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Exhibit
10.1
CREDIT AND RESTRUCTURING
AGREEMENT
BETWEEN
D IGITAL L
IGHTWAVE , I NC .
AND
O PTEL C
APITAL , LLC
A PRIL
4, 2008
CREDIT AND
RESTRUCTURING AGREEMENT
This Credit and Restructuring
Agreement (this “ Agreement ”) is entered into
as of April 4, 2008, by and between Digital Lightwave, Inc., a
Delaware corporation (“ Borrower ”), and Optel
Capital, LLC, a Delaware limited liability company (“
Lender ”).
RECITALS
A. Whereas Lender has
advanced funds to Borrower pursuant to those several secured
promissory notes listed on Schedule A attached hereto (the
“ Prior Secured Promissory Notes ”);
B. Whereas as of the date
hereof, (i) the total outstanding principal amount owed by
Borrower to Lender pursuant to the Prior Secured Promissory Notes
equals $27,945,177 (collectively, the “ Outstanding
Principal ”), all of which is currently due and payable
in full upon demand by Lender at any time, and (ii) the total
outstanding accrued and unpaid interest thereon equals $7,708,983
(the “ Outstanding Interest ,” and collectively
with the Outstanding Principal, the “ Outstanding Debt
”);
C. Whereas, Borrower
currently has insufficient capital resources to satisfy the
Outstanding Debt and desires that Lender: (1) restructure the
Outstanding Debt, and (2) make additional credit
accommodations available to Borrower in the form of one or more
loans to be used by Borrower to finance its on-going general
corporate purposes in an aggregate principal amount not to exceed
$2,500,000 (the “ New Commitment ”);
and
D. Whereas, in order to
induce Lender to restructure the Outstanding Debt and provide
Borrower with the New Commitment, Borrower desires to make the
Outstanding Debt and New Commitment convertible into
Borrower’s Common Stock on the terms and subject to the
conditions set forth herein.
AGREEMENT
In consideration of the
mutual promises contained herein and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:
1. Definitions
. As used in this Agreement, the following terms have the following
meanings:
“ Accredited
Investor ” means an accredited investor as defined in
Rule 501(a) of Regulation D promulgated under the Securities
Act.
“ Affiliate
” means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any
parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person.
“ Borrower
” has the meaning set forth in the introductory
paragraph.
“ Borrower’s
Address ” means 5775 Rio Vista Drive, Clearwater, FL
33760.
“ Business Day
” means a day other than a Saturday or a Sunday on which
financial institutions in Clearwater, Florida are open for
business.
“ Bylaws of
Borrower ” means the bylaws of the Borrower, as amended
from time to time.
“ Cash ”
means all cash, money, currency, and liquid funds, wherever held,
in which Borrower now or hereafter acquires any right, title, or
interest.
“ Certificate of
Incorporation ” means the certificate of incorporation of
Borrower, as amended from time to time.
“ Change of
Control ” means a sale of all or substantially all of
Borrower’s assets, or any merger or consolidation of Borrower
with or into another corporation; other than a merger or
consolidation in which the holders of the shares of capital stock
of Borrower outstanding immediately prior to such transaction
continue to hold (either by the voting securities remaining
outstanding or by their being converted into voting securities of
the surviving entity) more than 50% of the total voting power
represented by the voting securities of Borrower, or such surviving
entity, outstanding immediately after such transaction.
“ Closing
” means the action, execution and delivery of such agreements
and other instruments and documents as necessary or appropriate to
effect the transactions contemplated by this Agreement and the
other Credit Documents in accordance with the terms hereof and
thereof.
“ Closing Date
” has the meaning set forth in Section 2.4.
“ Collateral
” has the meaning set forth in the Security
Agreement.
“ Common Stock
” means the common stock, par value $0.0001 per share, of
Borrower.
“ Conversion
Feature ” has the meaning set forth in
Section 2.3(b).
“ Conversion
Price ” means, for any Promissory Note, the greater of
(a) $0.01, or (b) one hundred percent (100%) of the
average of the daily volume-weighted average price of Common Stock
quoted or traded on the over-the-counter market as reported by Pink
Sheets LLC (the “ Pink Sheets ”) (or, if the
Common Stock is not quoted or traded on the Pink Sheets at the time
of conversion, such other primary market on which the Common Stock
is quoted or traded) during the period of five consecutive trading
days ending on the date immediately prior to the date of the
conversion of such Promissory Note, from time to time.
“ Credit
Documents ” means and includes this Agreement, each New
Commitment Note, the Secured Convertible Promissory Note, the
Security Agreement, and the Registration Rights Agreement and all
other documents, instruments and agreements delivered by Borrower
in connection with any of the foregoing.
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“ Disinterested
Stockholders ” means those stockholders of Borrower that
are not Affiliates of Lender and are not otherwise interested
parties in any of the transactions set forth herein.
“ Disinterested
Stockholder Approval ” has the meaning set forth in
Section 2.3(b).
“ Equipment
” means any “Equipment,” as such term is defined
in the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and
all additions, upgrades, substitutions and replacements of any of
the foregoing, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto, now
owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires an interest.
“ Governmental
Authority ” means any domestic or foreign national, state
or local government, any political subdivision thereof, any
department, agency, authority or bureau of any of the foregoing, or
any other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
“ Intellectual
Property ” means, collectively, all rights, priorities
and privileges of Borrower relating to intellectual property,
whether arising under United States, multinational or foreign laws
or otherwise, including copyrights, copyright licenses, inventions,
patents, patent licenses, trademarks, trademark licenses and trade
secrets (including customer lists), domain names, Web sites and
know-how.
“ Lien ”
means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien
or charge of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, against any property, any
conditional sale or other title retention agreement, any lease in
the nature of a security interest, and the filing of any financing
statement (other than a precautionary financing statement with
respect to a lease that is not in the nature of a security
interest) under the UCC or comparable law of any
jurisdiction.
“ Material Adverse
Effect ” means any change, effect, event, occurrence or
development that (i) results or is reasonably likely to result
in a reduction in annual EBIT (earnings before interest and taxes)
of Borrower and its subsidiaries, on a consolidated basis, of
$500,000 or more; (ii) precludes Borrower from performing its
non-monetary Obligations in accordance with this Agreement and the
other Credit Documents; (iii) causes a reduction in the value
of the Collateral by more than $500,000 from its value on the date
hereof; or (iv) causes the loss of Lender’s security
interest in the Collateral or Lender’s perfection or priority
of such security interests; provided, however, that, in no event
shall any of the following, alone or in combination, be deemed to
constitute, nor taken into account in determining whether a
Material Adverse Effect has occurred: (i) the announcement or
pendency of the transactions contemplated by this Agreement and the
other Credit Documents, (ii) compliance with the terms and
conditions of this Agreement and the other Credit Documents,
(iii) any change in accounting requirements or principles or
any change in applicable laws, rules or regulations or the
interpretation thereof, (iv) any litigation or other similar
proceeding arising out of or in connection with this Agreement or
the other Credit Documents or the transactions contemplated hereby
and thereby, (v) any change, event, occurrence or development
arising from or relating to
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general business or economic conditions,
or (vi) any change, event, occurrence or development relating
to or affecting the technology industry generally. For the
avoidance of doubt, if Borrower’s actual annual EBIT for any
12-month period reflects a shortfall of $500,000 or more from the
projected EBIT set forth in any of the projections delivered to the
Lender pursuant to Section 5.11, such shortfall, in and of
itself, shall not be deemed to constitute a Material Adverse
Effect.
“ Maturity Date
” means the earlier to occur of (i) March 31, 2010,
and (ii) the date on which written demand is made by Lender in
accordance with Section 2.3(c).
“ New Commitment
” has the meaning set forth in Recital C .
“ New Commitment
Loans ” has the meaning set forth in
Section 2.1(a) .
“ New Commitment
Note ” has the meaning set forth in Section
2.1(b).
“ Obligations
” means, collectively, the Restated Debt, the New Commitment,
all other advances, debts, liabilities, obligations, guaranties,
covenants, duties and indebtedness at any time owing by Borrower to
Lender, whether evidenced by this Agreement, the Promissory Notes,
any other Credit Document or any note or other instrument or
document, whether arising from an extension of credit, loan,
guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and
any participation by Lender in Borrower’s debts owing to
others), absolute or contingent, due or to become due, including
without limitation all interest, fees, charges, expenses,
attorneys’ fees and accountants’ fees chargeable to
Borrower or payable by Borrower thereunder.
“ Outstanding
Interest ” has the meaning set forth in Recital B
.
“ Outstanding
Principal ” has the meaning set forth in Recital B
.
“ Outstanding
Debt ” has the meaning set forth in Recital B
.
“ Permitted
Liens ” has the meaning set forth in the Security
Agreement.
“ Person ”
means an individual, a partnership, a corporation (including a
business trust), a joint stock company, an unincorporated
association, a limited liability company, a joint venture, a trust
or other entity or a Governmental Authority.
“ Prior Secured
Promissory Notes ” has the meaning set forth in
Recital A .
“ Promissory
Notes ” means, collectively, the New Commitment Note and
the Secured Convertible Promissory Note.
“ Proposals
” has the meaning set forth in Section 7.1.
“ Registration
Rights Agreement ” has the meaning set forth in
Section 5.6.
“ Requirement of
Law ” applicable to any Person means (i) the
articles or certificate of incorporation and by-laws, partnership
agreement or other organizational or
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governing documents of such Person,
(ii) any rule of any Governmental Authority applicable to such
Person, (iii) any license, permit, approval or other
authorization granted by any Governmental Authority to or for the
benefit of such Person or (iv) any judgment, decision or
determination of any Governmental Authority or arbitrator, in each
case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is
subject.
“ Restated Debt
” has the meaning set forth in
Section 2.2(a).
“ Schedules
” means and includes all schedules attached hereto, including
the Schedule of Exceptions.
“ Secretary
Certificate ” has the meaning set forth in
Section 5.9.
“ Secured
Convertible Promissory Note ” has the meaning set forth
in Section 2.2(b).
“ Security
Agreement ” has the meaning set forth in
Section 5.3.
“ Securities
” means collectively the Promissory Notes and the shares of
Common Stock issuable upon conversion thereof.
“ Securities Act
” means the Securities Act of 1933, as amended.
“ Special
Committee ” means the special committee of the Board of
Directors of Borrower consisting of Gerald A. Fallon and Peter H.
Collins.
“ Stockholder
Meeting ” means the 2009 annual meeting of stockholders
of Borrower.
“ Taxes ”
has the meaning set forth in Section 2.5.
“ UCC ”
means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of Florida; provided , that
in the event that, by reason of mandatory provisions of law, any or
all of the attachment, perfection or priority of, or remedies with
respect to, Secured Party’s Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in
a jurisdiction other than the State of Florida, the term
“UCC” shall mean the Uniform Commercial Code as enacted
and in effect, from time to time, in such other jurisdiction solely
for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions
related to such provisions.
2. New Commitment and
Restructuring of Outstanding Debt .
2.1 New
Commitment .
(a) Subject to the terms and
conditions of this Agreement, the Lender agrees to advance to
Borrower from time to time during the period from and including the
Closing Date to anytime at least 5 Business Days immediately prior
to the Maturity Date loans in an aggregate principal amount of up
to the New Commitment in immediately available funds.
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The Company shall repay the principal
amount of such loans (collectively, the “ New Commitment
Loans ”), together with all accrued and unpaid interest
thereon, in full upon demand by Lender any time after the Maturity
Date. The Company shall request each New Commitment Loan by
delivering to the Lender: (i) an irrevocable written notice
specifying; (ii) the principal amount of such requested New
Commitment Loan which shall be in a minimum amount of $50,000 or an
integral multiple of $25,000 in excess thereof; (iii) the date
of the requested New Commitment Loan (which shall be a Business Day
not sooner than 5 Business Days prior to the date of such notice);
and (iv) a written certification from an executive officer of
the Company certifying that, on and as of the date of the requested
New Commitment Loan (I) the representations and warranties of
Borrower contained in the Credit Documents remain true and correct
in all material respects, and (II) no Event of Default has occurred
or is continuing. Without the consent of the Lender, Borrower may
not request more than one New Commitment Loan in any week. Borrower
may repay the New Commitment Loans at any time without any penalty
or premium. New Commitment Loans once repaid may be borrowed in the
form of New Commitment Loans hereunder at any time prior to the
Maturity Date, provided that the aggregate principal amount
of all New Commitment Loans outstanding at any time shall not
exceed the amount of the New Commitment.
(b) The terms and conditions
of the New Commitment Loans shall be set forth in a secured
convertible promissory note in the form attached hereto as
Exhibit A (the “ New Commitment Note ”),
appropriately completed, to be executed and delivered by Borrower
to the Lender on or prior to the Closing Date.
(c) The original principal
amount of the New Commitment Note shall equal the sum of the New
Commitment. The outstanding principal amount of the New Commitment
Note shall be due and payable in full upon demand at any time on or
after the Maturity Date. The accrued and unpaid outstanding
interest on the New Commitment Note shall be due and payable in
quarterly installments as set forth in the New Commitment
Note.
(d) The proceeds of each New
Commitment Loan shall only be used by Borrower for its general
corporate purposes and to pay any interests installments due under
the Promissory Notes.
2.2 Restructuring of
the Outstanding Debt .
(a) Subject to the terms and
conditions of this Agreement, on the Closing Date the Lender agrees
to restructure the Outstanding Debt by changing the repayment terms
thereof from being currently due and payable in full upon demand by
Lender to being due and payable in full upon demand by Lender at
any time after the Maturity Date (such restated Outstanding Debt,
the “ Restated Debt ”).
(b) The terms and conditions
of the Restated Debt shall be set forth in a secured promissory
note in the form attached hereto as Exhibit B (the “
Secured Convertible Promissory Note ”), appropriately
completed, to be executed and delivered by Borrower to the Lender
on or prior to the Closing Date.
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(c) The original principal
amount of the Secured Convertible Promissory Note shall equal the
sum of the Outstanding Debt (i.e., $35,654,160). The outstanding
principal amount of the Secured Convertible Promissory Note shall
be due and payable in full upon demand at any time on or after the
Maturity Date. The accrued and unpaid outstanding interest on the
Secured Convertible Promissory Note shall be due and payable in
quarterly installments as set forth in the Secured Convertible
Promissory Note.
2.3. Conversion Feature
and Accelerated Maturity Date .
(a) At the option of Lender,
the outstanding principal and interest amount of any Promissory
Note, or any portion thereof, shall become convertible into Common
Stock at the Conversion Price.
(b) It shall be a condition
precedent to the Promissory Notes becoming convertible in
accordance with the terms thereof (the “ Conversion
Feature ”), that the Proposals be approved at the
Stockholder Meeting by the affirmative vote in person or by proxy
of a majority of the outstanding shares of Common Stock
beneficially owned by all of the Disinterested Stockholders
(“ Disinterested Stockholder Approval ”). As a
part of the proxy statement issued for the Stockholder Meeting,
Borrower shall have received approval of the Conversion Feature by
a majority of the independent and disinterested directors of
Borrower, and shall have received an opinion issued by an
independent and reputable financial advisor as to the fairness from
a financial point of view, to the Disinterested Stockholders, of
the Conversion Feature.
(c) In the event Borrower
does not obtain Disinterested Stockholder Approval of the
Conversion Feature, then the Promissory Notes shall not become
convertible and the entire outstanding principal amount and unpaid
and accrued interest under the Promissory Notes shall immediately
become due and payable in full upon demand by Lender at any time on
or after the date of such Stockholder Meeting.
2.4 Closing .
Subject to the terms and conditions of this Agreement, the Closing
shall take place on April 4, 2008, unless otherwise agreed in
writing by both parties (the “ Closing Date ”).
At the Closing, Borrower and Lender shall take such actions and
execute and deliver such agreements and other instruments and
documents as set forth in Sections 5 and 6 respectively and as
necessary or appropriate to effect the transactions contemplated by
this Agreement and the other Credit Documents in accordance with
the terms hereof and thereof.
2.5 Taxes on
Payments . All payments made by Borrower under this
Agreement, the Promissory Notes, and the other Credit Documents
shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income,
stamp, documentary or other taxes, any duties, or any other levies,
imposts, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (except net income taxes and franchise taxes
in lieu of net income taxes imposed on Lender by its jurisdiction
of incorporation) (all such non-excluded taxes, duties, levies,
imposts, charges, fees, deductions and withholdings being
hereinafter called “ Taxes ”). If any Taxes are
required to be withheld from any amounts payable to Lender
hereunder or under the other Credit Documents, the amounts so
payable to Lender shall be
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increased to the extent necessary to
yield to Lender (after payment of all Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the other Credit Documents.
Whenever any Taxes are payable by Borrower, as promptly as possible
thereafter, Borrower shall send to Lender a certified copy of an
original official receipt received by Borrower showing payment
thereof. If Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to Lender the
required receipts or other required documentary evidence, Borrower
shall indemnify Lender for any taxes, interest or penalties that
may become payable by Lender as a result of any such failure. The
obligations of Borrower under this Section 2.5 shall survive
the payment and performance of the Obligations and the termination
of this Agreement.
2.6 Security
Agreement . Borrower’s payment and performance
obligations under this Agreement, the Promissory Notes, and the
other Credit Documents are secured by all of the personal property
assets of Borrower in accordance with the terms of Security
Agreement. The grant of security interest in the Collateral (as
defined in the Security Agreement) will continue to secure
Borrower’s obligations to pay the Outstanding Debt as
restructured into the Restated Debt along with Borrower’s
obligations to pay the New Commitment Loans.
3. Representations and
Warranties of Borrower . In order to induce Lender to enter
into this Agreement and to restructure the Outstanding Debt and
make the New Commitment, Borrower represents and warrants to Lender
as follows (except as set forth on a Schedule of Exceptions
attached hereto as Schedule 3 and delivered separately by
the Borrower to Lender, which exceptions shall be deemed to be
representations and warranties as if made hereunder), and Borrower
covenants that the following representations will continue to be
true, and that Borrower will at all times comply with all of the
following covenants:
3.1 Corporate
Existence . Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of
the State of Delaware. Borrower’s organizational
identification number issued by the State of Delaware is and will
continue to be #2578459. To the best of Borrower’s knowledge,
Borrower is and will continue to be qualified and licensed to do
business in all jurisdictions in which any failure to do so could
reasonably be expected to result in a Material Adverse
Effect.
3.2 Legal
Authority . The execution, delivery and performance by
Borrower of this Agreement and the other Credit Documents, the
consummation of the transactions contemplated thereby and issuance
and delivery of the Securities (a) are within the corporate
power of Borrower, and (b) have been duly authorized by all
necessary corporate actions on the part of Borrower.
3.3
Enforceability . Each of this Agreement and the other
Credit Documents executed, or to be executed, by Borrower has been,
or will be, duly executed and delivered by Borrower and
constitutes, and will constitute, a legal, valid and binding
obligation of Borrower, enforceable against Borrower 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.
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3.4 No
Contravention . Except as set forth on Schedule 3.4
, the execution and delivery by Borrower of this Agreement and the
other Credit Documents executed by Borrower and the performance and
consummation of the transactions contemplated thereby do not
(a) violate any Requirement of Law applicable to Borrower;
(b) 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
contractual obligation of Borrower; or (c) result in the
creation or imposition of any Lien (or the obligation to create or
impose any Lien) upon any property, asset or r
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