consents have been complied with. Seller
has complied and will comply with all applicable disclosure or
reporting requirements in respect of the transactions contemplated
hereby and by the Pledge Agreement, including without limitation any
requirements imposed by Section 13 or Section 16 of the Securities
Exchange Act of 1934, as amended, or the rules and regulations
thereunder.
(d) This Agreement and the Pledge Agreement have been duly
executed and delivered by Seller. Seller's obligations under this
Agreement and the Pledge Agreement constitute Seller's legal, valid and
binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(e) No Acceleration Event or event that, with the giving of
notice or the lapse of time or both, would constitute an Acceleration
Event has
8
<PAGE> 12
occurred and is continuing and no such event would occur as a result
of Seller's entering into or performing Seller's obligations under this
Agreement or the Pledge Agreement.
(f) There is not pending or, to Seller's knowledge, threatened
against Seller any action, suit or proceeding at law or in equity or
before any court, tribunal, governmental body, agency or official or
any arbitrator (including without limitation any bankruptcy, insolvency
or similar proceeding) that is likely to affect the legality, validity
or enforceability against Seller of this Agreement or the Pledge
Agreement or Seller's ability to perform Seller's obligations under
this Agreement or the Pledge Agreement.
(g) Seller is acting for Seller's own account, and has made
Seller's own independent decision to enter into this Agreement and the
Pledge Agreement and as to whether this Agreement and the Pledge
Agreement are appropriate or proper for Seller based upon Seller's own
judgment and upon advice of such advisors as Seller deems necessary.
Seller acknowledges and agrees that Seller is not relying, and has not
relied, upon any communication (written or oral) of Buyer or any
affiliate, employee or agent of Buyer with respect to the legal,
accounting, tax or other implications of this Agreement and the Pledge
Agreement and that Seller has conducted Seller's own analyses of the
legal, accounting, tax and other implications hereof and thereof; it
being understood that information and explanations related to the terms
and conditions of this Agreement or the Pledge Agreement shall not be
considered investment advice or a recommendation to enter into this
Agreement or the Pledge Agreement. Seller is entering into this
Agreement and the Pledge Agreement with a full understanding of all of
the terms and risks hereof and thereof (economic and otherwise) and is
capable of evaluating and understanding (on Seller's own behalf or
through independent professional advice), and understands and accepts,
the terms, conditions and risks. Seller is also capable of assuming
(financially and otherwise), and assumes, those risks. Seller
acknowledges that neither Buyer nor any affiliate, employee or agent of
Buyer is acting as a fiduciary for or an advisor to Seller in respect
of this Agreement or the Pledge Agreement.
(h) Seller is not, on the date of this Agreement, in
possession of any material non-public information regarding the Issuer.
Seller does not know or have any reason to believe that the Issuer has
not complied with the reporting requirements contained in Rule
144(c)(1) under the Securities Act. From the date three months prior to
the date hereof until the Restriction Termination Date, neither Seller
nor any person who would
9
<PAGE> 13
be considered to be the same "person" (as such term is used in Rule
144(a)(2) under the Securities Act) as Seller has, without the written
consent of Buyer (which consent shall not be unreasonably withheld),
sold any shares of Common Stock or hedged (through swaps, options,
short sales or otherwise) any long position in the Common Stock. Any
request by Seller for Buyer's consent pursuant to this Section 4.01(h)
shall be made in writing and delivered to each of Buyer, the
Calculation Agent and Davis Polk & Wardwell. Buyer shall use its
reasonable best efforts to grant or withhold such consent prior to the
end of the Business Day following the date on which Seller requests
such consent; provided that, in any event, Buyer shall respond to any
such request prior to the end of the fourth Business Day following the
date on which Seller requests such consent; and provided further that
Buyer's delay in responding to such request shall not be deemed to be a
grant of such request.
(i) Delivery of shares of Common Stock by Seller pursuant to
this Agreement on the Maturity Date or an Acceleration Delivery Date
will pass to Buyer title (or security entitlements) to such shares free
and clear of any Liens or Transfer Restrictions (other than Transfer
Restrictions arising solely from the fact that Seller is an
"affiliate", within the meaning of Rule 144 under the Securities Act,
of the Issuer), except for those created pursuant to the Pledge
Agreement.
(j) Seller has a valid business purpose for entering into this
Agreement, and the transaction contemplated hereby is consistent with
Seller's overall investment strategy. Seller currently expects that
Seller will not elect to deliver cash in lieu of Common Stock on the
Maturity Date pursuant to Section 2.04. Seller intends, however, to
consider all relevant economic, market and business factors in
ultimately determining whether to deliver cash in lieu of Common Stock
on the Maturity Date.
ARTICLE 5
CONDITIONS TO BUYER'S OBLIGATIONS
SECTION 5.1. Conditions. The obligation of Buyer to deliver the
Purchase Price on the Payment Date is subject to the satisfaction of the
following conditions, each of which shall be conclusively deemed to be satisfied
upon payment of the Purchase Price on the Payment Date:
10
<PAGE> 14
(a) The representations and warranties of Seller contained in
Article 4 and in the Pledge Agreement shall be true and correct as of
the Payment Date.
(b) The Pledge Agreement shall have been executed by the
parties thereto, and Seller shall have delivered to Secured Party in
accordance therewith the collateral required to be delivered pursuant
to Section 1(b) thereof, and Seller shall have executed UCC-1 financing
statements in the form of Exhibit B to the Pledge Agreement for filing
in the filing offices specified in Exhibit C to the Pledge Agreement.
(c) Seller shall have performed all of the covenants and
obligations to be performed by Seller hereunder and under the Pledge
Agreement on or prior to the Payment Date.
(d) Seller shall have delivered to Buyer on or prior to the
Payment Date an opinion of nationally recognized counsel acceptable to
Buyer to the effect set forth in Annex A.
ARTICLE 6
COVENANTS
SECTION 6.1. Taxes. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of any Common Stock
pursuant hereto. Seller further agrees to make all payments in respect of this
Agreement free and clear of, and without withholding or deduction for or on
account of, any present or future taxes, duties, fines, penalties, assessments
or other governmental charges of whatsoever nature (or interest on any taxes,
duties, fines, penalties, assessments or other governmental charges of
whatsoever nature) imposed, levied, collected, withheld or assessed by, within
or on behalf of (a) the United States or any political subdivision or
governmental authority thereof or therein having power to tax or (b) any
jurisdiction from or through which payment on the Agreement is made by Seller,
or any political subdivision or governmental authority thereof or therein having
power to tax. In the event such withholding or deduction is imposed, Seller
agrees to indemnify Buyer for the full amount of such withholding or deduction,
as well as any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto.
11
<PAGE> 15
SECTION 6.2. Forward Contract. Seller hereby agrees that: (i) Seller
will not treat this Agreement, any portion of this Agreement, or any obligation
hereunder as giving rise to any interest income or other inclusions of ordinary
income; (ii) Seller will not treat the delivery of any portion of the shares of
Common Stock or cash to be delivered pursuant to this Agreement as the payment
of interest or ordinary income; (iii) Seller will treat this Agreement in its
entirety as a forward contract for the delivery of such shares of Common Stock
or cash; and (iv) Seller will not take any action (including filing any tax
return or form or taking any position in any tax proceeding) that is
inconsistent with the obligations contained in (i) through (iii).
Notwithstanding the preceding sentence, Seller may take any action or position
required (A) by any taxing authority or (B) by law, provided that Seller
delivers to Buyer an opinion of counsel, nationally recognized as expert in
Federal tax matters and acceptable to Buyer, to the effect that such action or
position is required by a statutory change or a Treasury regulation or
applicable court decision published after the date of this Agreement.
SECTION 6.3. Notices. Seller will cause to be delivered to Buyer:
(a) Immediately upon the occurrence of any Acceleration Event
hereunder, notice of such occurrence; and
(b) In case at any time prior to the Maturity Date, Seller
receives notice that any event requiring that an adjustment be
calculated pursuant to Article 7 hereof shall have occurred or be
pending, then Seller shall promptly cause to be delivered to Buyer a
notice identifying such event and stating, if known to Seller, the date
on which such event occurred or is to occur and, if applicable, the
record date relating to such event. Seller shall cause further notices
to be delivered to Buyer if Seller shall subsequently receive notice of
any further or revised information regarding the terms or timing of
such event or any record date relating thereto.
SECTION 6.4. Further Assurances. From time to time from and after the
date hereof through the Maturity Date, each of the parties hereto shall use such
party's reasonable best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper and advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement in accordance with the terms and conditions
hereof, including (i) using reasonable best efforts to remove any legal
impediment to the consummation of such transactions and (ii) the execution and
delivery of all such deeds, agreements, assignments and further instruments of
transfer and conveyance necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement in accordance with the
terms and conditions hereof.
12
<PAGE> 16
SECTION 6.5. Securities Contract. The parties hereto recognize that the
Custodian is a "financial institution" within the meaning of Section 101(22) of
Title 11 of the United States Code (the "BANKRUPTCY CODE") and is acting as
agent and custodian for Buyer in connection with this Agreement and that Buyer
is a "customer" of the Custodian within the meaning of said Section 101(22). The
parties hereto further recognize that this Agreement is a "securities contract,"
as such term is defined in Section 741(7) of the Bankruptcy Code, entitled to
the protection of Section 555 of the Bankruptcy Code.
SECTION 6.6. Sales of Common Stock. Seller agrees that neither Seller
nor any person who would be considered to be the same "person" (as such term is
used in Rule 144(a)(2) under the Securities Act) shall, without the prior
written consent of Buyer (which consent shall not be unreasonably withheld),
sell any shares of Common Stock or hedge (through swaps, options, short sales or
otherwise) any long position in the Common Stock until the Restriction
Termination Date. Any request by Seller for Buyer's consent pursuant to this
Section 6.06 shall be made in writing and delivered to each of Buyer, the
Calculation Agent and Davis Polk & Wardwell. Buyer shall use its reasonable best
efforts to grant or withhold such consent prior to the end of the Business Day
following the date on which Seller requests such consent; provided that, in any
event, Buyer shall respond to any such request prior to the end of the fourth
Business Day following the date on which Seller requests such consent; and
provided further that Buyer's delay in responding to such request shall not be
deemed to be a grant of such request.
