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EXHIBIT 10
SAILS PLEDGE AGREEMENT
dated as of
▇▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ LIMITED PARTNERSHIP,
CSFB SAILS CORP.
and
CREDIT SUISSE FIRST BOSTON CORPORATION, as Agent
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TABLE OF CONTENTS
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PAGE
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SECTION 1. The Security Interests.....................................2
SECTION 2. Definitions................................................3
SECTION 3. Representations and Warranties of Pledgor..................5
SECTION 4. Certain Covenants of Pledgor...............................7
SECTION 5. Administration of the Collateral and Valuation of the
Securities......................................................8
SECTION 6. Income and Voting Rights in Collateral....................11
SECTION 7. Remedies upon Acceleration Events.........................12
SECTION 8. Miscellaneous.............................................15
SECTION 9. Termination of Pledge Agreement...........................17
SECTION 10. Set-off..................................................17
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PLEDGE AGREEMENT
THIS AGREEMENT is made as of this 8th day of March, 2000 among ZG
NEVADA LIMITED PARTNERSHIP ("PLEDGOR"), a Nevada limited partnership, CREDIT
SUISSE FIRST BOSTON CORPORATION, as agent (the "AGENT") hereunder, and CSFB
SAILS CORP. ("SECURED PARTY").
WHEREAS, Pledgor 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, Pledgor and Credit Suisse First Boston Corporation have
entered into a Term and Conditions for Private SAILS (the "TERM SHEET") dated as
of February 28, 2000, pursuant to which Pledgor and Credit Suisse First Boston
Corporation have agreed to sell and purchase such shares of Common Stock at the
time and on the terms set forth therein;
WHEREAS, pursuant to an Assignment and Assumption Agreement dated as
of March 8, 2000 between Credit Suisse First Boston Corporation and Secured
Party, Credit Suisse First Boston Corporation assigned to Secured Party all of
the rights and obligations of Credit Suisse First Boston Corporation under the
Term Sheet;
WHEREAS, the Term Sheet provides that the parties thereto will enter
into final documentation, consisting of a SAILS Mandatorily Exchangeable
Securities Contract and a SAILS Pledge Agreement, relating to the transactions
contemplated by the Term Sheet;
WHEREAS, pursuant to the Term Sheet, Pledgor has granted the
purchaser under the Term Sheet a security interest in certain shares of Common
Stock to secure the obligations of Pledgor thereunder and under the Securities
Contract;
WHEREAS, Pledgor and Secured Party wish to (i) set forth additional
understandings and agreements relating to such security interest and (ii)
confirm, on the terms set forth herein, the continuation of such security
interest;
WHEREAS, it is a condition to the obligations of Secured Party under
the Securities Contract (as defined herein) that Pledgor and Secured Party enter
into this Agreement;
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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 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
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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 date of the Term Sheet, Pledgor delivered to
Credit Suisse First Boston Corporation 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). As of the Payment Date, such Initial Pledged
Items shall include, as Eligible Collateral, at least the Base Amount of shares
of Common Stock.
(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.
(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
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(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 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.
"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.
"SECURITIES CONTRACT" means the SAILS Mandatorily Exchangeable
Securities Contract dated as of the date hereof among Pledgor, Secured Party and
the Agent, as amended from time to time.
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"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's holding period (calculated in the manner provided in
Rule 144(d) under the Securities Act) with respect to the Eligible Collateral
delivered in accordance with Section 1(b) commenced at least one year prior to
the date of the Term Sheet, and Pledgor (i) 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 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 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
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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 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 the General Partner of Pledgor.
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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 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,
identity or organizational structure 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
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
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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 the General Partner 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 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
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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 the General Partner of
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 the General Partner of 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
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
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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.
(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
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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 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 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).
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(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 the General Partner 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
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
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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 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, ▇▇▇ for, collect, receive and give
acquittance for any and all monies due or to become due upon or by
virtue thereof,
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(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 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:
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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 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
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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 ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. Freitas, Orrick,
▇▇▇▇▇▇▇▇▇▇ & Sutcliffe LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇; notices to Secured Party shall be directed to it in
care of Credit Suisse First Boston Corporation, Eleven ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, with a
copy to QSPV Limited, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇.
(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 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 and the United States District Court located in the Borough of Manhattan in
New York City. 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
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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, 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
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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.
21
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
PLEDGOR:
ZG NEVADA LIMITED PARTNERSHIP
By: ZG Nevada, Inc.,
its General Partner
By:
-------------------------------
Name:
Title:
SECURED PARTY:
CSFB SAILS CORP.
By:
-------------------------------
Name:
Title:
AGENT:
CREDIT SUISSE FIRST BOSTON
CORPORATION
By:
-------------------------------
Name:
Title:
22
EXHIBIT A
[Certificate for Additional Collateral]
The undersigned, the General Partner of ZG Nevada Limited Partnership
("PLEDGOR"), hereby certifies, pursuant to Section 5(b) of the SAILS Pledge
Agreement dated as of March 8, 2000 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 __________, 200_.
ZG NEVADA, INC.
By:
----------------------------
Name:
Title:
23
EXHIBIT B
[Form of UCC-1 Financing Statement]
SCHEDULE A TO FINANCING STATEMENT NAMING
ZG NEVADA LIMITED PARTNERSHIP, AS DEBTOR, AND
CSFB SAILS CORP., AS SECURED PARTY
This financing statement covers ZG Nevada Limited Partnership'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.
24
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 865,000 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
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EXHIBIT C
[Perfection Certificate]
The undersigned, the General Partner of ZG Nevada Limited Partnership
("PLEDGOR"), hereby certifies, pursuant to Section 3(h) of the SAILS Pledge
Agreement (the "PLEDGE AGREEMENT") dated as of March 8, 2000 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:
1. Jurisdiction of Organization. Pledgor is a limited partnership
organized under the laws of the State of Nevada.
2. Name. The exact name of Pledgor as it appears in its certificate
of limited partnership is:
ZG Nevada Limited Partnership
3. Prior Names. (a) Set forth below is each other name that Pledgor
has had since its organization, together with the date of the relevant change:
(b) Pledgor has not changed its organizational structure in any way
within the past five years.
4. Current Locations. The chief executive office of Pledgor is
located at the following address:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
5. Prior Locations. (a) Set forth below is the information required
by Section 4 above with respect to each other chief executive office maintained
by Pledgor at any time during the past five years:
26
MAILING ADDRESS COUNTY STATE
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
6. 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
Section 4 above.
7. Search Reports. 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 Sections 4 and 5 above with respect to each name set forth in
Sections 2 and 3(a) above (searches in local filing offices, if any, are not
required).
C-2
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this 8th day
of March, 2000.
ZG NEVADA, INC.
By:
----------------------------
Name:
Title: