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EXHIBIT 10.21
DIGITAL LIGHTWAVE, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
$3,000,000
9% SECURED BRIDGE NOTES DUE JANUARY 17, 2000
AND
WARRANTS TO PURCHASE 450,000 SHARES OF COMMON STOCK
This NOTE PURCHASE AGREEMENT, dated as of March 31, 1999, (this
"AGREEMENT") is entered into by and among DIGITAL LIGHTWAVE, INC. a Delaware
corporation ("COMPANY"), with its principal executive office at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and THE PERSONS AND ENTITIES LISTED ON THE SCHEDULE
OF PURCHASERS attached hereto as Schedule I (each a "PURCHASER", and
collectively, the "PURCHASERS").
RECITALS
On the terms and subject to the conditions set forth herein, each
Purchaser is willing to purchase from Company, and Company is willing to sell to
such Purchaser, a secured note in the principal amount set forth opposite such
Purchaser's name on Schedule 1 hereto.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, and the
representations, warranties, and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. As used in this Agreement and the other Transaction Documents,
the following capitalized terms have the following meanings:
"AFFILIATE," with respect to any Person, means (i) any director,
officer or employee of such Person, (ii) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person, and (iii) any Person beneficially owning or holding 5% or more of
any class of voting securities of such Person or any corporation of which such
Person beneficially owns or holds, in the aggregate, 5% or more of any class of
voting securities The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. The term "Affiliate," when used herein without reference
to any Person, shall mean an Affiliate of Company.
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"AGREEMENT" has the meaning given in the introductory paragraph hereof.
"CHANGE OF CONTROL" shall mean either of the following circumstances
(a) if any Person (other than ▇▇. ▇▇▇▇▇ ▇▇▇▇) or two or more Persons acting in
concert shall either acquire beneficial ownership, directly or indirectly, of,
or acquire by contract or otherwise, or enter into a contract or arrangement
which upon consummation will result in its or their acquisition of, or control
over, securities of Company (or other securities convertible into such
securities) representing 40% or more of the combined voting power of all
securities of Company entitled to vote in the election of directors; (b) if
during any period of twelve (12) consecutive months, commencing after the date
hereof, individuals who at the beginning of such twelve (12) month period were
directors of Company shall cease for any reason to constitute a majority of the
Board of Directors of Company unless the directors replacing such individuals
were nominated by the Board of Directors of Company; or (c) ▇▇. ▇▇▇▇▇ ▇▇▇▇ shall
no longer be the beneficial owner of a majority of the capital stock of the
Company.
"CLAIM" has the meaning given in Section 10.7.
"CODE" has the meaning give in Section 3.13.
"COLLATERAL AGENT" shall mean ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin together with its
permitted successor and assigns under the Security Agreement.
"COMPANY" includes the corporation initially executing Agreement and
any Person which shall succeed to or assume the obligations of Company under
this Agreement and the Notes.
"DEBT OR EQUITY OFFERING" shall mean any offering by Company or any of
its subsidiaries of debt securities or Equity Securities pursuant to a
registration statement or if the securities are intended to be eligible for
trading under Rule 144A under the Securities Act of 1933.
"DEFAULT RATE" shall mean the per annum rate of interest equal to the
lower of (i) eighteen percent (18%) per annum, and (ii) the highest rate
permitted by applicable law.
"DEFAULT" shall mean any condition or event that with the giving of
notice or the passage of time would give rise to an Event of Default.
"DISCLOSURE SCHEDULE" shall mean the disclosure schedule attached
hereto as Schedule II setting forth certain disclosures related to Borrower and
the Subsidiaries. Each item set forth in the Disclosure Schedule shall set forth
the Section of this Agreement to which it relates.
"ENVIRONMENTAL LAWS" means all judgments, orders, writs, decrees,
statutes, rules or regulations relating to the protection of human health or the
environment, including, without limitation, (i) all judgments, orders, writs
decrees, statutes, rules or regulations, pertaining to reporting, licensing,
permitting, investigation, and remediation of emissions, discharges, releases,
or threatened releases of hazardous materials, chemical substances, pollutants,
contaminants, or
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hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials, or wastes, whether
solid, liquid, or gaseous in nature; and (ii) all judgments, orders, writs,
decrees, statutes, rules or regulations pertaining to the protection of the
health and safety of employees or the public.
"ERISA" has the meaning give in Section 3.13.
"ERISA AFFILIATE" has the meaning give in Section 3.13.
"EMPLOYEE BENEFIT PLAN" has the meaning give in Section 3.13.
"EQUITY SECURITIES" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"EVENT OF DEFAULT" has the meaning given in Section 8 hereof.
"FINANCIAL STATEMENTS" shall mean, with respect to any accounting
period for any Person, statements of operations, retained earnings and cash flow
of such Person for such period, and balance sheets of such Person as of the end
of such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding fiscal year, all prepared in reasonable detail and in
accordance with GAAP. Unless otherwise indicated, each reference to Financial
Statements of any Person shall be deemed to refer to Financial Statements
prepared on a consolidated basis.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States of America from time to time.
"HOLDER" shall mean a holder of a Note.
"INDEBTEDNESS" shall mean and include the aggregate amount of, without
duplication (i) all obligations for borrowed money, (ii) all obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations to pay the deferred purchase price of property or services (other
than accounts payable incurred in the ordinary course of business determined in
accordance with GAAP), (iv) all obligations with respect to capital leases, (v)
all obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (vi) all
reimbursement and other payment obligations, contingent or otherwise, in respect
of letters of credit and similar surety instruments; (vii) the purchase price of
any receivables of the Company sold or factored for working capital purposes,
outstanding at any one time; and
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(viii) all guaranty obligations with respect to the types of Indebtedness listed
in clauses (i) through (vii) above.
"INDEMNIFIED PARTY" has the meaning given in Section 10.7 hereof.
"INVESTMENT" of any Person shall mean any loan or advance of funds by
such Person to any other Person (other than advances to employees of such Person
for moving and travel expense, drawing accounts and similar expenditures in the
ordinary course of business), any purchase or other acquisition of any Equity
Securities or Indebtedness of any other Person, any capital contribution by such
Person to or any other investment by such Person in any other Person (including,
without limitation, any Indebtedness incurred by such Person of the type
described in clauses (a) and (b) of the definition of "Indebtedness" on behalf
of any other Person); provided, however, that Investments shall not include
accounts receivable or other indebtedness owed by customers of such Person which
are current assets and arose from sales or non-exclusive licensing in the
ordinary course of such Person's business.
"LIEN" shall mean, with respect to any property, any security interest,
mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such
property or the income therefrom, including, without limitation, the interest of
a vendor or lessor under a conditional sale agreement, capital lease or other
title retention agreement, or any agreement to provide any of the foregoing, and
the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
"MAJORITY IN INTEREST" shall mean more than 50% of the aggregate
outstanding principal amount of the Notes issued pursuant to this Agreement.
"MATERIAL ADVERSE CHANGE" shall mean any of the occurrence of any event
or condition that results in a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the business, assets, operations or financial or other condition of Company; (b)
the ability of Company to pay or perform the Obligations in accordance with the
terms of this Agreement and the other Transaction Documents and to avoid an
Event of Default, or an event which, with the giving of notice or the passage of
time or both, would constitute an Event of Default, under any Transaction
Document; or (c) the rights and remedies of the Holders under the Notes, the
other Transaction Documents or any related document, instrument or agreement.
"NOTES" means Company's 9% Secured Bridge Notes due January 17, 2000,
in the form of Exhibit A hereto, issued hereunder.
"OBLIGATIONS" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Company to Holders of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or
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hereafter arising under or pursuant to the terms of this Agreement, the Notes
and the other Transaction Documents, including, all interest, fees, charges,
expenses, attorneys' fees and costs and accountants' fees and costs chargeable
to and payable by Company hereunder and thereunder, in each case, whether direct
or indirect, absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the United
States Code (11 U. S. C. Section 101 et seq.), as amended from time to time
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding.
"PERMITTED DEBT FACILITY" shall mean either (i) the accounts receivable
agreement entered into between Company and EAB Leasing Corp., as the same may be
amended, supplemented, amended and restated, or otherwise modified, or
refinanced or replaced, from time to time provided that the aggregate amount of
Indebtedness thereunder shall not exceed 80% of the Company's gross accounts
receivable (as would appear on a balance sheet prepared in accordance with GAAP)
(the "EAB Permitted Debt Facility"), or (ii) a credit facility entered into with
Emergent Business Capital on terms and conditions substantially similar to the
terms and conditions set forth in Exhibit E hereto in an aggregate principal
amount not to exceed $7,000,000 as the same may be amended, supplemented,
amended and restated, or otherwise modified, or refinanced or replaced, from
time to time.
"PERMITTED INDEBTEDNESS" shall mean and include: (i) Indebtedness of
Company under the Notes; (ii) Indebtedness of Company secured by Liens permitted
under clause (iv) or (v) of the definition of Permitted Liens; (iii)
Indebtedness arising from the endorsement of instruments in the ordinary course
of business; (iv) Indebtedness existing on the date hereof and set forth on the
Disclosure Schedule; (v) Indebtedness under any Permitted Debt Facility; and
(vi) other Indebtedness of Borrower not exceeding Five Hundred Thousand Dollars
($500,000) at any time.
"PERMITTED INVESTMENTS" shall mean (a) Investments in the Equity
Securities of the Company's Subsidiary existing as of the date hereof; (b)
Investments in the Company's leasing subsidiary in aggregate amount outstanding
at any one time not to exceed $3,000,000; (c) Investments made in accordance
with the Company's stated investment policy attached hereto as Exhibit F; and
(d) other Investments aggregating not in excess of One Hundred Thousand Dollars
($100,000) at any time.
"PERMITTED LIENS" shall mean and include: (i) Liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith, provided provision is made to the
reasonable satisfaction of the Collateral Agent for the eventual payment thereof
if subsequently found payable; (ii) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords incurred in the ordinary course of business
for sums not overdue or being contested in good faith, provided provision is
made to the reasonable satisfaction of Holder for the eventual payment thereof
if subsequently found payable; (iii) deposits under workers' compensation,
unemployment insurance and social security laws or to secure the performance of
bids, tenders, contracts (other than for the repayment of borrowed money) or
leases, or to secure statutory obligations of surety or appeal bonds or to
secure indemnity, performance or other similar
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bonds in the ordinary course of business; (iv) Liens securing obligations under
a capital lease if such lease is permitted under this Agreement and such Liens
do not extend to property other than the property leased under such capital
lease; (v) Liens upon any equipment acquired or held by Company or any of its
Subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such equipment,
so long as such Lien extends only to the equipment financed, and any accessions,
replacements, substitutions and proceeds (including insurance proceeds) thereof
or thereto; (vi) easements, reservations, rights of way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property in a manner not materially or adversely affecting the
value or use of such property; (vii) Liens securing the Company's obligations
incurred in connection with any Permitted Debt Facility; (viii) Liens existing
on the date hereof and set forth on the Disclosure Schedule; (viii) Liens in
favor of a Collateral Agent for the benefit of Holders; and (ix) interests of
lessees of property of the Comapany or any Subsidiary.
"PERSON" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of the date hereof among Company and the Holders in the form
of Exhibit D hereto.
"SECURITIES ACT" has the meaning given in Section 3.11 of this
Agreement.
"SECURITY AGREEMENT" has the meaning the Security Agreement dated the
date hereof by Company in favor of Collateral Agent in the form of Exhibit B
hereto.
"SOLVENT" shall mean, with respect to any Person on any date, that on
such date (a) the fair value of the property of such Person is greater than the
fair value of the liabilities (including, without limitation, contingent
liabilities) of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about in business or a transaction, for which such
Person's property would constitute an unreasonably small capital.
"SUBORDINATION AGREEMENT" shall mean a subordination agreement entered
by ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin (on behalf of the Purchasers) and the holders of
Indebtedness under any Permitted Debt Facility.
"SUBSIDIARY" shall mean (a) any corporation of which more than 50% of
the issued and outstanding equity securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation is at the time
directly or indirectly owned or controlled by Company,
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(b) any partnership, joint venture, or other association of which more than 50%
of the equity interest having the power to vote, direct or control the
management of such partnership, joint venture or other association is at the
time directly or indirectly owned and controlled by Company, (c) any other
entity included in the financial statements of Company on a consolidated basis.
"TRANSACTION DOCUMENTS" shall mean this Agreement, each of the Notes
issued under this Agreement, each of the Warrants issued under this Agreement,
the Registration Rights Agreement, the Security Agreement, and each other
document, instrument or certificate executed in connection with this Agreement.
"WARRANT" shall mean each of the Warrants issued to the Holders
pursuant to the terms of this Agreement in the form of Exhibit C hereto.
"WARRANT SHARES" shall mean each of the shares of capital stock of the
Company issued to the Holders upon the exercise of the Warrant.
2. THE NOTES AND WARRANTS.
2.1 ISSUANCE OF NOTES AND WARRANTS. At the Closing (as defined
below), Company agrees to issue and sell to each of the Purchasers, and, subject
to all of the terms and conditions hereof, each of the Purchasers agrees to
purchase a 9% Secured Bridge Note due January 17, 2000 in the form of Exhibit A
hereto (each, a "Note", and collectively, the "Notes") in the principal amount
set forth opposite the respective Purchaser's name on Schedule I hereto and upon
such purchase Company shall issue to each such Purchaser a Warrant to purchase
150 shares of the Company's Common Stock for each $1,000 in principal amount of
Notes purchased by such Purchaser. The obligations of the Purchasers to purchase
Notes are several and not joint.
2.2 DELIVERY. The sale and purchase of the Notes shall take place
at a closing (the "Closing") to be held at such place and time as Company and
the Purchasers may determine (the "Closing Date"). At the Closing, Company will
deliver to each of the Purchasers the respective Note and Warrant to be
purchased by such Purchaser, against receipt by Company of the corresponding
purchase price set forth on Schedule I hereto (the "Purchase Price"). Each of
the Notes and Warrants will be registered in such Purchaser's name in Company's
records.
2.3 INTEREST; MATURITY. Interest on the Notes will be payable in
cash and accrue semi-annually and at Maturity at the lower of (i) 9% per annum
and (ii) the highest rate permitted by law, and will be paid at maturity.
Interest on the Notes will be computed on the basis of a 360 day year of twelve
30 day months. The unpaid principal balance of all Notes, together with accrued
and unpaid interest thereon, shall be due and payable in cash on the stated date
of maturity of the Notes. The Notes will bear interest on overdue principal
(including any overdue mandatory or optional payment of principal) and (to the
extent legally enforceable) on any overdue installment of interest at the
Default Rate from the date such payment is due, whether by acceleration or
otherwise until paid.
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2.4 USE OF PROCEEDS. The proceeds of the sale and issuance of the
Notes shall be used for general corporate purposes.
2.5 PAYMENTS. Company will make all cash payments due under the
Notes in immediately available funds by 11:00 A.M. New York City time on the
date such payment is due in the manner and at the address for such purpose
specified below each Purchaser's name on Schedule I hereto, or at such other
address as a Purchaser or other registered Holder of a Note may from time to
time direct in writing.
2.6 REDEMPTION OF NOTES.
(a) Optional Redemption. Company may at any time and from
time to time redeem all or less than all of the then outstanding Notes by
payment in cash of the aggregate principal amount thereof plus all accrued and
unpaid interest on the amount so redeemed to the date of such redemption.
Company will give irrevocable written notice of any redemption of the Notes
pursuant to Section 2.1 to the Holders thereof not less than 15 days nor more
than 60 days before the date fixed for such redemption specifying (i) such date,
(ii) the aggregate principal amount of the Notes to be redeemed, and (iii)
accrued and unpaid interest, if any, payable to the redemption date. Notice of
redemption having been so given, the aggregate principal amount (or portion
thereof) specified in such notice, together with accrued and unpaid interest, if
any, shall become due and payable, on the redemption date.
(b) Mandatory Redemption. Upon the closing of a Debt or
Equity Offering, the Company shall be required to redeem all of the Notes
outstanding by payment in cash of the aggregate principal amount thereof plus
all accrued and unpaid interest thereon to the date of such redemption. As soon
as reasonably practicable, but in no event later than the date on which any
filing is made with the Securities and Exchange Commission or the date on which
any offering memorandum is circulated to prospective investors, the Company
shall give written notice to the Holders of the Notes of the expected timing of
any redemption of the Notes pursuant to this Section 2.6(b). Not less than three
(3) Business Days prior to date of redemption (which shall be the date of the
closing of the Debt or Equity Offering), Company shall give irrevocable written
notice of such redemption to each Holder of a Note specifying (i) such date,
(ii) the aggregate principal amount of the Notes to be redeemed, and (iii)
accrued and unpaid interest, if any, payable to the redemption date.
(c) Change of Control. If a Change in Control shall
occur, each Holder shall have the right to demand that Company redeem all or any
portion of the Notes then held by such Holder by giving written notice to such
effect to Company not later than sixty (60) days after the first to occur of the
following: (i) receipt by such holder from Company of written notice of the
occurrence of such Change in Control or (ii) the date on which such holder,
having otherwise obtained actual knowledge of such Change in Control notifies
Company thereof. Company shall redeem such Notes or portion thereof on a date
specified in a written notice from Company to such Holder given not less than
ten (10) days prior to the redemption date so specified (which date shall
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not be earlier than fifteen nor later than thirty (30) days after the date
demand for redemption was made by such Holder) and such redemption in respect of
each Note or portion thereof shall be by payment in cash of 101% the aggregate
principal amount thereof plus all accrued and unpaid interest thereon to the
date of such redemption.
(d) Partial Prepayment Pro Rata. The aggregate principal
amount of each partial redemption of Notes pursuant to this Section 2.6 shall be
allocated among the Holders of the Notes then outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts of such Notes
then held thereby, with adjustments, to the extent practicable, to compensate
for any prior prepayments not made in exactly such proportion. Any partial
prepayment shall be applied first against accrued and unpaid interest and second
against principal.
(e) Restrictions on Redemption. Except as otherwise
provided in this Section 2.6, there shall be no prepayment, in whole or in part,
of the principal of all or any of the Notes.
(f) Acquisition of Notes. Company will not, and will not
permit any Subsidiary or Affiliate to, purchase, redeem or otherwise acquire any
Note except upon the payment or prepayment thereof in accordance with the terms
hereof and of such Note.
2.7 PRIORITY OF NOTES. The Notes shall be senior secured
obligations of Company senior to all Indebtedness and other obligations of
Company other than Permitted Facility Debt. The Purchasers hereby acknowledge
that the Notes shall be subject to, and subordinated on the terms and conditions
of, the Subordination Agreement.
2.8 REDEMPTION OF WARRANTS. Company may redeem all, but not less
than all, of the then outstanding Warrants by payment in cash of $.01 per share
of Common Stock underlying the Warrants; provided that the last sale price of
the Company's common stock shall have been at least equal to 200% of the then
effective exercise price of the Warrants on any 20 out of the 30 consecutive
trading days ending on the third trading day prior to the day notice of such
redemption is given; provided further that none of such 20 trading days shall be
a trading day on or before the one year anniversary date of the original
issuance of the Warrants. Company will give irrevocable written notice of any
redemption of the Warrants pursuant to Section 2.8 delivered to the holders
thereof not less than 30 days nor more than 60 days before the date fixed for
such redemption specifying (i) such date, and (ii) the aggregate amount of
Warrants to be redeemed. Notice of redemption having been duly received by the
holders of the Warrants, the Warrants shall expire on the date specified for
redemption in accordance with their terms.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company represents and
warrants to each Purchaser that, except as otherwise set forth in the Disclosure
Schedule:
3.1 DUE INCORPORATION, QUALIFICATION, ETC. Each of Company and its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of
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incorporation; (ii) has the power and authority to own, lease and operate its
properties and carry on its business as now conducted; and (iii) is duly
qualified, licensed to do business and in good standing as a foreign corporation
in each jurisdiction where the failure to be so qualified or licensed could
reasonably be expected to have a Material Adverse Effect.
3.2 AUTHORITY. The execution, delivery and performance by Company
of each Transaction Document to be executed by Company and the consummation of
the transactions contemplated thereby (i) are within the power of Company and
(ii) have been duly authorized by all necessary actions on the part of Company.
3.3 ENFORCEABILITY. Each Transaction Document executed, or to be
executed, by Company has been, or will be, duly executed and delivered by
Company and constitutes, or will constitute, a legal, valid and binding
obligation of Company, enforceable against Company in accordance with its terms,
except as limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and
general principles of equity.
3.4 NON-CONTRAVENTION. The execution and delivery by Company of
the Transaction Documents executed by Company and the performance and
consummation of the transactions contemplated thereby do not and will not (i)
violate the Certificate of Incorporation or Bylaws of Company or any material
judgment, order, writ, decree, statute, rule or regulation applicable to
Company; (ii) violate any provision of, or result in the breach or the
acceleration of, or entitle any other Person to accelerate (whether after the
giving of notice or lapse of time or both), any material mortgage, indenture,
agreement, instrument or contract to which Company is a party or by which it is
bound, if such violation could reasonably be expected to have a Material Adverse
Effect; or (iii) result in the creation or imposition of any Lien upon any
property, asset or revenue of Company (other than any Lien arising under the
Transaction Documents) or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization or approval applicable
to Company, its business or operations, or any of its assets or properties.
3.5 APPROVALS. No consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental authority or other
Person (including, without limitation, the shareholders of any Person) is
required in connection with the execution and delivery of the Transaction
Documents executed by Company and the performance and consummation of the
transactions contemplated thereby.
3.6 NO VIOLATION OR DEFAULT. None of Company or Company's
Subsidiaries is in violation of or in default with respect to (i) its
Certificate of Incorporation or Bylaws or any material judgment, order, writ,
decree, statute, rule or regulation applicable to such Person; (ii) any material
mortgage, indenture, agreement, instrument or contract to which such Person is a
party or by which it is bound (nor is there any waiver in effect which, if not
in effect, would result in such a violation or default), where, in each case,
such violation or default, individually, or together with all such violations or
defaults, could reasonably be expected to have a Material Adverse Effect.
Without
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limiting the generality of the foregoing, none of Company or Company's
Subsidiaries (A) has violated any Environmental Laws (as defined below), (B) has
any liability under any Environmental Laws or (C) has received notice or other
communication of an investigation or is under investigation by any governmental
authority having authority to enforce Environmental Laws, where such violation,
liability or investigation could reasonably be expected to have a Material
Adverse Effect. No Event of Default or default, which after the giving of notice
or the lapse of time or both would constitute an Event of Default, has occurred
and is continuing.
3.7 LITIGATION. Except as set forth (with estimates of the dollar
amounts involved) in the Disclosure Schedule, no actions (including, without
limitation, derivative actions), suits, proceedings or investigations are
pending or, to the knowledge of Company, threatened against Company or Company's
Subsidiaries at law or in equity in any court or before any other governmental
authority which if adversely determined (i) would (alone or in the aggregate)
have a Material Adverse Effect or (ii) seeks to enjoin, either directly or
indirectly, the execution, delivery or performance by Company of the Transaction
Documents or the transactions contemplated thereby.
3.8 TITLE. Company and Company's Subsidiaries own and have good
and marketable title in fee simple absolute to, or a valid leasehold interest
in, all then respective real properties and good title to their other respective
assets and properties as reflected in the most recent Financial Statements
delivered to Purchasers (except those assets and properties disposed of in the
ordinary course of business since the date of such Financial Statements) and all
respective assets and properties acquired by Company and Company's Subsidiaries
since such date (except those disposed of in the ordinary course of business).
Such assets and properties are subject to no Lien, except for Permitted Liens.
3.9 INTELLECTUAL PROPERTY. To the best of their knowledge, Company
and Company's Subsidiaries own or possess sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, processes and other intellectual property rights
necessary for its business as now conducted and as proposed to be conducted
without any conflict with, or infringement of the rights of, others, in the
whole or in the aggregate that could reasonably be expected to have a Material
Adverse Effect.
3.10 FINANCIAL STATEMENTS. Except as set forth in the Disclosure
Schedule, the Financial Statements of Company for the quarter ended September
30, 1998 contained in the Company's quarterly report on Form 10-Q for such
period and for the year ended December 31, 1998 contained in the Company's press
release dated February 16, 1999 (together, the "Financials") (i) are in
accordance with the books and records of Company and its Subsidiaries, which
have been maintained in accordance with good business practice; (ii) have been
prepared in conformity with GAAP (except that such Financial Statements do not
contain footnotes required by GAAP, and, in the case of the Financial Statements
for the quarter ended September 30, 1998, are subject to year end adjustments
which, in the aggregate, are not material); and (iii) fairly present the
consolidated financial position of Company as of the dates presented therein and
the results of operations, changes in financial positions or cash flows, as the
case may be, for the periods presented therein. Except as
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set forth in the Disclosure Schedule, none of Company or any of Company's
Subsidiaries has any contingent obligations, liability for taxes or other
outstanding obligations which are material in the aggregate, except as disclosed
in the Financials.
3.11 EQUITY SECURITIES. Company's total authorized and issued
capitalization is as set forth in the Disclosure Schedule. The Equity Securities
of Company have the respective rights, preferences and privileges set forth in
Company's Certificate of Incorporation in effect on the date hereof. All of the
outstanding Equity Securities of Company have been duly authorized and are
validly issued, fully paid and nonassessable. Except as expressly referenced
herein or as set forth in the Disclosure Schedule, there are as of the date of
this Agreement no options, warrants or rights to purchase Equity Securities of
Company authorized, issued or outstanding, nor is Company obligated in any other
manner to issue shares of its Equity Securities. Except as set forth in the
Disclosure Schedule, there are no restrictions on the transfer of Equity
Securities of Company, other than those imposed by Company's Certificate of
Incorporation and Bylaws as of the date hereof, or relevant state and federal
securities laws, and no holder of any Equity Security of Company is entitled to
preemptive or similar statutory or contractual rights, either arising pursuant
to any agreement or instrument to which Company is a party or that are otherwise
binding upon Company. The offer and sale of all Equity Securities of Company
issued before the Closing Date complied with or were exempt from registration or
qualification under all applicable federal and state securities laws. Except as
expressly referenced herein or as set forth in the Disclosure Schedule, no
Person has the right to demand or other rights to cause Company to file any
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), relating to any Equity Securities of Company presently
outstanding or that may be subsequently issued, or any right to participate in
any such registration statement.
3.12 NO AGREEMENTS TO SELL ASSETS OR MERGE. None of Company or
Company's Subsidiaries has any legal obligation, absolute or contingent, to any
Person to sell the assets of Company or Company's Subsidiaries (other than sales
in the ordinary course of business, including, without limitation, accounts
receivables sold pursuant to the EAB Permitted Debt Facility), or to effect any
merger, consolidation or other reorganization of Company or to enter into any
agreement with respect thereto.
3.13 EMPLOYEE BENEFIT PLANS.
(a) Neither Company nor any Person (each, an "ERISA
AFFILIATE") which is treated as a single employer with Company under section 414
of the Internal Revenue Code of 1986, as amended (the "CODE") has an employee
benefit plan (an "EMPLOYEE BENEFIT PLAN") within the meaning of the Employee
Retirement Income Security Act of 1974 (as the same may from time to time be
amended or supplemented, and including any rules or regulations issued in
connection therewith, "ERISA") that is an "employee pension benefit plan"
(within the meaning of section 3(2) of ERISA). Neither Company nor any ERISA
Affiliate has any liability with respect to any post-retirement benefit under
any Employee Benefit Plan which is a welfare plan (as defined in section 3(1) of
ERISA), other than liability for health plan continuation coverage described in
Part 6
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of Title I(B) of ERISA, which liability for health plan continuation
coverage cannot reasonably be expected to have a Material Adverse Effect.
(b) Each Employee Benefit Plan complies, in both form and
operation, in all material respects, with its terms, ERISA and the Code, and no
condition exists or event has occurred with respect to any such Employee Benefit
Plan which would result in the incurrence by either Company or any ERISA
Affiliate of any material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of Company or any
ERISA Affiliate is legally valid and binding and in full force and effect. No
Employee Benefit Plan is being audited or investigated by any governmental
authority or is subject to any pending or threatened claim or suit. Neither
Company nor any ERISA Affiliate nor any fiduciary of any Employee Benefit Plan
has engaged in a prohibited transaction under sections 406 or 407 of ERISA or
section 4975 of the Code (other than transactions which are otherwise exempt
under either Section 408 of ERISA or 4975(d) of the Code).
(c) Except as set forth in the Disclosure Schedule,
neither Company nor any ERISA Affiliate (A) has incurred or expects to incur any
liability under Title IV of ERISA or Section 412 of the Code, or (B) contributes
to any multiemployer plan within the meaning of ERISA (a "MULTIEMPLOYER PLAN").
Neither Company nor any ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under section 4201
of ERISA or as a result of a sale of assets described in section 4204 of ERISA.
Neither Company nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of section
4241 or section 4245 of ERISA or that any Multiemployer Plan intends to
terminate or has been terminated under section 4041A of ERISA.
3.14 OTHER REGULATIONS. None of Company or its Subsidiaries is
subject to regulation under the Investment Company Act of 1940, the Public
Utility Holding Company Act of 1935 or to any federal or state statute or
regulation limiting its ability to incur Indebtedness.
3.15 GOVERNMENTAL CHARGES AND OTHER INDEBTEDNESS. Each of Company
and its Subsidiaries has filed or caused to be filed all tax returns which are
required to be filed by it. Company and Company's Subsidiaries have paid, or
made provision for the payment of, all taxes and other levies, assessments,
fees, claims or other charges imposed by any governmental authority which have
or may have become due pursuant to said returns and all other Indebtedness,
except such taxes, levies, assessments, fees, claims or other charges or
Indebtedness, if any, which are being contested in good faith and as to which
adequate reserves (determined in accordance with generally accepted accounting
principles) have been provided or which could not reasonably be expected to have
a Material Adverse Effect if unpaid.
3.16 SUBSIDIARIES, ETC. Except as set forth in the Disclosure
Schedule (setting forth the jurisdiction of incorporation, capital structure and
percentage ownership of each shareholder),
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Company has no Subsidiaries, is not a partner in any partnership or a joint
venturer in any joint venture.
3.17 SOLVENCY, ETC. Company is Solvent and, after the execution and
delivery of the Transaction Documents and the consummation of the transactions
contemplated thereby, each of Company and its Subsidiaries will be Solvent.
3.18 CATASTROPHIC EVENTS; LABOR DISPUTES. None of Company or
Company's Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or other casualty that could
reasonably be expected to have a Material Adverse Effect. There are no disputes
presently subject to grievance procedure, arbitration or litigation under any of
the collective bargaining agreements, employment contracts or employee welfare
or incentive plans to which Company or Company's Subsidiaries is a party, and
there are no strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Company, jurisdictional disputes or organizing activity occurring
or threatened which could reasonably be expected to have a Material Adverse
Effect.
3.19 NO MATERIAL ADVERSE EFFECT. No event has occurred and no
condition exists which could reasonably be expected to have a Material Adverse
Effect since September 30, 1998.
3.20 ACCURACY OF INFORMATION FURNISHED. None of Company's
registration statements, reports or other filings made with the Securities and
Exchange Commission, when taken as a whole, together with the information
contained in Company's Disclosure Schedule and any amendments, supplements,
restatements, modifications or other updates thereof, contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.21 CERTAIN AGREEMENTS OF OFFICERS, EMPLOYEES AND CONSULTANTS.
(a) No current officer, employee or consultant of Company
or Company's Subsidiaries is, or is now expected to be, in violation of any term
of any employment contract, proprietary information agreement, nondisclosure
agreement, noncompetition agreement, or any other contract or agreement or any
restrictive covenant relating to the right of any such officer, employee or
consultant to be employed by Company or Company's Subsidiaries because of the
nature of the business conducted or to be conducted by Company or Company's
Subsidiaries or relating to the use of trade secrets or proprietary information
of others, and to the best of Company's knowledge, after due inquiry, the
continued employment of Company's and Company's Subsidiaries' officers,
employees and consultants do not subject Company or its Subsidiaries to any
liability for any claim or claims arising out of or in connection with any such
contract, agreement, or covenant.
(b) To the knowledge of Company, no officers of Company,
and no employee or consultant of Company or Company's Subsidiaries whose
termination, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, has
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any present intention of terminating his or her employment or consulting
relationship with Company or Company's Subsidiaries.
3.22 CONTRACTS OR COMMITMENTS; INDEBTEDNESS. None of Company or
Company's Subsidiaries and none of their properties is subject to any material
judgment, order, writ, decree, statute, rule or regulation, or any material
mortgage, indenture, agreement, instrument or contract which could reasonably be
expected to have a Material Adverse Effect. Company and its Subsidiaries have no
Indebtedness other than Permitted Indebtedness.
3.23 TRANSACTIONS WITH AFFILIATES; INVESTMENTS. There are no loans,
leases, royalty agreements or other continuing transactions between Company or
its Subsidiaries and any Affiliate of Company or its Subsidiaries, except
transactions in the ordinary course of business and on terms at least as
favorable to Company or its Subsidiaries as would be the case in an arms-length
transaction with an unaffiliated Person. Company and its Subsidiaries have no
Investments other than Permitted Investments.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser, for that
Purchaser alone, represents and warrants to Company upon the acquisition of the
Note and the Warrants as follows:
4.1 BINDING OBLIGATION. Such Purchaser has full legal capacity,
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Each of this Agreement and the Security Agreement is a
valid and binding obligation of such Purchaser, enforceable in accordance with
its terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
4.2 SECURITIES LAW COMPLIANCE. Such Purchaser has been advised
that the Notes, the Warrants and the Warrant Shares have not been registered
under the Securities Act, or any state securities laws and, therefore, cannot be
resold unless they are registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration requirements is
available. Such Purchaser is aware that Company is under no obligation to effect
any such registration with respect to the Notes or, except as set forth in the
Registration Rights Agreement, the Warrants or the Warrant Shares, or to file
for or comply with any exemption from registration. Such Purchaser has not been
formed solely for the purpose of making this investment and is purchasing the
Notes and the Warrants to be acquired by such Purchaser hereunder for its own
account for investment, not as a nominee or agent, and not with a view to, or
for resale in connection with, the distribution thereof. Such Purchaser has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the merits and risks of such investment, is able to
incur a complete loss of such investment and is able to bear the economic risk
of such investment for an indefinite period of time. Such Purchaser is an
accredited investor as such term is defined in Rule 501 of Regulation D under
the Securities Act.
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4.3 ACCESS TO INFORMATION. Such Purchaser acknowledges that
Company has given such Purchaser access to the corporate records and accounts of
Company and to all information in its possession relating to Company, has made
its officers and representatives available for interview by such Purchaser, and
has furnished such Purchaser with all documents and other information required
for such Purchaser to make an informed decision with respect to the purchase of
the Notes and the Warrants.
5. CONDITIONS TO CLOSING OF THE PURCHASERS. Each Purchaser's obligations
at the Closing are subject to the fulfillment, on or prior to the Closing Date,
of all of the following conditions, any of which may be waived in whole or in
part by all of the Purchasers:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Company in Section 3 hereof shall have been true and correct
when made, and shall be true and correct on the Closing Date.
5.2 GOVERNMENTAL APPROVALS AND FILINGS. Except for any notices
required or permitted to be filed after the Closing Date with certain federal
and state securities commissions, Company shall have obtained all governmental
approvals required in connection with the lawful sale and issuance of the Notes.
5.3 LEGAL REQUIREMENTS. At the Closing, the sale and issuance by
Company, and the purchase by the Purchasers, of the Notes shall be legally
permitted by all laws and regulations to which the Purchasers or Company are
subject.
5.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers.
5.5 OPINION OF COUNSEL. There shall have been delivered to the
Purchasers a favorable written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ counsel to
Company dated as of the Closing Date.
5.6 TRANSACTION DOCUMENTS. Company shall have duly executed and
delivered to the Purchasers and/or the Collateral Agent, as the case may be, the
following documents:
(a) This Agreement together with the Disclosure Schedule;
(b) Each Note described in Section 2.1;
(c) The Security Agreement;
(d) Each Warrant described in Section 2.1;
(e) The Registration Rights Agreement; and
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(f) All UCC-1 financing statements and other documents
and instruments which the Purchaser may reasonably request to perfect its
security interest in the collateral described in the Security Agreement.
5.7 CORPORATE DOCUMENTS. Company shall have delivered to the
Collateral Agent each of the following:
(a) The Articles of Incorporation of Company, certified
as of a recent date prior to the Closing Date by the Secretary of State of
Delaware.
(b) A Certificate of Good Standing or comparable
certificate as to Company, certified as of a recent date prior to the Closing
Date by the Secretary of State of Delaware and a Certificate of Good Standing
certified as of a recent date prior to the Closing Date by the Secretary of the
State of Florida.
(c) A certificate of the Secretary of Company, dated the
Closing Date, certifying (i) that the Certificate of Incorporation of Company,
delivered to Purchasers pursuant to Section 5.7(a) hereof, is in full force and
effect and has not been amended, supplemented, revoked or repealed since the
date of such certification; (ii) that attached thereto is a true and correct
copy of the Bylaws of Company as in effect on the Closing Date; (iii) that
attached thereto are true and correct copies of resolutions duly adopted by the
Board of Directors of Company and continuing in effect, which authorize the
execution, delivery and performance by Company of this Agreement and the Notes
and the consummation of the transactions contemplated hereby and thereby; and
(iv) that there are no proceedings for the dissolution or liquidation of Company
(commenced or threatened); and
(d) A certificate of the Secretary of Company, dated the
Closing Date, certifying the incumbency, signatures and authority of the
officers of Company authorized to execute and deliver this Agreement and the
Notes on behalf of Company and perform Company's obligations thereunder on
behalf of Company.
5.8 POST-CLOSING DOCUMENTS. Company shall employ its best efforts
to have delivered to the Collateral Agent each of the following on or before
April 7, 1999:
(a) A legal opinion of special Florida counsel to Company
as to the attachment and perfection of the security interest of the Collateral
Agent granted pursuant to the terms of the Security Agreement; and
(b) a duly completed debtor profile in the form
attached as Attachment 2 to the Security Agreement.
6. CONDITIONS TO OBLIGATIONS OF COMPANY. Company's obligation to issue and
sell the Notes at the Closing is subject to the fulfillment, on or prior to the
Closing Date, of the following conditions, any of which may be waived in whole
or in part by Company:
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6.1 Representations and Warranties. The representations and
warranties made by the Purchasers in Section 4 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date.
6.2 Governmental Approvals and Filings. Except for any notices
required or permitted to be filed after the Closing Date with certain federal
and state securities commissions, Company shall have obtained all governmental
approvals required in connection with the lawful sale and issuance of the Notes.
6.3 Legal Requirements. At the Closing, the sale and issuance by
Company, and the purchase by the Purchasers, of the Notes shall be legally
permitted by all laws and regulations to which the Purchasers or Company are
subject.
6.4 Purchase Price. Each Purchaser shall have delivered to Company
the Purchase Price in respect of the Note being purchased by such Purchaser
referenced in Section 1(b) hereof.
7. CERTAIN COVENANTS. While any amounts are outstanding under the Notes:
7.1 INDEBTEDNESS. Neither Company nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness except Permitted
Indebtedness.
7.2 LIENS. Neither Company nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to any of
its assets or property of any character, whether now owned or hereafter
acquired, except for Permitted Liens.
7.3 ASSET DISPOSITIONS. Neither Company nor any of its
Subsidiaries shall sell, lease, transfer, license or otherwise dispose of
(collectively, a "Transfer") any of its assets or property, whether now owned or
hereafter acquired, except (i) Transfers in the ordinary course of its business
consisting of (A) the sale of inventory or units in its demonstration pool, or
(B) sales of worn-out or obsolete equipment, and (ii) Transfers of accounts
receivables pursuant to the EAB Permitted Debt Facility.
7.4 MERGERS, ACQUISITIONS, ETC. Neither Company nor any of its
Subsidiaries shall consolidate with or merge into any other Person or permit any
other Person to merge into it, or acquire all or substantially all of the assets
or capital stock of any other Person.
7.5 INVESTMENTS. Neither Company nor any of its Subsidiaries shall
make any Investment except for Permitted Investments.
7.6 DIVIDENDS, REDEMPTIONS, ETC. Neither Company nor any of its
Subsidiaries shall (i) pay any dividends or make any distributions on its equity
securities; (ii) purchase, redeem, retire, defease or otherwise acquire for
value any of its Equity Securities; (iii) return any capital to any holder of
its Equity Securities; (iv) make any distribution of assets, Equity Securities,
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obligations or securities to any holder of its Equity Securities; or (v) set
apart any sum for any such purpose; provided, however, that any Subsidiary may
pay cash dividends to Company.
7.7 INDEBTEDNESS PAYMENTS. Neither Company nor any of its
Subsidiaries shall (i) prepay, redeem, purchase, defease or otherwise satisfy in
any manner prior to the scheduled repayment thereof any Indebtedness (other than
amounts due under the Notes); (ii) amend, modify or otherwise change the terms
of any Indebtedness for borrowed money (other than the Obligations) or lease
obligations so as to accelerate the scheduled repayment thereof; or (iii) repay
any Indebtedness for borrowed money owed to officers, directors or shareholders.
7.8 AFFILIATE TRANSACTIONS. Except as otherwise expressly
permitted by this Agreement, neither Company nor any of its Subsidiaries shall
enter into any contractual obligation with any Affiliate or engage in any other
transaction with any Affiliate except upon terms at least as favorable to
Company or such Subsidiary as an arms-length transaction with unaffiliated
Persons.
7.9 INFORMATION RIGHTS: NOTICES. Company shall furnish to Holders
the following:
(a) Quarterly Financial Statements. Within sixty (60)
days after the last day of each fiscal quarter, a copy of the Financial
Statements of Company for such quarter and for the fiscal year to date,
certified by the chief financial officer or controller of Company to present
fairly the financial condition, results of operations and other information
presented therein and to have been prepared in accordance with GAAP consistently
applied, subject to normal year end adjustments and except that no footnotes
need be included with such Financial Statements;
(b) Annual Financial Statements. Within one hundred (100)
days after the close of each fiscal year of Company, (i) copies of the audited
Financial Statements of Company for such year, audited by nationally recognized
independent certified public accountants, and (ii) management's discussion and
analysis of financial condition and results of operation ("MD&A") of Company and
its Subsidiaries (it being understood that the MD&A included in Company's Form
10-K filed with the Securities and Exchange Commission shall suffice for
purposes of this Section 7.9(b)(ii));
(c) SEC Reports. As soon as possible and in no event
later than five (5) Business Days after they are sent, made available or filed,
copies of all registration statements and reports filed by Company with the
Securities and Exchange Commission and all reports, proxy statements and
financial statements sent or made available by Company to its shareholders
generally; and
(d) Notice of Defaults. Promptly upon the occurrence
thereof, written notice of the occurrence of any Default hereunder or any event
of default with respect to any Indebtedness of Company or its Subsidiaries.
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(e) Other Information. Copies of the management letters
delivered by the accountants in connection with the Financial Statements
delivered pursuant to subsection 7.9(b) above, and other information reasonably
requested by any Holder, provided that prior to the disclosure of any such items
to such Holder, the Company may require that such Holder execute a
confidentiality agreement requiring it to keep confidential all such
information, except to the extent disclosure is required by law.
7.10 INSPECTION RIGHTS. Any Holder of the Notes or its
representatives shall have the right, at any time during normal business hours,
upon reasonable prior notice, to visit and inspect the properties of Company and
its corporate, financial and operating records, and make abstracts therefrom,
and to discuss Company's affairs, finances and accounts with its directors,
officers and independent public accountants; provided that prior to any such
inspection, the Company may require that such Holder execute a confidentiality
agreement requiring it to keep confidential all such information, except if
disclosure is required by law.
8. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement, the Notes and the other
Transaction Documents:
8.1 FAILURE TO PAY. Company shall fail to pay (i) when due any
principal payment under any Note on the due date thereof or (ii) any interest or
other payment required under the terms of this Agreement or any other
Transaction Document on the date due and such payment shall not have been made
within ten (10) days of when due; or
8.2 BREACHES OF CERTAIN COVENANTS. Company or any of its
Subsidiaries shall fail to observe or perform any covenant, obligation,
condition or agreement set forth in Section 7 (other than Section 7.9) of this
Agreement or in the Security Agreement; or
8.3 BREACHES OF OTHER COVENANTS. Company or any of its
Subsidiaries shall fail to observe or perform any other covenant, obligation,
condition or agreement contained in this Agreement or the other Transaction
Documents (other than those specified in Sections 8.1 and 8.2 and such failure
shall continue for ten (10) days; or
8.4 REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of Company to Holder in writing in connection with this Agreement or
any of the other Transaction Documents, or as an inducement to the Holders to
enter into this Agreement and the other Transaction Documents, shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished; or
8.5 OTHER PAYMENT OBLIGATIONS. Company or any of its Subsidiaries
shall (i) fail to make any payment when due under the terms of any bond,
debenture, note or other evidence of Indebtedness to be paid by such Person
(excluding the Notes and the other Transaction Documents but including any other
evidence of Indebtedness of Company or any of its Subsidiaries to any Holder)
and such failure shall continue beyond any period of grace provided with respect
thereto, or
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(ii) default in the observance or performance of any other agreement, term or
condition contained in any such bond, debenture, note or other evidence of
Indebtedness, and the effect of such failure or default is to cause, or permit
the holder or holders thereof to cause, Indebtedness in an aggregate amount of
Two Hundred Thousand Dollars ($200,000) or more to become due prior to its
stated date of maturity; or
8.6 VOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS. Company or any
of its Subsidiaries shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property, (ii) be unable, or admit in writing its inability, to pay
its debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of effecting any
of the foregoing; or
8.7 INVOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of Company
or any of its Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to Company or any of its
Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement; or
8.8 JUDGMENTS. Except as set forth in the Disclosure Schedule,
final judgment or order for the payment of money in excess of One Hundred
Thousand Dollars ($100,000) (exclusive of amounts covered by insurance issued by
an insurer not an Affiliate of Company) shall be rendered against Company or any
of its Subsidiaries and the same shall remain undischarged for a period of
thirty (30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
Company or any of its Subsidiaries and such judgment, writ, or similar process
shall not be released, stayed, vacated or otherwise dismissed within thirty (30)
days after issue or levy; or
8.9 TRANSACTION DOCUMENTS. Any Transaction Document or any
material term thereof shall cease to be, or be asserted by Company not to be, a
legal, valid and binding obligation of Company enforceable in accordance with
its terms or if the Liens of Holder in any of the assets of Company or its
Subsidiaries shall cease to be or shall not be valid, perfected Liens or Company
or any Subsidiary shall assert that such Liens are not valid, perfected Liens;
or
8.10 MATERIAL ADVERSE CHANGE. A Material Adverse Change shall
occur.
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9. RIGHTS OF HOLDERS UPON DEFAULT. Upon the occurrence or
existence of any Event of Default (other than an Event of Default, referred to
in Sections 8.6 and 8.7) and at any time thereafter during the continuance of
such Event of Default, the Holders of 25% or more of the outstanding principal
amount of the Notes, by written notice to Company, may declare all outstanding
Obligations payable by Company under all of the Notes to be immediately due and
payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein or in the
other Transaction Documents to the contrary notwithstanding. Upon the occurrence
or existence of any Event of Default described in Sections 8.6 and 8.7,
immediately and without notice, all outstanding Obligations payable by Company
under all of the Notes shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the other
Transaction Documents to the contrary notwithstanding. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
Holder may exercise any other right power or remedy granted to it by the
Transaction Documents or otherwise permitted to it by law, either by suit in
equity or by action at law, or both.
10. MISCELLANEOUS.
10.1 WAIVERS AND AMENDMENTS. Any provision of this
Agreement may be amended, waived or modified only upon the written consent of
Company and Holders of a Majority in Interest; provided that without the written
consent of the Holders of all of the Notes then outstanding, no such amendment,
waiver or modification shall be effective if it would (i) change the time of
payment of the principal of or the interest on any Note or reduce the principal
amount thereof or change the rate of interest thereon, or (ii) change the
percentage of Holders of the Notes required to consent to any such amendment,
waiver or modification of any of the provisions of this Agreement.
10.2 GOVERNING LAW. This Agreement and all actions arising
out of or in connection with this Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflicts of law provisions of the State of New York or of any other state.
10.3 SURVIVAL. The representations, warranties, covenants
and agreements made herein shall survive the execution and delivery of this
Agreement.
10.4 SUCCESSORS AND ASSIGNS. Subject to the restrictions
on transfer described in Sections 10.5 and 10.6 below, the rights and
obligations of Company and the Purchasers of the Notes shall be binding upon and
benefit the successors, assigns, heirs, administrators and transferees of the
parties.
10.5 REGISTRATION, TRANSFER AND REPLACEMENT OF THE NOTES.
The Notes issuable under this Agreement shall be registered notes. Company will
keep, at its principal executive office, books for the registration and
registration of transfer of the Notes. Prior to presentation of any Note
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for registration of transfer, Company shall treat the Person in whose name such
Note is registered as the owner and Holder of such Note for all purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall not
be affected by notice to the contrary. Subject to any restrictions on or
conditions to transfer set forth in any Note, the Holder of any Note, at its
option, may in person or by duly authorized attorney surrender the same for
exchange at Company's chief executive office, and promptly thereafter and at
Company's expense, except as provided below, receive in exchange therefor one or
more new Note(s), each in the principal requested by such Holder, dated the date
to which interest shall have been paid on the Note so surrendered or, if no
interest shall have yet been so paid, dated the date of the Note so surrendered
and registered in the name of such Person or Persons as shall have been
designated in writing by such Holder or its attorney for the same principal
amount as the then unpaid principal amount of the Note so surrendered. Upon
receipt by Company of evidence reasonably satisfactory to it of the ownership of
and the loss, theft, destruction or mutilation of any Note and (i) in the case
of loss, theft or destruction, of indemnity reasonably satisfactory to it; or
(ii) in the case of mutilation, upon surrender thereof, Company, at its expense,
will execute and deliver in lieu thereof a new Note executed in the same manner
as the Note being replaced, in the same principal amount as the unpaid principal
amount of such Note and dated the date to which interest shall have been paid on
such Note or, if no interest shall have yet been so paid, dated the date of such
Note.
10.6 ASSIGNMENT BY COMPANY. Neither the Notes nor any of
the rights, interests or obligations hereunder may be assigned, by operation of
law or otherwise, in whole or in part, by Company without the prior written
consent of a Majority in Interest.
10.7 INDEMNITY. Company shall indemnify, reimburse and
hold each Purchaser, each of such Purchaser's equityholders, and each of their
respective successors, assigns, agents, officers, directors, shareholders,
servants, agents and employees (each, an "INDEMNIFIED PARTY") harmless from and
against all liabilities, losses, damages, actions, suits, demands, claims of any
kind and nature, all costs and expenses whatsoever to the extent they may be
incurred or suffered by such Indemnified Party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and other
charges of applicable governmental authorities), damage to or loss of use of
property (including consequential or special damages to third parties or damages
to Company's property) (each, a "CLAIM"), directly or indirectly relating to or
arising out of the use of the proceeds of the sale of the Notes or otherwise,
the falsity of any representation or warranty of Company or Company's failure to
comply with the terms of this Agreement or any other Operative Document during
the Term; provided, however, that Company shall not indemnify an Indemnified
Party for any liability incurred by such Indemnified Party as a direct and sole
result of such Indemnified Party's gross negligence or willful misconduct. Such
indemnities shall continue in full force and effect, notwithstanding the
expiration or termination of this Agreement. Upon an Indemnified Party's written
demand, Company shall assume and diligently conduct, at its sole cost and
expense, the entire defense of such Indemnified Party, using counsel reasonably
acceptable to such Indemnified Party against any indemnified Claim. Company
shall not settle or compromise any Claim against or
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involving an Indemnified Party without first obtaining such Indemnified Party's
written consent thereto, which consent shall not be unreasonably withheld.
10.8 ENTIRE AGREEMENT. This Agreement together with the
Notes and the other Transaction Documents constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
10.9 NOTICES. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by registered or certified
mail, postage prepaid, or by recognized overnight courier or personal delivery,
addressed (i) if to a Purchaser, at such Purchaser's address set forth in the
Schedule of Purchasers attached as Schedule I, or at such other address as such
Purchaser shall have furnished Company in writing, or (ii) if to Company, at its
address set forth at the beginning of this Agreement, or at such other address
as Company shall have furnished to the Purchasers in writing.
10.10 EXPENSES. Company shall pay on demand all reasonable
fees and expenses, including reasonable attorneys fees and expenses in
connection with the preparation, execution and delivery of this Agreement and
the other Transaction Documents, in an amount not to exceed $20,000.00 in the
aggregate. Company shall pay on demand all reasonable fees and expenses,
including reasonable attorneys' fees and expenses, incurred by Lender with
respect to any amendments or waivers hereof requested by Company or in the
enforcement or attempted enforcement of any of the obligations of Company to the
Purchasers under the Transaction Documents or in preserving any of the
Purchasers' rights and remedies (including, without limitation, all such fees
and expenses incurred in connection with any "workout" or restructuring
affecting the Transaction Documents or the obligations thereunder or any
bankruptcy or similar proceeding involving Company or any of its Subsidiaries).
10.11 SEPARABILITY OF AGREEMENTS; SEVERABILITY OF THIS
AGREEMENT. Company's agreement with each of the Purchasers is a separate
agreement and the sale of the Notes to each of the Purchasers is a separate
sale. Unless otherwise expressly provided herein, the rights of each Purchaser
hereunder are several rights, not rights jointly held with any of the other
Purchasers. Any invalidity, illegality or limitation on the enforceability of
the Agreement or any part thereof, by any Purchaser whether arising by reason of
the law of the respective Purchaser's domicile or otherwise, shall in no way
affect or impair the validity, legality or enforceability of this Agreement with
respect to other Purchasers. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall be deemed to constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
COMPANY:
DIGITAL LIGHTWAVE, INC.,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
[SIGNATURES CONTINUE]
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PURCHASERS:
--------------------------------------
By
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[SIGNATURES CONTINUE]
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EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NO SALE,
TRANSFER OR OTHER DISPOSITION OF THIS NOTE
MAY BE EFFECTED WITHOUT (I) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (II)
AN OPINION OF COUNSEL FOR THE HOLDER THAT SUCH
REGISTRATION IS NOT REQUIRED OR (III) RECEIPT
OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED.
9% SECURED BRIDGE NOTE DUE JANUARY 17, 2000
$____________ March 31, 1999
FOR VALUE RECEIVED, Digital Lightwave, Inc., a Delaware corporation
(the "Company"), hereby promises to pay to the order of
__________________________ (the "Lender"), its successors and assigns in lawful
money of the United States of America, the principal sum of
______________Dollars ($________), or such lesser principal amount as may be
outstanding from time to time, no later than January 17, 2000 (the "Maturity
Date") or as otherwise provided in the Purchase Agreement (as defined below).
This Note shall bear interest (computed on the basis of a year of 360 days
comprised of twelve 30-day months) on the unpaid principal amount hereof at a
rate of interest equal to nine percent (9.0%) per annum. All accrued and unpaid
interest on this Note shall be paid semi-annually, with the first such payment
coming due on September 30, 1999, and on the Maturity Date. Any prepayment
hereunder shall be applied first to the interest accrued and unpaid hereon and
then to the unpaid principal amount hereof.
This Note is one of the "Notes" as defined in, and is subject to the
terms and conditions of, the Note and Warrant Purchase Agreement dated as of
March 31, 1999 (the "Purchase Agreement") among the Company and the parties
thereto listed as "Purchasers." The Purchase Agreement contains optional and
mandatory redemption provisions, acceleration rights upon Events of Default (as
defined in the Purchase Agreement) and other terms and conditions applicable to
this Note.
This Note is secured by a Security Agreement dated as of March 31,
1999 among the Company, ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin, as collateral agent, and each
of the parties named as a "Secured Party" therein.
If any amount payable under this Note (or any interest payment
hereunder) becomes due and payable on a day other than a business day, the
maturity thereof shall be extended to the next succeeding business day. In the
event that the Company shall fail to pay when due (whether at maturity, by
reason of acceleration or otherwise) any principal of or interest on this Note,
such overdue amounts shall bear interest at a rate per annum equal to the
lesser of (i) eighteen percent (18%) per annum , or (ii) the highest percentage
rate of interest permitted under applicable law.
28
The Company hereby waives diligence, demand, presentment, protest and
notice of any kind, and all rights of set-off, and assents to extensions of the
time of payment, release, surrender or substitution of security, or forbearance
or other indulgence, without notice. This Note may not be changed, modified or
terminated except in accordance with the Purchase Agreement. This Note shall be
binding upon the heirs, executors, administrators, successors and assigns of
the Company and inure to the benefit of the Lender and its permitted
successors, endorsees and assigns.
If any term or provision of this Note shall be held invalid, illegal
or unenforceable the validity, legality and enforceability of all other terms
and provisions hereof shall in no way be affected thereby. In the event any
interest is paid on this Note which is deemed to be in excess of the then legal
maximum rate, then that portion of the interest payment representing an amount
in excess of the then legal maximum rate shall be deemed a payment of principal
and applied against the principal of this Note.
This Note shall be governed by and construed in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed and delivered by its authorized officer as of the date and year first
written above.
DIGITAL LIGHTWAVE, INC.
By
--------------------------
Name:
Title:
29
EXHIBIT B
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of March __, 1999, is executed by
DIGITAL LIGHTWAVE, INC., a Delaware corporation ("Debtor"), in favor of ▇.▇.
▇▇▇▇▇▇▇▇▇, Towbin ("Collateral Agent") on behalf of the parties listed listed
as secured parties on the signature page hereof (together with their successors
and assigns, the "Secured Parties").
RECITALS
A. Debtor and the Secured Parties have entered into a Note and
Warrant Purchase Agreement dated the date hereof (the "Note Purchase Agreement")
and Debtor has executed a 9% Senior Secured Bridge Note (each a "Note" and
collectively, the "Notes") in favor of each Secured Party.
B. In order to induce each Secured Party to extend the credit
evidenced by the Note, Debtor has agreed to enter into this Security Agreement
and to grant Collateral Agent the security interest in the Collateral described
below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees with Collateral Agent and the Secured
Parties as follows:
1. Definitions and Interpretation. When used in this
Security Agreement, the following terms shall have the following respective
meanings:
"Account Debtor" shall have the meaning given to that term in
Section 3 hereof.
"Collateral" shall have the meaning given to that term in
Section 2 hereof.
"Equipment" shall have the meaning given to that term in
Attachment 1 hereto.
"Inventory" shall have the meaning given to that term in
Attachment 1 hereto.
"Obligations" shall mean and include all loans, advances,
debts, liabilities and obligations, howsoever arising, owed
by Debtor to the Secured Parties of every kind and
description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), now
existing or hereafter arising under or pursuant to the terms
of the Notes, the Note Purchase Agreement and the other
Transaction Documents, including, all interest, fees,
charges, expenses, attorneys'
30
fees and costs and accountants' fees and costs chargeable to
and payable by Debtor hereunder and thereunder, in each case,
whether direct or indirect, absolute or contingent, due or to
become due, and whether or not arising after the commencement
of a proceeding under Title 11 of the United States Code (11
U.S.C. Section 101 et seq.), as amended from time to time
(including post-petition interest) and whether or not allowed
or allowable as a claim in any such proceeding.
"Receivables" shall have the meaning given to that term in
Attachment 1 hereto.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of Florida from time to time.
All capitalized terms not otherwise defined herein shall have the
respective meanings given in the Note Purchase Agreement. Unless otherwise
defined herein, all terms defined in the UCC shall have the respective meanings
given to those terms in the UCC.
2. Grant of Security Interest. As security for the Obligations,
Debtor hereby pledges and assigns to Collateral Agent and grants to Collateral
Agent a security interest in all right, title and interests of Debtor in and to
the property described in Attachment 1 hereto (collectively and severally, the
"Collateral"), which Attachment 1 is incorporated herein by this reference.
3. Representations and Warranties. Debtor represents and
warrants to Collateral Agent and the Secured Parties that (a) Debtor is the
owner of the Collateral (or, in the case of after-acquired Collateral, at the
time Debtor acquires rights in the Collateral, will be the owner thereof) and
that no other Person has (or, in the case of after-acquired Collateral, at the
time Debtor acquires rights therein, will have) any right, title, claim or
interest (by way of Lien or otherwise) in, against or to the Collateral, other
than Permitted Liens; (b) Collateral Agent has (or in the case of
after-acquired Collateral, at the time Debtor acquires rights therein, will
have) a perfected security interest in the Collateral, subject to Permitted
Liens; (c) each Receivable is genuine and enforceable against the party
obligated to pay the same (an "Account Debtor"); and (d) all information set
forth in Attachment 2 ▇▇▇▇▇ be true and correct when completed by Debt and
delivered to Collateral Agent.
4. Covenants Relating to Collateral. Debtor hereby agrees (a)
to perform all acts that may reasonably be necessary to maintain, preserve,
protect and perfect the Collateral, the Lien granted to Collateral Agent
therein and the priority of such Lien, subject to for Permitted Liens; (b) not
to use or permit any Collateral to be used (i) in violation of any provision of
any Transaction Document, (ii) in violation of any applicable law, rule or
regulation, or (iii) in violation of any policy of insurance covering the
Collateral; (c) to pay promptly when due all taxes and other governmental
charges, all Liens and all other charges now or hereafter imposed upon or
affecting any Collateral other than Permitted Liens; (d) without 30 days'
written notice to Collateral Agent, (i) not to change Debtor's name or place of
business (or, if Debtor has more than one place of business, its chief
executive office), or the office in which Debtor's records relating to
Receivables are kept, (ii) not to keep Collateral consisting of chattel paper
at any location other than its chief executive office set forth in item 1 of
Attachment 2 hereto, and (iii) not to keep
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Collateral consisting of Equipment or Inventory at any location other than the
locations set forth in item 6 of Attachment 2 hereto, (e) to procure, execute
and deliver from time to time any endorsements, assignments, financing
statements and other writings reasonably deemed necessary or appropriate by
Collateral Agent to perfect, maintain and protect its Lien hereunder and the
priority thereof, subject to Permitted Liens, and to deliver promptly to
Collateral Agent all originals of Collateral consisting of instruments; (f) to
appear in and defend any action or proceeding which may affect its title to or
Collateral Agent's interest in the Collateral; and (g) to collect, enforce and
receive delivery of the Receivables in accordance with past practice until
otherwise notified by Collateral Agent.
5. Authorized Action by Agent. Debtor hereby irrevocably
appoints Collateral Agent as its attorney-in-fact and agrees that Collateral
Agent may perform (but Collateral Agent shall not be obligated to and shall
incur no liability to Debtor or any third party for failure so to do) any act
which Debtor is obligated by this Security Agreement to perform, and to
exercise such rights and powers as Debtor might exercise with respect to the
Collateral, including the right to (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or
on account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) insure, process and preserve the Collateral; (d) make any compromise or
settlement, and take any action it deems advisable, with respect to the
Collateral; (e) pay any Indebtedness of Debtor relating to the Collateral; and
(f) execute UCC financing statements and other documents, instruments and
agreements required hereunder; provided, however, that Collateral Agent shall
not exercise any such powers prior to the occurrence of an Event of Default and
shall only exercise such powers during the continuance of an Event of Default.
Debtor agrees to reimburse Collateral Agent upon demand for any reasonable
costs and expenses, including attorneys' fees, Collateral Agent may incur while
acting as Debtor's attorney-in-fact hereunder, all of which costs and expenses
are included in the Obligations. It is further agreed and understood between
the parties hereto that such care as Collateral Agent gives to the safekeeping
of its own property of like kind shall constitute reasonable care of the
Collateral when in Collateral Agent's possession; provided, however, that
Collateral Agent shall not be required to make any presentment, demand or
protest, or give any notice and need not take any action to preserve any rights
against any prior party or any other person in connection with the Obligations
or with respect to the Collateral.
6. Default and Remedies. Debtor shall be deemed in default under
this Security Agreement upon the occurrence and during the continuance of an
Event of Default (as defined in the Note Purchase Agreement). Upon the
occurrence and during the continuance of any such Event of Default, Collateral
Agent shall have the rights of a secured creditor under the UCC, all rights
granted by this Security Agreement and by law, including the right to: (a)
require Debtor to assemble the Collateral and make it available to Collateral
Agent at a place to be designated by Collateral Agent; and (b) prior to the
disposition of the Collateral, store, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent Collateral
Agent deems appropriate and in connection with such preparation and
disposition, without charge, use any trademark, trade name, copyright, patent
or technical process used by Debtor. Debtor
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hereby agrees that ten (10) days' notice of any intended sale or disposition of
any Collateral is reasonable. In furtherance of Collateral Agent's rights
hereunder, Debtor hereby grants to Collateral Agent an irrevocable,
non-exclusive license (exercisable without royalty or other payment by
Collateral Agent, but only in connection with the exercise of remedies
hereunder) to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which Debtor now or hereafter has
any right, title or interest together with the right of access to all media in
which any of the foregoing may be recorded or stored.
7. Collateral Agent.
(a) Appointment. The Secured Parties hereby appoint ▇.▇. ▇▇▇▇▇▇▇▇▇,
Towbin as collateral agent for the Secured Parties under this Security
Agreement (in such capacity, the "Collateral Agent") to serve from the date
hereof until the termination of the Security Agreement.
(b) Powers and Duties of Collateral Agent, Indemnity by Secured
Parties.
(i) Each Secured Party hereby irrevocably authorizes the
Collateral Agent to take such action and to exercise such powers hereunder as
provided herein or as requested in writing by the holders of a majority of the
principal amount of the outstanding Notes in accordance with the terms hereof,
together with such powers as are reasonably incidental thereto. In addition,
Collateral Agent is hereby authorized by the Secured Parties to hold any lien
subordination agreements required by any holders of Permitted Facility Debt.
Collateral Agent may execute any of its duties hereunder by or through agents
or employees and shall be entitled to request and act in reliance upon the
advise of counsel concerning all matters pertaining to its duties hereunder and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance therewith.
(ii) Neither the Collateral Agent nor any of its
directors, officers or employees shall be liable or responsible to any Secured
Party or to Debtor for any action taken or omitted to be taken by Collateral
Agent or any other such person hereunder or under any related agreement,
instrument or document, except in the case of gross negligence or willful
misconduct on the part of the Collateral Agent, nor shall the Collateral Agent
or any of its directors, officers or employees be liable or responsible for (A)
the validity, effectiveness, sufficiency, enforceability or enforcement of the
Notes, this Security Agreement or any instrument or document delivered
hereunder or relating hereto; (B) the title of Debtor to any of the Collateral
or the freedom of any of the Collateral from any prior or other liens or
security interests; (C) the determination, verification or enforcement of
Debtor's compliance with any of the terms and conditions of this Security
Agreement; (D) the failure by Debtor to deliver any instrument or document
required to be delivered pursuant to the terms hereof; or (E) the receipt,
disbursement, waiver, extension or other handling of payments or proceeds made
or received with respect to the collateral, the servicing of the Collateral or
the enforcement or the collection of any amounts owing with respect to the
Collateral.
(iii) In the case of this Security Agreement and the
transactions contemplated hereby and any related document relating to any of
the Collateral, each of the Secured Parties agrees to pay to the Collateral
Agent, on demand, its pro rata share of all fees and
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all expenses incurred in connection with the operation and enforcement of this
Security Agreement, the Notes or any related agreement to the extent that such
fees or expenses have not been paid by Debtor. In the case of this Security
Agreement and each instrument and document relating to any of the Collateral,
each of the Secured Parties and the Debtor hereby agrees to hold the Collateral
Agent harmless, and to indemnify the Collateral Agent from and against any and
all loss, damage, expense or liability which may be incurred by the Collateral
Agent under this Security Agreement and the transactions contemplated hereby
and any related agreement or other instrument or document, as the case may be,
unless such liability shall be caused by the willful misconduct or gross
negligence of the Collateral Agent.
8. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all
notices, requests, demands, consents, instructions or other communications to
or upon Debtor or Secured Party under this Security Agreement shall be by
telecopy or in writing and telecopied, mailed or delivered to each party at
telecopier number or its address set forth below (or to such other telecopy
number or address as the recipient of any notice shall have notified the other
in writing). All such notices and communications shall be effective (a) when
sent by Federal Express or other overnight service of recognized standing, on
the Business Day following the deposit with such service; (b) when mailed, by
registered or certified mail, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon receipt; (c) when
delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of
receipt.
Collateral Agent:
Swiss Bank Tower
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Debtor:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) Nonwaiver. No failure or delay on Collateral Agent's
part in exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other right.
(c) Amendments and Waivers. This Security Agreement may
not be amended or modified, nor may any of its terms be waived, except by
written instruments signed by Debtor
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and Collateral Agent. Each waiver or consent under any provision hereof shall
be effective only in the specific instances for the purpose for which given.
(d) Assignments. This Security Agreement shall be
binding upon and inure to the benefit of Collateral Agent and Debtor and their
respective successors and assigns; provided, however, that Debtor may not sell,
assign or delegate rights and obligations hereunder without the prior written
consent of Collateral Agent.
(e) Cumulative Rights, etc. The rights, powers and
remedies of Collateral Agent under this Security Agreement shall be in addition
to all rights, powers and remedies given to Collateral Agent by virtue of any
applicable law, rule or regulation of any Governmental Authority, any
Transaction Document or any other agreement, all of which rights, powers, and
remedies shall be cumulative and may be exercised successively or concurrently
without impairing Collateral Agent's rights hereunder. Debtor waives any right
to require Collateral Agent to proceed against any Person or to exhaust any
Collateral or to pursue any remedy in Collateral Agent's power.
(f) Payments Free of Taxes, Etc. All payments made by
Debtor under this Security Agreement shall be made by Debtor free and clear of
and without deduction for any and all present and future taxes, levies,
charges, deductions and withholdings. In addition, Debtor shall pay upon demand
any stamp or other taxes, levies or charges of any jurisdiction with respect to
the execution, delivery, registration, performance and enforcement of this
Security Agreement. Upon request by Secured Party Collateral Agent, Debtor
shall furnish evidence satisfactory to Collateral Agent that all requisite
authorizations and approvals by, and notices to and filings with, governmental
authorities and regulatory bodies have been obtained and made and that all
requisite taxes, levies and charges have been paid.
(g) Partial Invalidity. If at any time any provision of
this Security Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Security Agreement nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
(h) Expenses. Debtor shall pay on demand all reasonable
fees and expenses, including reasonable attorneys' fees and expenses, incurred
by Collateral Agent in connection with custody, preservation or sale of, or
other realization on, any of the Collateral or the enforcement or attempt to
enforce any of the Obligations which is not performed as and when required by
this Security Agreement.
(i) Headings. Headings in this Security Agreement and
each of the other Transaction Documents are for convenience of reference only
and are not part of the substance hereof or thereof.
(j) Plural Terms. All terms defined in this Security
Agreement or any other Transaction Document in the singular form shall have
comparable meanings when used in the plural form and vice versa.
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(k) Governing Law. This Security Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without reference to conflicts of law rules (except to the extent governed by
the UCC).
(l) Jury Trial. EACH OF DEBTOR AND COLLATERAL AGENT, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY
AGREEMENT.
-7-
36
IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be
executed as of the day and year first above written.
DIGITAL LIGHTWAVE, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
AGREED:
▇.▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
as Collateral Agent
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-8-
37
SECURED PARTIES:
AGREED:
--------------------------
(Entity Name)
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-9-
38
ATTACHMENT 1
TO SECURITY AGREEMENT
All right, title and interest of Debtor now owned or hereafter acquired in and
to the following:
All equipment and fixtures (including, without limitation, furniture, vehicles
and other machinery and office equipment), together with all additions and
accessions thereto and replacements therefor (collectively, the "Equipment");
All inventory (including, without limitation, (i) all boards, processors and
lasers other raw materials, work in process and finished goods and (ii) all
such goods which are returned to or repossessed by Debtor), together with all
additions and accessions thereto, replacements therefor, products thereof and
documents therefor (collectively, the "Inventory");
All accounts, chattel paper, contract rights and rights to the payment of money
(collectively, the "Receivables");
All general intangibles, including, without limitation, (i) customer and
supplier lists and contracts, books and records, insurance policies, tax
refunds, contracts for the purchase of real or personal property; (ii) all
patents, copyrights, trademarks, trade names, service marks and other
intellectual property rights, (iii) all licenses to use, applications for, and
other rights to, such patents, copyrights, trademarks, trade names and service
marks, and (iv) all goodwill of Debtor;
All deposit accounts, money, certificated securities (but excluding securities
of foreign Subsidiaries), uncertificated securities, instruments and
documents; and
All proceeds of the foregoing (including, without limitation, whatever is
receivable or received when Collateral or proceeds is sold, collected,
exchanged, returned, substituted or otherwise disposed of, whether such
disposition is voluntary or involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with respect to any Collateral,
and all rights to payment with respect to any cause of action affecting or
relating to the Collateral); provided, however, that the foregoing shall not be
construed to include, and the Collateral shall not include, (i) (in each case
except to the extent provided in Section 9-318(4) of the UCC) any account,
right or intangible arising from any contract or agreement if such inclusion
could violate such contract or agreement, or (ii) any accounts receivable
subject to sale, assignment or transfer ___ Section 1 of the EAB Permitted Debt
Facility.
Att. 1-1
39
ATTACHMENT 2
TO SECURITY AGREEMENT
DEBTOR PROFILE
1. The legal name of the Debtor is and the address of its chief executive
office is: Digital Lightwave ______________________________.
2. Debtor was incorporated on _____________, 19__ in the state of _______
____________________. Since its incorporation Debtor has had the
following legal names (other than its current legal name):
Date of the Debtor's Name
Date Debtor's Name Prior Name Date Changed
3. Debtor does business under the following trade names:
Trade Name Is This Name Registered? Number Registration Date
4. Since Debtor's incorporation the following companies have been merged
into Debtor (provide names, dates and brief description of
transactions):
5. The following assets of Debtor were acquired in a bulk sale or another
transaction not in the ordinary course of business of the seller
(provide description of collateral, date and description of
transaction, and name of seller):
▇▇▇. ▇-▇
▇▇
▇. ▇▇▇▇▇▇ has the following places of business:
Brief Description
Address Owner of Location of Assets and Value
7. Debtor has assets at the following other locations that are not places
of business of Debtor:
Brief Description
Address Owner of Location of Assets and Value
The following locations listed in items 6 and 7 are public warehouses issuing
warehouse receipts:
8. Debtor had the following other locations within the past four months:
Brief Description
Address Owner of Location of Assets and Value
9. Debtor imports assets from outside the United States through the
following ports of entry (list location by state and county):
Att. 2-2
41
10. The following Persons have possession of inventory of Debtor for the
purpose of processing or finishing it:
Name and Address Processing Services Description of inventory
11. Debtor is qualified to do business in the following states:
12. Does Debtor regularly receive letters of credit from customers to
secure payments of sums owed to Debtor? Yes . No .
----- -----
13. Debtor holds notes payable from the following persons:
Name of Obligor Amount
14. Does Debtor regularly have accounts receivable due from, or contracts
with, the United States government or any agency or department
thereof? Yes . No .
----- -----
If yes, indicate the percentage of Debtor's total outstanding accounts
receivable that are due from the United States government or such
agency or department: _____%
15. Does Debtor regularly receive advance deposits from customers for
goods not yet delivered to such customers? Yes . No .
----- -----
16. Debtor's federal employer identification number is: _________________.
Att. 2-3
42
17. Debtor's assets are subject to the following security interest of
Persons other than the Collateral Agent:
Assets Name of Secured Party
18. The following tax assessments are currently outstanding and unpaid:
Assessing Authority Amount and Description
19. Debtor has directly or indirectly guaranteed the following obligations
of third parties:
Secured Party Amount Debtor
20. Debtor owns the following material intellectual property rights
(including patents, trademarks and copyrights, whether or not
registered):
21. The following is a list of all software or other copyrighted material
which is licensed to third parties and generates accounts receivable:
22. Debtor has the following subsidiaries (list jurisdiction and date of
incorporation, federal employer identification number, type and value
of assets):
Att. 2-4
43
EXHIBIT C
NEITHER THIS WARRANT NOR THE SHARES OF STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. NO SALE, TRANSFER OR OTHER
DISPOSITION OF THIS WARRANT OR SAID SHARES MAY
BE EFFECTED WITHOUT (I) AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (II) AN OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION
IS NOT REQUIRED OR (III) RECEIPT OF A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION
TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS
NOT REQUIRED.
Number of Shares Issuable Upon Exercise:
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
Expires: 5:00 p.m. (E.S.T.) March 31, 2004
THIS CERTIFIES THAT, for value received, _____________, a
________________, is entitled to subscribe for and purchase ________ shares (as
adjusted pursuant to the provisions hereof, the "Shares") of the Common Stock
of Digital Lightwave, Inc., a Delaware corporation (the "Company"), at a price
per share of $___ (as adjusted pursuant to the provisions hereof, the "Exercise
Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, the term "Common Stock" shall mean the
Company's presently authorized Common Stock, and any stock into or for which
such Common Stock may hereafter be converted or exchanged, and the term "Grant
Date" shall mean March 31, 1999.
1. Term. This Warrant is exercisable, in whole or in part, at
any time and from time to time from and after the Grant Date and prior to March
31, 2004
2. Method of Exercise; Net Issue Exercise.
2.1 Method of Exercise; Payment; Issuance of New
Warrant. This Warrant may be exercised by the holder hereof at any time prior
to its expiration, in whole or in part and from time to time, at the election
of the holder hereof, by the surrender of this Warrant (with the Notice of
Exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company, by cash, check or
cancellation of indebtedness, of an amount equal to the Exercise Price per
share multiplied by the number of Shares then being purchased. The person or
persons in whose name(s) any certificate(s) representing Shares shall be
issuable upon
44
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the
Shares represented thereby (and such Shares shall be deemed to have been
issued) immediately prior to the close of business on the date or dates upon
which this Warrant is exercised. In the event of any exercise of this Warrant,
certificates for the Shares so purchased shall be delivered to the holder
hereof as soon as possible and in any event within fifteen (15) days of receipt
of such notice and, unless this Warrant has been fully exercised or expired, a
new Warrant representing the portion of the Shares, if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the holder hereof as soon as possible thereafter.
2.2 Automatic Exercise. To the extent this Warrant is
not previously exercised, and if the fair market value of one share of the
Company's Common Stock is greater than the Exercise Price then in effect, this
Warrant shall be deemed automatically exercised pursuant to Section 2.3 below
(even if not surrendered) immediately before its expiration. For purposes of
such automatic exercise, the fair market value of one share of the Company's
Common Stock upon such expiration shall be determined pursuant to Section 2.3
(b) below. To the extent this Warrant or any portion thereof is deemed
automatically exercised pursuant to this Section 2.2, the Company agrees to
promptly notify the holder hereof of the number of Shares, if any, the holder
hereof is to receive by reason of such automatic exercise.
2.3 Right to Convert Warrant into Stock: Net Issuance.
(a) In addition to and without limiting the
rights of the holder under the terms of this Warrant, at any time prior to its
expiration, the holder may elect to convert this Warrant or any portion thereof
(the "Conversion Right") into shares of Common Stock, the aggregate value of
which shares shall be equal to the value of this Warrant or the portion thereof
being converted. The Conversion Right may be exercised by the holder by
surrender of this Warrant at the principal office of the Company together with
notice of the holder's intention to exercise the Conversion Right, in which
event the Company shall issue to the holder a number of shares of the Company's
Common Stock computed using the following formula:
X = Y ( A - B )
A
Where: X = The number of shares of Common Stock to be issued to
the holder.
Y = The number of shares of Common Stock purchasable
under this Warrant subject to the exercise election.
A = The fair market value of one share of the Company's
Common Stock.
B = Exercise Price (as adjusted to the date of such
calculations).
(b) For purposes of this Section 2.3, the "fair
market value" per share of the Company's Common Stock shall mean:
-2-
45
(i) If the Common Stock is traded on a
national securities exchange or admitted to unlisted trading privileges on such
an exchange, or is listed on the National Market System (the "National Market
System") of the National Association of Securities Dealers Automated Quotations
System (the "NASDAQ"), the fair market value shall be the average of the last
reported sale prices of the Common Stock on such exchange or on the National
Market System on the last ten (10) trading days (or all such trading days such
Common Stock has been traded if fewer than 10 trading days) before the
effective date of exercise of the Conversion Right or if no such sale is made
on any such day, the mean of the closing bid and asked prices for such day on
such exchange or on the National Market System;
(ii) If the Common Stock is not so
listed or admitted to unlisted trading privileges, the fair market value shall
be the average of the means of the last bid and asked prices reported on the
last ten (10) trading days (or all such trading days such Common Stock has been
traded if fewer than 10 trading days) before the date of the election (1) by
the NASDAQ or (2) if reports are unavailable under clause (1) above, by the
National Quotation Bureau Incorporated; and
(iii) If the Common Stock is not so
listed or admitted to unlisted trading privileges and bid and ask prices are
not reported, the fair market value shall be determined in good faith by the
Board of Directors of the Company.
(c) Notwithstanding the foregoing, in the event that the
"fair market value" is determined pursuant to Section 2.3(b)(iii) above, then
the Company shall provide the holder of this Warrant with written notice of its
determination of "fair market value" within ten (10) days following receipt of
the notice of exercise and the holder shall have five (5) days following the
date of receipt of such written notice to withdraw its notice of exercise.
3. Stock Fully Paid; Reservation of Shares. All Shares that may
be issued upon the exercise of this Warrant shall, upon issuance, be validly
issued, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. During the period within which this
Warrant may be exercised, the Company will at all times have duly authorized
and reserved, for the purpose of issuance upon exercise of this Warrant, a
sufficient number of shares of Common Stock.
4. Adjustments to Exercise Price and Number of Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time as set
forth in Appendix I hereto upon the occurrence of certain events described
therein. The provisions of Appendix I are incorporated by reference herein with
the same effect as if set forth in full herein.
5. Notices of Record Date. In the event of any taking by the
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire any
share of
-3-
46
any class or any other securities or property, or to receive any other right,
or for the purpose of determining shareholders who are entitled to vote in
connection with any proposed merger or consolidation of the Company with or
into any other corporation, or any proposed sale, lease or conveyance of all or
substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, then, in connection with each such
event, the Company shall mail to the holder of this Warrant at least twenty
(20) days prior written notice of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right(s) or vote of the
shareholders. Each such written notice shall specify the amount and character
of any such dividend, distribution or right(s), and shall set forth, in
reasonable detail, the matter requiring any such vote of the shareholders.
6. Fractional Shares. No fractional shares of Common Stock will
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based upon the
per share fair market value of the Common Stock on the date of exercise.
7. Compliance with Securities Act; Disposition of Warrant or
Shares of Common Stock.
(a) Compliance with Securities Act. The holder of this
Warrant, by acceptance hereof, agrees that this Warrant, the Shares to be
issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant or any Shares
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the Securities Act. This Warrant and all Shares issued
upon exercise of this Warrant (unless registered under the Securities Act)
shall be stamped or imprinted with a legend in substantially the following
form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
(I) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (II) AN OPINION OF COUNSEL FOR THE
HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR
(III) RECEIPT OF A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to
any offer, sale or other disposition of this Warrant or any Shares acquired
pursuant to the exercise of this Warrant prior to registration thereof, the
holder hereof and each subsequent holder of this Warrant agrees to give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the
Securities Act as then in effect or any federal or state law then in effect) of
this Warrant or such
-4-
47
Shares and indicating whether or not under the Securities Act certificates for
this Warrant or such Shares to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Securities Act. Each certificate representing this
Warrant or the Shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Securities Act unless, in the aforesaid
opinion of counsel for the holder, such legend is not required in order to
insure compliance with the Securities Act. Nothing herein shall restrict the
transfer of this Warrant or any portion hereof by the initial holder hereof to
any partnership affiliated with the initial holder, or to any partner of any
such partnership provided such transfer may be made in compliance with
applicable federal and state securities laws. The Company may issue stop
transfer instructions to its transfer agent in connection with the foregoing
restrictions.
8. Rights as Shareholders; Information.
8.1 Shareholder Rights. Except as set forth herein, no
holder of this Warrant, as such, shall be entitled to vote upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or be deemed the holder of Common Stock until this Warrant shall have
been exercised and the Shares purchasable upon such exercise shall have become
deliverable, as provided herein.
8.2 Financial Statements and Information. The Company
shall deliver to the registered holder hereof (i) within one hundred (100) days
after the end of the fiscal year of the Company, a consolidated balance sheet
of the Company as of the end of such year and a consolidated statement of
income, cash flows and shareholders' equity for such year, which year-end
financial reports shall be in reasonable detail and certified by independent
public accountants of nationally recognized standing selected by the Company,
and (ii) within sixty-five (65) days after the end of each fiscal quarter
(other than the last fiscal quarter), unaudited consolidated statements of
income and cash flows for such quarter and a consolidated balance sheet as of
the end of such quarter, certified by the Company's chief financial officer. In
addition, the Company shall deliver to the registered holder hereof any other
information or data provided generally to the shareholders of the Company.
9. Registration Rights The holder of this Warrant (and any
transferee pursuant to subsection 7(b) hereof) shall be entitled to
registration rights set forth in that certain Registration Rights Agreement,
dated as of March 31, 1999 (the "Registration Rights Agreement").
10. Mergers. The Company agrees to provide the holder of this
Warrant with at least thirty (30) days' prior written notice of the terms and
conditions of any proposed transaction, in which the Company would (i) sell,
lease, exchange, convey or otherwise dispose of all or substantially all of its
property or business, or (ii) merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary of the Company), or effect
any transaction (including a merger or other reorganization) or series of
related transactions, in which more than fifty percent (50%) of the voting
power of the Company is disposed of.
-5-
48
11. Representations and Warranties. This Warrant is issued and
delivered on the basis of the following:
(a) This Warrant has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved
for issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Shares and the holders thereof are as set forth
in the Company's Certificate of Incorporation, as amended (the "Charter"), a
true and complete copy of which has been delivered to the original holder of
this Warrant; and
(d) As of the Grant Date, the capitalization of the
Company shall be as set forth in the Capitalization Schedule attached hereto as
Appendix II, which indicates the following: (i) the authorized capital stock of
the Company (including the authorized number of shares of Common Stock); (ii)
the number of shares of capital stock that have been issued; (iii) the number
of shares for which options have been granted under any employee, officer or
director stock ownership plan; and (iv) any other securities that are
convertible into or exchangeable for capital stock of the Company or options to
purchase or rights to subscribe for capital stock of the Company or such
convertible or exchangeable securities, and the number of shares of capital
stock of the Company issuable upon any conversion, exchange or exercise of such
securities, options or rights. All issued and outstanding shares of the
Company's capital stock have duly authorized and validly issued, and are fully
paid and nonassessable. Except as set forth in Appendix II, there are no
outstanding rights, options, warrants, conversion rights, preemptive rights,
rights of first refusal or similar rights for or understandings relating to the
purchase or acquisition from the Company of any securities of the Company.
(e) The execution and delivery of this Warrant, the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof and the compliance by the Company with the provisions hereof (i)
are not and will not be inconsistent with the Company's Charter or Bylaws, (ii)
do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and (iii) do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration with or the taking of any action in respect of or by, any
Federal, state or local government authority or agency or other person.
13. Modification and Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same is sought.
-6-
49
14. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or sent to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the
signature page of this Warrant and shall be deemed received by the holder upon
the earlier of actual receipt or, if sent by certified mail (postage pre-paid),
five (5) days after deposit in the U.S. mail.
15. Binding Effect on Successors. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Shares shall survive the exercise
and termination of this Warrant. All of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise of this Warrant, in whole
or in part, upon request of the holder hereof but at the Company's expense,
acknowledge in writing its continuing obligation to the holder hereof in
respect of any rights (including, without limitation, any right to registration
of the Shares in accordance with the Registration Rights Agreement) to which
the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof
to make any such request shall not affect the continuing obligation of the
Company to the holder hereof in respect of such rights.
16. Lost Warrants or Stock Certificates. The Company covenants to
the holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate issued upon exercise thereof and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant or stock certificate, the Company
shall make and deliver a new Warrant or stock certificate, or like tenor, in
lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.
17. No Impairment. The Company will not, by amendment of its
Charter or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company, but will at
all times in good faith assist in the carrying out of all the provisions of
this Warrant and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant
against impairment.
18. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
19. Recovery of Litigation Costs. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Warrant, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
-7-
50
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
51
20. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
LAWS OF THE STATE OF NEW YORK.
Date: _________, 1999 DIGITAL LIGHTWAVE, INC.,
a Delaware corporation
By
------------------------------
Name:
Title:
--------------------------
-9-
52
EXHIBIT A
NOTICE OF EXERCISE
To: Digital Lightwave, Inc.
1. The undersigned hereby:
*elects to purchase __________ shares of Common Stock of the Company
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full; or
*elects to exercise its net issuance rights pursuant to Section 2.3 of
the attached Warrant with respect to __________ shares of Common Stock.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
----------------------------------------
(Address)
---------------
(Date)
53
APPENDIX I
ADJUSTMENT PROVISIONS
1. Capitalized Terms. Capitalized terms used in this Appendix I that
are not otherwise defined herein shall have the respective meanings assigned to
them in the Warrant, dated as of March __, 1999, to which this Appendix I is
attached, if therein defined.
2. Reclassification or Merger. In case of any reclassification, change
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation or entity
(other than a merger with another corporation in which the Company is a
continuing corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation or entity, as the case may
be, shall execute a new Warrant (in form and substance satisfactory to the
holder of this Warrant) providing that the holder of this Warrant shall have the
right to exercise such new Warrant and upon such exercise to receive, in lieu of
each share of Common Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Common Stock. Such new Warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Appendix I. The provisions of this Section 3 shall similarly apply to successive
reclassifications, changes, mergers and transfers.
3. Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Exercise Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted.
4. Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend payable in shares of Common
Stock, then the Exercise Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Exercise Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution and the number of Shares subject to this Warrant shall
be proportionately adjusted.
5. Other Distributions. In the event the Company shall declare a
dividend or distribution payable in cash, securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets or options or
rights not referred to in Sections 2, 3 or 4 of this Appendix I, then, in each
such case, provision shall be made by the Company such that the holder of this
Warrant shall
54
receive upon exercise of this Warrant a proportionate share of any such dividend
or distribution as though it were the holder of the Shares as of the record date
fixed for the determination of the shareholders of the Company entitled to
receive such dividend or distribution.
6. Notice of Adjustments. Whenever the Exercise Price shall be adjusted
pursuant to the provisions hereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate signed by its chief financial officer to
the registered holder(s) hereof setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Exercise Price after giving effect to such
adjustment.
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EXHIBIT D
DIGITAL LIGHTWAVE, INC.
WARRANTS TO PURCHASE 550,000 SHARES OF COMMON STOCK
REGISTRATION RIGHTS AGREEMENT
Dated as of March __, 1999
▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
----------------------
----------------------
c/o ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
Swiss Bank Tower
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇
Ladies and Gentlemen:
Digital Lightwave, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the Purchasers (as defined herein) its Warrants to
Purchase Common Stock dated as of the date hereof (the "Warrants") pursuant to a
Purchase Agreement (as defined herein) as well as pursuant to a fee letter
between the Company and ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin. As an inducement to the
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Purchasers thereunder, the Company agrees
with the Purchasers, for the benefit of the Holders (as defined herein) from
time to time of the Registrable Securities (as defined herein), as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
have their respective meanings set forth in or pursuant to the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Act" or "Securities Act" means the United States Securities Act of
1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Common Stock" means the Company's Common Stock, par value $0.001 per
share.
"Commission" means the United States Securities and Exchange
Commission.
"Effective Time" means the date on which the Commission declares the
Shelf Registration Statement effective or on which the Shelf Registration
Statement otherwise becomes effective.
56
"Effectiveness Period" has the meaning set forth in Section 2(b)(i)
hereof.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Holder" means any Person that holds a Warrant or shares of Common
Stock issuable upon exercise of a Warrant.
"NASD Rules" means the Rules of the National Association of Securities
Dealers, Inc., as amended from time to time.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, any preliminary prospectus, any final
prospectus and any prospectus that discloses information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A under the Act), included in the Shelf Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Shelf Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.
"Purchase Agreement" means the Note and Warrant Purchase Agreement
dated as of March __, 1999 between the Company and the Purchasers.
"Purchasers" means you, as the Purchasers named in Schedule I to the
Purchase Agreement.
"Registrable Securities" means all or any portion of the Warrants and
the Common Stock issuable upon the exercise of such Warrants by the holders
thereof; provided, however, that a security ceases to be a Registrable Security
when it is no longer a Restricted Security.
"Registration Default" has the meaning assigned thereto in Section 7
hereof.
"Restricted Security" means any Warrant or share of Common Stock
issuable upon exercise thereof except any such Warrant or such share of Common
Stock which (i) has been effectively registered under the Securities Act and
sold in a manner contemplated by the Shelf Registration Statement, or (ii) has
been transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k) of
such Rule 144 (or any successor provision thereto).
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"Shelf Registration" means a registration effected pursuant to Section
2 hereof.
"Shelf Registration Statement" means a shelf registration statement of
the Company pursuant to the provisions of Section 2 hereof filed with the
Commission which covers all of the Registrable Securities, as applicable, on an
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
2. SHELF REGISTRATION.
(a) The Company shall cause a Shelf Registration Statement to be
filed under the Securities Act promptly following the issuance of the Warrants
but in no event later than 180 days after such issuance.
(b) The Company shall use all reasonable efforts:
(i) To have the Shelf Registration Statement declared
effective by the Commission as promptly as practicable following the filing
thereof;
(ii) To keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part thereof to
be usable by holders of Registrable Securities for a period of two years from
the date it is declared effective, or such shorter period that will terminate
when there are no Registrable Securities outstanding (in either case, such
period being referred to herein as the "Effectiveness Period");
(iii) After the Effective Time of the Shelf Registration
Statement, promptly upon the request of any Holder of Registrable Securities, to
take any action reasonably necessary to enable such Holder to use the Prospectus
forming a part thereof for offers and resales of Registrable Securities,
including, without limitation, any action reasonably necessary to identify such
Holder as a selling securityholder in the Shelf Registration Statement;
provided, however, that nothing in this subparagraph shall relieve such Holder
of the obligation to return a completed and signed Notice and Questionnaire to
the Company in accordance with Sections 3(a)(1) or 3(a)(2) hereof; and
If at any time, the Warrants, pursuant to Section 4 of the Warrant, are
exercisable into securities other than shares of Common Stock, the Company
shall, or shall cause any successor to, cause such securities to be included in
the Shelf Registration Statement no later than the date on which the Warrants
may then be exerciseable into such securities.
3. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) (1) The Company shall mail the Notice and Questionnaire to
the Holders of Registrable Securities not less than 30 calendar days prior to
the time the Company intends in good
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faith to have the Shelf Registration Statement declared effective. Subject to
Section 3(a)(2) hereof, no Holder of Registrable Securities shall be entitled to
be named as a selling securityholder in the Shelf Registration Statement as of
the Effective Time, and no Holder of Registrable Securities shall be entitled to
use the Prospectus forming a part thereof for offers and resales of Registrable
Securities at any time, unless such Holder has returned a completed and signed
Notice and Questionnaire to the Company by the deadline for response set forth
therein; provided, however, that Holders of Registrable Securities shall have at
least 30 calendar days from the date on which the Notice and Questionnaire is
first mailed to such Holders to return a completed and signed Notice and
Questionnaire to the Company.
(2) After the Effective Time of the Shelf Registration
Statement, the Company shall, upon the request of any Holder of Registrable
Securities, as promptly as reasonably practicable, send a Notice and
Questionnaire to such Holder. The Company shall not be required to take any
action to name such Holder as a selling securityholder in the Shelf Registration
Statement until such Holder has returned a completed and signed Notice and
Questionnaire to the Company. Following its receipt of such Notice and
Questionnaire, the Company will reasonably promptly include the Registrable
Securities covered thereby in the Shelf Registration Statement (if not
previously included).
(b) The Company shall, as promptly as reasonably practicable, take
all such action as may be necessary so that (i) each of the Shelf Registration
Statement and any amendment thereto and any Prospectus forming part thereof and
any amendment or supplement thereto (and each report or other document
incorporated therein by reference in each case) complies in all material
respects with the Securities Act and the Exchange Act and the respective rules
and regulations thereunder, (ii) each of the Shelf Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(iii) each of the Prospectus forming part of the Shelf Registration Statement,
and any amendment or supplement to such Prospectus, does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(c) (i) The Company shall, as promptly as reasonably practicable,
advise each Holder and shall confirm such advice in writing if so requested by
any such Holder:
(1) when a Shelf Registration Statement and any amendment
thereto has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;
(2) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus included
therein or for additional information;
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(3) of the issuance by the Commission of any stop order
suspending effectiveness of the Shelf Registration Statement or the initiation
of any proceedings for that purpose; and
(4) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the securities included
in the Shelf Registration Statement for sale in any jurisdiction or the
initiation of any proceeding for such purpose.
(ii) The Company shall, as promptly as reasonably practicable,
advise the Purchasers and each Holder of the happening of any event or the
existence of any state of facts that requires the making of any changes in the
Shelf Registration Statement or the Prospectus included therein so that, as of
such date, the Shelf Registration Statement and the Prospectus do not contain an
untrue statement of a material fact and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under which they were
made) not misleading (which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been made).
(d) The Company shall use all reasonable efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of any Shelf Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder, without charge, at
least one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all reports, other documents and exhibits that
are filed with or incorporated by reference in the Shelf Registration Statement.
The Company shall use all reasonable efforts to take into account and, if
appropriate, reflect in an amendment to the Shelf Registration Statement such
comments on the Shelf Registration Statement as initially filed as the Holders
and their counsel may reasonably propose.
(f) The Company shall, during the Effectiveness Period, deliver to
each Holder, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request; and the
Company consents (except during the continuance of any event described in
Section 3(c)(ii)) to the use of the Prospectus or any amendment or supplement
thereto by each of the Holders in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto during the Effectiveness Period. The Company shall use all reasonable
efforts to take into account and, if appropriate, reflect in a Prospectus
supplement or amendment such comments as the Holders and their counsel may
reasonably propose.
(g) Prior to any offering of Registrable Securities pursuant to
the Shelf Registration Statement, the Company shall (i) register or qualify or
cooperate with the Holders and their respective counsel in connection with the
registration or qualification of such Registrable Securities
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for offer and sale under the securities or blue sky laws of such jurisdictions
as any such Holders reasonably request, (ii) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers and sales in such jurisdictions for so long as may be
necessary to enable any Holder or underwriter, if any, to complete its
distribution of Registrable Securities pursuant to the Shelf Registration
Statement and (iii) take any and all other actions necessary or advisable to
enable the disposition in such jurisdictions of such Registrable Securities;
provided, however, that in no event shall the Company be obligated to (a)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for this
Section 3(g), or (b) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof then so subject.
(h) Upon the occurrence of any event contemplated by paragraph
3(c)(ii) above, the Company shall as promptly as reasonably practicable prepare
a post-effective amendment or supplement to the Shelf Registration Statement or
the Prospectus, or any document incorporated therein be reference, or file any
other required document so that, as thereafter delivered to purchasers of the
Registrable Securities included therein, the Prospectus will not include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, (1) if the Company determines
based upon the advice of counsel that it is advisable to disclose in the Shelf
Registration Statement a financing, acquisition or other corporate transaction
or other material event affecting the Company or its securities, and the Board
of Directors of the Company (or an executive officer of the Company duly
authorized for such purpose) shall have determined in good faith that such
disclosure would not be in the best interests of the Company and its
stockholders, and (2) for other periods not to exceed in the aggregate sixty
days in any twelve-month period, the Company shall not be required to prepare
and file such amendment, supplement or document for such period as the Board of
Directors of the Company shall have determined in good faith is in the best
interests of the Company and its stockholders. If the Holders are notified of
the occurrence of any event contemplated by paragraph 3(c)(ii) above, the
Holders shall suspend the use of the Prospectus until the requisite changes to
the Prospectus have been made.
(i) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall provide a CUSIP number for the Registrable
Securities (other than Common Stock).
(j) The Company will use all reasonable efforts to cause the shares
of Common Stock issuable upon exercise of the Warrants to be quoted on the
Nasdaq National Market or other trading system or stock exchange on which the
Common Stock primarily trades on or prior to the Effective Time of any Shelf
Registration Statement hereunder.
(k) In the event that any broker-dealer registered under the
Exchange Act shall be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD
Rules (or any successor provision thereto)) of the Company or has a "conflict of
interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities
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covered by the Shelf Registration Statement, whether as a Holder of such
Registrable Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, assist such broker or dealer
in respect thereof, or otherwise, the Company shall assist such broker-dealer in
complying with the requirements of the NASD Rules, including, without
limitation, by (A) engaging a "qualified independent underwriter" (as defined in
Rule 2720(b)(15) of the NASD Rules (or any successor provision thereto)) to
participate in the preparation of the Shelf Registration Statement relating to
such Registrable Securities, to exercise usual standards of due diligence in
respect thereto and to recommend the public offering price of such Registrable
Securities, (B) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 5 hereof, and
(C) providing such information to such broker-dealer as may be required in order
for such broker-dealer to comply with the requirements of the NASD Rules.
(l) The Company shall use all reasonable efforts to take all
other steps necessary to effect the registration, offering and sale of the
Registrable Securities covered by the Shelf Registration Statement contemplated
hereby.
4. REGISTRATION EXPENSES. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 2
and 3and shall bear or reimburse the Holders for the reasonable fees and
disbursements of one firm of counsel designated by the Company and reasonably
acceptable to the Holders of a majority of the Registrable Securities covered by
the Shelf Registration Statement to act as counsel therefor in connection
therewith.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification by the Company. In connection with any Shelf
Registration Statement, the Company shall indemnify and hold harmless each
Holder and each underwriter, selling agent or other securities professional, if
any, who facilitates the disposition of Registrable Securities, and each of
their respective officers and directors and each person, if any, who controls
such Holder, underwriter, selling agent or other securities professional within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (each such person being sometimes referred to herein as an "Indemnified
Person") against any losses, claims, damages or liabilities, joint or several,
to which such Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based on any untrue statement or alleged
untrue statement of a material fact contained in any Shelf Registration
Statement (or any amendment thereto) under which such Registrable Securities are
registered under the Securities Act, or any Prospectus contained therein or
furnished by the Company to any Indemnified Person, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the Prospectus, in
light of the circumstances under which they were made), and the Company hereby
agrees to reimburse such Indemnified Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such
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case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Shelf Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by such Indemnified Person expressly for
use therein.
(b) Indemnification by the Holders and Any Agents and
Underwriters. Each Holder agrees, as a consequence of the inclusion of any such
holder's Registrable Securities in such Shelf Registration Statement, and each
underwriter, selling agent or other securities professional, if any, who
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors, officers who sign any Shelf Registration Statement and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in such Shelf Registration Statement or Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectus, in light of the circumstances under which they were made), in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Holder, underwriter, selling agent or other securities professional expressly
for use therein and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Notices and Claims. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under this Section 5, notify such
indemnifying party in writing of the commencement thereof; but the omission to
so notify the indemnifying party shall not relieve it from any liability which
it may have to the indemnified party otherwise than under this Section 5. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party) and, after notice from the indemnifying party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party under this Section 5 for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall,
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without the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) Contribution. If the indemnification provided for in this
Section 5 is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) of this Section 5 in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and the indemnified
party in connection with the statements or omissions which resulted in such
losses, claims, damages and liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 5(d) were determined by pro rata allocation (even if the Holders or any
underwriters, selling agents or other securities professionals or all of them
were treated as one entity for such purpose) or by any other method of
allocation that does not take into account the equitable considerations referred
to in this Section 5(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the Holders and
any underwriters, selling agents or other securities professionals in this
Section 5(d) to contribute shall be several in proportion to the percentage of
principal amount of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 5, in no
event shall any Holder be required to undertake liability to any person under
this Section 5 for any amounts in excess of the dollar amount of the proceeds
received by such Holder from the sale of such Holder's Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto)
pursuant to any Shelf Registration Statement under which such Registrable
Securities are registered under the Securities Act.
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(f) The obligations of the Company under this Section 5 shall be
in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Holder, underwriter, selling agent
or other securities professional under this Section 5 shall be in addition to
any liability which any such Holder, underwriter, selling agent or other
securities professional shall otherwise have to the Company. The remedies
provided in this Section 5 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to an indemnified party at law or in
equity.
6. MISCELLANEOUS.
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this Section 6(a), may be amended, and waivers or
consents to departures from the provisions hereof may be given, only by a
written instrument duly executed by the Company and the Holders of a majority in
aggregate principal amount of Registrable Securities then outstanding. Each
Holder of Registrable Securities outstanding at the time of any such amendment,
waiver or consent or thereafter shall be bound by any amendment, waiver or
consent effected pursuant to this Section 7(a), whether or not any notice,
writing or marking indicating such amendment, waiver or consent appears on the
Registrable Securities or is delivered to such Holder.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this Section
6(b);
(2) if to the Purchasers, initially at the address set
forth in the Purchase Agreement; and
(3) if to the Company, initially at its address set forth
in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Purchasers, the Holders or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
and the Holders, including, without the need for an express assignment or any
consent by the Company thereto, subsequent Holders of Registrable Securities.
The Company hereby agrees to extend the benefits of this Agreement to any Holder
of Registrable Securities and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
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(d) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
(g) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(h) Survival. The respective indemnities, agreements,
representations, warranties and other provisions set forth in this Agreement or
made pursuant hereto shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Holder, any director, officer or partner of such Holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or
any controlling person of any of the foregoing, and shall survive the transfer
and registration of the Registrable Securities of such Holder.
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Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
DIGITAL LIGHTWAVE, INC.
By:
----------------------------------
Name:
Title:
The foregoing Registration Rights Agreement is hereby confirmed and
accepted as of the date first above written.
▇.▇. ▇▇▇▇▇▇▇▇▇, TOWBIN
-------------------------------------
-------------------------------------
By:
----------------------------------
(▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin)
On behalf of each of the Purchasers
[Signature Page to Registration Rights Agreement]
12
67
Exhibit A
DIGITAL LIGHTWAVE, INC.
NOTICE OF REGISTRATION STATEMENT AND SELLING SECURITY HOLDER
QUESTIONNAIRE
(DATE)
Digital Lightwave, Inc. (the "Company") has filed or intends shortly to
file with the United States Securities and Exchange Commission (the
"Commission") a registration statement on form S-1 (the "Shelf Registration
Statement") for the registration and resale under the United States Securities
Act of 1933, as amended (the "Securities Act"), of the Company's Warrants to
Purchase Common Stock dated March __, 1999 (CUSIP No. 0________) (the
"Warrants"), and Common Stock, par value $0.01 per share, of the Company
issuable upon exercise thereof, in accordance with the terms of the Registration
Rights Agreement dated as of March __, 1999 (the "Registration Rights
Agreement") between the Company and the purchasers named therein (the
"Purchasers"). All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.
In order to have Registrable Securities included in the Shelf
Registration Statement (or a supplement or amendment thereto), this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company at the
address set forth herein for receipt ON OR BEFORE [insert date that is 30 days
from the Notice Date] (the "Questionnaire Deadline").
The term "Registrable Securities" is defined in the Registration Rights
Agreement to mean all or any portion of the Warrants and the Common Stock
issuable upon exercise thereof; provided, however, that a security ceases to be
a Registrable Security when it is no longer a Restricted Security.
The term "Restricted Security" is defined in the Registration Rights
Agreement to mean any Note or share of Common Stock issuable upon exercise
thereof except any such Note or share of Common Stock which (i) has been
effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, or (ii) has been transferred
in compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto).
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ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities held by it and listed below in Item (3) (unless otherwise
specified under Item (3). The undersigned, by signing and returning this Notice
and Questionnaire, agrees to be bound with respect to such Registrable
Securities by the terms and conditions of this Notice and Questionnaire and the
Registration Rights Agreement, including, without limitation, Section 5 of the
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the undersigned Selling Securityholder will be required
to deliver to the Company the Notice of Transfer completed and signed set forth
in Appendix I to the Notice and Questionnaire.
The undersigned Selling Securityholder hereby provides the following
information to the Company and represents and warrants that such information is
accurate and complete:
69
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
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(b) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in (3) Below:
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(2) Address for Notices to Selling Securityholder:
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Telephone:
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Fax:
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Contact:
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(3) Registrable Securities:
Except as set forth below, the undersigned Selling Securityholder does
not hold any Warrants or Common Stock previously issued upon exercise
of any Warrant.
Warrants held (expressed as the number of shares of Common Stock
underlying such Warrant):
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Number of shares of Common Stock held and issued to date upon exercise
of any Warrant (if any):
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Amount of Warrants which the undersigned wishes to be included in the
Shelf Registration Statement:
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Number of shares of Common Stock (if any) issued upon exercise of
Warrants which are to be included in the Shelf Registration Statement:
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(4) Other shares of Common Stock or other Notes of the Company Owned by the
Selling Securityholder:
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70
Except as set forth below, and under Item (3) above, the undersigned
Selling Securityholder is not the holder any shares of Common Stock or
any other securities of the Company.
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its affiliates, officers, directors or principal equity holders (5%
or more) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates)
during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item
(3) only as follows (if at all): Such Registrable Securities may be
sold from time to time directly by the undersigned Selling
Securityholder or, alternatively, through underwriters, broker-dealer
or agents. Such Registrable Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time
of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which
may involve crosses or block transactions) (i) on any national
securities exchanges or U.S. inter-dealer quotation system of a
registered national securities association on which the Registrable
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv)
through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may
enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Registrable Securities in the course of
hedging the positions they assume. The Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities to
close out such short position, or loan or pledge Registrable Securities
to broker-dealers that in turn may sell such securities.
State any exceptions here:
Note: In no event may such method(s) of distribution take the form of
an underwritten offering of the Registrable Securities without the
prior agreement of the Company.
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply,
with the prospectus delivery and other provisions of the Securities Act
and Exchange Act and the respective rules thereunder, particularly
Regulation M.
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71
In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after
the date on which such information is provided to the Company, the
Selling Securityholder agrees to notify the transferee(s) at the time
of the transfer of its rights and obligations under this Notice and
Questionnaire and the Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through
(6) above and the inclusion of such information in the Shelf
Registration Statement and related Prospectus. The Selling
Securityholder understands that such information will be relied upon by
the Company in connection with the preparation of the Shelf
Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under the
Registration Rights Agreement to provide such information as may be
required by law for inclusion in the Self Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein which may
occur subsequent to the date hereof at any time while the Self
Registration Statement remains in effect. All notices hereunder and
pursuant to the Registration Rights Agreement shall be made in writing
by hand delivery, first-class mail, or air courier guaranteeing
overnight delivery as follows:
To the Company:
Digital Lightwave, Inc.
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Attn: CFO
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice
and Questionnaire, and the representations and warranties contained
herein, shall be binding on, shall inure to the benefit of and shall be
enforceable by the respective successors, heirs, personal
representatives and assigns of the Company and the Selling
Securityholder with respect to the Registrable Securities held by such
Selling Securityholder and listed in Item (3) above. This Agreement
shall be governed in all respects by the laws of the State of New York.
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72
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated:
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Selling Securityholder
(Print/type full legal name of holder of Registrable Securities)
By:
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Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR
RECEIPT ON OR BEFORE (DEADLINE FOR RESPONSE) TO THE COMPANY AT:
To the Company:
Digital Lightwave, Inc.
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Attn: CFO
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73
APPENDIX I
NOTICE TO TRANSFER PURSUANT TO REGISTRATION STATEMENT
Digital Lightwave, Inc.
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Attn: CFO
Re Digital Lightwave Warrants dated March __, 1999 (the "Warrants")
Dear Sirs:
Please be advised that _________________________________ has
transferred Warrants representing ________ shares of Common Stock or ______
shares of the Company's Common Stock, issued upon exercise of Warrants, pursuant
to the Registration Statement Form S-1 (File No. 333-_________) filed by the
Company.
We hereby certify that the prospectus delivery requirements, if any, of
the Securities Act of 1933, as amended, have been satisfied with respect to the
transfer described above and that the above-named holder of the Warrants of
Common Stock is named as a selling security holder in the Prospectus dated
____________ or in amendments or supplements thereto, and that the aggregate
amount of Warrants or number of Common Stock transferred are [a portion of] the
Warrants or Common Stock listed in such Prospectus as amended or supplemented
opposite such owner's name.
Dated:
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Very truly yours,
--------------------------------
(Name)
By:
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(Authorized Signature)
