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EXHIBIT 12
SAILS PLEDGE AGREEMENT
dated as of
June 23, 2000
among
ZG NEVADA LIMITED PARTNERSHIP,
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............................................2
SECTION 2. Definitions.......................................................3
SECTION 3. Representations and Warranties of Pledgor.........................5
SECTION 4. Certain Covenants of Pledgor......................................7
SECTION 5. Administration of the Collateral and Valuation of the Securities..8
SECTION 6. Income and Voting Rights in Collateral...........................11
SECTION 7. Remedies upon Acceleration Events................................12
SECTION 8. Miscellaneous....................................................15
SECTION 9. Termination of Pledge Agreement..................................17
SECTION 10. Set-off.........................................................17
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PLEDGE AGREEMENT
THIS AGREEMENT is made as of this 23rd day of June, 2000 among ZG NEVADA
LIMITED PARTNERSHIP ("PLEDGOR"), a Nevada limited partnership, CREDIT SUISSE
FIRST BOSTON CORPORATION, as agent (the "AGENT") hereunder, and CSFB SAILS
CORP. ("SECURED PARTY").
WHEREAS, Pledgor owns shares of common stock, par value $0.0001 per
share, of Digital Lightwave, Inc., a Delaware corporation (the "ISSUER"), or
security entitlements in respect thereof (the "COMMON STOCK");
WHEREAS, Pledgor and Credit Suisse First Boston Corporation have entered
into an agreement entitled "Binding Terms for Private SAILS" (the "TERM SHEET")
dated as of May 11, 2000, pursuant to which Pledgor and Credit Suisse First
Boston Corporation have agreed to sell and purchase such shares of Common Stock
at the time and on the terms set forth therein;
WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of
June 23, 2000 between Credit Suisse First Boston Corporation and Secured Party,
(i) Credit Suisse First Boston Corporation assigned to Secured Party all of the
rights and obligations of Credit Suisse First Boston Corporation under the Term
Sheet, (ii) Secured Party assumed all of such obligations and (iii) Credit
Suisse First Boston Corporation delivered the Initial Pledged Items to Secured
Party (collectively, the "ASSIGNMENT")
WHEREAS, the Term Sheet provides that the parties thereto will enter into
final documentation, consisting of a SAILS Mandatorily Exchangeable Securities
Contract and a SAILS Pledge Agreement, relating to the transactions
contemplated by the Term Sheet;
WHEREAS, pursuant to the Term Sheet, Pledgor has granted the purchaser
under the Term Sheet a security interest in the Initial Pledged Items (as
defined herein) to secure the obligations of Pledgor thereunder and under the
Securities Contract;
WHEREAS, Pledgor and Secured Party wish to (i) set forth additional
understandings and agreements relating to such security interest and (ii)
confirm, on the terms set forth herein, the continuation of such security
interest;
WHEREAS, it is a condition to the obligations of Secured Party under the
Securities Contract (as defined herein) that Pledgor and Secured Party enter
into this Agreement;
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NOW, THEREFORE, in consideration of their mutual covenants contained
herein and to secure the performance by Pledgor of Pledgor's obligations under
the Securities Contract and the observance and performance of the covenants and
agreements contained herein and in the Securities Contract, the parties hereto,
intending to be legally bound, hereby mutually covenant and agree as follows:
SECTION 1. The Security Interests. In order to secure the full and
punctual observance and performance of the covenants and agreements contained
herein and in the Securities Contract:
(a) Pledgor hereby assigns and pledges to Secured Party, and grants to
Secured Party, security interests in and to, and a lien upon and right of
set-off against, and transfers to Secured Party, as and by way of a security
interest having priority over all other security interests, with power of sale
(and, in the case of the Initial Pledged Items, reaffirms its assignment and
pledge thereof, and its grant of a security interest therein, pursuant to the
Term Sheet), all of Pledgor's right, title and interest in and to (i) the
Initial Pledged Items; (ii) all additions to and substitutions for the Initial
Pledged Items (including, without limitation, any securities, instruments or
other property delivered or pledged pursuant to Section 4(a) or 5(b)) (such
additions and substitutions, the "ADDITIONS AND SUBSTITUTIONS"); (iii) all
income, proceeds and collections received or to be received, or derived or to
