Exhibit 10.22
PLEDGE AND ASSIGNMENT OF CASH COLLATERAL ACCOUNT
THIS PLEDGE AND ASSIGNMENT OF CASH COLLATERAL ACCOUNT, dated as of
March 30, 2001 (the "Agreement"), is made by ZHONE TECHNOLOGIES CAMPUS, LLC, a
California limited liability company ("Xxxxxxx"), to FREMONT INVESTMENT & LOAN,
a California industrial loan association ("Lender").
RECITALS
A. Pursuant to that certain Loan and Security Agreement of even date
herewith (the "Loan Agreement"), Lender has agreed to make a loan to Xxxxxxx in
the original principal amount of up to Thirty-Five Million Dollars ($35,000,000)
(the "Loan"). The Loan is evidenced by that certain Secured Promissory Note of
even date herewith from Xxxxxxx to Lender in the original principal amount of
the Loan (the "Note"). The Loan is secured by, among other things, that certain
Deed of Trust and Fixture Filing of even date herewith executed by Xxxxxxx, as
trustor, in favor of Lender, as beneficiary (the "Security Instrument")
encumbering the property described therein (the "Property"). As used herein,
"Loan Documents" shall mean this Agreement, the Note, the Security Instrument
and all other documents or instruments executed in connection with or securing
the Loan (other than the Environmental Indemnity). All initially-capitalized
terms used herein without definition shall have the meanings given such terms in
the Loan Agreement.
B. As a condition precedent to the closing of the Loan, Lender has
required that (i) Xxxxxxx deposit the amount of Six Million Dollars ($6,000,000)
into the Account (as hereinafter defined) to be used for the purposes set forth
herein, and (ii) pledge and assign to Lender the Account and the other
Collateral (as hereinafter defined) as provided herein.
NOW, THEREFORE, in consideration of the foregoing recitals and in
order to induce Lender to make the Loan to Xxxxxxx, Xxxxxxx hereby agrees as
follows.
SECTION 1. Pledge and Assignment. Xxxxxxx hereby pledges and assigns
to Lender and grants to Lender a security interest in the following collateral
(the "Collateral"):
(i) Account No. __________ (the "Account") with Lender, in the name
of Xxxxxxx and Lender, and all certificates and instruments, if any, from
time to time representing or evidencing the Account; and
(ii) all cash or other items, now or hereafter from time to time
contained in or evidencing the Account (collectively, "Deposits") and all
certificates and instruments, if any, from time to time representing or
evidencing the Deposits; and
(iii) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of the then existing Collateral; and
(iv) to the extent not covered by clauses (i) through (iii) above,
all proceeds of any or all of the foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement secures all
obligations of Xxxxxxx now or hereafter existing under the Loan Documents and
this Agreement (all such obligations of Xxxxxxx being the "Obligations").
SECTION 3. Interest on the Account. Interest and proceeds of the
Account shall be deposited and held in the Account.
SECTION 4. Deposits Into the Account.
(a) Initial Deposit. As a condition to the closing of the Loan,
Xxxxxxx shall execute a Pledge Account Agreement in the form of Exhibit A
attached hereto and shall deposit the amount of Six Million Dollars
(36,000,000) (the "Initial Deposit") into the Account.
(b) Additional Deposit. If Borrower fails to complete the Work to the
satisfaction of Lender and its consultants by the Scheduled Completion
Date, then Xxxxxxx shall make an additional deposit into the Account (the
"Additional Deposit"), which Additional Deposit shall be in the aggregate
amount of all of the following items:
(i) the remaining costs to complete Building 3, as projected by
Lender and its consultants (the "Remaining Building 3
Costs") plus a contingency in the amount of ten percent
(10%) of the Remaining Building 3 Costs; and
(if) all soft costs and financing costs necessary to complete
Buildings 1 and 2, as determined by Lender and its
consultants.
Borrower shall deposit the Additional Deposit into the Account within
ten (10) days of receipt of Lender's written determination of the amount of
the Additional Deposit, which determination shall be made in Lender's sole
discretion.
(c) Letter of Credit. At any time during the term of the Loan,
Xxxxxxx may substitute a letter of credit ("Letter of Credit") for the
Initial Deposit and any Additional Deposit required hereunder, subject to
complying with the following conditions to Lender's satisfaction:
(i) Xxxxxxx shall give Lender thirty (30) days written notice
prior to substituting the Letter of Credit for the Deposits;
and
(ii) the Letter of Credit shall be an irrevocable, unconditional,
direct draw letter of credit issued by an Issuer in the face
amount of the total Deposits which are then required to be
in the Account, having an initial term of not less than
twelve (12) months, and in form and substance satisfactory
to Lender in its discretion. "Issuer" means a bank (other
than an affiliate of Borrower or the Completion Guarantor)
organized under the laws of the United States, any state of
the United States, or of the District of Columbia and with
both: (a) a Long-Term Bank Deposit Rating of A2 or better
from Xxxxx'x Investors Service, and (b) a Long Term
Counterparty Credit Rating of A or better from Standard &
Poor's, and otherwise approved by Lender in its sole
discretion.
(d) Waiver of Deposits. The requirement for the Deposits and the
maintenance of the Account hereunder (the "Pledge Requirements") shall be
waived by Lender upon receipt by Lender of evidence satisfactory to Lender
of the following events:
(i) Zhone Technologies, Inc. ("Zhone, Inc."), the managing
member of Xxxxxxx has achieved "investment grade status,"
which shall mean that Zhone, Inc. is rated BBB (or higher)
by Standard & Poors Rating Service;
(ii) Zhone, Inc. has a minimum net worth, as determined under
generally accepted accounting principles ("Minimum Net
Worth") of at least Two Hundred Million Dollars
($200,000,000); and
(iii) there are no Events of Default under the Loan Documents.
(e) Reduction of Deposits. If during the term of the Loan Lender
receives evidence satisfactory to Lender, in its sole discretion, that
during eight (8) successive calendar quarters (the "Eight Quarter Period"):
(i) Zhone, Inc.'s Minimum Net Worth has exceeded Two Hundred
Million Dollars ($200,000,000); and
(ii) Zhone, Inc.'s EBITDA has remained positive,
then the amount of the Deposits required under this Agreement shall be
reduced at the commencement of each successive Loan Year following the
Eight Quarter Period by Six Hundred Thousand Dollars ($600,000), provided
that: (A) the requirements set forth in subparagraphs (i) and (ii) above
continue to be met to Lender's satisfaction; and (B) in no event shall the
Deposits be reduced below Three Million Dollars ($3,000,000).
SECTION 5. Maintaining the Account. The Account shall be, and at all
times during the term of the Loan remain, a demand deposit money market account
held with Lender bearing interest at the rate then publicly offered by Lender
for similar accounts. Xxxxxxx shall pay all of Lender's costs and customary
charges associated with the opening and closing of, and any withdrawals from,
the Account. Pledgor will maintain the Account with the Lender until the
Termination Date (as hereinafter defined). It shall be a term and condition of
the Account, except as otherwise provided by the provisions of Section 6 and
Section 13 hereof, that no amount (including interest on the Account) shall be
paid or released to or for the account of, or withdrawn by or for the account
of, Pledgor or any other person or entity from the Account, without the prior
written consent of Lender. The Account shall be subject to such applicable laws,
and such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as may
now or hereafter be in effect.
SECTION 6. Application of Amounts. The funds in the Account shall be
held by Lender as additional Collateral for the Loan. Funds shall be disbursed
from the Account pursuant to Section 13 below upon the Lender's determination
that an Event of Default has occurred under the Loan Documents. Pledgor hereby
expressly authorizes Lender to disburse the funds from the Account as provided
in this Section 6. Notwithstanding the foregoing, Pledgor agrees to promptly
execute all documents and instruments as are requested by Lender in connection
with the disbursement of the funds in the Account as provided in this Section 6.
SECTION 7. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Xxxxxxx is the legal and beneficial owner of the Collateral free
and clear of any lien, security interest, or other charge or encumbrance
except for the security interest created by this Agreement.
(b) The pledge and assignment of the Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in
the Collateral, securing the payment of the Obligations.
SECTION 8. Further Assurances. Xxxxxxx agrees that at any time and
from time to time, at the expense of Xxxxxxx, Xxxxxxx will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be reasonably necessary, or that Lender may reasonably request, in order to
perfect, continue and protect any security interest granted or purported to be
granted hereby or to enable Lender to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 9. Transfers and Other Liens. Xxxxxxx agrees that it will not
(i) sell or otherwise dispose of any of the Collateral, or (ii) create or permit
to exist any lien, security interest, or other charge or encumbrance upon or
with respect to any of the Collateral, except for the security interest under
this Agreement.
SECTION 10. Lender Appointed Attorney-in-Fact. Xxxxxxx hereby appoints
Lender, through any duly authorized officer of Lender, as Xxxxxxx'x
attorney-in-fact, with full authority in the place and stead of Xxxxxxx and in
the name of Xxxxxxx or otherwise, from time to time in Lender's reasonable
discretion to take any action and to execute any instrument which Lender may
deem reasonably necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, indorse and collect all
instruments made payable to Xxxxxxx representing any interest payment, dividend,
or other distribution in respect of the Collateral or any part thereof and to
give full discharge for the same.
SECTION 11. Lender May Perform. If Piedgor fails to perform any
agreement contained herein, Lender may itself perform, or cause performance of,
such agreement, and the expenses of Lender incurred in connection therewith
shall be payable by Piedgor under Section 14.
SECTION 12. Reasonable Care. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which Lender accords its own property. Lender shall not have any responsibility
for taking any necessary steps to preserve rights against any parties with
respect to any Collateral.
SECTION 13. Remedies upon Default. If any Event of Default shall have
occurred under any of the Loan Documents:
(a) Lender may, without notice to Piedgor except as required by law
and at any time or from time to time, charge, set-off and otherwise apply
all or any part of the Account or any part thereof to Xxxxxxx'x obligations
under the Loan Documents.
(b) Lender may also exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code (the "Code") in effect in the State of
California at that time, and Lender may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of Lender's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as
Lender may deem commercially reasonable. Xxxxxxx agrees that, to the extent
notice of sale shall be required by law, at least ten (10) days, notice to
Xxxxxxx of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.
Lender shall not be obligated to make any sale of the Collateral regardless
of notice of sale having been given. Lender may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(c) Any cash held by Lender as Collateral and all cash proceeds
received by it in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion
of Lender, then or at any time thereafter be applied (after payment of any
amounts payable to Lender pursuant to Section 14) in whole or in part by
Lender against all or any part of the Obligations in such order as Lender
shall elect. Any surplus of such cash or cash proceeds held by Lender and
remaining after payment in full of all the Obligations shall be paid over
to Xxxxxxx or to whomsoever may be lawfully entitled to receive such
surplus.
SECTION 14. Expenses. Xxxxxxx will upon demand pay to Lender the
amount of any and all fees and expenses, including the fees and expenses of its
counsel and of any experts and agents, which Lender may incur in connection with
(i) the administration of this Agreement, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of Lender
hereunder or (iv) the failure by Xxxxxxx or perform or observe any of the
provisions hereof.
SECTION 15. Amendments. Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by Xxxxxxx herefrom shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 16. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and given in the
manner set forth in the Loan Agreement.
SECTION 17. Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall (i) remain in full
force and effect until the Loan and all other amounts owing to Lender under the
Loan Documents have been paid in full (the "Termination Date"), (ii) be binding
upon Xxxxxxx, its successors and assigns, and (iii) inure to the benefit of
Lender and the respective successors, transferees and assigns of Lender. From
and after the Termination Date, Xxxxxxx shall be entitled to the return, upon
its request and at its expense, of such of the Collateral as shall not have been
sold or otherwise applied pursuant to the terms hereof.
SECTION 18. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, except to
the extent that perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of California. Unless otherwise defined herein
or in the Loan Documents, terms defined in the Uniform Commercial Code in the
State of California are used herein as therein defined.
SECTION 19. Counterparts. This Agreement may be executed in one or
more counterparts, each of which together shall constitute but one and the same
agreement.
IN WITNESS WHEREOF, Xxxxxxx has caused this Agreement to be duly
executed and delivered as of the date first above written.
PLEDGOR:
ZHONE TECHNOLOGIES CAMPUS, LLC,
a California limited liability company
By: Zhone Technologies, Inc. a
Delaware corporation Its:
Managing Member
By: Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
Its. Vice President and Treasurer
S-1
EXHIBIT A PLEDGE
ACCOUNT AGREEMENT
Pledge Account Number: __________________________
Loan Number: 950114107
Borrower's Legal Name: Zhone Technologies Campus, LLC, a California limited
liability company
Account Tax ID No.:____________________________
1. Pledge Account Agreement. This Pledge Account Agreement ("Agreement")
is entered into by and between Zhone Technologies Campus, LLC, a California
limited liability company ("Borrower") and Fremont Investment & Loan ("Lender")
as of the date set forth below to establish a pledge account (the "Pledge
Account") with Lender in accordance with that certain Pledge and Assignment of
Cash Collateral Account of even date herewith made by Borrower in favor of
Lender (the "Pledge Agreement"). Borrower acknowledges and agrees that no one
shall have access to the Pledge Account, other than Lender and its designees and
except as provided herein.
Borrower acknowledges that it is establishing a Pledge Account relationship
with Lender by completing the information requested and by signing below.
Borrower hereby authorizes the person(s) whose signature(s) appear below to
establish on behalf of Borrower a Pledge Account with Lender. Lender and its
designees and Borrower's authorized signatories, if provided for herein, are
authorized to execute withdrawals and other items on behalf of Borrower, signed
as provided herein, and to endorse and deposit checks and other items payable or
belonging to Borrower. Lender is authorized to honor and pay all checks and
other items so signed, including those payable to order of any person authorized
to sign them. This authorization remains in force until all obligations of
Borrower to Lender under the Loan Documents (as defined in the Pledge Agreement)
are repaid and performed in full. Borrower hereby certifies that its entering
into this Agreement was adopted by Borrower in accordance with all applicable
laws and its charter documents, which are now in full force and effect, and that
the person(s) whose signature(s) appear below on behalf of Borrower are
authorized to act as stated above.
2. Certification of Tax Identification Number. (The Tax Identification
Number must match the account name for Internal Revenue Service ("IRS")
purposes.) Under penalty of perjury, the undersigned acknowledges and confirms
one of the following: (Check on the appropriate line).
______ That the taxpayer identification number furnished for this account
is correct and applicable to this account.
______ That the entity listed herein has been notified by the IRS that it is
subject to backup withholding because of under reporting interest
or dividends.
______ The entity listed herein is an exempt recipient under IRS Regulations and
is not subject to backup withholding.
1) Signature Date
Title:_______________________
2) Signature Date
A-1
Title:
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Borrower's Business Address: c/o Zhone Technologies Campus, ILC
0000 Xxxxxxx Xxxxxx Xxxxxxx, Xxxxxxxxxx
00000 Attn: Xx. Xxxx Xxxxxx Telephone
No._____________
Statement Mailing Address: c/o Zhone Technologies Campus, LLC
0000 Xxxxxxx Xxxxxx Xxxxxxx, Xxxxxxxxxx
00000 Attn: Xx. Xxxx Xxxxxx Telephone No.
_____________
3. Number of Borrower Signatures Required for Transactions. All
transactions with respect to the Pledge Account shall require one (1)
signature of Lender and ___ signatures of Borrower.
4. Authorized Signature(s) of Borrower.
Print Name:
Signature Title:
__
Print Name:
Signature Title:
__ Print Name:
Signature Title:,
Print Name:
Signature Title:
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NOTICE: SPACE BELOW THIS LINE TO BE COMPLETED BY LENDER AFTER RECEIPT FROM
BORROWER
5. Authorized Signature of Lender.
Print Name:
Signature Title:.
A-2