Exhibit 34
DIGITAL LIGHTWAVE, INC.
ELEVENTH AMENDED AND RESTATED SECURITY AGREEMENT
This Eleventh Amended and Restated Security Agreement (this
"Agreement") is made as of July 14, 2003, by and between Digital Lightwave,
Inc., a Delaware corporation (the "Debtor"), in favor of Optel, LLC (the
"Secured Party").
RECITALS
The Debtor and the Secured Party are parties to (i) that certain
Secured Promissory Note dated as of February 14, 2003 in the original
principal amount of $800,000 upon the terms and subject to the conditions set
forth therein, and as the same may be increased, amended, modified or
extended from time to time, (ii) that certain Secured Promissory Note dated
as of February 26, 2003 in the original principal amount of $650,000 upon the
terms and subject to the conditions set forth therein, and as the same may be
increased, amended, modified or extended from time to time, (iii) that
certain Secured Promissory Note dated as of March 28, 2003 in the original
principal amount of $450,000 upon the terms and subject to the conditions set
forth therein, and as the same may be increased, amended, modified or
extended from time to time, (iv) that certain Secured Promissory Note dated
as of April 2, 2003 in the original principal amount of $60,000 upon the
terms and subject to the conditions set forth therein, and as the same may be
increased, amended, modified or extended from time to time, (v) that certain
Secured Promissory Note dated as of April 29, 2003 in the original principal
amount of $500,000 upon the terms and subject to the conditions set forth
therein, and as the same may be increased, amended, modified or extended from
time to time, (vi) that certain Secured Promissory Note dated as of May 14,
2003 in the original principal amount of $400,000 upon the terms and subject
to the conditions set forth therein, and as the same may be increased,
amended, modified or extended from time to time, (vii) that certain Secured
Promissory Note dated as of May 19, 2003 in the original principal amount of
$620,000 upon the terms and subject to the conditions set forth therein, and
as the same may be increased, amended, modified or extended from time to
time, (viii) that certain Secured Promissory Note dated as of May 29, 2003 in
the original principal amount of $520,000 upon the terms and subject to the
conditions set forth therein, and as the same may be increased, amended,
modified or extended from time to time, (ix) that certain Secured Promissory
Note dated as of the June 12, 2003 in the original principal amount of
$500,000 upon the terms and subject to the conditions set forth therein, and
as the same may be increased, amended, modified or extended from time to
time, (x) that certain Secured Promissory Note dated as of June 26, 2003 in
the original principal amount of $2,000,000 upon the terms and subject to the
conditions set forth therein, and as the same may be increased, amended,
modified or extended from time to time and (xi) that certain Secured
Promissory Note dated as of the date hereof in the original principal amount
of $500,000 upon the terms and subject to the conditions set forth therein,
and as the same may be increased, amended, modified or extended from time to
time (collectively, the "Notes"). The parties intend that the Debtor's
obligations to repay the Notes be secured by all of the assets of the Debtor.
AGREEMENT
In consideration of the purchase of the Notes by the Secured Party and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Debtor hereby agrees with the Secured Party as
follows:
1. GRANT OF SECURITY INTEREST.
(a) To secure the Debtor's full and timely performance of the
Obligations, the Debtor hereby grants to the Secured Party a continuing Lien
on and security interest (the "Security Interest") in, all of the Debtor's
right, title and interest in and to all of its personal property and assets
(both tangible and intangible), including, without limitation, the following,
whether now owned or hereafter acquired and wherever located: (a) all
Receivables; (b) all Equipment; (c) all Fixtures; (d) all General
Intangibles; (e) all Inventory; (f) all Investment Property; (g) all Deposit
Accounts; (h) all Cash; (i) all other Goods of the Debtor; (j) all
Intellectual Property; and (l) all Proceeds of each of the foregoing and all
accessions to, and replacements for, each of the foregoing (collectively, the
"Collateral"). The Security Interest shall be a first and prior interest in
all of the Collateral, provided, however, that the Security Interest shall be
subordinated with respect to any Collateral that is subject to the Prior
Security Interests (as defined below).
(b) The following terms shall have the following meanings for
purposes of this Agreement:
"ACCOUNT" means any "Account," as such term is defined in the UCC
now owned or hereafter acquired by the Debtor or in which the Debtor now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts, rights to payment
and other forms of obligations (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to the Debtor whether or not arising out of
goods or software sold or services rendered by the Debtor or from any other
transaction, whether or not the same involves the sale of goods or services
by the Debtor and all of the Debtor's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or
services, and all of the Debtor's rights to any goods represented by any of
the foregoing, and all monies due or to become due to the Debtor under all
purchase orders and contracts for the sale of goods or the performance of
services or both by the Debtor or in connection with any other transaction
(whether or not yet earned by performance on the part of the Debtor), now in
existence or hereafter occurring, including, without limitation, the right to
receive the proceeds of said purchase orders and contracts, and all
collateral security and guarantees of any kind given by any Person with
respect to any of the foregoing.
"CASH" means all cash, money, currency, and liquid funds, wherever
held, in which the Debtor now or hereafter acquires any right, title, or
interest.
"CHATTEL PAPER" means any "Chattel paper," as such term is
defined in the UCC, now owned or hereafter acquired by the Debtor or in which
the Debtor now holds or hereafter acquires any interest.
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"COMMERCIAL TORT CLAIM" shall have the meaning given to that term
in Section 2(e) of this Agreement.
"CREDIT DOCUMENTS" means this Agreement, the Notes and any UCC-1
Financing Statement filed herewith.
"DEPOSIT ACCOUNTS" means any "Deposit accounts," as such term is
defined in the UCC, and includes any checking account, savings account, or
certificate of deposit, now owned or hereafter acquired by the Debtor or in
which the Debtor now holds or hereafter acquires any interest.
"DOCUMENTS" means any "Documents," as such term is defined in the
UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now
holds or hereafter acquires any interest.
"ELECTRONIC CHATTEL PAPER" means any "Electronic chattel paper,"
as such term is defined in the UCC, now owned or hereafter acquired by the
Debtor or in which the Debtor now holds or hereafter acquires any interest.
"EQUIPMENT" means any "Equipment," as such term is defined in the
UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now
holds or hereafter acquires any interest and any and all additions, upgrades,
substitutions and replacements of any of the foregoing, together with all
attachments, components, parts, equipment and accessories installed thereon
or affixed thereto, now owned or hereafter acquired by the Debtor or in which
the Debtor now holds or hereafter acquires interest.
"FIXTURES" means any "Fixtures," as such term is defined in the
UCC, together with all right, title and interest of the Debtor in and to all
extensions, improvements, betterments, accessions, renewals, substitutes, and
replacements of, and all additions and appurtenances to any of the foregoing
property, and all conversions of the security constituted thereby,
immediately upon any acquisition or release thereof or any such conversion,
as the case may be, now owned or hereafter acquired by the Debtor or in which
the Debtor now holds or hereafter acquires any interest.
"GENERAL INTANGIBLE" means any "General intangible," as such term
is defined in the UCC, now owned or hereafter acquired by the Debtor or in
which the Debtor now holds or hereafter acquires any interest and, in any
event, shall include, without limitation, all right, title and interest that
the Debtor may now or hereafter have in or under any contracts, rights to
payment, payment intangibles, confidential information, interests in
partnerships, limited liability companies, corporations, joint ventures and
other business associations, permits, goodwill, claims in or under insurance
policies, including unearned premiums and premium adjustments, uncertificated
securities, deposit, checking and other bank accounts, but shall not include
any Intellectual Property (including the right to receive all proceeds and
damages therefrom), rights to receive tax refunds and other payments and
rights of indemnification.
"GOODS" means any "Goods," as such term is defined in the UCC,
now owned or hereafter acquired by the Debtor or in which the Debtor now
holds or hereafter acquires any interest.
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"INSTRUMENTS" means any "Instrument," as such term is defined in
the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor
now holds or hereafter acquires any interest.
"INTELLECTUAL PROPERTY" means, collectively, all rights,
priorities and privileges of the Debtor relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including copyrights, copyright licenses, inventions, patents,
patent licenses, trademarks, trademark licenses and trade secrets (including
customer lists), domain names, Web sites and know-how, including, but not
limited to, the patents, trademarks and copyrights set forth on Schedule 2 .
"INVENTORY" means any "Inventory," as such term is defined in the
UCC, now owned or hereafter acquired by the Debtor or in which the Debtor now
holds or hereafter acquires any interest, and, in any event, shall include,
without limitation, all inventory, goods and other personal property that are
held by or on behalf of the Debtor for sale or lease or are furnished or are
to be furnished under a contract of service or that constitute raw materials,
work in process or materials used or consumed or to be used or consumed in
the Debtor's business, or the processing, packaging, promotion, delivery or
shipping of the same, and all finished goods, whether or not the same is in
transit or in the constructive, actual or exclusive possession of the Debtor
or is held by others for the Debtor's account, including, without limitation,
all goods covered by purchase orders and contracts with suppliers and all
goods billed and held by suppliers and all such property that may be in the
possession or custody of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other Persons.