ARTICLE 7
ADJUSTMENTS
SECTION 7.1. Dilution Adjustments. (a) Following the declaration by the
Issuer of the terms of any Potential Adjustment Event occurring prior to the
Maturity Date, the Calculation Agent will determine whether such Potential
Adjustment Event has a diluting or concentrative effect on the theoretical value
of the Common Stock and, if so, will (i) make the corresponding adjustment, if
any, to any one or more of the Base Amount, the Exchange Rate, the Threshold
Price, the Issue Price, the Maturity Price, the Cash Settlement Amount, any
Closing Price and any other variable relevant to the exercise, settlement or
payment terms hereof or of the Pledge Agreement as the Calculation Agent
determines appropriate to account for that diluting or concentrative effect and
(ii) determine the effective date of the adjustment. The Calculation Agent may
(but need not) determine the appropriate adjustment by reference to the
adjustment in respect of
13
<PAGE> 17
such Potential Adjustment Event made by an options exchange to options on the
Common Stock traded on that options exchange.
(b) For these purposes, "POTENTIAL ADJUSTMENT EVENT" means any of the
following:
(i) a subdivision, consolidation or reclassification of shares
of Common Stock (which does not constitute a Reorganization Event), or
a free distribution or dividend of any shares of Common Stock to
existing holders of Common Stock by way of bonus, capitalization or
similar issue;
(ii) a distribution or dividend to existing holders of Common
Stock of (A) shares of Common Stock, or (B) other share capital or
securities granting the right to payment of dividends and/or the
proceeds of liquidation of the Issuer equally or proportionately with
such payments to holders of Common Stock, or (C) other types of
securities, rights or warrants or other assets, in any case for payment
(cash or other) at less than the prevailing market price as determined
by the Calculation Agent;
(iii) a cash dividend;
(iv) a call by the Issuer in respect of shares of Common Stock
that are not fully paid;
(v) a repurchase by the Issuer of shares of Common Stock,
whether out of profits or capital and whether the consideration for
such repurchase is cash, securities or otherwise; or
(vi) any other similar event that may have a diluting or
concentrative effect on the theoretical value of the Common Stock.
Without limiting the foregoing, the parties acknowledge that the
Calculation Agent will make adjustments to the Base Amount, the Exchange Rate,
the Threshold Price, the Issue Price, the Maturity Price, the Cash Settlement
Amount, any Closing Price and any other variable relevant to the exercise,
settlement or payment terms hereof or of the Pledge Agreement as the Calculation
Agent determines appropriate to account for the value of all cash dividends
(ordinary or extraordinary) with respect to the Common Stock.
(c) Notwithstanding the foregoing, in the event of a distribution of
shares of capital stock of a subsidiary of the Issuer that is a Publicly-Traded
Entity (a "SPIN-OFF") made to holders of shares of Common Stock, (i) the
"Contract Shares" shall include, in addition to the number of shares of Free
Stock equal to
14
<PAGE> 18
the Contract Share Amount, a number of shares of New Common Stock equal to the
product of (A) the Base Amount immediately prior to the consummation of the
Spin-Off and (B) the number of shares of New Common Stock that a holder of one
share of Original Common Stock receives in connection with such Spin-Off and
(ii) the "Maturity Price" shall be equal to the sum of (A) the Maturity Price of
the Original Common Stock and (B) the product of (x) Maturity Price of the New
Common Stock and (y) the number of shares of New Common Stock that a holder of
one share of Original Common Stock would have owned or been entitled to receive
immediately following such Spin-Off. Following a Spin-Off, "ORIGINAL COMMON
STOCK" shall mean the common stock of the entity that is the Issuer immediately
prior to the Spin-Off and "NEW COMMON STOCK" shall mean the common equity
securities of the Publicly-Traded Entity resulting from such Spin-Off.
SECTION 7.2. Reorganization Events. In the event of (i) any
consolidation or merger of the Issuer with or into another entity (other than a
merger or consolidation in which the Issuer is the continuing corporation and in
which the Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of the
Issuer or another corporation), (ii) any sale, transfer, lease or conveyance of
the property of the Issuer as an entirety or substantially as an entirety, (iii)
any statutory exchange of securities of the Issuer with another corporation
(other than in connection with a merger or acquisition) or (iv) any liquidation,
dissolution or winding up of the Issuer (any such event, a "REORGANIZATION
EVENT"), then (A) if there is a surviving or continuing corporation and (1) such
surviving or continuing corporation is a Publicly-Traded Entity or (2) the
entity (the "ACQUIRING CORPORATION") issuing the consideration received by
holders of Common Stock in such Reorganization Event is a Publicly-Traded
Entity, "Base Amount" shall mean the product of (x) the Base Amount immediately
prior to the consummation of the Reorganization Event and (y) the number of
shares of common stock of such Publicly-Traded Entity that a holder of one share
of Common Stock receives in connection with such Reorganization Event and, if
the consideration received by holders of Common Stock includes cash or property
other than common stock of such Publicly-Traded Entity ("NON-STOCK
CONSIDERATION"), Seller shall make a cash payment as if this Agreement were
terminated in part pursuant to Section 3.01, by wire transfer of immediately
available funds to an account designed by Buyer, to Buyer on the date on which
the Reorganization Event is consummated (the "REORGANIZATION TERMINATION DATE")
in an amount equal to the Replacement Value (calculated in the manner set forth
in Section 8.01 as if the Reorganization Termination Date were the Acceleration
Date; provided that for purposes of such calculation, the Base Amount shall be
equal to the product of (I) the Base Amount immediately prior to consummation of
the Reorganization Event and (II) the percentage of the value of the
consideration received by holders of Common
15
<PAGE> 19
Stock represented by the Non-Stock Consideration, as determined by the
Calculation Agent) or (B) if there is no surviving or continuing corporation in
such Reorganization Event or if the consideration received by holders of Common
Stock consists solely of Non-Stock Consideration, this Agreement shall terminate
and Seller shall make a payment or delivery to Buyer as provided in Section
7.04.
SECTION 7.3. Provisions Relating to Reorganization Events and
Spin-Offs. If a Reorganization Event occurs and clause (B) of Section 7.02 does
not apply, (a) the surviving or continuing corporation or the Acquiring
Corporation, as the case may be, shall be deemed to be the "Issuer" and the
common equity securities of such corporation shall be deemed to be the "Common
Stock" and (b) the Calculation Agent shall calculate corresponding adjustments,
if any, to the Base Amount, the Exchange Rate, the Threshold Price, the Issue
Price, the Maturity Price, the Cash Settlement Amount, any Closing Price and any
other variable relevant to the exercise, settlement or payment terms hereof as
the Calculation Agent determines appropriate to account for such event. If a
Spin-Off occurs, the entity that is the Issuer immediately prior to the Spin-Off
and the Publicly-Traded Entity resulting from the Spin-Off shall each be deemed
to be the "Issuer" and the Original Common Stock and the New Common Stock shall
each be deemed to be the "Common Stock". Following any Spin-Off, the Calculation
Agent shall calculate further adjustments pursuant to this Article 7 by applying
the methodology set forth in this Article 7 to both the Original Common Stock
and the New Common Stock.
SECTION 7.4. Termination and Payment. Following termination of this
Agreement pursuant to clause (B) of Section 7.02 as a result of any
Reorganization Event, the Calculation Agent shall determine the Replacement
Value in the manner provided in Section 8.01 (calculated, for purposes of this
Section 7.04, as if the Reorganization Termination Date were the Acceleration
Date, and representing the fair replacement value (including both intrinsic and
time value) to Buyer of an agreement with terms that would preserve for Buyer
the economic equivalent of the payments and deliveries that Buyer and its
affiliates would, but for the occurrence of the Reorganization Event, have been
entitled to receive after the Reorganization Termination Date hereunder). As
promptly as reasonably practicable after calculation of the Replacement Value,
the Calculation Agent shall deliver to Buyer and Seller a notice (the
"TERMINATION AMOUNT NOTICE") specifying the Replacement Value. Not later than
three Business Days following delivery of a Termination Amount Notice, Seller
shall make a cash payment, by wire transfer of immediately available funds to an
account designated by Buyer, to Buyer in an amount equal to the Replacement
Value. Notwithstanding the foregoing, to the extent that any Marketable
Securities are received by holders of Common Stock in such Reorganization Event,
then in lieu of delivering cash as provided in the immediately preceding
16
<PAGE> 20
sentence, Seller may deliver Marketable Securities with an equal value (as
determined by the Calculation Agent).
ARTICLE 8
ACCELERATION
SECTION 8.1. Acceleration. If one or more of the following events (each
an "ACCELERATION EVENT") shall occur:
(a any legal proceeding shall have been instituted or any
other event shall have occurred or condition shall exist that in
Buyer's reasonable judgment is highly likely to have a material adverse
effect on the financial condition of Seller or on Seller's ability to
perform Seller's obligations hereunder, or that is likely to affect the
validity or binding effect of any agreement of Seller hereunder or
under the Pledge Agreement;
(b Seller makes an assignment for the benefit of creditors,
files a petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions or applies to any tribunal for any receiver of or any trustee
for Seller or any substantial part of Seller's property, commences any
proceeding relating to Seller under any reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there is commenced
against or with respect to Seller or any substantial portion of
Seller's property any such proceeding and an order for relief is issued
or such proceeding remains undismissed for a period of 30 days;
(c at any time, representations made by Seller in Sections
4.01(b), 4.01(c), 4.01(d) and 4.01(i) under this Agreement or in
Section 3 under the Pledge Agreement or any certificate delivered
pursuant to Section 5(b) of the Pledge Agreement would be incorrect or
misleading in any material respect if made as of such time;
(d Seller fails to deliver shares of Common Stock (or the
Cash Settlement Amount) on the Maturity Date as required by this
Agreement;
(e Seller fails to fulfill or discharge when due any of
Seller's obligations, covenants or agreements under or relating to this
Agreement or the Pledge Agreement (other than the obligation referred
to in Section
17
<PAGE> 21
8.01(d)) and such failure remains unremedied for 60 days following
notice from Buyer;
(f due to the adoption of, or any change in, any applicable
law after the date hereof, or due to the promulgation of, or any change
in, the interpretation by any court, tribunal or regulatory authority
with competent jurisdiction of any applicable law after the date
hereof, it becomes unlawful for Seller to perform any absolute or
contingent obligation to make payment or delivery hereunder or to
comply with any other material provision of this Agreement or the
Pledge Agreement;
(g in the reasonable judgment of the Calculation Agent, Buyer
is unable to hedge Buyer's exposure to this Agreement because of the
lack of sufficient shares of Common Stock being made available for
share borrowing by lenders;
(h there occurs a default under any indebtedness for money
borrowed by Seller, whether such indebtedness now exists or shall
hereafter be created, which indebtedness, individually or in the
aggregate, is in excess of $10,000,000 principal amount, which default
shall constitute a failure to pay any portion of the principal of such
indebtedness when due and payable after the expiration of any
applicable grace or cure period with respect thereto or shall have
resulted in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due
and payable;
(i the death of Seller; or
(j a Collateral Event of Default within the meaning of the
Pledge Agreement shall occur;
then, upon notice to Seller from Buyer at any time following an Acceleration
Event, an "ACCELERATION DATE" shall occur, and Seller shall become obligated to
deliver to Buyer on the date (the "ACCELERATION DELIVERY DATE") three Exchange
Business Days following delivery of the Acceleration Amount Notice a number of
shares of Free Stock equal to the Acceleration Amount; provided that if Secured
Party proceeds to realize upon any collateral pledged under the Pledge Agreement
and to apply the proceeds of such realization as provided in the second
paragraph of Section 7(d) thereof, then, to the extent of such application of
proceeds, Seller's obligation to deliver Free Stock pursuant to this paragraph
shall be deemed to be an obligation to deliver an amount of cash equal to the
aggregate Market Value of such Free Stock on the Acceleration Date. The
"ACCELERATION AMOUNT" means
18
<PAGE> 22
the quotient obtained by dividing: (i) the Replacement Value by (ii) the Market
Value per share of the Common Stock on the Acceleration Date.
