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EXHIBIT 3
SAILS PLEDGE AGREEMENT
dated as of
December 8, 1999
among
XXXXX X. XXXX,
CSFB SAILS CORP.
and
CREDIT SUISSE FIRST BOSTON CORPORATION, as Agent
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TABLE OF CONTENTS
PAGE
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SECTION 1. The Security Interests..............................................................1
SECTION 2. Definitions.........................................................................3
SECTION 3. Representations and Warranties of Pledgor...........................................4
SECTION 4. Certain Covenants of Pledgor........................................................6
SECTION 5. Administration of the Collateral and Valuation of the Securities....................7
SECTION 6. Income and Voting Rights in Collateral.............................................11
SECTION 7. Remedies upon Acceleration Events..................................................11
SECTION 8. Miscellaneous......................................................................15
SECTION 9. Termination of Pledge Agreement....................................................16
SECTION 10. Set-off...........................................................................16
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PLEDGE AGREEMENT
THIS AGREEMENT is made as of this 8th day of December, 1999 among XXXXX
X. XXXX ("PLEDGOR"), CREDIT SUISSE FIRST BOSTON CORPORATION, as agent (the
"AGENT") hereunder, and CSFB SAILS CORP. ("SECURED PARTY").
WHEREAS, pursuant to the SAILS Mandatorily Exchangeable Securities
Contract (as amended from time to time, the "SECURITIES CONTRACT") dated as of
the date hereof among Pledgor, the Agent and Secured Party, Pledgor has agreed
to sell and Secured Party has agreed to purchase shares of common stock, par
value $0.0001 per share, of Digital Lightwave, Inc., a Delaware corporation (the
"ISSUER") (or security entitlements in respect thereof) (the "COMMON STOCK"), or
cash in lieu thereof, subject to the terms and conditions of the Securities
Contract;
WHEREAS, it is a condition to the obligations of Secured Party under
the Securities Contract that Pledgor and Secured Party enter into this Agreement
and that Pledgor grant the pledge provided for herein;
NOW, THEREFORE, in consideration of their mutual covenants contained
herein and to secure the performance by Pledgor of Pledgor's obligations under
the Securities Contract and the observance and performance of the covenants and
agreements contained herein and in the Securities Contract, the parties hereto,
intending to be legally bound, hereby mutually covenant and agree as follows:
SECTION 1. The Security Interests. In order to secure the full and
punctual observance and performance of the covenants and agreements contained
herein and in the Securities Contract:
(a) Pledgor hereby assigns and pledges to Secured Party, and grants to
Secured Party, security interests in and to, and a lien upon and right of
set-off against, and transfers to Secured Party, as and by way of a security
interest having priority over all other security interests, with power of sale,
all of Pledgor's right, title and interest in and to (i) the Initial Pledged
Items; (ii) all additions to and substitutions for the Initial Pledged Items
(including, without limitation, any securities, instruments or other property
delivered or pledged pursuant to Section 4(a) or 5(b)) (such additions and
substitutions, the "ADDITIONS AND SUBSTITUTIONS"); (iii) all income, proceeds
and collections received or to be received, or derived or to be derived, now or
any time hereafter (whether before or after the commencement of any proceeding
under applicable bankruptcy, insolvency or similar law, by or against Pledgor,
with respect to Pledgor) from or
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in connection with the Initial Pledged Items and the Additions and Substitutions
(including, without limitation, (A) any shares of capital stock issued by the
Issuer in respect of any Common Stock constituting Collateral or any cash,
securities or other property distributed in respect of or exchanged for any
Common Stock constituting Collateral, or into which any such Common Stock is
converted, in connection with any Reorganization Event, and any security
entitlements in respect of any of the foregoing, (B) any obligation of Secured
Party to replace any rehypothecated Collateral pursuant to Section 5(i) and (C)
any amounts paid or assets delivered to Pledgor by Secured Party in respect of
dividends paid or distributions made on shares of Common Stock constituting
Collateral that have been rehypothecated in accordance with Section 5(i)); (iv)
the Collateral Account and all securities and other financial assets (each as
defined in Section 8-102 of the UCC), including the Initial Pledged Items and
the Additions and Substitutions, and other funds, property or assets from time
to time held therein or credited thereto; and (v) all powers and rights now
owned or hereafter acquired under or with respect to the Initial Pledged Items
or the Additions and Substitutions (such Initial Pledged Items, Additions and
Substitutions, proceeds, collections, powers, rights, Collateral Account and
assets held therein or credited thereto being herein collectively called the
"COLLATERAL"). Secured Party shall have all of the rights, remedies and
recourses with respect to the Collateral afforded a secured party by the UCC, in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded to Secured Party by this Agreement.
(b) On or prior to the Payment Date, Pledgor shall deliver to Secured
Party in pledge hereunder Eligible Collateral consisting of a number of shares
of Common Stock equal to the Base Amount as of the Payment Date (the "INITIAL
PLEDGED ITEMS"), in the manner provided in Section 5(c).
(c) In the event that the Issuer at any time issues in respect of any
Common Stock constituting Collateral hereunder, or comprising financial assets
underlying security entitlements constituting Collateral hereunder, any
additional or substitute shares of capital stock of any class, Pledgor shall
immediately pledge and deliver to Secured Party in accordance with Section 5(c)
all such shares or security entitlements in respect thereof as additional
Collateral hereunder.