be derived, now or any time hereafter (whether before or after the commencement
of any proceeding under applicable bankruptcy, insolvency or similar law, by or
against Pledgor, with respect to Pledgor) from or in connection with the
Initial Pledged Items and the Additions and Substitutions (including, without
limitation, (A) any shares of capital stock issued by the Issuer in respect of
any Common Stock constituting Collateral or any cash, securities or other
property distributed in respect of or exchanged for any Common Stock
constituting Collateral, or into which any such Common Stock is converted, in
connection with any Reorganization Event, and any security entitlements in
respect of any of the foregoing, (B) any obligation of Secured Party to replace
any rehypothecated Collateral pursuant to Section 5(i) and (C) any amounts paid
or assets delivered to Pledgor by Secured Party in respect of dividends paid or
distributions made on shares of Common Stock constituting Collateral that have
been rehypothecated in accordance with Section 5(i)); (iv) the Collateral
Account and all securities and other financial assets (each as defined in
Section 8-102 of the UCC), including the Initial Pledged Items and the
Additions and Substitutions, and other funds, property or assets from time to
time held therein or credited thereto; and (v) all powers and rights now owned
or hereafter acquired under or with respect to the Initial Pledged Items or the
Additions and Substitutions (such Initial Pledged Items, Additions and
Substitutions, proceeds, collections, powers, rights, Collateral Account and
assets held therein or credited thereto being herein
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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 date of the Term Sheet, Pledgor delivered to
Credit Suisse First Boston Corporation a number of shares of Common Stock equal
to the Base Amount as of the Payment Date (the "INITIAL PLEDGED ITEMS"), in a
manner that enabled Credit Suisse First Boston Corporation to deliver the
Initial Pledged Items to the Custodian in the manner described in Section 5(c)
in connection with the Assignment. As of the Payment Date, such Initial Pledged
Items shall include, as Eligible Collateral, at least the Base Amount of shares
of Common Stock.
(c) In the event that the Issuer at any time issues in respect of any
Common Stock constituting Collateral hereunder, or comprising financial assets
underlying security entitlements constituting Collateral hereunder, any
additional or substitute shares of capital stock of any class, Pledgor shall
immediately pledge and deliver to Secured Party in accordance with Section 5(c)
all such shares or security entitlements in respect thereof as additional
Collateral hereunder.
(d) The Security Interests are granted as security only and shall not
subject Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of Pledgor or the Issuer with respect to any of the
Collateral or any transaction in connection therewith.
(e) The parties hereto expressly agree that all rights, assets and
property at any time held in or credited to the Collateral Account shall be
treated as financial assets (as defined in Section 8-102 of the UCC).
SECTION 2. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Securities Contract. As
used herein, the following words and phrases shall have the following meanings:
"ADDITIONS AND SUBSTITUTIONS" has the meaning provided in Section 1(a).
"COLLATERAL" has the meaning provided in Section 1(a).
"COLLATERAL ACCOUNT" has the meaning provided in Section 5(c).
"COLLATERAL EVENT OF DEFAULT" means, at any time, the occurrence of
either of the following: (A) failure of the Collateral to include, as Eligible
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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 Pledgor.
"DEFAULT SETTLEMENT DATE" has the meaning provided in Section 7(a).
"ELIGIBLE COLLATERAL" means Common Stock; provided that Pledgor has good
and marketable title thereto, free of all Liens (other than the Security
Interests) and Transfer Restrictions and that Secured Party has a valid, first
priority perfected security interest therein, a first lien thereon and Control
with respect thereto, and provided further that to the extent the number of
shares of Common Stock pledged hereunder exceeds at any time the Maximum
Deliverable Number thereof, such excess shares shall not be Eligible
Collateral.
"INITIAL PLEDGED ITEMS" has the meaning provided in Section 1(b).
"LOCATION" means, with respect to any party, the place such party is
"deemed located" within the meaning of Section 9-103(3)(d) of the UCC.
"MAXIMUM DELIVERABLE NUMBER" means, on any date, a number of shares of
Common Stock equal to the Base Amount on such date.