The "REPLACEMENT VALUE" means an amount determined by the Calculation
Agent representing the fair replacement value (including both intrinsic and time
value) to Buyer of an agreement with terms that would preserve for Buyer the
economic equivalent of the payments and deliveries that Buyer would, but for the
occurrence of the Acceleration Date, have been entitled to receive after the
Acceleration Date hereunder (taking into account any adjustments pursuant to
Section 7.01 or pursuant to Section 5(i) of the Pledge Agreement that may have
been calculated on or prior to the Acceleration Date), including any loss of
bargain, cost of funding or, without duplication, loss or cost incurred as a
result of Buyer's terminating, liquidating, obtaining or reestablishing any
hedge or related trading position.
As promptly as reasonably practicable after calculation of the
Replacement Value, the Calculation Agent shall deliver to Seller and Buyer a
notice (the "ACCELERATION AMOUNT NOTICE") specifying the Acceleration Amount of
shares of Common Stock required to be delivered by Seller.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard forms of telecommunication. Notices to Buyer shall
be directed to it care of Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, New York 10010, Telecopy No. (212) 325-8175, Attention:
Ricardo Harewood, with a copy to QSPV Limited, Queensgate House, George Town,
Grand Cayman, Cayman Islands, Telecopy No. (345) 945-7100, Attention: Martin
Couch. Notices to Seller shall be directed to Seller at 406 Saint Andrews Drive,
Belleair, Florida 33756, Telecopy No. (727) 468-9466, with a copy to Robert E.
Freitas, Orrick, Herrington & Sutcliffe LLP, 1020 Marsh Road, Menlo Park,
California 94025, Telecopy No. (650) 614-7401. Notices to the Calculation Agent
shall be directed to it care of Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, New York 10010, Telecopy No. (212) 325-8175,
Attention: Ricardo Harewood. Notices to Davis Polk & Wardwell shall be directed
to it at 450 Lexington Avenue, New York, New York 10017, Telecopy No. (212)
450-4800, Attention: James T. Rothwell.
19
<PAGE> 23
SECTION 9.2. Governing Law; Submission to Jurisdiction; Severability;
Waiver of Jury Trial. (a This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine and each party hereto submits to the jurisdiction of the Courts of
the State of New York and the United States District Court located in the
Borough of Manhattan in New York City.
(b To the extent permitted by law, the unenforceability or invalidity
of any provision or provisions of this Agreement shall not render any other
provision or provisions herein contained unenforceable or invalid.
(c SELLER AND BUYER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(d Service of Process. Seller irrevocably appoints CT Corporation
System as process agent to receive for Seller and on Seller's behalf, service of
process in any action, suit or other proceeding arising out of this Agreement,
the Pledge Agreement or any transaction contemplated hereby or thereby. If for
any reason CT Corporation System is unable to act as such, Seller will promptly
notify Buyer and within 30 days appoint a substitute process agent acceptable to
Buyer. Buyer irrevocably appoints CT Corporation System as process agent to
receive for Buyer and on Buyer's behalf, service of process in any action, suit
or other proceeding arising out of this Agreement, the Pledge Agreement or any
transaction contemplated hereby or thereby. If for any reason CT Corporation
System is unable to act as such, Buyer will promptly notify Seller and within 30
days appoint a substitute process agent acceptable to Seller. Nothing in this
Agreement will affect the right of either party to serve process in any other
manner permitted by law.
SECTION 9.3. Confidentiality. Except as required by law or judicial or
administrative process, or as requested by a regulatory authority or
self-regulatory organization, each party hereto agrees to keep this Agreement
and the Pledge Agreement and the transactions contemplated hereby and thereby
confidential. In the event disclosure is permitted pursuant to the preceding
sentence, the disclosing party shall (i) provide prior notice of such disclosure
to the other party, (ii) use such party's best efforts to minimize the extent of
such disclosure and (iii) comply with all reasonable requests of the other party
to minimize the extent of such disclosure. This Section 9.03 shall not prevent
Seller or Buyer from disclosing information as necessary to third-party advisors
in connection with the transactions contemplated hereby or by the Pledge
Agreement; provided that Seller or Buyer, as the case may be, shall use their
reasonable best efforts to cause such advisors to comply with this Section 9.03
as if a party hereto.
20
<PAGE> 24
SECTION 9.4. Entire Agreement. Except as expressly set forth herein,
this Agreement constitutes the entire agreement and understanding among the
parties with respect to its subject matter hereof and supersedes all oral
communications and prior writings with respect thereto.
SECTION 9.5. Amendments, Waivers. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Buyer and Seller or, in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.6. No Third Party Rights, Successors and Assigns. This
Agreement is not intended and shall not be construed to create any rights in any
person other than Seller, Buyer and their respective successors and assigns and
no other person shall assert any rights as third party beneficiary hereunder.
Whenever any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party. All the covenants
and agreements herein contained by or on behalf of Seller and Buyer shall bind,
and inure to the benefit of, their respective successors and assigns whether so
expressed or not, and shall be enforceable by and inure to the benefit of Seller
and Buyer and their respective successors and assigns. The rights and duties
under this Agreement may not be assigned or transferred by any party hereto
without the prior written consent of the other parties hereto; provided that (i)
Buyer may assign or transfer any of its rights or duties hereunder without the
prior written consent of Seller and (ii) the Agent may assign or transfer any of
its rights or duties hereunder without the prior written consent of the other
parties hereto to any affiliate of Credit Suisse First Boston, so long as such
affiliate is a broker-dealer registered with the Securities and Exchange
Commission.
SECTION 9.7. Calculation Agent. All determinations and calculations of
the Calculation Agent made pursuant to this Agreement or the Pledge Agreement
shall be made in a commercially reasonable manner and shall be binding in the
absence of manifest error. The Calculation Agent will have no responsibility for
good faith errors or omissions in the determination so made of any Closing
Price, the Maturity Price, the Exchange Rate, the Cash Settlement Amount or any
other amount as provided herein or in the Pledge Agreement. The Calculation
Agent shall promptly advise Seller in writing of any adjustments, calculations
or determinations made by it under this Agreement or the Pledge Agreement. The
Calculation Agent shall in good faith consider and respond in writing to any
21
<PAGE> 25
objection of Seller to any determination or calculation of the Calculation Agent
hereunder or under the Pledge Agreement.
SECTION 9.8. Set-off. In addition to and without limiting any rights of
set-off that a party hereto may have as a matter of law, pursuant to contract or
otherwise, upon the occurrence of a Reorganization Termination Date or an
Acceleration Date, Buyer shall have the right to terminate, liquidate and
otherwise close out the transactions contemplated by this Agreement pursuant to
the terms of this Agreement, and to set off any obligation that Buyer or any
affiliate of Buyer may have to Seller pursuant to this Agreement or the Pledge
Agreement, including without limitation any obligation to make any release,
delivery or payment to Seller pursuant to the Pledge Agreement, against any
right Buyer or any of its affiliates may have against Seller pursuant to this
Agreement or the Pledge Agreement, including without limitation any right to
receive a payment or delivery pursuant to this Agreement. In the case of a
set-off of any obligation to release, deliver or pay assets against any right to
receive assets of the same type, such obligation and right shall be set off in
kind. In the case of a set-off of any obligation to release, deliver or pay
assets against any right to receive assets of any other type, the value of each
of such obligation and such right shall be determined by the Calculation Agent
and the result of such set-off shall be that the net obligor shall pay or
deliver to the other party an amount of cash or assets, at the net obligor's
option, with a value (determined, in the case of a delivery of assets, by the
Calculation Agent) equal to that of the net obligation. In determining the value
of any obligation to release or deliver Common Stock or right to receive Common
Stock, the value at any time of such obligation or right shall be determined by
reference to the Market Value of the Common Stock at such time. If an obligation
or right is unascertained at the time of any such set-off, the Calculation Agent
may in good faith estimate the amount or value of such obligation or right, in
which case set-off will be effected in respect of that estimate, and the
relevant party shall account to the other party at the time such obligation or
right is ascertained.
SECTION 9.9. Matters Related to Credit Suisse First Boston Corporation,
as Agent. (a Credit Suisse First Boston Corporation shall act as "agent" for
Buyer and Seller within the meaning of Rule 15a-6 under the Securities Exchange
Act of 1934 in connection with the transactions contemplated by this Agreement
and by the Pledge Agreement.
(b The Agent shall have no responsibility or liability (including,
without limitation, by way of guarantee, endorsement or otherwise) to Buyer or
Seller or otherwise in respect of this Agreement or the Pledge Agreement,
including, without limitation, in respect of the failure of Buyer or Seller to
pay or perform
22
<PAGE> 26
under this Agreement or the Pledge Agreement, except for its gross negligence or
willful misconduct in performing its duties as Agent hereunder or thereunder.
(c Each of Buyer and Seller agrees to proceed solely against the
other to collect or recover any securities or money owing to Buyer or Seller, as
the case may be, in connection with or as a result of this Agreement or the
Pledge Agreement.
(d As a broker-dealer registered with the Securities and Exchange
Commission, Credit Suisse First Boston Corporation, in its capacity as Agent,
will be responsible for (i) effecting the transactions contemplated by this
Agreement and the Pledge Agreement, (ii) issuing all required notices,
confirmations and statements to Buyer and Seller and (iii) maintaining books and
records relating to this Agreement and the Pledge Agreement.
SECTION 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, and all such counterparts taken together shall be deemed
to constitute one and the same agreement.