(d) The Security Interests are granted as security only and shall not
subject Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of Pledgor or the Issuer with respect to any of the
Collateral or any transaction in connection therewith.
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(e) The parties hereto expressly agree that all rights, assets and
property at any time held in or credited to the Collateral Account shall be
treated as financial assets (as defined in Section 8-102 of the UCC).
SECTION 2. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Securities
Contract. As used herein, the following words and phrases shall have the
following meanings:
"ADDITIONS AND SUBSTITUTIONS" has the meaning provided in Section 1(a).
"COLLATERAL" has the meaning provided in Section 1(a).
"COLLATERAL ACCOUNT" has the meaning provided in Section 5(c).
"COLLATERAL EVENT OF DEFAULT" means, at any time, the occurrence of
either of the following: (A) failure of the Collateral to include, as Eligible
Collateral, at least the Maximum Deliverable Number of shares of Common Stock or
(B) failure at any time of the Security Interests to constitute valid and
perfected security interests in all of the Collateral, subject to no prior or
equal Lien, and, with respect to any Collateral consisting of securities or
security entitlements (each as defined in Section 8-102 of the UCC), as to which
Secured Party has Control, or, in each case, assertion of such by Pledgor in
writing.
"CONTROL" means "control" as defined in Section 8-106 and Section 9-115
of the UCC.
"CUSTODIAN" means The Bank of New York, or any other custodian
appointed by Secured Party and identified to Seller.
"DEFAULT SETTLEMENT DATE" has the meaning provided in Section 7(a).
"ELIGIBLE COLLATERAL" means Common Stock; provided that Pledgor has
good and marketable title thereto, free of all Liens (other than the Security
Interests) and Transfer Restrictions (other than the Existing Transfer
Restrictions) and that Secured Party has a valid, first priority perfected
security interest therein, a first lien thereon and Control with respect
thereto, and provided further that to the extent the number of shares of Common
Stock pledged hereunder exceeds at any time the Maximum Deliverable Number
thereof, such excess shares shall not be Eligible Collateral.
"EXISTING TRANSFER RESTRICTIONS" means Transfer Restrictions existing
with respect to any securities by virtue of the fact that Pledgor is an
"affiliate", within the meaning of Rule 144 under the Securities Act, of the
Issuer.
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"INITIAL PLEDGED ITEMS" has the meaning provided in Section 1(b).
"LOCATION" means, with respect to any party, the place such party is
"deemed located" within the meaning of Section 9-103(3)(d) of the UCC.
"MAXIMUM DELIVERABLE NUMBER" means, on any date, a number of shares of
Common Stock equal to the Base Amount on such date.
"PLEDGED ITEMS" means, as of any date, any and all securities and
instruments delivered by Pledgor to be held by or on behalf of Secured Party
under this Agreement as Collateral.
"REHYPOTHECATION UNAVAILABILITY" has the meaning provided in Section
5(i).
"REHYPOTHECATE" has the meaning provided in Section 5(i).
"SECURITY INTERESTS" means the security interests in the Collateral
created hereby.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
SECTION 3. Representations and Warranties of Pledgor. Pledgor hereby
represents and warrants to Secured Party that:
(a) Pledgor (i) acquired all of the Eligible Collateral delivered
pursuant to Section 1(b) at least two years prior to the date hereof, owns, and,
except with respect to Collateral rehypothecated pursuant to Section 5(i) at all
times prior to the release of the Collateral pursuant to the terms of this
Agreement, will own the Collateral free and clear of any Liens (other than the
Security Interests) or Transfer Restrictions (other than the Existing Transfer
Restrictions) and (ii) is not and will not become a party to or otherwise bound
by any agreement, other than this Agreement, that (x) restricts in any manner
the rights of any present or future owner of the Collateral with respect thereto
or (y) provides any person other than Pledgor, Secured Party or any securities
intermediary through whom any Collateral is held (but, in the case of any such
securities intermediary, only with respect to Collateral held through it) with
Control with respect to any Collateral.
(b) Other than financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests, no financing
statement, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of record in any
jurisdiction
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in which such filing or recording would be effective to perfect a lien, security
interest or other encumbrance of any kind on such Collateral.
(c) All Collateral consisting of securities and all financial assets
underlying Collateral consisting of security entitlements (each as defined in
Section 8-102 of the UCC) at any time pledged hereunder is and will be issued by
an issuer organized under the laws of the United States, any State thereof or
the District of Columbia and (i) certificated (and the certificate or
certificates in respect of such securities or financial assets are and will be
located in the United States) and registered in the name of Pledgor or held
through a securities intermediary whose securities intermediary's jurisdiction
(within the meaning of Section 8-110(e) of the UCC) is located in the United
States or (ii) uncertificated and either registered in the name of Pledgor or
held through a securities intermediary whose securities intermediary's
jurisdiction (within the meaning of Section 8-110(e) of the UCC) is located in
the United States; provided that this representation shall not be deemed to be
breached if, at any time, any such Collateral is issued by an issuer that is not
organized under the laws of the United States, any State thereof or the District
of Columbia, and the parties hereto agree to procedures or amendments hereto
necessary to enable Secured Party to maintain a valid and continuously perfected
security interest in such Collateral, in respect of which Secured Party will
have Control, subject to no prior Lien. The parties hereto agree to negotiate in
good faith any such procedures or amendments.