"INVESTMENT PROPERTY" means any "Investment property," as such
term is defined in the UCC, and includes certificated securities,
uncertificated securities, money market funds and U.S. Treasury bills or
notes, now owned or hereafter acquired by the Debtor or in which the Debtor
now holds or hereafter acquires any interest.
"LETTER OF CREDIT RIGHT" means any "Letter of credit right," as
such term is defined in the UCC, now owned or hereafter acquired by the
Debtor or in which the Debtor now holds or hereafter acquires any interest,
including any right to payment or performance under any letter of credit.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, xxxx, xxxx or charge
of any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title
retention agreement, any lease in the nature of a security interest, and the
filing of any financing statement (other than a precautionary financing
statement with respect to a lease that is not in the nature of a security
interest) under the UCC or comparable law of any jurisdiction.
"OBLIGATIONS" shall mean and include all loans, advances, debts,
liabilities and obligations, however arising, owed by the Debtor to the
Secured Party of every kind and description (whether or not evidenced by any
note or instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of the Notes, or any of the other
Credit Documents or otherwise, including without limitation all interest,
fees, charges, expenses,
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attorneys' fees and accountants' fees chargeable to the Debtor or payable by the
Debtor thereunder.
"PERMITTED LIENS" shall mean (a) Liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith, provided that adequate reserves for
the payment thereof have been established in accordance with generally
accepted accounting principals, (b) Liens of carriers, warehousemen,
mechanics, materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business for sums not
overdue more than 45 days or being contested in good faith, provided that
adequate reserves for the payment thereof have been established in accordance
with generally accepted accounting principals, (c) deposits under workers'
compensation, unemployment insurance and social security laws or to secure
the performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory obligations of surety or
appeal bonds or to secure indemnity, performance or other similar bonds in
the ordinary course of business, (d) zoning restrictions, easements,
rights-of-way, title irregularities and other similar encumbrances, which
alone or in the aggregate are not substantial in amount and do not materially
detract from the value of the property subject thereto or interfere with the
ordinary conduct of the business of the Debtor, (e) banker's Liens and
similar Liens (including set-off rights) in respect of bank deposits, (f)
Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties and in connection with the importation of
goods in the ordinary course of the Debtor's business, (g) Liens on the
property or assets of any subsidiary of the Debtor in favor of the Debtor,
(h) purchase money Liens that will be discharged upon the Debtor's payment of
the purchase price for the applicable property, to the extent such Liens
relate solely to the property so purchased and (j) the security interests set
forth on Schedule 1 (the "Prior Security Interests"); provided, however, that
except for the Prior Security Interests, that in each case, such Lien is not
senior or prior to the Security Interest created hereunder.
"PERSON" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other
entity or government (whether federal, state, county, city, municipal, local,
foreign, or otherwise, including any instrumentality, division, agency, body
or department thereof).
"PROCEEDS" means "Proceeds," as such term is defined in the UCC
and, in any event, shall include, without limitation, (a) any and all
Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to the Debtor from time to time in respect
of the Collateral, (b) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to the Debtor from time to time with respect to
any of the Collateral, (c) any and all payments (in any form whatsoever) made
or due and payable to the Debtor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any Person acting
under color of governmental authority), (d) the proceeds, damages, or
recovery based on any claim of the Debtor against third parties (i) for past,
present or future infringement of any copyright, patent or patent license or
(ii) for past, present or future infringement or dilution of any trademark or
trademark license or for injury to the goodwill associated with any
trademark, trademark
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registration or trademark licensed under any trademark license and (e) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"RECEIVABLES" means all of the Debtor's Accounts, Instruments,
Documents, Chattel Paper, Supporting Obligations, and letters of credit and
Letter of Credit Rights.
"SUPPORTING OBLIGATION" means any "Supporting obligation," as
such term is defined in the UCC, now owned or hereafter acquired by the
Debtor or in which the Debtor now holds or hereafter acquires any interest.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Florida; provided, that in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Secured
Party's Lien on any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of Florida, the
term "UCC" shall mean the Uniform Commercial Code as enacted and in effect,
from time to time, in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.
Unless otherwise defined herein, all capitalized terms used
herein and defined in the Notes shall have the respective meaning given to
those terms in the Notes, and terms that are defined in the UCC and used
herein shall have the meanings given to them in the UCC.