SECTION 9.11. Limited Recourse. Seller hereby agrees that it shall not
institute against, or join any other person in instituting against, Buyer any
bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation
proceedings. Seller hereby acknowledges and agrees that Buyer's obligations
under this Agreement will be solely the corporate obligations of Buyer, and that
Seller will not have any recourse to any of the directors, officers or employees
of Buyer with respect to any claims, losses, damages, liabilities, indemnities
or other obligations in connection with any transactions contemplated by this
Agreement. Recourse in respect of any obligations of Buyer under this Agreement
will be limited to the assets of Buyer and no debt shall be owed by Buyer in
respect of any shortfall after realization of such assets.
23
<PAGE> 27
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
SELLER:
--------------------------------
Bryan J. Zwan
BUYER:
CSFB SAILS CORP.
By:
-----------------------------
Name:
Title:
AGENT:
CREDIT SUISSE FIRST BOSTON
CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE> 28
ANNEX A
(a The execution and delivery of this Agreement and the
Pledge Agreement and the performance by Seller of Seller's obligations
hereunder and thereunder do not violate or conflict with any New York
or federal law applicable to Seller, any order or judgment of any New
York or federal court or other agency of government known to such
counsel applicable to Seller or any of Seller's assets or any
contractual restriction known to such counsel binding on or affecting
Seller or any of Seller's assets.
(b All government and other consents that are known to such
counsel to be required to have been obtained by Seller with respect to
this Agreement or the Pledge Agreement have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with.
(c This Agreement and the Pledge Agreement have been duly
executed and delivered by Seller.
(d Seller's obligations under this Agreement and the Pledge
Agreement constitute Seller's legal, valid and binding obligations,
enforceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity
or at law)).
(e To such counsel's knowledge, no registration, recordation
or filing with any governmental body, agency or official is required by
Seller in connection with the execution and delivery by Seller of this
Agreement or the Pledge Agreement, other than any such registration,
recordation or filing that (i) has previously been made or (ii) will be
made by Seller in connection with Section 13(d) or 16 of the Securities
Exchange Act of 1934, as amended.
(f The Pledge Agreement creates in favor of Buyer a security
interest in Seller's rights in the Initial Pledged Items. Upon the
Custodian's indicating by book entry that such Collateral has been
credited to Buyer's securities account pursuant to the Pledge
Agreement, Buyer will have control (within the meaning of Section 8-106
of the UCC) of a security entitlement with respect to such Collateral
and such security interest will be perfected. Assuming that Buyer
acquires such security
<PAGE> 29
entitlement without notice of any adverse claim, then an action based
on an adverse claim to the financial asset relating to such Collateral,
whether framed in conversion, replevin, constructive trust, equitable
lien, or other theory, may not be asserted against Buyer.
(g Assuming that Buyer purchases Common Stock pursuant to the
Securities Contract and that, at the time of such purchase the
Custodian has indicated by book entry that such Common Stock has been
credited to Buyer's account, and that Buyer acquires such security
entitlement without notice of any adverse claim, then an action based
on an adverse claim to the financial asset relating to such Common
Stock, whether framed in conversion, replevin, constructive trust,
equitable lien, or other theory, may not be asserted against Buyer.
A-2
<PAGE> 30
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN THE
TARGET PULL-DOWN LIST.
(THIS LIST IS FOR THE USE OF THE WORDPROCESSOR ONLY, IS NOT A PART OF THIS
DOCUMENT AND MAY BE DISCARDED.)
<TABLE>
<CAPTION>
ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME
================================= ============================= ============================ =============================
<S> <C> <C> <C>
1, 9.11(g)....................001
1.01..........................002
2.............................003
2.01..........................004
2.02..........................005
2.03..........................006
2.03(a).......................007
2.03(b).......................008
2.03(c).......................009
2.04..........................010
3.01...........TERMINATION.SELLER
4.............................011
4.01..........................012
4.01(a).......................013
4.01(b).......................015
4.01(c).......................016
4.01(d).......................017
4.01(e).......................018
4.01(f).......................019
4.01(g).......................020
4.01(i).......................021
4.01(j).......................022
5.............................023
5.01..........................024
5.01(a).......................025
5.01(b).......................026
5.01(c).......................027
6.............................028
6.01..........................029
6.02..........................030
6.03..........................031
6.03(a).......................032
6.03(b).......................033
6.04..........................034
6.05..........................037
7.............................038
7.01..........................039
7.01(c).......................040
7.02................MERGER.EVENTS
7.04..........................047
8.............................048
8.01..........................049
8.01(a).......................059
8.01(b).......................051
8.01(c).......................052
8.01(d).......................055
8.01(e).......................053
8.01(f).......................054
8.01(j).......................056
9.............................057
9.01..........................058
9.02..........................059
9.02(a).......................060
9.02(b).......................061
9.02(c).......................063
9.02(d).......................064
9.03..........................065
9.04..........................066
9.05..........................067
9.06..........................068
9.10..........................069
</TABLE>
<PAGE> 1
EXHIBIT 3
SAILS PLEDGE AGREEMENT
dated as of
December 8, 1999
among
BRYAN J. ZWAN,
CSFB SAILS CORP.
and
CREDIT SUISSE FIRST BOSTON CORPORATION, as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. The Security Interests..............................................................1
SECTION 2. Definitions.........................................................................3
SECTION 3. Representations and Warranties of Pledgor...........................................4
SECTION 4. Certain Covenants of Pledgor........................................................6
SECTION 5. Administration of the Collateral and Valuation of the Securities....................7
SECTION 6. Income and Voting Rights in Collateral.............................................11
SECTION 7. Remedies upon Acceleration Events..................................................11
SECTION 8. Miscellaneous......................................................................15
SECTION 9. Termination of Pledge Agreement....................................................16
SECTION 10. Set-off...........................................................................16
</TABLE>
<PAGE> 3
PLEDGE AGREEMENT
THIS AGREEMENT is made as of this 8th day of December, 1999 among BRYAN
J. ZWAN ("PLEDGOR"), CREDIT SUISSE FIRST BOSTON CORPORATION, as agent (the
"AGENT") hereunder, and CSFB SAILS CORP. ("SECURED PARTY").
WHEREAS, pursuant to the SAILS Mandatorily Exchangeable Securities
Contract (as amended from time to time, the "SECURITIES CONTRACT") dated as of
the date hereof among Pledgor, the Agent and Secured Party, Pledgor has agreed
to sell and Secured Party has agreed to purchase shares of common stock, par
value $0.0001 per share, of Digital Lightwave, Inc., a Delaware corporation (the
"ISSUER") (or security entitlements in respect thereof) (the "COMMON STOCK"), or
cash in lieu thereof, subject to the terms and conditions of the Securities
Contract;
WHEREAS, it is a condition to the obligations of Secured Party under
the Securities Contract that Pledgor and Secured Party enter into this Agreement
and that Pledgor grant the pledge provided for herein;
NOW, THEREFORE, in consideration of their mutual covenants contained
herein and to secure the performance by Pledgor of Pledgor's obligations under
the Securities Contract and the observance and performance of the covenants and
agreements contained herein and in the Securities Contract, the parties hereto,
intending to be legally bound, hereby mutually covenant and agree as follows:
SECTION 1. The Security Interests. In order to secure the full and
punctual observance and performance of the covenants and agreements contained
herein and in the Securities Contract:
(a) Pledgor hereby assigns and pledges to Secured Party, and grants to
Secured Party, security interests in and to, and a lien upon and right of
set-off against, and transfers to Secured Party, as and by way of a security
interest having priority over all other security interests, with power of sale,
all of Pledgor's right, title and interest in and to (i) the Initial Pledged
Items; (ii) all additions to and substitutions for the Initial Pledged Items
(including, without limitation, any securities, instruments or other property
delivered or pledged pursuant to Section 4(a) or 5(b)) (such additions and
substitutions, the "ADDITIONS AND SUBSTITUTIONS"); (iii) all income, proceeds
and collections received or to be received, or derived or to be derived, now or
any time hereafter (whether before or after the commencement of any proceeding
under applicable bankruptcy, insolvency or similar law, by or against Pledgor,
with respect to Pledgor) from or
<PAGE> 4
in connection with the Initial Pledged Items and the Additions and Substitutions
(including, without limitation, (A) any shares of capital stock issued by the
Issuer in respect of any Common Stock constituting Collateral or any cash,
securities or other property distributed in respect of or exchanged for any
Common Stock constituting Collateral, or into which any such Common Stock is
converted, in connection with any Reorganization Event, and any security
entitlements in respect of any of the foregoing, (B) any obligation of Secured
Party to replace any rehypothecated Collateral pursuant to Section 5(i) and (C)
any amounts paid or assets delivered to Pledgor by Secured Party in respect of
dividends paid or distributions made on shares of Common Stock constituting
Collateral that have been rehypothecated in accordance with Section 5(i)); (iv)
the Collateral Account and all securities and other financial assets (each as
defined in Section 8-102 of the UCC), including the Initial Pledged Items and
the Additions and Substitutions, and other funds, property or assets from time
to time held therein or credited thereto; and (v) all powers and rights now
owned or hereafter acquired under or with respect to the Initial Pledged Items
or the Additions and Substitutions (such Initial Pledged Items, Additions and
Substitutions, proceeds, collections, powers, rights, Collateral Account and
assets held therein or credited thereto being herein collectively called the
"COLLATERAL"). Secured Party shall have all of the rights, remedies and
recourses with respect to the Collateral afforded a secured party by the UCC, in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded to Secured Party by this Agreement.
(b) On or prior to the Payment Date, Pledgor shall deliver to Secured
Party in pledge hereunder Eligible Collateral consisting of a number of shares
of Common Stock equal to the Base Amount as of the Payment Date (the "INITIAL
PLEDGED ITEMS"), in the manner provided in Section 5(c).
(c) In the event that the Issuer at any time issues in respect of any
Common Stock constituting Collateral hereunder, or comprising financial assets
underlying security entitlements constituting Collateral hereunder, any
additional or substitute shares of capital stock of any class, Pledgor shall
immediately pledge and deliver to Secured Party in accordance with Section 5(c)
all such shares or security entitlements in respect thereof as additional
Collateral hereunder.
(d) The Security Interests are granted as security only and shall not
subject Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of Pledgor or the Issuer with respect to any of the
Collateral or any transaction in connection therewith.
2
<PAGE> 5
(e) The parties hereto expressly agree that all rights, assets and
property at any time held in or credited to the Collateral Account shall be
treated as financial assets (as defined in Section 8-102 of the UCC).
SECTION 2. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Securities
Contract. As used herein, the following words and phrases shall have the
following meanings:
"ADDITIONS AND SUBSTITUTIONS" has the meaning provided in Section 1(a).
"COLLATERAL" has the meaning provided in Section 1(a).
"COLLATERAL ACCOUNT" has the meaning provided in Section 5(c).
"COLLATERAL EVENT OF DEFAULT" means, at any time, the occurrence of
either of the following: (A) failure of the Collateral to include, as Eligible
Collateral, at least the Maximum Deliverable Number of shares of Common Stock or
(B) failure at any time of the Security Interests to constitute valid and
perfected security interests in all of the Collateral, subject to no prior or
equal Lien, and, with respect to any Collateral consisting of securities or
security entitlements (each as defined in Section 8-102 of the UCC), as to which
Secured Party has Control, or, in each case, assertion of such by Pledgor in
writing.
"CONTROL" means "control" as defined in Section 8-106 and Section 9-115
of the UCC.
"CUSTODIAN" means The Bank of New York, or any other custodian
appointed by Secured Party and identified to Seller.
"DEFAULT SETTLEMENT DATE" has the meaning provided in Section 7(a).
"ELIGIBLE COLLATERAL" means Common Stock; provided that Pledgor has
good and marketable title thereto, free of all Liens (other than the Security
Interests) and Transfer Restrictions (other than the Existing Transfer
Restrictions) and that Secured Party has a valid, first priority perfected
security interest therein, a first lien thereon and Control with respect
thereto, and provided further that to the extent the number of shares of Common
Stock pledged hereunder exceeds at any time the Maximum Deliverable Number
thereof, such excess shares shall not be Eligible Collateral.
"EXISTING TRANSFER RESTRICTIONS" means Transfer Restrictions existing
with respect to any securities by virtue of the fact that Pledgor is an
"affiliate", within the meaning of Rule 144 under the Securities Act, of the
Issuer.
3
<PAGE> 6
"INITIAL PLEDGED ITEMS" has the meaning provided in Section 1(b).
"LOCATION" means, with respect to any party, the place such party is
"deemed located" within the meaning of Section 9-103(3)(d) of the UCC.
"MAXIMUM DELIVERABLE NUMBER" means, on any date, a number of shares of
Common Stock equal to the Base Amount on such date.
"PLEDGED ITEMS" means, as of any date, any and all securities and
instruments delivered by Pledgor to be held by or on behalf of Secured Party
under this Agreement as Collateral.
"REHYPOTHECATION UNAVAILABILITY" has the meaning provided in Section
5(i).
"REHYPOTHECATE" has the meaning provided in Section 5(i).
"SECURITY INTERESTS" means the security interests in the Collateral
created hereby.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
SECTION 3. Representations and Warranties of Pledgor. Pledgor hereby
represents and warrants to Secured Party that:
(a) Pledgor (i) acquired all of the Eligible Collateral delivered
pursuant to Section 1(b) at least two years prior to the date hereof, owns, and,
except with respect to Collateral rehypothecated pursuant to Section 5(i) at all
times prior to the release of the Collateral pursuant to the terms of this
Agreement, will own the Collateral free and clear of any Liens (other than the
Security Interests) or Transfer Restrictions (other than the Existing Transfer
Restrictions) and (ii) is not and will not become a party to or otherwise bound
by any agreement, other than this Agreement, that (x) restricts in any manner
the rights of any present or future owner of the Collateral with respect thereto
or (y) provides any person other than Pledgor, Secured Party or any securities
intermediary through whom any Collateral is held (but, in the case of any such
securities intermediary, only with respect to Collateral held through it) with
Control with respect to any Collateral.
(b) Other than financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests, no financing
statement, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of record in any
jurisdiction
4
<PAGE> 7
in which such filing or recording would be effective to perfect a lien, security
interest or other encumbrance of any kind on such Collateral.
(c) All Collateral consisting of securities and all financial assets
underlying Collateral consisting of security entitlements (each as defined in
Section 8-102 of the UCC) at any time pledged hereunder is and will be issued by
an issuer organized under the laws of the United States, any State thereof or
the District of Columbia and (i) certificated (and the certificate or
certificates in respect of such securities or financial assets are and will be
located in the United States) and registered in the name of Pledgor or held
through a securities intermediary whose securities intermediary's jurisdiction
(within the meaning of Section 8-110(e) of the UCC) is located in the United
States or (ii) uncertificated and either registered in the name of Pledgor or
held through a securities intermediary whose securities intermediary's
jurisdiction (within the meaning of Section 8-110(e) of the UCC) is located in
the United States; provided that this representation shall not be deemed to be
breached if, at any time, any such Collateral is issued by an issuer that is not
organized under the laws of the United States, any State thereof or the District
of Columbia, and the parties hereto agree to procedures or amendments hereto
necessary to enable Secured Party to maintain a valid and continuously perfected
security interest in such Collateral, in respect of which Secured Party will
have Control, subject to no prior Lien. The parties hereto agree to negotiate in
good faith any such procedures or amendments.
(d) Upon (i) in the case of Collateral consisting of investment
property (as defined in Section 9-115 of the UCC), (A) the delivery of
certificates evidencing any such investment property consisting of securities to
the Custodian in accordance with Section 5(c)(i), (B) the registration of any
such investment property consisting of uncertificated securities in the name of
the Custodian or its nominee in accordance with Section 5(c)(ii) or (C) the
crediting of any securities or other financial assets underlying any such
investment property consisting of security entitlements to a securities account
of the Custodian in accordance with Section 5(c)(iii) and, in each case, the
crediting of such securities or financial assets to the Collateral Account or
(ii) in the case of Collateral not consisting of investment property, the filing
of UCC-1 financing statements in the form of Exhibit B hereto in the filing
offices specified in Exhibit C hereto, Secured Party will have a valid and
perfected security interest in such Collateral, in respect of which Secured
Party will have (in the case of Collateral consisting of investment property)
Control, subject to no prior Lien.
(e) No registration, recordation or filing with any governmental body,
agency or official is required in connection with the execution and delivery of
this Agreement or necessary for the validity or enforceability hereof or for the
5
<PAGE> 8
perfection or enforcement of the Security Interests, other than the filing of
UCC-1 financing statements in the form of Exhibit B hereto in the filing offices
specified in Exhibit C hereto.
(f) Pledgor has not performed and will not perform any acts that might
prevent Secured Party from enforcing any of the terms of this Agreement or that
might limit Secured Party in any such enforcement.
(g) The Location of Pledgor is the address set forth in Section 8(c),
and under the Uniform Commercial Code as in effect in such Location, no local
filing is required to perfect a security interest in collateral consisting of
general intangibles.
(h) Pledgor has delivered to Secured Party a perfection certificate
substantially in the form attached as Exhibit C hereto, completed and
supplemented with the schedules and attachments contemplated thereby to the
satisfaction of Secured Party, and signed by Pledgor.
SECTION 4. Certain Covenants of Pledgor. Pledgor agrees that, so long
as any of Pledgor's obligations under the Securities Contract remain
outstanding:
(a) Pledgor shall ensure at all times that a Collateral Event of
Default shall not occur, and shall pledge additional Collateral in the manner
described in Sections 5(b) and 5(c) as necessary to cause such requirement to be
met.
(b) Pledgor shall, at the expense of Pledgor and in such manner and
form as Secured Party may reasonably require, give, execute, deliver, file and
record any financing statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable in order to (i) create, preserve,
perfect, substantiate or validate any security interest granted pursuant hereto,
(ii) create or maintain Control with respect to any such security interests in
any investment property (as defined in Section 9-115 of the UCC) or (iii) enable
Secured Party to exercise and enforce its rights hereunder with respect to such
security interest. To the extent permitted by applicable law, Pledgor hereby
authorizes Secured Party to execute and file, in the name of Pledgor or
otherwise, UCC financing or continuation statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) that Secured Party in its sole
discretion may deem reasonably necessary or appropriate to further perfect, or
maintain the perfection of, the Security Interests.
(c) Pledgor shall warrant and defend Pledgor's title to the
Collateral, subject to the rights of Secured Party, against the claims and
demands of all
6
<PAGE> 9
persons. Secured Party may elect, but without an obligation to do so, to
discharge any Lien of any third party on any of the Collateral.
(d) Pledgor agrees that Pledgor shall not change (i) Pledgor's name or
identity in any manner or (ii) Pledgor's Location, unless in either case (A)
Pledgor shall have given Secured Party not less than 30 days' prior notice
thereof and (B) such change shall not cause any of the Security Interests to
become unperfected, cause Secured Party to cease to have Control in respect of
any of the Security Interests in any Collateral consisting of investment
property (as defined in Section 9-115 of the UCC) or subject any Collateral to
any other Lien.
(e) Pledgor agrees that Pledgor shall not (i) create or permit to
exist any Lien (other than the Security Interests) or any Transfer Restriction
(other than the Existing Transfer Restrictions) upon or with respect to the
Collateral, (ii) sell or otherwise dispose of, or grant any option with respect
to, any of the Collateral or (iii) enter into or consent to any agreement
pursuant to which any person other than Pledgor, Secured Party and any
securities intermediary through whom any of the Collateral is held (but in the
case of any such securities intermediary only in respect of Collateral held
through it) has or will have Control in respect of any Collateral.
SECTION 5. Administration of the Collateral and Valuation of the
Securities. (a) Secured Party shall determine on each Business Day whether a
Collateral Event of Default shall have occurred.
(b) Pledgor may pledge additional Eligible Collateral hereunder at any
time. Concurrently with the delivery of any additional Eligible Collateral,
Pledgor shall deliver to Secured Party a certificate of Pledgor substantially in
the form of Exhibit A hereto and dated the date of such delivery, (i)
identifying the additional items of Eligible Collateral being pledged and (ii)
certifying that with respect to such items of additional Eligible Collateral the
representations and warranties contained in paragraphs (a), (b), (c) and (d) of
Section 3 are true and correct with respect to such Eligible Collateral on and
as of the date thereof. Pledgor hereby covenants and agrees to take all actions
required under Section 5(c) and any other actions necessary to create for the
benefit of Secured Party a valid, first priority, perfected security interest
in, and a first lien upon, such additional Eligible Collateral, as to which
Secured Party will have Control.