(d) Upon (i) in the case of Collateral consisting of investment
property (as defined in Section 9-115 of the UCC), (A) the delivery of
certificates evidencing any such investment property consisting of securities to
the Custodian in accordance with Section 5(c)(i), (B) the registration of any
such investment property consisting of uncertificated securities in the name of
the Custodian or its nominee in accordance with Section 5(c)(ii) or (C) the
crediting of any securities or other financial assets underlying any such
investment property consisting of security entitlements to a securities account
of the Custodian in accordance with Section 5(c)(iii) and, in each case, the
crediting of such securities or financial assets to the Collateral Account or
(ii) in the case of Collateral not consisting of investment property, the filing
of UCC-1 financing statements in the form of Exhibit B hereto in the filing
offices specified in Exhibit C hereto, Secured Party will have a valid and
perfected security interest in such Collateral, in respect of which Secured
Party will have (in the case of Collateral consisting of investment property)
Control, subject to no prior Lien.
(e) No registration, recordation or filing with any governmental body,
agency or official is required in connection with the execution and delivery of
this Agreement or necessary for the validity or enforceability hereof or for the
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perfection or enforcement of the Security Interests, other than the filing of
UCC-1 financing statements in the form of Exhibit B hereto in the filing offices
specified in Exhibit C hereto.
(f) Pledgor has not performed and will not perform any acts that might
prevent Secured Party from enforcing any of the terms of this Agreement or that
might limit Secured Party in any such enforcement.
(g) The Location of Pledgor is the address set forth in Section 8(c),
and under the Uniform Commercial Code as in effect in such Location, no local
filing is required to perfect a security interest in collateral consisting of
general intangibles.
(h) Pledgor has delivered to Secured Party a perfection certificate
substantially in the form attached as Exhibit C hereto, completed and
supplemented with the schedules and attachments contemplated thereby to the
satisfaction of Secured Party, and signed by Pledgor.
SECTION 4. Certain Covenants of Pledgor. Pledgor agrees that, so long
as any of Pledgor's obligations under the Securities Contract remain
outstanding:
(a) Pledgor shall ensure at all times that a Collateral Event of
Default shall not occur, and shall pledge additional Collateral in the manner
described in Sections 5(b) and 5(c) as necessary to cause such requirement to be
met.
(b) Pledgor shall, at the expense of Pledgor and in such manner and
form as Secured Party may reasonably require, give, execute, deliver, file and
record any financing statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable in order to (i) create, preserve,
perfect, substantiate or validate any security interest granted pursuant hereto,
(ii) create or maintain Control with respect to any such security interests in
any investment property (as defined in Section 9-115 of the UCC) or (iii) enable
Secured Party to exercise and enforce its rights hereunder with respect to such
security interest. To the extent permitted by applicable law, Pledgor hereby
authorizes Secured Party to execute and file, in the name of Pledgor or
otherwise, UCC financing or continuation statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) that Secured Party in its sole
discretion may deem reasonably necessary or appropriate to further perfect, or
maintain the perfection of, the Security Interests.
(c) Pledgor shall warrant and defend Pledgor's title to the
Collateral, subject to the rights of Secured Party, against the claims and
demands of all
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persons. Secured Party may elect, but without an obligation to do so, to
discharge any Lien of any third party on any of the Collateral.
(d) Pledgor agrees that Pledgor shall not change (i) Pledgor's name or
identity in any manner or (ii) Pledgor's Location, unless in either case (A)
Pledgor shall have given Secured Party not less than 30 days' prior notice
thereof and (B) such change shall not cause any of the Security Interests to
become unperfected, cause Secured Party to cease to have Control in respect of
any of the Security Interests in any Collateral consisting of investment
property (as defined in Section 9-115 of the UCC) or subject any Collateral to
any other Lien.
(e) Pledgor agrees that Pledgor shall not (i) create or permit to
exist any Lien (other than the Security Interests) or any Transfer Restriction
(other than the Existing Transfer Restrictions) upon or with respect to the
Collateral, (ii) sell or otherwise dispose of, or grant any option with respect
to, any of the Collateral or (iii) enter into or consent to any agreement
pursuant to which any person other than Pledgor, Secured Party and any
securities intermediary through whom any of the Collateral is held (but in the
case of any such securities intermediary only in respect of Collateral held
through it) has or will have Control in respect of any Collateral.
SECTION 5. Administration of the Collateral and Valuation of the
Securities. (a) Secured Party shall determine on each Business Day whether a
Collateral Event of Default shall have occurred.
(b) Pledgor may pledge additional Eligible Collateral hereunder at any
time. Concurrently with the delivery of any additional Eligible Collateral,
Pledgor shall deliver to Secured Party a certificate of Pledgor substantially in
the form of Exhibit A hereto and dated the date of such delivery, (i)
identifying the additional items of Eligible Collateral being pledged and (ii)
certifying that with respect to such items of additional Eligible Collateral the
representations and warranties contained in paragraphs (a), (b), (c) and (d) of
Section 3 are true and correct with respect to such Eligible Collateral on and
as of the date thereof. Pledgor hereby covenants and agrees to take all actions
required under Section 5(c) and any other actions necessary to create for the
benefit of Secured Party a valid, first priority, perfected security interest
in, and a first lien upon, such additional Eligible Collateral, as to which
Secured Party will have Control.
(c) Any delivery of any securities or security entitlements (each as
defined in Section 8-102 of the UCC) as Collateral to Secured Party by Pledgor
shall be effected (i) in the case of Collateral consisting of certificated
securities registered in the name of Pledgor, by delivery of certificates
representing such securities to the Custodian, accompanied by any required
transfer tax stamps, and
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in suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, all in form and substance satisfactory to Secured Party, and the
crediting by the Custodian of such securities to a securities account (as
defined in Section 8-501 of the UCC) (the "COLLATERAL ACCOUNT") of Secured Party
maintained by the Custodian, (ii) in the case of Collateral consisting of
uncertificated securities registered in the name of Pledgor, by transmission by
Pledgor of an instruction to the issuer of such securities instructing such
issuer to register such securities in the name of the Custodian or its nominee,
accompanied by any required transfer tax stamps, the issuer's compliance with
such instructions and the crediting by the Custodian of such securities to the
Collateral Account, (iii) in the case of securities in respect of which security
entitlements are held by Pledgor through a securities intermediary, by the
crediting of such securities, accompanied by any required transfer tax stamps,
to a securities account of the Custodian at such securities intermediary or, at
the option of Secured Party, at another securities intermediary satisfactory to
Secured Party and the crediting by the Custodian of such securities to the
Collateral Account or (iv) in any case, by complying with such reasonable
alternative delivery instructions as Secured Party shall provide to Pledgor in
writing. Upon delivery of any such Pledged Item under this Agreement, Secured
Party shall examine (or cause the Custodian to examine) such Pledged Item and
any certificates delivered pursuant to Section 5(b) or otherwise pursuant to the
terms hereof in connection therewith to determine that they comply as to form
with the requirements for Eligible Collateral.
(d) If on any Business Day Secured Party determines that a Collateral
Event of Default shall have occurred, Secured Party shall promptly notify
Pledgor of such determination by telephone call to Pledgor followed by a written
confirmation of such call.
(e) If on any Business Day Secured Party determines that no
Acceleration Event or failure by Pledgor to meet any of Pledgor's obligations
under Sections 4 or 5 hereof has occurred and is continuing, Pledgor may obtain
the release from the Security Interests of any Collateral upon delivery to
Secured Party of a written notice from Pledgor indicating the items of
Collateral to be released so long as, after such release, no Collateral Event of
Default shall have occurred.
(f) On the Maturity Date, unless (i) Pledgor shall have otherwise
effected the deliveries required by Section 2.03(b) of the Securities Contract
or shall have delivered the Cash Settlement Amount to Secured Party in lieu of
shares of Common Stock in accordance with Section 2.04 of the Securities
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Contract on the Maturity Date or (ii) the Common Stock then held by or on behalf
of Secured Party hereunder is not Free Stock, Secured Party shall deliver or
cause to be delivered to itself from the Collateral Account in whole or partial,
as the case may be, satisfaction of Pledgor's obligations to deliver shares of
Common Stock to Secured Party on the Maturity Date pursuant to the Securities
Contract, shares of Common Stock then held by or on behalf of it hereunder
representing the number of shares of Common Stock required to be delivered under
the Securities Contract on the Maturity Date. Upon any such delivery, Secured
Party shall hold such shares of Common Stock absolutely and free from any claim
or right whatsoever (including, without limitation, any claim or right of
Pledgor).
(g) Secured Party may at any time or from time to time, in its sole
discretion, cause any or all of the Common Stock pledged hereunder registered in
the name of Pledgor or Pledgor's nominee to be transferred of record into the
name of the Custodian, Secured Party or its nominee. Pledgor shall promptly give
to Secured Party copies of any notices or other communications received by
Pledgor with respect to Common Stock pledged hereunder registered, or held
through a securities intermediary, in the name of Pledgor or Pledgor's nominee
and Secured Party shall promptly give to Pledgor copies of any notices and
communications received by Secured Party with respect to Common Stock pledged
hereunder registered, or held through a securities intermediary, in the name of
Custodian, Secured Party or its nominee.
(h) Pledgor agrees that Pledgor shall forthwith upon demand pay to
Secured Party:
(i) the amount of any taxes that Secured Party or the
Custodian may have been required to pay by reason of the Security
Interests or to free any of the Collateral from any Lien thereon, and
(ii) the amount of any and all reasonable costs and expenses,
including the fees and disbursements of counsel and of any other
experts, that Secured Party or the Custodian may incur in connection
with (A) the enforcement of this Agreement, including such expenses as
are incurred to preserve the value of the Collateral and the validity,
perfection, rank and value of the Security Interests, (B) the
collection, sale or other disposition of any of the Collateral, (C) the
exercise by Secured Party of any of the rights conferred upon it
hereunder or (D) any Acceleration Event.
Any such amount not paid on demand shall bear interest (computed on the basis of
a year of 360 days and payable for the actual number of days elapsed) at a rate
per annum equal to 5% plus the prime rate as published from time to time in The
Wall Street Journal, Eastern Edition.
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(i) Without limiting the rights and obligations of the parties under
this Agreement, upon the consent of Pledgor (which consent need not be in
writing), Secured Party may, notwithstanding Section 9-207 of the UCC, sell,
lend, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose
of, or otherwise use in its business (collectively, "REHYPOTHECATE"), any
Collateral, free from any claim or right of any nature whatsoever of Pledgor,
including any equity or right of redemption by Pledgor; provided that Secured
Party will replace any rehypothecated Collateral (with the same Collateral or
identical substitute Collateral) (A) upon five Business Days' notice from
Pledgor or (B) if not already replaced, on the Maturity Date or any Optional
Termination Date; provided further that in the case of any Optional Termination
Date on which the Securities Contract is terminated in part pursuant to Section
3.01 of the Securities Contract, Secured Party will be obligated to replace only
an amount of rehypothecated Collateral sufficient to ensure that on such date,
the Collateral Account will contain a number of shares of Common Stock at least
equal to the number of shares of Common Stock with respect to which the
Securities Contract is to be terminated pursuant to Section 3.01 of the
Securities Contract. If at any time at which any shares of Common Stock
constituting Collateral have been rehypothecated pursuant to this Section 5(i)
there shall occur an event of a type that would, had Secured Party borrowed such
shares of Common Stock from Pledgor on terms customary for loans of equity
securities (as determined by the Calculation Agent), require either (i) an
adjustment to the number of shares of Common Stock or a change in the type of
securities or other property that Secured Party would be required to deliver to
Pledgor to repay such stock loan or (ii) a payment or delivery by Secured Party
to Pledgor in respect of dividends paid or distributions made on such shares of
Common Stock, then, in the case of clause (i), such adjustment or change shall
be applied to the number of shares of Common Stock that Secured Party is
required to replace in accordance with the proviso to the immediately preceding
sentence and, in the case of clause (ii), Secured Party shall make such payment
or delivery to Pledgor, whereupon the amount so paid or the assets so delivered
shall become Collateral hereunder. All determinations related to the immediately
preceding sentence shall be made by the Calculation Agent. Notwithstanding the
foregoing, if any of the Eligible Collateral pledged hereunder is unavailable
for rehypothecation by Secured Party at any time ((1) as a result of Pledgor's
withholding Pledgor's consent to rehypothecation of such Collateral, (2) as a
result of Pledgor's causing Secured Party to replace such Collateral pursuant to
the proviso to the first sentence in this Section 5(i), (3) as a result of any
Transfer Restrictions (including the Existing Transfer Restrictions) or (4)
otherwise) (a "REHYPOTHECATION UNAVAILABILITY"), the Calculation Agent shall
adjust one or more of the Base Amount, the Exchange Rate, the Threshold Price,
the Issue Price, the Maturity Price, the Cash Settlement Amount, any Closing
Price and any other variable relevant to the exercise, settlement or payment
terms hereof or of the
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Securities Contract, as appropriate to make Secured Party whole for Secured
Party's cost relating to the borrowing of shares of Common Stock in connection
with hedging Secured Party's exposure to the Securities Contract (whether such
borrowing is effected by Secured Party or by a counterparty to a transaction
entered into by Secured Party to hedge Secured Party's exposure to the
Securities Contract), as determined by the Calculation Agent. For purposes of
determining the occurrence of a Collateral Event of Default, the rehypothecation
of any Collateral pledged hereunder shall not affect the status of such
Collateral as Collateral or Eligible Collateral hereunder.
SECTION 6. Income and Voting Rights in Collateral. (a) Secured Party
shall have the right to receive and retain as Collateral hereunder all proceeds
(including, without limitation, ordinary cash dividends or interest) of the
Collateral, and Pledgor shall take all such action as Secured Party shall deem
reasonably necessary or appropriate to give effect to such right. All such
proceeds that are received by Pledgor shall be received in trust for the benefit
of Secured Party and, if Secured Party so directs, shall be segregated from
other funds of Pledgor and shall, forthwith upon demand by Secured Party, be
delivered over to the Custodian on behalf of Secured Party as Collateral in the
same form as received (with any necessary endorsement).
(b) Unless an Acceleration Event shall have occurred and be
continuing, Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral (other than
Collateral that has been rehypothecated by Secured Party pursuant to Section
5(i)), and Secured Party shall, upon receiving a written request from Pledgor
accompanied by a certificate of Pledgor stating that no Acceleration Event has
occurred and is continuing, deliver to Pledgor or as specified in such request
such proxies, powers of attorney, consents, ratifications and waivers in respect
of any of the Collateral that is registered, or held through a securities
intermediary, in the name of the Custodian, Secured Party or its nominee as
shall be specified in such request and shall be in form and substance
satisfactory to Secured Party.
(c) If an Acceleration Event shall have occurred and be continuing,
Secured Party shall have the right, to the extent permitted by law, and Pledgor
shall take all such action as may be necessary or appropriate to give effect to
such right, to vote and to give consents, ratifications and waivers, and to take
any other action with respect to any or all of the Collateral with the same
force and effect as if Secured Party were the absolute and sole owner thereof.
SECTION 7. Remedies upon Acceleration Events. (a) If any Acceleration
Event shall have occurred and be continuing, Secured Party may exercise all the
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rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
without being required to give any notice, except as herein provided or as may
be required by mandatory provisions of law, shall: (i) deliver or cause to be
delivered to itself from the Collateral Account all Collateral consisting of
shares of Common Stock (but not in excess of the number thereof deliverable
under the Securities Contract at such time) on the date of the Acceleration
Amount Notice relating to such Acceleration Event (the "DEFAULT SETTLEMENT
DATE") in satisfaction of Pledgor's obligations to deliver Common Stock under
the Securities Contract, whereupon Secured Party shall hold such shares of
Common Stock absolutely free from any claim or right of whatsoever kind,
including any equity or right of redemption of Pledgor that may be waived or any
other right or claim of Pledgor, and Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal that
Pledgor has or may have under any law now existing or hereafter adopted; and
(ii) if such delivery shall be insufficient to satisfy in full all of the
obligations of Pledgor under the Securities Contract or hereunder, sell all of
the remaining Collateral, or such lesser portion thereof as may be necessary to
generate proceeds sufficient to satisfy in full all of the obligations of
Pledgor under the Securities Contract or hereunder, at public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery, and at such price or prices as Secured Party may deem
satisfactory. Pledgor covenants and agrees that Pledgor will execute and deliver
such documents and take such other action as Secured Party deems necessary or
advisable in order that any such sale may be made in compliance with law. Upon
any such sale, Secured Party shall have the right to deliver, assign and
transfer to the buyer thereof the Collateral so sold. Each buyer at any such
sale shall hold the Collateral so sold absolutely and free from any claim or
right of whatsoever kind, including any equity or right of redemption of Pledgor
that may be waived or any other right or claim of Pledgor, and Pledgor, to the
extent permitted by law, hereby specifically waives all rights of redemption,
stay or appraisal that Pledgor has or may have under any law now existing or
hereafter adopted. The notice (if any) of such sale required by Section 9-504 of
the UCC shall (1) in case of a public sale, state the time and place fixed for
such sale, (2) in case of sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as Secured Party may fix in the notice of such sale. At any
such sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as Secured Party may determine. Secured Party shall not be obligated to
make any such sale pursuant to any such notice. Secured Party may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to
12
15
time by announcement at the time and place fixed for the sale, and such sale may
be made at any time or place to which the same may be so adjourned. In case of
any sale of all or any part of the Collateral on credit or for future delivery,
the Collateral so sold may be retained by Secured Party until the selling price
is paid by the buyer thereof, but Secured Party shall not incur any liability in
case of the failure of such buyer to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may again be sold upon like
notice. Secured Party, instead of exercising the power of sale herein conferred
upon it, may proceed by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.
(b) Pledgor hereby irrevocably appoints Secured Party Pledgor's true
and lawful attorney, with full power of substitution, in the name of Pledgor,
Secured Party or otherwise, for the sole use and benefit of Secured Party, but
at the expense of Pledgor, to the extent permitted by law, to exercise, at any
time and from time to time while an Acceleration Event has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral:
(i) to demand, xxx for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
Secured Party were the absolute owner thereof (including, without
limitation, the giving of instructions and entitlement orders in
respect thereof), and
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that Secured Party shall give Pledgor not less than one day's prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral that threatens to decline
speedily in value, including, without limitation, equity securities, or is of a
type customarily sold on a recognized market. Secured Party and Pledgor agree
that such notice constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the UCC.
(c) Upon any delivery or sale of all or any part of any Collateral
made either under the power of delivery or sale given under this Section 7 or
under judgment or decree in any judicial proceedings for foreclosure or
otherwise for the
13
16
enforcement of this Agreement, Secured Party is hereby irrevocably appointed the
true and lawful attorney of Pledgor, in the name and stead of Pledgor, to make
all necessary deeds, bills of sale, instruments of assignment, transfer or
conveyance of the property, and all instructions and entitlement orders in
respect of the property thus delivered or sold. For that purpose Secured Party
may execute all such documents, instruments, instructions and entitlement
orders. This power of attorney shall be deemed coupled with an interest, and
Pledgor hereby ratifies and confirms that which Pledgor's attorney acting under
such power, or such attorney's successors or agents, shall lawfully do by virtue
of this Agreement. If so requested by Secured Party or by any buyer of the
Collateral or a portion thereof, Pledgor shall further ratify and confirm any
such delivery or sale by executing and delivering to Secured Party or to such
buyer or buyers at the expense of Pledgor all proper deeds, bills of sale,
instruments of assignment, conveyance or transfer, releases, instructions and
entitlement orders as may be designated in any such request.
(d) In the case of an Acceleration Event, Secured Party may proceed to
realize upon the security interest in the Collateral against any one or more of
the types of Collateral, at any time, as Secured Party shall determine in its
sole discretion subject to the foregoing provisions of this Section 7. The
proceeds of any sale of, or other realization upon, or other receipt from, any
of the Collateral shall be applied by Secured Party in the following order of
priorities:
first, to the payment to Secured Party or the
Custodian of the expenses of such sale or other realization,
including reasonable compensation to the Custodian and the
agents and counsel of the Custodian and Secured Party, and all
expenses, liabilities and advances incurred or made by Secured
Party or the Custodian in connection therewith, including
brokerage fees in connection with the sale by Secured Party of
any Collateral;
second, to the payment to Secured Party of an amount
equal to the aggregate Market Value of a number of shares of
Common Stock equal to (i) the number of shares of Common Stock
that would be required to be delivered under Section 8.01 of
the Securities Contract on the Default Settlement Date without
giving effect to the proviso therein minus (ii) the number of
shares of Common Stock delivered to Secured Party on the
Default Settlement Date as described in Section 7(a);
finally, if all of the obligations of Pledgor
hereunder and under the Securities Contract have been fully
discharged or sufficient funds have been set aside by Secured
Party at the request of Pledgor for the
14
17
discharge thereof, any remaining proceeds shall be released
to Pledgor.
SECTION 8. Miscellaneous. (a). This Agreement is not intended and shall
not be construed to create any rights in any person other than Pledgor, Secured
Party and their respective successors and assigns and no other person shall
assert any rights as third party beneficiary hereunder. Whenever any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All the covenants and agreements herein
contained by or on behalf of Pledgor and Secured Party shall bind, and inure to
the benefit of, their respective successors and assigns whether so expressed or
not. The rights and duties under this Agreement may not be assigned or
transferred by any party hereto without the prior written consent of the other
parties hereto; provided that (i) Secured Party may assign or transfer any of
its rights or duties hereunder without the prior written consent of Pledgor and
(ii) the Agent may assign or transfer any of its rights or duties hereunder
without the prior written consent of the other parties hereto to any affiliate
of Credit Suisse First Boston, so long as such affiliate is a broker-dealer
registered with the Securities and Exchange Commission.
(b) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Pledgor and Secured Party or, in the case of a waiver, by the
party against whom the waiver is to be effective. No failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
(c) All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any
standard forms of telecommunication. Notices to Pledgor shall be directed to
Pledgor at 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxx 00000, Telecopy No. (727)
468-9466, with a copy to Xxxxxx X. Freitas, Orrick, Xxxxxxxxxx & Xxxxxxxxx LLP,
0000 Xxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, Telecopy No. (000) 000-0000;
notices to Secured Party shall be directed to it in care of Credit Suisse First
Boston Corporation, Eleven Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Telecopy
No. (000) 000-0000, Attention: Xxxxxxx Xxxxxxxx, with a copy to QSPV Limited,
Xxxxxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxx, Telecopy No. (345)
945-7100, Attention: Xxxxxx Xxxxx.
(d) This Agreement shall in all respects be construed in accordance
with and governed by the laws of the State of New York without reference to
choice of
15
18
law doctrine (provided that as to Pledged Items located in any jurisdiction
other than the State of New York, Secured Party shall, in addition to any rights
under the laws of the State of New York, have all of the rights to which a
secured party is entitled under the laws of such other jurisdiction) and each
party hereto submits to the jurisdiction of the Courts of the State of New York.
The parties hereto hereby agree that the Custodian's jurisdiction, within the
meaning of Section 8-110(e) of the UCC, insofar as it acts as a securities
intermediary hereunder or in respect hereof, is the State of New York. To the
extent permitted by law, the unenforceability or invalidity of any provision or
provisions of this Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
(e) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(f) Pledgor hereby agrees that it shall not institute against, or join
any other person in instituting against, Secured Party any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceedings.
Pledgor hereby acknowledges and agrees that Secured Party's obligations under
this Agreement will be solely the corporate obligations of Secured Party, and
that Pledgor will not have any recourse to any of the directors, officers or
employees of Secured Party with respect to any claims, losses, damages,
liabilities, indemnities or other obligations in connection with any
transactions contemplated by this Agreement. Recourse in respect of any
obligations of Secured Party under this Agreement will be limited to the assets
of Secured Party and no debt shall be owed by Secured Party in respect of any
shortfall after realization of such assets
(g) This Agreement may be executed, acknowledged and delivered in any
number of counterparts and all such counterparts taken together shall be deemed
to constitute one and the same agreement.
(h) The rights and obligations of the Agent shall be as set forth in
Section 9.09 of the Securities Contract.
SECTION 9. Termination of Pledge Agreement. This Agreement and the
rights hereby granted by Pledgor in the Collateral shall cease, terminate and be
void upon fulfillment of all of the obligations of Pledgor under the Securities
Contract and hereunder. Any Collateral remaining at the time of such termination
shall be fully released and discharged from the Security Interests and delivered
to Pledgor by Secured Party, all at the request and expense of Pledgor.
SECTION 10. Set-off. In addition to and without limiting any rights of
set-off that Secured Party may have as a matter of law, pursuant to contract or
otherwise,
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upon the occurrence of a Reorganization Termination Date or an Acceleration
Date, Secured Party shall have the right to terminate, liquidate and otherwise
close out the transactions contemplated by the Securities Contract and this
Agreement pursuant to the terms of the Securities Contract and this Agreement,
and to set off any obligation it may have to Pledgor pursuant to the Securities
Contract or this Agreement, including without limitation any obligation to (i)
release from the Security Interests or return to Pledgor any Collateral pursuant
to Section 5(e) or Section 9 or (ii) replace any rehypothecated Collateral
pursuant to Section 5(i), against any right Secured Party or any of its
affiliates may have against Pledgor pursuant to the Securities Contract or this
Agreement, including without limitation any right to receive a payment or
delivery pursuant to the Securities Contract. In the case of a set-off of any
obligation to return or replace assets against any right to receive assets of
the same type, such obligation and right shall be set off in kind. In the case
of a set-off of any obligation to return or replace assets against any right to
receive assets of any other type, the value of each of such obligation and such
right shall be determined by the Calculation Agent and the result of such
set-off shall be that the net obligor shall pay or deliver to the other party an
amount of cash or assets, at the net obligor's option, with a value (determined,
in the case of a delivery of assets, by the Calculation Agent) equal to that of
the net obligation. In determining the value of any obligation to release or
deliver Common Stock or right to receive Common Stock, the value at any time of
such obligation or right shall be determined by reference to the Market Value of
the Common Stock at such time. If an obligation or right is unascertained at the
time of any such set-off, the Calculation Agent may in good faith estimate the
amount or value of such obligation or right, in which case set-off will be
effected in respect of that estimate, and the relevant party shall account to
the other party at the time such obligation or right is ascertained.
20
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date and year first above written.
PLEDGOR:
--------------------------------
Xxxxx X. Xxxx
SECURED PARTY:
CSFB SAILS CORP.
By:
-----------------------------
Name:
Title:
AGENT:
CREDIT SUISSE FIRST BOSTON
CORPORATION
By:
-----------------------------
Name:
Title:
21
EXHIBIT A
[Certificate for Additional Collateral]
The undersigned, Xxxxx X. Xxxx ("PLEDGOR"), hereby certifies, pursuant
to Section 5(b) of the SAILS Pledge Agreement dated as of December 8, 1999 among
Pledgor, Credit Suisse First Boston Corporation, as Agent, and CSFB SAILS Corp.
(the "PLEDGE AGREEMENT"; terms defined in the Pledge Agreement being used herein
as defined therein), that:
1. Pledgor is delivering, or causing to be delivered in
accordance with Section 5(c) of the Pledge Agreement, the following
securities (or security entitlements in respect thereof) to Secured
Party to be held by Secured Party as additional Collateral (the
"ADDITIONAL COLLATERAL"):
2. Pledgor hereby represents and warrants to Secured Party
that the Additional Collateral is Eligible Collateral and that the
representations and warranties contained in paragraphs (a), (b), (c)
and (d) of Section 3 of the Pledge Agreement are true and correct with
respect to the Additional Collateral on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
__ day of _______, ____.
-----------------------------
Xxxxx X. Xxxx
22
EXHIBIT B
[Form of UCC-1 Financing Statement]
SCHEDULE A TO FINANCING STATEMENT NAMING
XXXXX X. XXXX, AS DEBTOR, AND
CSFB SAILS CORP., AS SECURED PARTY
This financing statement covers Xxxxx X. Xxxx'x ("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.
23
As used in this Schedule A, the following capitalized terms have the
meanings specified below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"AGENT" means Credit Suisse First Boston Corporation.
"COLLATERAL ACCOUNT" means a securities account (as defined in Section
8-501(a) of the UCC) established in the name of Secured Party at the offices of
the Custodian in which or to which certain of the Collateral is to be deposited
or credited.
"COMMON STOCK" means shares of Common Stock, par value $0.0001 per
share, of the Issuer, or security entitlements in respect thereof.
"CUSTODIAN" means The Bank of New York or any other custodian appointed
by Secured Party and identified to Debtor.
"INITIAL PLEDGED ITEMS" means 1,000,000 shares of Common Stock.
"ISSUER" means Digital Lightwave, Inc., a Delaware corporation.
"SECURED PARTY" means CSFB SAILS Corp.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
B-2
24
EXHIBIT C
[Perfection Certificate]
The undersigned, Xxxxx X. Xxxx ("PLEDGOR"), hereby certifies, pursuant
to Section 3(h) of the SAILS Pledge Agreement (the "PLEDGE AGREEMENT") dated as
of December 8, 1999 among Pledgor, Credit Suisse First Boston Corporation, as
Agent, and CSFB SAILS Corp. ("SECURED PARTY") (terms defined therein being used
herein as defined in the Pledge Agreement), that:
A. INFORMATION REQUIRED FOR FILINGS UNDER CURRENT UCC
AND SEARCHES FOR PRIOR FILINGS THEREUNDER.
1. Name. The exact name of Pledgor is:
Xxxxx Xxxxxx Zwan
2. Prior Names. (a) Set forth below is each other name that Pledgor
has had, together with the date of the relevant change:
3. Current Locations. The residence of Pledgor is located at the
following address:
MAILING ADDRESS STATE
-------------------------------------------------------------------------------
000 Xxxxx Xxxxxxx Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
4. Prior Locations. (a) Set forth below is the information required by
Part A-3 above with respect to each other location or residence maintained by
Pledgor at any time during the past five years:
5. Filing Offices. In order to perfect the Security Interests granted
by Pledgor, a duly signed financing statement on Form UCC-1 in the form attached
as Exhibit B to the Pledge Agreement should be on file in the appropriate
offices (central and, where required, local) in each jurisdiction identified in
Part A-3 and Part A-4 above.
B. SEARCH REPORTS.
25
Attached hereto as Schedule I is a true copy of a file search report
from the central UCC filing office in each jurisdiction identified in Part A-5
above with respect to each name set forth in Part A-1 and Part A-2 above
(searches in local filing offices, if any, are not required).
C-2
26
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
8th day of December, 1999.
-----------------------------
Xxxxx X. Xxxx
27
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN
THE TARGET PULL-DOWN LIST.
(THIS LIST IS FOR THE USE OF THE WORDPROCESSOR ONLY, IS NOT A PART OF
THIS DOCUMENT AND MAY BE DISCARDED.)
ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME
=============== =========== =============== =========== =============== =========== =============== ===========
1..............................01
1(a)...........................03
1(b)...........................07
2..............................02
3..............................17
4..............................13
4(a)...........................15
5..............................12
5(b)...........................10
5(c)...........................11
5(c)(i)...............XX.XXX.XXXX
5(c)(ii)...............COLLATERAL
5(c)(iii).............CASE.OF.SEC
5(c)(iv)................BY.COMPLY
5(i)...........................06
7..............................14
7(a)...........................04
8(d)...........................08