2. REPRESENTATIONS AND WARRANTIES. The Debtor hereby represents and
warrants to the Secured Party that:
(a) OWNERSHIP OF COLLATERAL. The Debtor is the legal and
beneficial owner of the Collateral (or, in the case of after-acquired
Collateral, at the time the Debtor acquires rights in the Collateral, will be
the legal and beneficial owner thereof). Except for the Security Interest
granted to the Secured Party pursuant to this Agreement, the Debtor has
rights in or the power to transfer the Collateral free and clear of any
adverse Lien, security interest or encumbrance except as created by this
Security Interest, except for Permitted Liens. Except for the financing
statements listed in Schedule 3, no financing statements covering any
Collateral or any proceeds thereof are on file in any public office (other
than filings listing the Secured Party as the secured party).
(b) VALID SECURITY INTEREST. The Security Interest granted
pursuant to this Agreement will constitute a valid and continuing first
priority, perfected security interest in favor of the Secured Party in the
Collateral for which perfection is governed by the UCC or filing with the
United States Copyright Office or United States Patent and Trademark Office.
Such Security Interest will be prior to all other Liens on the Collateral,
except for Permitted Liens.
(c) ORGANIZATION AND GOOD STANDING. The Debtor has been duly
incorporated, and is validly existing and in good standing, under the laws of
the State of Delaware.
(d) LOCATION, STATE OF ORGANIZATION AND NAME OF THE DEBTOR.
The Debtor's state of organization is Delaware and the Debtor's exact legal
name as it appears in the
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official filings in the State of Delaware is as set forth in the first paragraph
of this Agreement. The Debtor has only one jurisdiction of organization.
(e) LOCATION OF EQUIPMENT AND INVENTORY. All Equipment and
Inventory are (i) located at the locations indicated on Schedule 4 (ii) in
transit to such locations or (iii) in transit to a third party purchaser
which will become obligated on a Receivable to the Debtor upon receipt.
Except for Equipment and Inventory referred to in clauses (ii) and (iii) of
the preceding sentence, the Debtor has exclusive possession and control of
the Inventory and Equipment.
(g) DELIVERY OF ITEMS. Schedule 5 lists all Instruments (other
than checks received in the ordinary course of business), letter-of-credit
rights, Electronic Chattel paper and Chattel Paper of the Debtor as of the
date hereof. The Debtor has delivered to the Secured Party, together with
all necessary stock powers, endorsements, assignments and other necessary
instruments of transfer, the originals of all Receivables consisting of
instruments and Chattel Paper and the originals of all certificated
securities owned directly by the Debtor.
(h) RECEIVABLES. Each Receivable is genuine and enforceable
against the party obligated to pay the same (an "Account Debtor") free from
any right of rescission, defense, setoff or discount.
(i) INSURANCE. Each insurance policy maintained by the Debtor
is validly existing and is in full force and effect. The Debtor is not in
default in any material respect under the provisions of any insurance policy,
and there are no facts which, with the giving of notice or passage of time
(or both), would result in such a default under any material provision of any
such insurance policy. Set forth in Schedule 6 is a complete and accurate
list of the insurance of the Debtor in effect on the date of this Agreement
covering fire, public liability, property damage and worker's compensation,
showing as of such date, (i) the type of insurance carried, (ii) the name of
the insurance carrier, and (iii) the amount of each type of insurance carried.
(j) This Agreement is effective to create a valid and
continuing Lien upon the Collateral. All action by the Debtor necessary to
protect and perfect such Lien on each item of the Collateral has been duly
taken.
3. COVENANTS. The Debtor covenants and agrees with the Secured
Party that, from and after the date of this Agreement until the Obligations
are paid in full:
(a) OTHER LIENS. Except for the Security Interest and
Permitted Liens, the Debtor has rights in or the power to transfer the
Collateral and its title and will be able to do so hereafter free from any
adverse Lien, security interest or encumbrance, and the Debtor will defend
the Collateral against the claims and demands of all persons at any time
claiming the same or any interest therein.
(b) FURTHER DOCUMENTATION. At any time and from time to time,
upon the written request of the Secured Party, and at the sole expense of the
Debtor, the Debtor will promptly and duly authenticate and deliver such
further instruments and documents and take such further action as the Secured
Party may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted
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including, without limitation, filing any financing or continuation statements
under the UCC in effect with respect to the Liens created hereby. The Debtor
also hereby authorizes the Secured Party to file any such financing, amendment
or continuation statement without the authentication of the Debtor to the extent
permitted by applicable law. A reproduction of this Agreement shall be
sufficient as a financing statement (or as an exhibit to a financing statement
on form UCC-1) for filing in any jurisdiction.