"PLEDGED ITEMS" means, as of any date, any and all securities and
instruments delivered by Pledgor to be held by or on behalf of Secured Party
under this Agreement as Collateral.
"REHYPOTHECATION UNAVAILABILITY" has the meaning provided in Section
5(i).
"REHYPOTHECATE" has the meaning provided in Section 5(i).
"SECURITY INTERESTS" means the security interests in the Collateral
created hereby.
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"SECURITIES CONTRACT" means the SAILS Mandatorily Exchangeable Securities
Contract dated as of the date hereof among Pledgor, Secured Party and the
Agent, as amended from time to time.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
SECTION 3. Representations and Warranties of Pledgor. Pledgor hereby
represents and warrants to Secured Party that:
(a) Pledgor's holding period (calculated in the manner provided in Rule
144(d) under the Securities Act) with respect to the Eligible Collateral
delivered in accordance with Section 1(b) commenced at least one year prior to
the date of the Term Sheet, and Pledgor (i) owns, and, except with respect to
Collateral rehypothecated pursuant to Section 5(i) at all times prior to the
release of the Collateral pursuant to the terms of this Agreement, will own the
Collateral free and clear of any Liens (other than the Security Interests) or
Transfer Restrictions and (ii) is not and will not become a party to or
otherwise bound by any agreement, other than this Agreement, that (x) restricts
in any manner the rights of any present or future owner of the Collateral with
respect thereto or (y) provides any person other than Pledgor, Secured Party or
any securities intermediary through whom any Collateral is held (but, in the
case of any such securities intermediary, only with respect to Collateral held
through it) with Control with respect to any Collateral.
(b) Other than financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests, no financing
statement, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of record in any
jurisdiction in which such filing or recording would be effective to perfect a
lien, security interest or other encumbrance of any kind on such Collateral.
(c) All Collateral consisting of securities and all financial assets
underlying Collateral consisting of security entitlements (each as defined in
Section 8-102 of the UCC) at any time pledged hereunder is and will be issued
by an issuer organized under the laws of the United States, any State thereof
or the District of Columbia and (i) certificated (and the certificate or
certificates in respect of such securities or financial assets are and will be
located in the United States) and registered in the name of Pledgor or held
through a securities intermediary whose securities intermediary's jurisdiction
(within the meaning of Section 8-110(e) of the UCC) is located in the United
States or (ii) uncertificated and either registered in the name of Pledgor or
held through a securities intermediary whose securities intermediary's
jurisdiction (within the meaning of
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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 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.
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(h) Pledgor has delivered to Secured Party a perfection certificate
substantially in the form attached as Exhibit C hereto, completed and
supplemented with the schedules and attachments contemplated thereby to the
satisfaction of Secured Party, and signed by the General Partner of Pledgor.
SECTION 4. Certain Covenants of Pledgor. Pledgor agrees that, so long as
any of Pledgor's obligations under the Securities Contract remain outstanding:
(a) Pledgor shall ensure at all times that a Collateral Event of
Default shall not occur, and shall pledge additional Collateral in the manner
described in Sections 5(b) and 5(c) as necessary to cause such requirement to
be met.
(b) Pledgor shall, at the expense of Pledgor and in such manner and
form as Secured Party may reasonably require, give, execute, deliver, file and
record any financing statement, notice, instrument, document, agreement or
other papers that may be necessary or desirable in order to (i) create,
preserve, perfect, substantiate or validate any security interest granted
pursuant hereto, (ii) create or maintain Control with respect to any such
security interests in any investment property (as defined in Section 9-115 of
the UCC) or (iii) enable Secured Party to exercise and enforce its rights
hereunder with respect to such security interest. To the extent permitted by
applicable law, Pledgor hereby authorizes Secured Party to execute and file, in
the name of Pledgor or otherwise, UCC financing or continuation statements
(which may be carbon, photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this Agreement) that Secured
Party in its sole discretion may deem reasonably necessary or appropriate to
further perfect, or maintain the perfection of, the Security Interests.
(c) Pledgor shall warrant and defend Pledgor's title to the Collateral,
subject to the rights of Secured Party, against the claims and demands of all
persons. Secured Party may elect, but without an obligation to do so, to
discharge any Lien of any third party on any of the Collateral.