(c) Any delivery of any securities or security entitlements (each as
defined in Section 8-102 of the UCC) as Collateral to Secured Party by Pledgor
shall be effected (i) in the case of Collateral consisting of certificated
securities registered in the name of Pledgor, by delivery of certificates
representing such securities to the Custodian, accompanied by any required
transfer tax stamps, and
7
<PAGE> 10
in suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, all in form and substance satisfactory to Secured Party, and the
crediting by the Custodian of such securities to a securities account (as
defined in Section 8-501 of the UCC) (the "COLLATERAL ACCOUNT") of Secured Party
maintained by the Custodian, (ii) in the case of Collateral consisting of
uncertificated securities registered in the name of Pledgor, by transmission by
Pledgor of an instruction to the issuer of such securities instructing such
issuer to register such securities in the name of the Custodian or its nominee,
accompanied by any required transfer tax stamps, the issuer's compliance with
such instructions and the crediting by the Custodian of such securities to the
Collateral Account, (iii) in the case of securities in respect of which security
entitlements are held by Pledgor through a securities intermediary, by the
crediting of such securities, accompanied by any required transfer tax stamps,
to a securities account of the Custodian at such securities intermediary or, at
the option of Secured Party, at another securities intermediary satisfactory to
Secured Party and the crediting by the Custodian of such securities to the
Collateral Account or (iv) in any case, by complying with such reasonable
alternative delivery instructions as Secured Party shall provide to Pledgor in
writing. Upon delivery of any such Pledged Item under this Agreement, Secured
Party shall examine (or cause the Custodian to examine) such Pledged Item and
any certificates delivered pursuant to Section 5(b) or otherwise pursuant to the
terms hereof in connection therewith to determine that they comply as to form
with the requirements for Eligible Collateral.
(d) If on any Business Day Secured Party determines that a Collateral
Event of Default shall have occurred, Secured Party shall promptly notify
Pledgor of such determination by telephone call to Pledgor followed by a written
confirmation of such call.
(e) If on any Business Day Secured Party determines that no
Acceleration Event or failure by Pledgor to meet any of Pledgor's obligations
under Sections 4 or 5 hereof has occurred and is continuing, Pledgor may obtain
the release from the Security Interests of any Collateral upon delivery to
Secured Party of a written notice from Pledgor indicating the items of
Collateral to be released so long as, after such release, no Collateral Event of
Default shall have occurred.
(f) On the Maturity Date, unless (i) Pledgor shall have otherwise
effected the deliveries required by Section 2.03(b) of the Securities Contract
or shall have delivered the Cash Settlement Amount to Secured Party in lieu of
shares of Common Stock in accordance with Section 2.04 of the Securities
8
<PAGE> 11
Contract on the Maturity Date or (ii) the Common Stock then held by or on behalf
of Secured Party hereunder is not Free Stock, Secured Party shall deliver or
cause to be delivered to itself from the Collateral Account in whole or partial,
as the case may be, satisfaction of Pledgor's obligations to deliver shares of
Common Stock to Secured Party on the Maturity Date pursuant to the Securities
Contract, shares of Common Stock then held by or on behalf of it hereunder
representing the number of shares of Common Stock required to be delivered under
the Securities Contract on the Maturity Date. Upon any such delivery, Secured
Party shall hold such shares of Common Stock absolutely and free from any claim
or right whatsoever (including, without limitation, any claim or right of
Pledgor).
(g) Secured Party may at any time or from time to time, in its sole
discretion, cause any or all of the Common Stock pledged hereunder registered in
the name of Pledgor or Pledgor's nominee to be transferred of record into the
name of the Custodian, Secured Party or its nominee. Pledgor shall promptly give
to Secured Party copies of any notices or other communications received by
Pledgor with respect to Common Stock pledged hereunder registered, or held
through a securities intermediary, in the name of Pledgor or Pledgor's nominee
and Secured Party shall promptly give to Pledgor copies of any notices and
communications received by Secured Party with respect to Common Stock pledged
hereunder registered, or held through a securities intermediary, in the name of
Custodian, Secured Party or its nominee.
(h) Pledgor agrees that Pledgor shall forthwith upon demand pay to
Secured Party:
(i) the amount of any taxes that Secured Party or the
Custodian may have been required to pay by reason of the Security
Interests or to free any of the Collateral from any Lien thereon, and
(ii) the amount of any and all reasonable costs and expenses,
including the fees and disbursements of counsel and of any other
experts, that Secured Party or the Custodian may incur in connection
with (A) the enforcement of this Agreement, including such expenses as
are incurred to preserve the value of the Collateral and the validity,
perfection, rank and value of the Security Interests, (B) the
collection, sale or other disposition of any of the Collateral, (C) the
exercise by Secured Party of any of the rights conferred upon it
hereunder or (D) any Acceleration Event.
Any such amount not paid on demand shall bear interest (computed on the basis of
a year of 360 days and payable for the actual number of days elapsed) at a rate
per annum equal to 5% plus the prime rate as published from time to time in The
Wall Street Journal, Eastern Edition.
9
<PAGE> 12
(i) Without limiting the rights and obligations of the parties under
this Agreement, upon the consent of Pledgor (which consent need not be in
writing), Secured Party may, notwithstanding Section 9-207 of the UCC, sell,
lend, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose
of, or otherwise use in its business (collectively, "REHYPOTHECATE"), any
Collateral, free from any claim or right of any nature whatsoever of Pledgor,
including any equity or right of redemption by Pledgor; provided that Secured
Party will replace any rehypothecated Collateral (with the same Collateral or
identical substitute Collateral) (A) upon five Business Days' notice from
Pledgor or (B) if not already replaced, on the Maturity Date or any Optional
Termination Date; provided further that in the case of any Optional Termination
Date on which the Securities Contract is terminated in part pursuant to Section
3.01 of the Securities Contract, Secured Party will be obligated to replace only
an amount of rehypothecated Collateral sufficient to ensure that on such date,
the Collateral Account will contain a number of shares of Common Stock at least
equal to the number of shares of Common Stock with respect to which the
Securities Contract is to be terminated pursuant to Section 3.01 of the
Securities Contract. If at any time at which any shares of Common Stock
constituting Collateral have been rehypothecated pursuant to this Section 5(i)
there shall occur an event of a type that would, had Secured Party borrowed such
shares of Common Stock from Pledgor on terms customary for loans of equity
securities (as determined by the Calculation Agent), require either (i) an
adjustment to the number of shares of Common Stock or a change in the type of
securities or other property that Secured Party would be required to deliver to
Pledgor to repay such stock loan or (ii) a payment or delivery by Secured Party
to Pledgor in respect of dividends paid or distributions made on such shares of
Common Stock, then, in the case of clause (i), such adjustment or change shall
be applied to the number of shares of Common Stock that Secured Party is
required to replace in accordance with the proviso to the immediately preceding
sentence and, in the case of clause (ii), Secured Party shall make such payment
or delivery to Pledgor, whereupon the amount so paid or the assets so delivered
shall become Collateral hereunder. All determinations related to the immediately
preceding sentence shall be made by the Calculation Agent. Notwithstanding the
foregoing, if any of the Eligible Collateral pledged hereunder is unavailable
for rehypothecation by Secured Party at any time ((1) as a result of Pledgor's
withholding Pledgor's consent to rehypothecation of such Collateral, (2) as a
result of Pledgor's causing Secured Party to replace such Collateral pursuant to
the proviso to the first sentence in this Section 5(i), (3) as a result of any
Transfer Restrictions (including the Existing Transfer Restrictions) or (4)
otherwise) (a "REHYPOTHECATION UNAVAILABILITY"), the Calculation Agent shall
adjust one or more of the Base Amount, the Exchange Rate, the Threshold Price,
the Issue Price, the Maturity Price, the Cash Settlement Amount, any Closing
Price and any other variable relevant to the exercise, settlement or payment
terms hereof or of the
10
<PAGE> 13
Securities Contract, as appropriate to make Secured Party whole for Secured
Party's cost relating to the borrowing of shares of Common Stock in connection
with hedging Secured Party's exposure to the Securities Contract (whether such
borrowing is effected by Secured Party or by a counterparty to a transaction
entered into by Secured Party to hedge Secured Party's exposure to the
Securities Contract), as determined by the Calculation Agent. For purposes of
determining the occurrence of a Collateral Event of Default, the rehypothecation
of any Collateral pledged hereunder shall not affect the status of such
Collateral as Collateral or Eligible Collateral hereunder.
SECTION 6. Income and Voting Rights in Collateral. (a) Secured Party
shall have the right to receive and retain as Collateral hereunder all proceeds
(including, without limitation, ordinary cash dividends or interest) of the
Collateral, and Pledgor shall take all such action as Secured Party shall deem
reasonably necessary or appropriate to give effect to such right. All such
proceeds that are received by Pledgor shall be received in trust for the benefit
of Secured Party and, if Secured Party so directs, shall be segregated from
other funds of Pledgor and shall, forthwith upon demand by Secured Party, be
delivered over to the Custodian on behalf of Secured Party as Collateral in the
same form as received (with any necessary endorsement).
(b) Unless an Acceleration Event shall have occurred and be
continuing, Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral (other than
Collateral that has been rehypothecated by Secured Party pursuant to Section
5(i)), and Secured Party shall, upon receiving a written request from Pledgor
accompanied by a certificate of Pledgor stating that no Acceleration Event has
occurred and is continuing, deliver to Pledgor or as specified in such request
such proxies, powers of attorney, consents, ratifications and waivers in respect
of any of the Collateral that is registered, or held through a securities
intermediary, in the name of the Custodian, Secured Party or its nominee as
shall be specified in such request and shall be in form and substance
satisfactory to Secured Party.
(c) If an Acceleration Event shall have occurred and be continuing,
Secured Party shall have the right, to the extent permitted by law, and Pledgor
shall take all such action as may be necessary or appropriate to give effect to
such right, to vote and to give consents, ratifications and waivers, and to take
any other action with respect to any or all of the Collateral with the same
force and effect as if Secured Party were the absolute and sole owner thereof.
SECTION 7. Remedies upon Acceleration Events. (a) If any Acceleration
Event shall have occurred and be continuing, Secured Party may exercise all the
11
<PAGE> 14
rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
without being required to give any notice, except as herein provided or as may
be required by mandatory provisions of law, shall: (i) deliver or cause to be
delivered to itself from the Collateral Account all Collateral consisting of
shares of Common Stock (but not in excess of the number thereof deliverable
under the Securities Contract at such time) on the date of the Acceleration
Amount Notice relating to such Acceleration Event (the "DEFAULT SETTLEMENT
DATE") in satisfaction of Pledgor's obligations to deliver Common Stock under
the Securities Contract, whereupon Secured Party shall hold such shares of
Common Stock absolutely free from any claim or right of whatsoever kind,
including any equity or right of redemption of Pledgor that may be waived or any
other right or claim of Pledgor, and Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal that
Pledgor has or may have under any law now existing or hereafter adopted; and
(ii) if such delivery shall be insufficient to satisfy in full all of the
obligations of Pledgor under the Securities Contract or hereunder, sell all of
the remaining Collateral, or such lesser portion thereof as may be necessary to
generate proceeds sufficient to satisfy in full all of the obligations of
Pledgor under the Securities Contract or hereunder, at public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery, and at such price or prices as Secured Party may deem
satisfactory. Pledgor covenants and agrees that Pledgor will execute and deliver
such documents and take such other action as Secured Party deems necessary or
advisable in order that any such sale may be made in compliance with law. Upon
any such sale, Secured Party shall have the right to deliver, assign and
transfer to the buyer thereof the Collateral so sold. Each buyer at any such
sale shall hold the Collateral so sold absolutely and free from any claim or
right of whatsoever kind, including any equity or right of redemption of Pledgor
that may be waived or any other right or claim of Pledgor, and Pledgor, to the
extent permitted by law, hereby specifically waives all rights of redemption,
stay or appraisal that Pledgor has or may have under any law now existing or
hereafter adopted. The notice (if any) of such sale required by Section 9-504 of
the UCC shall (1) in case of a public sale, state the time and place fixed for
such sale, (2) in case of sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as Secured Party may fix in the notice of such sale. At any
such sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as Secured Party may determine. Secured Party shall not be obligated to
make any such sale pursuant to any such notice. Secured Party may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to
12
<PAGE> 15
time by announcement at the time and place fixed for the sale, and such sale may
be made at any time or place to which the same may be so adjourned. In case of
any sale of all or any part of the Collateral on credit or for future delivery,
the Collateral so sold may be retained by Secured Party until the selling price
is paid by the buyer thereof, but Secured Party shall not incur any liability in
case of the failure of such buyer to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may again be sold upon like
notice. Secured Party, instead of exercising the power of sale herein conferred
upon it, may proceed by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.
(b) Pledgor hereby irrevocably appoints Secured Party Pledgor's true
and lawful attorney, with full power of substitution, in the name of Pledgor,
Secured Party or otherwise, for the sole use and benefit of Secured Party, but
at the expense of Pledgor, to the extent permitted by law, to exercise, at any
time and from time to time while an Acceleration Event has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
Secured Party were the absolute owner thereof (including, without
limitation, the giving of instructions and entitlement orders in
respect thereof), and
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that Secured Party shall give Pledgor not less than one day's prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral that threatens to decline
speedily in value, including, without limitation, equity securities, or is of a
type customarily sold on a recognized market. Secured Party and Pledgor agree
that such notice constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the UCC.
(c) Upon any delivery or sale of all or any part of any Collateral
made either under the power of delivery or sale given under this Section 7 or
under judgment or decree in any judicial proceedings for foreclosure or
otherwise for the
13
<PAGE> 16
enforcement of this Agreement, Secured Party is hereby irrevocably appointed the
true and lawful attorney of Pledgor, in the name and stead of Pledgor, to make
all necessary deeds, bills of sale, instruments of assignment, transfer or
conveyance of the property, and all instructions and entitlement orders in
respect of the property thus delivered or sold. For that purpose Secured Party
may execute all such documents, instruments, instructions and entitlement
orders. This power of attorney shall be deemed coupled with an interest, and
Pledgor hereby ratifies and confirms that which Pledgor's attorney acting under
such power, or such attorney's successors or agents, shall lawfully do by virtue
of this Agreement. If so requested by Secured Party or by any buyer of the
Collateral or a portion thereof, Pledgor shall further ratify and confirm any
such delivery or sale by executing and delivering to Secured Party or to such
buyer or buyers at the expense of Pledgor all proper deeds, bills of sale,
instruments of assignment, conveyance or transfer, releases, instructions and
entitlement orders as may be designated in any such request.
(d) In the case of an Acceleration Event, Secured Party may proceed to
realize upon the security interest in the Collateral against any one or more of
the types of Collateral, at any time, as Secured Party shall determine in its
sole discretion subject to the foregoing provisions of this Section 7. The
proceeds of any sale of, or other realization upon, or other receipt from, any
of the Collateral shall be applied by Secured Party in the following order of
priorities:
first, to the payment to Secured Party or the
Custodian of the expenses of such sale or other realization,
including reasonable compensation to the Custodian and the
agents and counsel of the Custodian and Secured Party, and all
expenses, liabilities and advances incurred or made by Secured
Party or the Custodian in connection therewith, including
brokerage fees in connection with the sale by Secured Party of
any Collateral;
second, to the payment to Secured Party of an amount
equal to the aggregate Market Value of a number of shares of
Common Stock equal to (i) the number of shares of Common Stock
that would be required to be delivered under Section 8.01 of
the Securities Contract on the Default Settlement Date without
giving effect to the proviso therein minus (ii) the number of
shares of Common Stock delivered to Secured Party on the
Default Settlement Date as described in Section 7(a);
finally, if all of the obligations of Pledgor
hereunder and under the Securities Contract have been fully
discharged or sufficient funds have been set aside by Secured
Party at the request of Pledgor for the
14
<PAGE> 17
discharge thereof, any remaining proceeds shall be released
to Pledgor.
SECTION 8. Miscellaneous. (a). This Agreement is not intended and shall
not be construed to create any rights in any person other than Pledgor, Secured
Party and their respective successors and assigns and no other person shall
assert any rights as third party beneficiary hereunder. Whenever any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All the covenants and agreements herein
contained by or on behalf of Pledgor and Secured Party shall bind, and inure to
the benefit of, their respective successors and assigns whether so expressed or
not. The rights and duties under this Agreement may not be assigned or
transferred by any party hereto without the prior written consent of the other
parties hereto; provided that (i) Secured Party may assign or transfer any of
its rights or duties hereunder without the prior written consent of Pledgor and
(ii) the Agent may assign or transfer any of its rights or duties hereunder
without the prior written consent of the other parties hereto to any affiliate
of Credit Suisse First Boston, so long as such affiliate is a broker-dealer
registered with the Securities and Exchange Commission.
(b) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Pledgor and Secured Party or, in the case of a waiver, by the
party against whom the waiver is to be effective. No failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
(c) All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any
standard forms of telecommunication. Notices to Pledgor shall be directed to
Pledgor at 406 Saint Andrews Drive, Belleair, Florida 33756, Telecopy No. (727)
468-9466, with a copy to Robert E. Freitas, Orrick, Herrington & Sutcliffe LLP,
1020 Marsh Road, Menlo Park, California 94025, Telecopy No. (650) 614-7401;
notices to Secured Party shall be directed to it in care of Credit Suisse First
Boston Corporation, Eleven Madison Avenue, New York, New York 10010, Telecopy
No. (212) 325-8175, Attention: Ricardo Harewood, with a copy to QSPV Limited,
Queensgate House, George Town, Grand Cayman, Cayman Islands, Telecopy No. (345)
945-7100, Attention: Martin Couch.
(d) This Agreement shall in all respects be construed in accordance
with and governed by the laws of the State of New York without reference to
choice of
15
<PAGE> 18
law doctrine (provided that as to Pledged Items located in any jurisdiction
other than the State of New York, Secured Party shall, in addition to any rights
under the laws of the State of New York, have all of the rights to which a
secured party is entitled under the laws of such other jurisdiction) and each
party hereto submits to the jurisdiction of the Courts of the State of New York.
The parties hereto hereby agree that the Custodian's jurisdiction, within the
meaning of Section 8-110(e) of the UCC, insofar as it acts as a securities
intermediary hereunder or in respect hereof, is the State of New York. To the
extent permitted by law, the unenforceability or invalidity of any provision or
provisions of this Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
(e) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(f) Pledgor hereby agrees that it shall not institute against, or join
any other person in instituting against, Secured Party any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceedings.
Pledgor hereby acknowledges and agrees that Secured Party's obligations under
this Agreement will be solely the corporate obligations of Secured Party, and
that Pledgor will not have any recourse to any of the directors, officers or
employees of Secured Party with respect to any claims, losses, damages,
liabilities, indemnities or other obligations in connection with any
transactions contemplated by this Agreement. Recourse in respect of any
obligations of Secured Party under this Agreement will be limited to the assets
of Secured Party and no debt shall be owed by Secured Party in respect of any
shortfall after realization of such assets
(g) This Agreement may be executed, acknowledged and delivered in any
number of counterparts and all such counterparts taken together shall be deemed
to constitute one and the same agreement.
(h) The rights and obligations of the Agent shall be as set forth in
Section 9.09 of the Securities Contract.
SECTION 9. Termination of Pledge Agreement. This Agreement and the
rights hereby granted by Pledgor in the Collateral shall cease, terminate and be
void upon fulfillment of all of the obligations of Pledgor under the Securities
Contract and hereunder. Any Collateral remaining at the time of such termination
shall be fully released and discharged from the Security Interests and delivered
to Pledgor by Secured Party, all at the request and expense of Pledgor.
SECTION 10. Set-off. In addition to and without limiting any rights of
set-off that Secured Party may have as a matter of law, pursuant to contract or
otherwise,
16
<PAGE> 19
upon the occurrence of a Reorganization Termination Date or an Acceleration
Date, Secured Party shall have the right to terminate, liquidate and otherwise
close out the transactions contemplated by the Securities Contract and this
Agreement pursuant to the terms of the Securities Contract and this Agreement,
and to set off any obligation it may have to Pledgor pursuant to the Securities
Contract or this Agreement, including without limitation any obligation to (i)
release from the Security Interests or return to Pledgor any Collateral pursuant
to Section 5(e) or Section 9 or (ii) replace any rehypothecated Collateral
pursuant to Section 5(i), against any right Secured Party or any of its
affiliates may have against Pledgor pursuant to the Securities Contract or this
Agreement, including without limitation any right to receive a payment or
delivery pursuant to the Securities Contract. In the case of a set-off of any
obligation to return or replace assets against any right to receive assets of
the same type, such obligation and right shall be set off in kind. In the case
of a set-off of any obligation to return or replace assets against any right to
receive assets of any other type, the value of each of such obligation and such
right shall be determined by the Calculation Agent and the result of such
set-off shall be that the net obligor shall pay or deliver to the other party an
amount of cash or assets, at the net obligor's option, with a value (determined,
in the case of a delivery of assets, by the Calculation Agent) equal to that of
the net obligation. In determining the value of any obligation to release or
deliver Common Stock or right to receive Common Stock, the value at any time of
such obligation or right shall be determined by reference to the Market Value of
the Common Stock at such time. If an obligation or right is unascertained at the
time of any such set-off, the Calculation Agent may in good faith estimate the
amount or value of such obligation or right, in which case set-off will be
effected in respect of that estimate, and the relevant party shall account to
the other party at the time such obligation or right is ascertained.
<PAGE> 20
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date and year first above written.
PLEDGOR:
--------------------------------
Bryan J. Zwan
SECURED PARTY:
CSFB SAILS CORP.
By:
-----------------------------
Name:
Title:
AGENT:
CREDIT SUISSE FIRST BOSTON
CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE> 21
EXHIBIT A
[Certificate for Additional Collateral]
The undersigned, Bryan J. Zwan ("PLEDGOR"), hereby certifies, pursuant
to Section 5(b) of the SAILS Pledge Agreement dated as of December 8, 1999 among
Pledgor, Credit Suisse First Boston Corporation, as Agent, and CSFB SAILS Corp.