(c) INDEMNIFICATION. The Debtor agrees to defend, indemnify
and hold harmless the Secured Party against any and all liabilities, costs
and expenses (including, without limitation, legal fees and expenses)
("Liabilities"): (i) with respect to, or resulting from, any delay in paying,
any and all excise, sales or other taxes which may be payable or determined
to be payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, any delay in complying with any law, rule, regulation or
order of any governmental authority applicable to any of the Collateral or
(iii) in connection with any of the transactions contemplated by this
Agreement.
(d) MAINTENANCE OF RECORDS. The Debtor will keep and maintain
at its own expense complete and satisfactory, in all material respects,
records of the Collateral.
(e) INSPECTION RIGHTS. The Secured Party shall have full
access during normal business hours, and upon prior notice, to all the books,
correspondence and other records of the Debtor relating to the Collateral.
The Secured Party or its representatives may examine such records and make
photocopies or otherwise take extracts from such records. The Debtor agrees
to render to the Secured Party, at the Debtor's expense, such clerical and
other assistance as the Secured Party may request with regard to the exercise
of its rights pursuant to this paragraph.
(f) COMPLIANCE WITH LAWS, ETC. The Debtor (i) will comply with
all laws, rules, regulations and orders of any governmental authority
applicable to any part of the Collateral or to the operation of the Debtor's
business, the failure of which to comply with will have a material adverse
effect on the Debtor, and (ii) shall not use or permit any Collateral to be
used in violation of any provision of any Credit Document, any law, rule or
obligation or order of any governmental authority, or any policy of insurance
covering the Collateral; PROVIDED, HOWEVER, that in each case, the Debtor may
contest any such law, rule, regulation or order; in any reasonable manner
which does not, in the reasonable opinion of the Secured Party, adversely
affect the Secured Party's rights or the priority of its Liens on the
Collateral.
(g) PAYMENT OF OBLIGATIONS. The Debtor will pay promptly when
due all taxes, assessments and governmental charges or levies imposed upon
the Collateral or with respect to any its income or profits derived from the
Collateral, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral.
(h) LIMITATION ON LIENS ON COLLATERAL. The Debtor will not
create, incur or permit to exist, will defend the Collateral against, and
will take such other action as is necessary to remove, any Lien or claim on
or to the Collateral, other than the Security Interest and
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Permitted Liens, and will defend the right, title and interest of the Secured
Party in and to any of the Collateral against the claims and demands of all
other persons.
(i) LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Debtor will
not sell, transfer, lease, or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so other than dispositions of Inventory in
the ordinary course of the Debtor's business; PROVIDED, HOWEVER that the
Debtor will be allowed to grant licenses to its products and related
documentation in the ordinary course of business and to establish or provide
for escrows of related intellectual property in connection therewith.
(j) FURTHER IDENTIFICATION OF COLLATERAL. The Debtor will
furnish to the Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may request, all in
detail acceptable to the Secured Party.
(k) NOTICE OF CHANGE OF STATE OF INCORPORATION. Without 30
days' prior written notice to the Debtor shall not (i) change the Debtor's
name, state of incorporation or organization, organizational identification
number or place of business (or, if the Debtor has more than one place of
business, its chief executive office), or the office in which the Debtor's
records relating to Receivables are kept, or (ii) keep Collateral consisting
of Chattel Paper and documents at any location other than its chief executive
office.
(l) FUTURE COMMERCIAL TORT CLAIMS. The Debtor will promptly
give notice to the Secured Party upon the initiation of any Commercial Tort
Claim. The Debtor hereby authorizes the Secured Party to amend this
Agreement (without any further action or consent from the Debtor) to include
any such Commercial Tort Claim as Collateral hereunder.
(m) DEPOSIT ACCOUNTS. For each deposit account maintained by
the Debtor, the Debtor shall, along with the bank or other depository
institution at which such deposit account is maintained (the "Depositary
Bank"), execute and deliver to the Secured Party a Deposit Account Control
Agreement in form and substance reasonably satisfactory to the Secured
Party. If requested by the Secured Party, the Debtor shall also obtain a
blocked account, lockbox or similar agreement with all or certain Depository
Banks. Without ten days prior written notice to the Secured Party, the
Debtor shall not establish any deposit account not set forth on Schedule 6.
(n) COLLECTION OF RECEIVABLES. The Debtor shall collect,
enforce and receive delivery of the Receivables in accordance with past
practice.