(d) Pledgor agrees that Pledgor shall not change (i) Pledgor's name,
identity or organizational structure in any manner or (ii) Pledgor's Location,
unless in either case (A) Pledgor shall have given Secured Party not less than
30 days' prior notice thereof and (B) such change shall not cause any of the
Security Interests to become unperfected, cause Secured Party to cease to have
Control in respect of any of the Security Interests in any Collateral
consisting of investment property (as defined in Section 9-115 of the UCC) or
subject any Collateral to any other Lien.
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(e) Pledgor agrees that Pledgor shall not (i) create or permit to exist
any Lien (other than the Security Interests) or any Transfer Restriction upon
or with respect to the Collateral, (ii) sell or otherwise dispose of, or grant
any option with respect to, any of the Collateral or (iii) enter into or
consent to any agreement pursuant to which any person other than Pledgor,
Secured Party and any securities intermediary through whom any of the
Collateral is held (but in the case of any 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. (a)
Secured Party shall determine on each Business Day whether a Collateral Event
of Default shall have occurred.
(b) Pledgor may pledge additional Eligible Collateral hereunder at any
time. Concurrently with the delivery of any additional Eligible Collateral,
Pledgor shall deliver to Secured Party a certificate of the General Partner of
Pledgor substantially in the form of Exhibit A hereto and dated the date of
such delivery, (i) identifying the additional items of Eligible Collateral
being pledged and (ii) certifying that with respect to such items of additional
Eligible Collateral the representations and warranties contained in paragraphs
(a), (b), (c) and (d) of Section 3 are true and correct with respect to such
Eligible Collateral on and as of the date thereof. Pledgor hereby covenants and
agrees to take all actions required under Section 5(c) and any other actions
necessary to create for the benefit of Secured Party a valid, first priority,
perfected security interest in, and a first lien upon, such additional Eligible
Collateral, as to which Secured Party will have Control.
(c) Any delivery of any securities or security entitlements (each as
defined in Section 8-102 of the UCC) as Collateral to Secured Party by Pledgor
shall be effected (i) in the case of Collateral consisting of certificated
securities registered in the name of Pledgor, by delivery of certificates
representing such securities to the Custodian, accompanied by any required
transfer tax stamps, and in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in blank,
with signatures appropriately guaranteed, all in form and substance
satisfactory to Secured Party, and the crediting by the Custodian of such
securities to a securities account (as defined in Section 8-501 of the UCC)
(the "COLLATERAL ACCOUNT") of Secured Party maintained by the Custodian, (ii)
in the case of Collateral consisting of uncertificated securities registered in
the name of Pledgor, by transmission by Pledgor of an instruction to the issuer
of such securities instructing such issuer to register such securities in the
name of the Custodian or its nominee, accompanied by any required transfer tax
stamps, the issuer's compliance with such instructions and the crediting by the
Custodian of such securities to the Collateral Account,
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(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 the General Partner of
Pledgor followed by a written confirmation of such call.
(e) If on any Business Day Secured Party determines that no
Acceleration Event or failure by Pledgor to meet any of Pledgor's obligations
under Sections 4 or 5 hereof has occurred and is continuing, Pledgor may obtain
the release from the Security Interests of any Collateral upon delivery to
Secured Party of a written notice from the General Partner of Pledgor
indicating the items of Collateral to be released so long as, after such
release, no Collateral Event of Default shall have occurred.
(f) On the Maturity Date, unless (i) Pledgor shall have otherwise
effected the deliveries required by Section 2.03(b) of the Securities Contract
or shall have delivered the Cash Settlement Amount to Secured Party in lieu of
shares of Common Stock in accordance with Section 2.04 of the Securities
Contract on the Maturity Date or (ii) the Common Stock then held by or on
behalf of Secured Party hereunder is not Free Stock, Secured Party shall
deliver or cause to be delivered to itself from the Collateral Account in whole
or partial, as the case may be, satisfaction of Pledgor's obligations to
deliver shares of Common Stock to Secured Party on the Maturity Date pursuant
to the Securities Contract, shares of Common Stock then held by or on behalf of
it hereunder representing the number of shares of Common Stock required to be
delivered under the Securities Contract on the Maturity Date. Upon any such
delivery, Secured Party shall hold such shares of Common Stock absolutely and
free from any claim or right whatsoever (including, without limitation, any
claim or right of Pledgor).
