1
Exhibit 4
DIGITAL LIGHTWAVE, INC.
MEMORANDUM OF UNDERSTANDING
October 14, 1999
This memorandum of understanding ("Memorandum") is binding and sets
forth the agreement between Digital Lightwave, Inc. (the "Company") and Xx.
Xxxxx Xxxx, the majority stockholder of the Company ("BJZ"). Upon execution of
this Memorandum, the parties agree to immediately proceed to prepare and execute
additional agreements regarding the terms of this Memorandum; provided however
that if the parties hereto do not ever finalize such additional agreements, this
Memorandum shall be binding and control with respect to the matters contained
herein.
1) RETRACTION OF LETTERS TO THE OUTSIDE DIRECTORS OF THE COMPANY
BJZ hereby retracts, and agrees to execute a formal notice retracting,
the statements contained in his letters dated September 16, 1999 and
September 20, 1999.
2) AGREEMENT NOT TO TAKE ADDITIONAL ACTION
For so long as he is a director of the Company, BJZ shall not take any
action in his capacity as a stockholder of the Company to (a) remove
current senior management of the Company (Messrs. Chastelet, Grant,
Haider and Xxxx); it being understood that BJZ may, in his capacity as
a director, remove senior management in accordance with paragraph 4(c)
below or (b) remove Messrs. Xxxxxxxx, Chastelet or Zwan from the Board
from the date hereof up to and including the date of the annual meeting
in the year 2000.
3) AGREEMENT WITH RESPECT TO THE BOARD
a) BJZ and the Company shall enter into an agreement which provides
that:
i) The size of the Company's board of directors (the
"Board") shall be increased from four members to five
members and two new, outside directors ("New
Directors") shall be appointed to the Board.
ii) Xxxxxxx Xxxxxxx shall resign from the Board upon the
later to occur of (i) the appointment of the New
Directors to the Board and (ii) the conclusion
2
of his assignments on the two special committees of
the Board on which he serves.
iii) The New Directors shall be nominated for appointment
to the Board by any member of the current Board
(Messrs. Hamilton, Seifert, Zwan and Chastelet).
iv) BJZ agrees to vote his shares of common stock at the
Company's annual meeting in the year 2000 in favor of
the election to the Board of Messrs. Xxxxxxxx,
Chastelet and Zwan and, if appointed to the Board
prior to the annual meeting in the year 2000, the New
Directors.
v) the New Directors shall be appointed to the Board
only with the vote or consent of a majority of the
directors serving as of the date hereof; provided
however that no director shall serve without the
affirmative vote or consent of BJZ in the Board
action to appoint the New Directors.
4) EMPLOYMENT AGREEMENTS
a) Upon the vote of a majority of the members of the Board
serving as of the date hereof and eligible to vote, the
Company shall enter into an agreement with respect to change
of control, severance and non-compete with Messrs. Chastelet,
Grant, Haider and Xxxx.
b) The agreements referred to in paragraph 4(a) above shall be in
the form negotiated, in good faith and in accordance with
current negotiations, between counsel to the Company and
counsel to BJZ.
c) The agreements referred to in paragraph 4(a) above shall
contain a provision providing for removal of Messrs.
Chastelet, Grant, Haider and Xxxx, as applicable, in
accordance with the terms of their respective agreements, upon
the vote of a majority of the members of the Board.
5) UNTERBERG PUBLIC OFFERING
a) The Company and BJZ agree to decide by November 1, 1999
whether to proceed immediately on such date with the public
offering of common stock by the Company and, if BJZ so elects,
BJZ, by converting the proposed underwritten offering by X.X.
Xxxxxxxxx Towbin ("Unterberg") on file with the Securities and
Exchange Commission as of the date hereof, into an equity
offering.
b) The terms and conditions of the public offering of common
stock, including the pricing, and other terms, shall be
finally determined by the Pricing Committee established by the
Board for this purpose, which is comprised of BJZ, Xx. Xxxxxxx
Xxxxxxxx and Xx. Xxxxxxx Xxxxxxx.
2
3
c) In connection with the offering, BJZ will agree to a standard
six month lock-up agreement with the Company and Unterberg
with respect to any public sale (including a sale under Rule
144) of his shares of common stock, other than shares
currently under option.
Executed on October 14, 1999.
DIGITAL LIGHTWAVE, INC.
By: /s/ Xxxxx Xxxxxxxxx /s/ Xx. Xxxxx X. Xxxx
------------------- ---------------------
Xxxxx Xxxxxxxxx ` Xx. Xxxxx X. Xxxx
President and CEO