(q) INSURANCE. The Debtor shall (i) maintain and keep in force
insurance of the types and in amounts customarily carried from time to time
during the term of this Agreement in its lines of business, including fire,
public liability, property damage and worker's compensation, such insurance
to be carried with companies and in amounts satisfactory to the Secured
Party, (ii) deliver to the Secured Party from time to time, as the Secured
Party may request, schedules setting forth all insurance then in effect, and
(iii) deliver to the Secured Party copies of each policy of insurance which
replaces, or evidences the renewal of, each existing policy of insurance at
least 15 days prior to the expiration of such policy. The Secured Party
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shall be named as additional insured or additional loss payee, as appropriate,
on all liability and property insurance of the Debtor and such policies shall
contain such additional endorsements as shall be required by the Secured Party.
(r) MORTGAGEE WAIVERS. The Debtor shall use its best efforts
to obtain waivers or subordinations of Liens from landlords and mortgagees,
and the Debtor shall, in all instances, obtain signed acknowledgements of the
Secured Party's Liens from bailees having possession of any of the Debtor's
Collateral that they hold such Collateral for the benefit of the Secured
Party pursuant to Section 9313(c) of the UCC.
(s) LETTERS OF CREDIT. If the Debtor is or becomes the
beneficiary of a letter of credit, the Debtor shall promptly, and in any
event within two business days after becoming a beneficiary, notify the
Secured Party thereof and enter into a tri-party agreement with the Secured
Party and the issuer or confirmation bank with respect to such Letter of
Credit Rights assigning such Letter of Credit Rights to the Secured Party and
directing all payments thereunder to the Secured Party, all in form and
substance satisfactory to the Secured Party.
(t) ELECTRONIC CHATTEL PAPER. The Debtor shall take all steps
reasonably necessary to grant the Secured Party control of all Electronic
Chattel Paper in accordance with the UCC and all "transferable records" as
defined in each of the Uniform Electronic Transactions Act and the Electronic
Signatures in Global and National Commerce Act.
(u) INTELLECTUAL PROPERTY MATTERS. The Debtor shall notify the
Secured Party immediately if it knows or has reason to know (i) that any
application or registration relating to any of its Intellectual Property that
is material to the operation of its business may become abandoned or
dedicated, or (ii) of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding the Debtor's ownership of any Intellectual
Property that is material to the operation of its business, its right to
register the same, or to keep and maintain the same.
(v) INTELLECTUAL PROPERTY APPLICATIONS. In no event shall the
Debtor, either itself or through any agent, employee, licensee or designee,
file an application for the registration of any patent, trademark or
copyright with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency without giving the
Secured Party prior written notice thereof, and, upon request of the Secured
Party, the Debtor shall execute and deliver any and all security documents as
the Secured Party may request to evidence the Secured Party's Lien on such
Intellectual Property and the general intangibles of the Debtor relating
thereto or represented thereby. The Debtor hereby authorizes the Secured
Party to amend this Agreement (without any further action or consent from the
Debtor) to include any such patent, trademark or copyright as Collateral
hereunder.
(w) INTELLECTUAL PROPERTY ABANDONMENT. The Debtor shall take
all actions reasonably necessary or requested by the Secured Party to
maintain and pursue each application, to obtain the relevant registration and
to maintain the registration of its Intellectual Property, including the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation
proceedings.
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(x) PROTECTION OF INTELLECTUAL PROPERTY. In the event that any of
the Debtor's Intellectual Property is infringed upon, or misappropriated or
diluted by a third party, the Debtor shall notify the Secured Party promptly
after the Debtor learns thereof. The Debtor shall, unless the Secured Party
shall determine that such Intellectual Property is in no way material to the
conduct of its business or operations, promptly xxx for, and seek recovery of
any and all damages resulting from such infringement, misappropriation or
dilution, and shall take such other actions as the Secured Party shall deem
necessary under the circumstances to protect such Intellectual Property.
(y) CHATTEL PAPER. The Debtor shall type, print or stamp
conspicuously on the face of all original copies of all Collateral consisting of
Chattel Paper and Documents not in the possession of the Secured Party having a
value in excess of $100,000 a legend satisfactory to the Secured Party
indicating that such Chattel Paper is subject to the security interest granted
hereby.
(z) LIMITATION ON FILING OF FINANCING STATEMENTS. The Debtor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of the Secured Party and agrees that it will
not do so without the prior written consent of the Secured Party, subject to the
Debtor's rights under Section 9509(d)(2) of the UCC.
4. EVENT OF DEFAULT; THE SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) EVENT OF DEFAULT. For purposes of this Agreement, the occurrence
of any one of the following events (each, an "Event of Default") shall
constitute a default hereunder and under the Notes or any of the other Credit
Documents:
(i) The Debtor's failure to pay or discharge the Obligations
in full in accordance with the terms of the Notes or any of the other Credit
Documents;
(ii) A breach of any representation or warranty made by the
Debtor under this Agreement, the Notes or any of the other Credit Documents as
of the date thereof or any other document or instrument entered into between the
Debtor and the Secured Party in connection herewith.
(iii) The Debtor's failure to observe or perform any other
covenant, obligation, condition or agreement contained in this Agreement, the
Notes or any of the other Credit Documents and such failure shall continue for
10 days after the earlier of (i) the Debtor's written acknowledgement of such
failure and (ii) written notice by the Secured Party to the Debtor of such
failure.
(iv) The insolvency of the Debtor, the commission of any act
of bankruptcy by the Debtor, the execution by the Debtor of a general assignment
for the benefit of creditors, the filing by or against the Debtor of a petition
in bankruptcy or any petition for relief under the federal bankruptcy act or the
continuation of such petition without dismissal for a period of 90 days or more,
or the appointment of a receiver or trustee to take possession of the property
or assets of the Debtor.
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(v) A default shall occur under the Notes or any of the other
Credit Documents, or any other agreement entered into between the Debtor and the
Secured Party in connection herewith.
(b) POWERS. The Debtor hereby appoints the Secured Party and any
officer or agent of the Secured Party, with full power of substitution, as its
attorney-in-fact with full irrevocable power and authority in the place of the
Debtor and in the name of the Debtor or its own name, from time to time in the
Secured Party's discretion so long as an Event of Default has occurred and is
continuing, for the purpose of carrying out the terms of this Agreement, to take
any appropriate action and to authenticate any instrument which may be necessary
or desirable to accomplish the purposes of this Agreement. Without limiting the
foregoing, so long as an Event of Default has occurred and is continuing, the
Secured Party shall have the right, without notice to, or the consent of, the
Debtor, to do any of the following on the Debtor's behalf:
(i) to pay or discharge any taxes or Liens levied or placed on
or threatened against the Collateral;
(ii) to direct any party liable for any payment under any of
the Collateral to make payment of any and all amounts due or to become due
thereunder directly to the Secured Party or as the Secured Party directs;
(iii) to ask for or demand, collect, and receive payment of
and receipt for, any payments due or to become due at any time in respect of or
arising out of any Collateral;
(iv) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
enforce any right in respect of any Collateral;
(v) to defend any suit, action or proceeding brought against
the Debtor with respect to any Collateral;
(vi) to settle, compromise or adjust any suit, action or
proceeding described in subsection (v) above and to give such discharges or
releases in connection therewith as the Secured Party may deem appropriate;
(vii) to assign any patent right included in the Collateral of
the Debtor (along with the goodwill of the business to which any such patent
right pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Secured Party shall in its sole
discretion determine; and
(viii) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral and to
take, at the Secured Party's option and the Debtor's expense, any actions which
the Secured Party deems necessary to protect, preserve or realize upon the
Collateral and the Secured Party's Liens on the Collateral and to carry out the
intent of this Agreement, in each case to the same extent as if the Secured
Party were the absolute owner of the Collateral for all purposes.
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Xxx Xxxxxx hereby ratifies whatever actions the Secured Party shall
lawfully do or cause to be done in accordance with this Section 4. This power of
attorney shall be a power coupled with an interest and shall be irrevocable.
(c) NO DUTY ON THE SECURED PARTY'S PART. The powers conferred on the
Secured Party by this Section 4 are solely to protect the Secured Party's
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither the
Secured Party nor any of its officers, directors, employees or agents shall, in
the absence of willful misconduct or gross negligence, be responsible to the
Debtor for any act or failure to act pursuant to this Section 4.
5. PERFORMANCE BY THE SECURED PARTY OF THE DEBTOR'S OBLIGATIONS. If the
Debtor fails to perform or comply with any of its agreements or covenants
contained in this Agreement and the Secured Party performs or complies, or
otherwise causes performance or compliance, with such agreement or covenant in
accordance with the terms of this Agreement, then the expenses of the Secured
Party incurred in connection with such performance or compliance shall be
payable by the Debtor to the Secured Party on demand and shall constitute
Obligations secured by this Agreement.
6. REMEDIES. If an Event of Default has occurred and is continuing, the
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in any other instrument or agreement relating to the
Obligations, all rights and remedies of a secured party under the UCC. Without
limiting the foregoing, the Secured Party, without demand of performance or
other demand, presentment, protest, advertisement or notice of any kind (except
any notice required by law) to or upon the Debtor or any other person (all of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances collect, receive, appropriate and realize upon any or all of
the Collateral, and/or may sell, lease, assign, give an option or options to
purchase, or otherwise dispose of and deliver any or all of the Collateral (or
contract to do any of the foregoing), in one or more parcels at a public or
private sale or sales, at any exchange, broker's board or office of the Secured
Party or elsewhere upon such terms and conditions as the Secured Party may deem
advisable, for cash or on credit or for future delivery without assumption of
any credit risk. The Secured Party shall have the right upon any such public
sale or sales and, to the extent permitted by law, upon any such private sale or
sales, to purchase all or any part of the Collateral so sold, free of any right
or equity of redemption in the Debtor, which right or equity is hereby waived or
released. The Secured Party shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable expenses incurred therein or in connection with the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Secured Party under this Agreement (including, without
limitation, reasonable attorneys' fees and expenses) to the payment in whole or
in part of the Obligations, in such order as the Secured Party may elect, and
only after such application and after the payment by the Secured Party of any
other amount required by any provision of law, need the Secured Party account
for the surplus, if any, to the Debtor. To the extent permitted by applicable
law, the Debtor waives all claims, damages and demands it may acquire against
the Secured Party arising out of the exercise by the Secured Party of any of its
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable
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and proper if given at least ten days before such sale or other disposition. The
Debtor shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Obligations and
the fees and disbursements of any attorneys employed by the Secured Party to
collect such deficiency.
7. LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL. The Secured
Party's sole duty with respect to the custody, safekeeping and preservation of
the Collateral, under Section 9207 of the UCC or otherwise, shall be to deal
with it in the same manner as the Secured Party deals with similar property for
its own account. Neither the Secured Party nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Debtor or otherwise.
8. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
contained in this Agreement with respect to the Collateral are irrevocable and
are powers coupled with an interest.
9. NO WAIVER; CUMULATIVE REMEDIES. The Secured Party shall not by any act
(except by a written instrument pursuant to Section 11(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default under the Notes or any of the
other Credit Documents or in any breach of any of the terms and conditions of
this Agreement. No failure to exercise, nor any delay in exercising, on the part
of the Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Secured Party of any
right or remedy under this Agreement on any one occasion shall not be construed
as a bar to any right or remedy which the Secured Party would otherwise have on
any subsequent occasion. The rights and remedies provided in this Agreement are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
10. TERMINATION OF SECURITY INTEREST. Upon satisfaction of the Debtor's
obligations pursuant to the Notes, the security interest granted herein shall
terminate and all rights to the Collateral shall revert to the Debtor. Upon any
such termination, the Secured Party shall authenticate and deliver to the Debtor
such documents as the Debtor may reasonably request to evidence such
termination.
11. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended with the written consent of the parties or their respective successors
and assigns. Any amendment or waiver effected in accordance with this Section
11(a) shall be binding upon the parties and their respective successors and
assigns.
(b) TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall be binding upon the Debtor and its successors and assigns,
as well as all persons
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who become bound as a debtor to this Agreement and inure to the benefit of the
Secured Party and its successors and assigns. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(c) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(e) TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
48 hours after being deposited in the U.S. mail as certified or registered mail
with postage prepaid, if such notice is addressed to the party to be notified at
such party's address or facsimile number as set forth below or as subsequently
modified by written notice.
(h) PAYMENTS FREE OF TAXES, ETC. All payments made by the Debtor
under this Agreement shall be made by the Debtor free and clear of and without
deduction for any and all present and future taxes, levies, charges, deductions
and withholdings. In addition, the Debtor shall pay upon demand any stamp or
other taxes, levies or charges of any jurisdiction with respect to the
execution, delivery, registration, performance and enforcement of this
Agreement. Upon request by the Secured Party, the Debtor shall furnish evidence
satisfactory to the Secured Party that all requisite authorizations and
approvals by, and notices to and filings with, governmental authorities and
regulatory bodies have been obtained and made and that all requisite taxes,
levies and charges have been paid.
(i) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(j) ENTIRE AGREEMENT. This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter
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hereof, and any and all other written or oral agreements existing between the
parties hereto concerning such subject matter are expressly canceled.
(k) AMENDMENT AND RESTATEMENT. Effective upon execution of this
Agreement by both parties, the Tenth Amended and Restated Security Agreement
dated as of June 26, 2003 between the Debtor and the Secured Party is hereby
amended and restated in its entirety to read as set forth in this Agreement.
[Signature Page Follows]
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The Debtor and the Secured Party have caused this Agreement to be duly
executed and delivered as of the date first above written.
DEBTOR:
DIGITAL LIGHTWAVE, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SECURED PARTY:
OPTEL, LLC
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