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(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.
(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
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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 or (4) otherwise) (a
"REHYPOTHECATION UNAVAILABILITY"), the Calculation Agent shall adjust one or
more of the Base Amount, the Exchange Rate, the Threshold Price, the Issue
Price, the Maturity Price, the Cash Settlement Amount, any Closing Price and
any other variable relevant to the exercise, settlement or payment terms hereof
or of the Securities Contract, as appropriate to make Secured Party whole for
Secured Party's cost relating to the borrowing of shares of Common Stock in
connection with hedging Secured Party's exposure to the Securities Contract
(whether such borrowing is effected by Secured Party or by a counterparty to a
transaction entered into by Secured Party to hedge Secured Party's exposure to
the Securities Contract), as determined by the Calculation Agent. For purposes
of determining the occurrence of a Collateral Event of Default, the
rehypothecation of any Collateral pledged hereunder shall not affect the status
of such Collateral as Collateral or Eligible Collateral hereunder.
SECTION 6. Income and Voting Rights in Collateral. (a) Secured Party
shall have the right to receive and retain as Collateral hereunder all proceeds
(including, without limitation, ordinary cash dividends or interest) of the
Collateral, and Pledgor
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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 the General Partner of Pledgor stating that no Acceleration
Event has occurred and is continuing, deliver to Pledgor or as specified in
such request such proxies, powers of attorney, consents, ratifications and
waivers in respect of any of the Collateral that is registered, or held through
a securities intermediary, in the name of the Custodian, Secured Party or its
nominee as shall be specified in such request and shall be in form and
substance satisfactory to Secured Party.
(c) If an Acceleration Event shall have occurred and be continuing,
Secured Party shall have the right, to the extent permitted by law, and Pledgor
shall take all such action as may be necessary or appropriate to give effect to
such right, to vote and to give consents, ratifications and waivers, and to
take any other action with respect to any or all of the Collateral with the
same force and effect as if Secured Party were the absolute and sole owner
thereof.
SECTION 7. Remedies upon Acceleration Events. (a) If any Acceleration
Event shall have occurred and be continuing, Secured Party may exercise all the
rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
without being required to give any notice, except as herein provided or as may
be required by mandatory provisions of law, shall: (i) deliver or cause to be
delivered to itself from the Collateral Account all Collateral consisting of
shares of Common Stock (but not in excess of the number thereof deliverable
under the Securities Contract at such time) on the date of the Acceleration
Amount Notice relating to such Acceleration Event (the "DEFAULT SETTLEMENT
DATE") in satisfaction of Pledgor's obligations to deliver Common Stock under
the Securities Contract, whereupon Secured Party shall hold such shares of
Common Stock absolutely free from any claim or right of whatsoever kind,
including any equity or right of redemption of Pledgor that may be waived or
any other right or claim of Pledgor, and Pledgor, to the extent permitted by
law, hereby specifically waives all rights of redemption, stay or appraisal
that Pledgor has or may have under any law now existing or hereafter adopted;
and (ii) if
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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 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
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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 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.
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(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
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.
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18
(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 Xxxxx 000, 000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000,
Telecopy No. (000) 000-0000, with a copy to Xxxxxx X. Freitas, Orrick,
Xxxxxxxxxx & Sutcliffe LLP, 000 Xxxxxx Xxx, Xxxx 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. (000) 000-0000, 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 law doctrine (provided that as to Pledged Items located in any
jurisdiction other than the State of New York, Secured Party shall, in addition
to any rights under the laws of the State of New York, have all of the rights
to which a secured party is entitled under the laws of such other jurisdiction)
and each party hereto submits to the jurisdiction of the Courts of the State of
New York and the United States District Court located in the Borough of
Manhattan in New York City. The parties hereto hereby agree that the
Custodian's jurisdiction, within the meaning of Section 8-110(e) of the UCC,
insofar as it acts as a securities intermediary hereunder or in respect hereof,
is the State of New York. To the extent permitted by law, the unenforceability
or invalidity of any provision or provisions of this Agreement shall not render
any other provision or provisions herein contained unenforceable or invalid.