(the "PLEDGE AGREEMENT"; terms defined in the Pledge Agreement being used herein
as defined therein), that:
1. Pledgor is delivering, or causing to be delivered in
accordance with Section 5(c) of the Pledge Agreement, the following
securities (or security entitlements in respect thereof) to Secured
Party to be held by Secured Party as additional Collateral (the
"ADDITIONAL COLLATERAL"):
2. Pledgor hereby represents and warrants to Secured Party
that the Additional Collateral is Eligible Collateral and that the
representations and warranties contained in paragraphs (a), (b), (c)
and (d) of Section 3 of the Pledge Agreement are true and correct with
respect to the Additional Collateral on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
__ day of _______, ____.
-----------------------------
Bryan J. Zwan
<PAGE> 22
EXHIBIT B
[Form of UCC-1 Financing Statement]
SCHEDULE A TO FINANCING STATEMENT NAMING
BRYAN J. ZWAN, AS DEBTOR, AND
CSFB SAILS CORP., AS SECURED PARTY
This financing statement covers Bryan J. Zwan's ("DEBTOR'S") right,
title and interest in and to the following, whether now owned or hereafter
acquired (all of which is hereinafter collectively referred to as the
"COLLATERAL"):
(i) the Initial Pledged Items;
(ii) all additions to and substitutions for the Initial Pledged Items
(the "ADDITIONS AND SUBSTITUTIONS")
(iii) all income, proceeds and collections received or to be received,
or derived or to be derived, now or at any time hereafter (whether before or
after the commencement of any proceeding under applicable bankruptcy, insolvency
or similar law, by or against Debtor, with respect to Debtor) from or in
connection with the Initial Pledged Items and the Additions and Substitutions
(including, without limitation, (A) any shares of capital stock issued by the
Issuer in respect of any Common Stock constituting Collateral or any cash,
securities or other property distributed in respect of or exchanged for any
Common Stock constituting Collateral, or into which any such Common Stock is
converted in connection with any Reorganization Event, and any security
entitlements in respect of any of the foregoing, (B) any obligation of Secured
Party to replace any rehypothecated Collateral and (C) any amounts paid or
assets delivered to Pledgor by Secured Party in respect of dividends paid or
distributions made on shares of Common Stock constituting Collateral that have
been rehypothecated);
(iv) the Collateral Account and all securities and other financial
assets (each as defined in Section 8-102 of the UCC), including the Initial
Pledged Items and the Additions and Substitutions, and other funds, property or
other assets from time to time held therein or credited thereto; and
(v) all powers and rights now owned or hereafter acquired under or with
respect to the Initial Pledged Items or the Additions and Substitutions.
<PAGE> 23
As used in this Schedule A, the following capitalized terms have the
meanings specified below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"AGENT" means Credit Suisse First Boston Corporation.
"COLLATERAL ACCOUNT" means a securities account (as defined in Section
8-501(a) of the UCC) established in the name of Secured Party at the offices of
the Custodian in which or to which certain of the Collateral is to be deposited
or credited.
"COMMON STOCK" means shares of Common Stock, par value $0.0001 per
share, of the Issuer, or security entitlements in respect thereof.
"CUSTODIAN" means The Bank of New York or any other custodian appointed
by Secured Party and identified to Debtor.
"INITIAL PLEDGED ITEMS" means 1,000,000 shares of Common Stock.
"ISSUER" means Digital Lightwave, Inc., a Delaware corporation.
"SECURED PARTY" means CSFB SAILS Corp.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
B-2
<PAGE> 24
EXHIBIT C
[Perfection Certificate]
The undersigned, Bryan J. Zwan ("PLEDGOR"), hereby certifies, pursuant
to Section 3(h) of the SAILS Pledge Agreement (the "PLEDGE AGREEMENT") dated as
of December 8, 1999 among Pledgor, Credit Suisse First Boston Corporation, as
Agent, and CSFB SAILS Corp. ("SECURED PARTY") (terms defined therein being used
herein as defined in the Pledge Agreement), that:
A. INFORMATION REQUIRED FOR FILINGS UNDER CURRENT UCC
AND SEARCHES FOR PRIOR FILINGS THEREUNDER.
1. Name. The exact name of Pledgor is:
Bryan Joseph Zwan
2. Prior Names. (a) Set forth below is each other name that Pledgor
has had, together with the date of the relevant change:
3. Current Locations. The residence of Pledgor is located at the
following address:
MAILING ADDRESS STATE
- -------------------------------------------------------------------------------
406 Saint Andrews Drive Florida
Belleair, Florida 33756
4. Prior Locations. (a) Set forth below is the information required by
Part A-3 above with respect to each other location or residence maintained by
Pledgor at any time during the past five years:
5. Filing Offices. In order to perfect the Security Interests granted
by Pledgor, a duly signed financing statement on Form UCC-1 in the form attached
as Exhibit B to the Pledge Agreement should be on file in the appropriate
offices (central and, where required, local) in each jurisdiction identified in
Part A-3 and Part A-4 above.
B. SEARCH REPORTS.
<PAGE> 25
Attached hereto as Schedule I is a true copy of a file search report
from the central UCC filing office in each jurisdiction identified in Part A-5
above with respect to each name set forth in Part A-1 and Part A-2 above
(searches in local filing offices, if any, are not required).
C-2
<PAGE> 26
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
8th day of December, 1999.
-----------------------------
Bryan J. Zwan
<PAGE> 27
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN
THE TARGET PULL-DOWN LIST.
(THIS LIST IS FOR THE USE OF THE WORDPROCESSOR ONLY, IS NOT A PART OF
THIS DOCUMENT AND MAY BE DISCARDED.)
<TABLE>
<CAPTION>
ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME
=============== =========== =============== =========== =============== =========== =============== ===========
<S> <C> <C> <C> <C> <C> <C> <C>
1..............................01
1(a)...........................03
1(b)...........................07
2..............................02
3..............................17
4..............................13
4(a)...........................15
5..............................12
5(b)...........................10
5(c)...........................11
5(c)(i)...............IN.ANY.CASE
5(c)(ii)...............COLLATERAL
5(c)(iii).............CASE.OF.SEC
5(c)(iv)................BY.COMPLY
5(i)...........................06
7..............................14
7(a)...........................04
8(d)...........................08
</TABLE>
<PAGE> 1
Exhibit 4
DIGITAL LIGHTWAVE, INC.
MEMORANDUM OF UNDERSTANDING
October 14, 1999
This memorandum of understanding ("Memorandum") is binding and sets
forth the agreement between Digital Lightwave, Inc. (the "Company") and Dr.
Bryan Zwan, the majority stockholder of the Company ("BJZ"). Upon execution of
this Memorandum, the parties agree to immediately proceed to prepare and execute
additional agreements regarding the terms of this Memorandum; provided however
that if the parties hereto do not ever finalize such additional agreements, this
Memorandum shall be binding and control with respect to the matters contained
herein.
1) RETRACTION OF LETTERS TO THE OUTSIDE DIRECTORS OF THE COMPANY
BJZ hereby retracts, and agrees to execute a formal notice retracting,
the statements contained in his letters dated September 16, 1999 and
September 20, 1999.
2) AGREEMENT NOT TO TAKE ADDITIONAL ACTION
For so long as he is a director of the Company, BJZ shall not take any
action in his capacity as a stockholder of the Company to (a) remove
current senior management of the Company (Messrs. Chastelet, Grant,
Haider and Matz); it being understood that BJZ may, in his capacity as
a director, remove senior management in accordance with paragraph 4(c)
below or (b) remove Messrs. Hamilton, Chastelet or Zwan from the Board
from the date hereof up to and including the date of the annual meeting
in the year 2000.
3) AGREEMENT WITH RESPECT TO THE BOARD
a) BJZ and the Company shall enter into an agreement which provides
that:
i) The size of the Company's board of directors (the
"Board") shall be increased from four members to five
members and two new, outside directors ("New
Directors") shall be appointed to the Board.
ii) William Seifert shall resign from the Board upon the
later to occur of (i) the appointment of the New
Directors to the Board and (ii) the conclusion
<PAGE> 2
of his assignments on the two special committees of
the Board on which he serves.
iii) The New Directors shall be nominated for appointment
to the Board by any member of the current Board
(Messrs. Hamilton, Seifert, Zwan and Chastelet).
iv) BJZ agrees to vote his shares of common stock at the
Company's annual meeting in the year 2000 in favor of
the election to the Board of Messrs. Hamilton,
Chastelet and Zwan and, if appointed to the Board
prior to the annual meeting in the year 2000, the New
Directors.
v) the New Directors shall be appointed to the Board
only with the vote or consent of a majority of the
directors serving as of the date hereof; provided
however that no director shall serve without the
affirmative vote or consent of BJZ in the Board
action to appoint the New Directors.
4) EMPLOYMENT AGREEMENTS
a) Upon the vote of a majority of the members of the Board
serving as of the date hereof and eligible to vote, the
Company shall enter into an agreement with respect to change
of control, severance and non-compete with Messrs. Chastelet,
Grant, Haider and Matz.
b) The agreements referred to in paragraph 4(a) above shall be in
the form negotiated, in good faith and in accordance with
current negotiations, between counsel to the Company and
counsel to BJZ.
c) The agreements referred to in paragraph 4(a) above shall
contain a provision providing for removal of Messrs.
Chastelet, Grant, Haider and Matz, as applicable, in
accordance with the terms of their respective agreements, upon
the vote of a majority of the members of the Board.
5) UNTERBERG PUBLIC OFFERING
a) The Company and BJZ agree to decide by November 1, 1999
whether to proceed immediately on such date with the public
offering of common stock by the Company and, if BJZ so elects,
BJZ, by converting the proposed underwritten offering by C.E.
Unterberg Towbin ("Unterberg") on file with the Securities and
Exchange Commission as of the date hereof, into an equity
offering.
b) The terms and conditions of the public offering of common
stock, including the pricing, and other terms, shall be
finally determined by the Pricing Committee established by the
Board for this purpose, which is comprised of BJZ, Dr. William
Hamilton and Mr. William Seifert.
2
<PAGE> 3
c) In connection with the offering, BJZ will agree to a standard
six month lock-up agreement with the Company and Unterberg
with respect to any public sale (including a sale under Rule
144) of his shares of common stock, other than shares
currently under option.
Executed on October 14, 1999.
DIGITAL LIGHTWAVE, INC.
By: /s/ Gerry Chastelet /s/ Dr. Bryan J. Zwan
------------------- ---------------------
Gerry Chastelet ` Dr. Bryan J. Zwan
President and CEO