(e) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(f) Pledgor hereby agrees that it shall not institute against, or join
any other person in instituting against, Secured Party any bankruptcy,
reorganization,
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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 9.08 of the Securities Contract.
SECTION 9. Termination of Pledge Agreement. This Agreement and the rights
hereby granted by Pledgor in the Collateral shall cease, terminate and be void
upon fulfillment of all of the obligations of Pledgor under the Securities
Contract and hereunder. Any Collateral remaining at the time of such
termination shall be fully released and discharged from the Security Interests
and delivered to Pledgor by Secured Party, all at the request and expense of
Pledgor.
SECTION 10. Set-off. In addition to and without limiting any rights of
set-off that Secured Party may have as a matter of law, pursuant to contract or
otherwise, upon the occurrence of a Reorganization Termination Date or an
Acceleration Date, Secured Party shall have the right to terminate, liquidate
and otherwise close out the transactions contemplated by the Securities
Contract and this Agreement pursuant to the terms of the Securities Contract
and this Agreement, and to set off any obligation it may have to Pledgor
pursuant to the Securities Contract or this Agreement, including without
limitation any obligation to (i) release from the Security Interests or return
to Pledgor any Collateral pursuant to Section 5(e) or Section 9 or (ii) replace
any rehypothecated Collateral pursuant to Section 5(i), against any right
Secured Party or any of its affiliates may have against Pledgor pursuant to the
Securities Contract or this Agreement, including without limitation any right
to receive a payment or delivery pursuant to the Securities Contract. In the
case of a set-off of any obligation to return or replace assets against any
right to receive assets of the same type, such obligation and right shall be
set off in kind. In the case of a set-off of any obligation to return or
replace assets against any right to receive assets of any other type, the value
of each of such obligation and such right shall be determined by the
Calculation Agent and the result of such set-off shall be that the net obligor
shall pay or deliver to the other party an amount of cash or assets, at the
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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.
21
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date and year first above written.
PLEDGOR:
ZG NEVADA LIMITED PARTNERSHIP
By: ZG Nevada, Inc.,
its General Partner
By:
-----------------------------
Name:
Title:
SECURED PARTY:
CSFB SAILS CORP.
By:
-----------------------------
Name:
Title:
AGENT:
CREDIT SUISSE FIRST BOSTON
CORPORATION
By:
-----------------------------
Name:
Title:
22
EXHIBIT A
[Certificate for Additional Collateral]
The undersigned, the General Partner of ZG Nevada Limited Partnership
("PLEDGOR"), hereby certifies, pursuant to Section 5(b) of the SAILS Pledge
Agreement dated as of June 23, 2000 among Pledgor, Credit Suisse First Boston
Corporation, as Agent, and CSFB SAILS Corp. (the "PLEDGE AGREEMENT"; terms
defined in the Pledge Agreement being used herein as defined therein), that:
1. Pledgor is delivering, or causing to be delivered in accordance
with Section 5(c) of the Pledge Agreement, the following securities (or
security entitlements in respect thereof) to Secured Party to be held by
Secured Party as additional Collateral (the "ADDITIONAL COLLATERAL"):
2. Pledgor hereby represents and warrants to Secured Party that the
Additional Collateral is Eligible Collateral and that the representations
and warranties contained in paragraphs (a), (b), (c) and (d) of Section 3
of the Pledge Agreement are true and correct with respect to the
Additional Collateral on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this __
day of ____, 200_.
ZG NEVADA, INC.
By:
-----------------------------
Name:
Title:
23
EXHIBIT B
[Form of UCC-1 Financing Statement]
SCHEDULE A TO FINANCING STATEMENT NAMING
ZG NEVADA LIMITED PARTNERSHIP, AS DEBTOR, AND
CSFB SAILS CORP., AS SECURED PARTY
This financing statement covers ZG Nevada Limited Partnership's
("DEBTOR'S") right, title and interest in and to the following, whether now
owned or hereafter acquired (all of which is hereinafter collectively referred
to as the "COLLATERAL"):
(i) the Initial Pledged Items;
(ii) all additions to and substitutions for the Initial Pledged Items
(the "ADDITIONS AND SUBSTITUTIONS")
(iii) all income, proceeds and collections received or to be received, or
derived or to be derived, now or at any time hereafter (whether before or after
the commencement of any proceeding under applicable bankruptcy, insolvency or
similar law, by or against Debtor, with respect to Debtor) from or in
connection with the Initial Pledged Items and the Additions and Substitutions
(including, without limitation, (A) any shares of capital stock issued by the
Issuer in respect of any Common Stock constituting Collateral or any cash,
securities or other property distributed in respect of or exchanged for any
Common Stock constituting Collateral, or into which any such Common Stock is
converted in connection with any Reorganization Event, and any security
entitlements in respect of any of the foregoing, (B) any obligation of Secured
Party to replace any rehypothecated Collateral and (C) any amounts paid or
assets delivered to Debtor by Secured Party in respect of dividends paid or
distributions made on shares of Common Stock constituting Collateral that have
been rehypothecated);
(iv) the Collateral Account and all securities and other financial assets
(each as defined in Section 8-102 of the UCC), including the Initial Pledged
Items and the Additions and Substitutions, and other funds, property or other
assets from time to time held therein or credited thereto; and
(v) all powers and rights now owned or hereafter acquired under or with
respect to the Initial Pledged Items or the Additions and Substitutions.
24
As used in this Schedule A, the following capitalized terms have the
meanings specified below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"AGENT" means Credit Suisse First Boston Corporation.
"COLLATERAL ACCOUNT" means a securities account (as defined in Section
8-501(a) of the UCC) established in the name of Secured Party at the offices of
the Custodian in which or to which certain of the Collateral is to be deposited
or credited.
"COMMON STOCK" means shares of Common Stock, par value $0.0001 per share,
of the Issuer, or security entitlements in respect thereof.
"CUSTODIAN" means The Bank of New York or any other custodian appointed
by Secured Party and identified to Debtor.
"INITIAL PLEDGED ITEMS" means 475,000 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
25
EXHIBIT C
[Perfection Certificate]
The undersigned, the General Partner of ZG Nevada Limited Partnership
("PLEDGOR"), hereby certifies, pursuant to Section 3(h) of the SAILS Pledge
Agreement (the "PLEDGE AGREEMENT") dated as of June 23, 2000 among Pledgor,
Credit Suisse First Boston Corporation, as Agent, and CSFB SAILS Corp.
("SECURED PARTY") (terms defined therein being used herein as defined in the
Pledge Agreement), that:
1. Jurisdiction of Organization. Pledgor is a limited partnership
organized under the laws of the State of Nevada.
2. Name. The exact name of Pledgor as it appears in its certificate of
limited partnership is:
ZG Nevada Limited Partnership
3. Prior Names. (a) Set forth below is each other name that Pledgor has
had since its organization, together with the date of the relevant change:
(b) Pledgor has not changed its organizational structure in any way
within the past five years.
4. Current Locations. The chief executive office of Pledgor is located
at the following address:
XXXXXXX XXXXXXX XXXXXX XXXXX
-------------------------------------------------------------------------------
Xxxxx 000 Xxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
5. Prior Locations. (a) Set forth below is the information required by
Section 4 above with respect to each other chief executive office maintained by
Pledgor at any time during the past five years:
26
MAILING ADDRESS COUNTY STATE
-------------------------------------------------------------------------------
0000 Xxxxxxxx Xxxxx Xxxxxx Xxxxxx
Xxxx, Xxxxxx Xxxxxx, Xxxxxx 00000
6. Filing Offices. In order to perfect the Security Interests granted by
Pledgor, a duly signed financing statement on Form UCC-1 in the form attached
as Exhibit B to the Pledge Agreement should be on file in the appropriate
offices (central and, where required, local) in each jurisdiction identified in
Section 4 above.
7. Search Reports. Attached hereto as Schedule I is a true copy of a file
search report from the central UCC filing office in each jurisdiction
identified in Sections 4 and 5 above with respect to each name set forth in
Sections 2 and 3(a) above (searches in local filing offices, if any, are not
required).
C-2
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this 23nd day
of June, 2000.
ZG NEVADA, INC.
By:
-----------------------------
Name:
Title:
