Document:

DIGITAL LIGHTWAVE EXHIBIT 10.1

 

Exhibit 10.1

SETTLEMENT AGREEMENT

 

THIS SETTLEMENT AGREEMENT (this “Agreement”) is made and entered into as of the 11th day of May, 2004 (the “Effective Date”), by and between Jabil Circuit, Inc. (“Jabil”), a Delaware corporation, and Digital Lightwave, Inc. (“Digital”), a Delaware corporation.

RECITALS

 

WHEREAS, effective as of May 1, 2003, Digital and Jabil entered into a Forbearance Agreement (the “Forbearance Agreement”) relating to Jabil’s claims against Digital under that certain Manufacturing Services Agreement or Agreements (collectively, the “Manufacturing Agreement”); and

WHEREAS, under the terms of the Forbearance Agreement, Digital (a) paid Jabil $620,000 in cash, (b) executed and delivered to Jabil a Promissory Note dated effective May 1, 2003 in the original principal amount of $2,838,904.06 (the “A/R Note”), and (c) executed and delivered to Jabil a Promissory Note dated effective May 1, 2003 in the original principal amount of $2,741,095.94 (the “Inventory Note” and, together with the A/R Note, the “Notes”); and

WHEREAS, Digital and Jabil agreed that (a) the original principal amount of the A/R Note represented the unpaid outstanding accounts receivable owed by Digital to Jabil for product previously delivered to Digital under the Manufacturing Agreement and (b) the original principal amount of the Inventory Note represented the compromised amount due by Digital to Jabil for component inventory, work-in-process inventory, and finished goods inventory for which Digital had not yet paid Jabil; and

WHEREAS, Digital and Jabil agreed in the Forbearance Agreement that all payments made by Digital to Jabil for certain “Existing Inventory” (as that term is defined in the Forbearance Agreement) and all proceeds from the sale of such Existing Inventory to third parties would be credited as payments made by Digital on the Inventory Note; and

WHEREAS, Digital defaulted on its obligations under the Forbearance Agreement and on its payment obligations under the Notes; and

WHEREAS, as a result of such defaults, Jabil filed two complaints in the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida, Civil Division, Case No. 03 9331 Division 1 (the “First Action”) and Case No. 03 9332 Division B (the “Second Action” and, together with the First Action, the “Actions”), seeking full payment of the Notes; and 

WHEREAS, Jabil asserts (a) total claims against Digital under or relating to the A/R Note of $3,011,404 and (b) total claims against Digital under or relating to the Inventory Note of $2,227,500, which is inclusive of interest, attorneys’ fees and costs (collectively, the “Claim”); and

WHEREAS, the parties desire to resolve and settle all disputes (except as described in this Agreement) between them relating to the Actions and the Claim and to renew and modify the terms of the Notes in accordance with the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the covenants contained in this Agreement, and for further, good and valuable consideration, including, but not limited to, the mutual avoidance of further costs, inconvenience and uncertainties relating to the Actions and the Claim, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:

 

1.                  Renewal of the A/R Note.  On the Effective Date, Digital shall execute a renewal promissory note in the form of attached Exhibit 1 (the “Renewal A/R Note”), which shall renew and modify the A/R Note, and Digital shall repay the Renewal A/R Note according to its terms.  

 

2.                  Renewal of Inventory Note. On the Effective Date, Digital shall execute a renewal promissory note in the form of attached Exhibit 2 (the “Renewal Inventory Note”), which shall renew and modify the Inventory Note, and Digital shall repay the Renewal Inventory Note according to its terms.  Digital acknowledges and agrees that the Renewal Inventory Note represents the amount due by Digital to Jabil for component inventory, work-in-process inventory, and finished good inventory that exist and is in Jabil’s possession as of the date of this Agreement (referred to as the “Existing Inventory”) for which Digital has not yet paid Jabil.  If Digital or a third party pays for Existing Inventory, the amounts paid to Jabil will be credited to reduce the amount owed by Digital under the Renewal Inventory Note.  The Renewal A/R Note and the Renewal Inventory Note are jointly and severally referred to as the “Renewal Notes.”

 

3.                  Payments at Closing.  Upon the execution of this Agreement, Digital shall place a purchase order (the “Initial Purchase Order”) of $1,121,000 and pay Jabil $1,391,000 for the following:

 

a.                   $170,000 for amounts due for recent purchase orders;

b.                  $100,000 as a payment on the Renewal A/R Note;

c.                   $617,000 as a payment on the Renewal Inventory Note.  To the extent that Existing Inventory is used to complete the Initial Purchase Order, Digital will be given credit on the amount due on the Initial Purchase Order up to a maximum of $617,000; and

d.                  $504,000 as a deposit on the Initial Purchase Order.  To the extent that $617,000 in Existing Inventory is not used by Jabil to fill the Initial Purchase Order, then Digital must pay an additional amount to Jabil on the Initial Purchase Order equal to (a) $617,000 less (b) the value of the Existing Inventory used by Jabil to complete the Initial Purchase Order.  

4.                  Additional Payments on Renewal Inventory Note.  As provided in the Renewal Inventory Note, Digital shall make a $400,000 payment to Jabil on both July 1, 2004 and October 1, 2004.  If these payments are timely made, then Jabil will give Digital a credit on purchase orders accepted by Jabil during the 3-month period following each of these payments up to the $400,000 amount of each payment but only to the extent that Existing Inventory is used by Jabil to complete purchase orders.  

 

5.                  Purchase Orders Prior to January 1, 2005.  For all purchase orders dated prior to January 1, 2005, Digital shall prepay any non-cancellable (i.e., inventory that cannot be returned to the vendor for full credit) portion of new inventory purchased by Jabil based on purchase orders issued by Digital. 

 

6.                  Reevaluation of Credit Terms in January 2005.  Jabil agrees to reevaluate Digital’s financial condition as of January 2005 and to offer Digital credit terms similar to those offered by Jabil to other customers with a similar financial condition and business relationship with Jabil.  This evaluation is to be made by Jabil within its sole discretion, and Jabil’s discretion is determinative and may not be challenged.

7.                  Dismissal of Actions.  On the Effective Date, Digital and Jabil shall execute (i) a joint motion and stipulation in the form of Exhibit 3 attached hereto for dismissal of the First Action and (ii) a joint motion and stipulation in the form of Exhibit 4 attached hereto for dismissal of the Second Action.

8.                  Confidentiality.  Until the material terms of this Agreement are disclosed by Digital in accordance with Securities and Exchange Commission regulations, Digital and Jabil shall not voluntarily disclose to any person who is not a signatory to this Agreement any of the terms of this Agreement, except the parties may disclose this Agreement and any terms thereof (i) in response to a subpoena or other binding legal process that the party believes is lawfully issued and served, or (ii) in response to a request initiated by any state or federal regulatory agency, or (iii) to any person within their organization or professionals retained by their organization with a need to know the information, including, without limitation, senior management, internal and external counsel, auditors, regulators, etc. (provided, that in each case such party shall take reasonable measures to protect the secrecy of and avoid disclosure of the fact of this Agreement and its terms by such persons), or (iv) as otherwise required by law.  In the event any party is served with a subpoena or other binding legal process which calls for the disclosure of any information that is subject to this confidentiality provision, that party shall immediately notify the other party to this Agreement of the subpoena or other legal process and such other party shall take whatever action it deems necessary to protect its own interest.  The parties further agree that if any party initiates any proceedings to enforce the terms of this Agreement, this Agreement and its contents shall be sealed in connection with such proceedings and shall remain confidential to the fullest extent possible by law.  Nothing in this Agreement is intended by the parties to alter, eliminate, change, abrogate or reduce any disclosure requirement that any party hereto is (or at any time hereafter may be) obligated to comply with under the law.

 

9.                  Press Release.  On the Effective Date, Digital may issue a press release regarding this Agreement.

10.              Governing Law.  This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Florida with respect to their obligations under this Agreement. 

 

11.              Integration and Effect of Prior Agreements.  This Agreement, together with all of the Exhibits, embodies the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereof.  In addition, this Agreement supersedes and controls over the terms of the Forbearance Agreement dated effective May 1, 2003 between the parties, and the financial reporting requirements in section 9 of the Forbearance Agreement are terminated.

 

12.              Amendment.  No amendment or waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing and signed by Jabil and Digital, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

13.              Execution.  This Agreement may be executed in any number of counterparts and by different parties 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.

14.              Representation by Counsel.  Each of the parties represents and warrants that it has been represented by counsel in the negotiation of this Agreement, that each has read and understands the contents hereof, and that each has executed this Agreement knowingly, voluntarily, and willfully.

15.              Disclaimer.  Neither this Agreement nor any action or acts taken in connection with this Agreement or pursuant to it constitutes an admission by any party to this Agreement or by any other entity or person that any conduct or action was unlawful or in violation of any contract, agreement, understanding, custom, or obligation among or between any of the parties, or constituted any wrongdoing whatsoever.

16.              Warranty of Authority.  Each of the signatories below represents and warrants that he or she is authorized to execute this Agreement on behalf of the party for whom he or she signs this Agreement.

 

 

	IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. 
	 	 
	 	JABIL CIRCUIT, INC. 
	 	 
	 	By: /s/  Chris Lewis
	 	

	
 
	
Its: CFO

	 	
	 	 
	
 
	
DIGITAL LIGHTWAVE, INC.

	 	 
	 	By: /s/ James R. Green 
	 	

		
Its: CEODIGITAL LIGHTWAVE EXHIBIT 10.2

Exhibit 10.2

                                   (Renewal A/R Note)

This is a renewal promissory note. The document excise tax in the amount prescribed by law has been paid in connection with the promissory note renewed by this note. No additional excise taxes are due on this renewal note. 

PROMISSORY NOTE

DIGITAL LIGHTWAVE, INC.

	$3,011,404	
Effective Date: May 11, 2004

1.    Promise to Pay. Digital Lightwave, Inc. (“Maker” or “Digital”), a Delaware corporation, whose address is 15550 Lightwave Drive, Clearwater, Florida 33760, for value received, promises to pay to the order of Jabil Circuit, Inc. (“Jabil”), a Delaware corporation, at 10560 Dr. Martin Luther King Jr. Street North, St. Petersburg, Florida 33716, or at such other place as the holder of this Note designates in writing to Maker, the principal amount of THREE MILLION, ELEVEN THOUSAND, FOUR HUNDRED FOUR AND 00/100 DOLLARS (U.S. $3,011,404.00) and to pay interest as required under this Note.

2.    Interest Rate. Maker shall pay interest on the outstanding principal amount of this Note at a rate of six percent (6%) per year. All interest on this Note will be computed on the basis of the actual number of days elapsed over a 360-day year.

3.    Payments. Maker shall make the following payments on this Note:

 

	a.	Upon the execution of this Note, Maker shall make a payment of $100,000.
	 	 
	b.	On each of July 1, 2004, October 1, 2004, January 1, 2005, April 1, 2005, July 1, 2005, and October 1, 2005, Maker shall make a payment of $150,000.
	 	 
	c.	
On December 31, 2005, Maker shall make a final payment of all outstanding principal and unpaid interest.

4.    Application and Form of Payments. Until maturity, payments will be applied to principal. At maturity, payments will be applied first to unpaid attorneys’ fees and accrued interest and then to principal. Payments of interest and principal must be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. Payments received after 2:00 p.m. will be treated as being received on the next banking day.

5.    Prepayment, Late Fee, Interest on Default, and Maximum Interest. Maker may prepay all or any portion of this Note without penalty. Partial prepayments will be applied against required principal installments in the inverse order of their maturities. Therefore, partial prepayments will not affect the due date of any required installments under this Note until this Note is paid in full. Maker agrees to pay a late fee equal to one percent (1%) of any payment of either principal or interest that is not paid within five (5) days of the date the payment is due. Interest on all amounts not paid when due after maturity, acceleration, or otherwise, will accrue and be payable at the rate of twelve percent (12%) per year. Notwithstanding anything in this Note to the contrary, the annual rate of interest payable on this Note is limited to the maximum rate of interest now allowed by applicable law or any higher rate of interest allowed because of a future amendment to applicable law. If any payment of interest, or any charge in the nature of interest, under this Note would cause the annual interest rate of this Note to exceed this limitation, Jabil shall credit the excess amount as a payment of principal under this Note or, if Maker so requests, return the excess amount to Maker.

6.    Default and Remedies. The occurrence of any of the following events constitutes a “Default”:

 

	a.	
the nonpayment when due of any interest or principal under this Note or any other liability, obligation, or indebtedness owing from Maker to Jabil, whether at maturity, by acceleration, or otherwise;

	 	 
	b.	a breach by Maker of any representation, warranty, or covenant contained in this Note or any other agreement between Maker and Jabil;
	 	 
	c.	the initiation of an action or proceeding for the dissolution, termination or liquidation of Maker;
	 	 
	d.	
the insolvency, appointment of a custodian, trustee or receiver for Maker, or Maker files (or any creditor files against Maker) a petition seeking relief under any bankruptcy, insolvency, reorganization, or other debtor relief law;

	 	 
	e.	
A lien not expressly approved in writing by Jabil is placed upon or attaches to any property of Maker, except: (i) liens and security interests of Jabil or Optel LLC; (ii) liens securing the payment of taxes, either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Maker and with respect to which adequate reserves have been set aside on its books; (iii) non-consensual statutory liens (other than liens securing the payment of taxes) arising in the ordinary course of Maker’s business to the extent: (A) such liens secure indebtedness which is not overdue or (B) such liens secure indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to Maker, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books; (iv) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of real property which do not interfere in any material respect with the use of such real property or ordinary conduct of the business of Maker as presently conducted thereon or materially impair the value of the real property which may be subject thereto; (v) purchase money security interests in equipment (including capital leases) and purchase money mortgages on real estate not to exceed $50,000 in the aggregate at any time outstanding so long as such security interests and mortgages do not apply to any property of Maker other than the equipment or real estate so acquired, and the indebtedness secured thereby does not exceed the cost of the equipment or real estate so acquired, as the case may be; and (vi) any lien on the property of Maker existing as of the date of this Note; or

	 	 
	f.	
The entry of a judgment or issuance of a writ of execution, garnishment, levy, attachment or similar process related to any judgment for the payment of money against Maker in excess of $50,000 in any one case or in excess of $50,000 in the aggregate and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against Maker or any of its assets.

Upon the occurrence of a Default and at any time thereafter, Jabil, at its option and as often as it desires, may declare all liabilities, obligations, and indebtedness, including this Note, to be immediately due and payable without demand, notice, or presentment.

7.    Payment of Costs. Maker shall pay all costs incurred by the holder of this Note in enforcing or collecting this Note and enforcing each agreement executed in connection with this Note (including any agreement under which real or personal property is pledged as security for this Note), including without limitation all attorneys’ fees, costs, and expenses incurred in all matters of interpretation, enforcement, and collection, before, during, and after demand, suit, proceeding, trial, appeal, and post-judgment collection efforts as well as all costs and fees incurred by the holder of this Note in connection with any bankruptcy, reorganization, or similar proceeding (including efforts to obtain relief from any stay) if Maker or any other person or entity liable for the indebtedness represented by this Note becomes involved in any bankruptcy, reorganization, or similar proceeding.

8.    Waiver and Consents. Maker and every other person liable at any time for payment of this Note waives presentment, protest, notice of protest, and notice of dishonor. Maker expressly consents to all extensions and renewals of this Note (as a whole or in part) and all delays in time of payment or other performance under this Note that the holder of this Note grants at any time and from time to time, without limitation and without any notice to or further consent of Maker. Maker agrees that its obligations under this Note are independent of the obligations of any other person or entity that now or later is obligated to pay this Note. Maker also agrees that Jabil may release any security for or other obligor of this Note or waive, extend, alter, amend, or modify this Note or otherwise take any action that varies the risk of Maker without releasing or discharging Maker from Maker’s obligation to repay this Note.

9.    VENUE AND WAIVER OF JURY TRIAL. MAKER FURTHER AGREES THAT VENUE FOR EACH ACTION, SUIT, OR OTHER LEGAL PROCEEDING ARISING UNDER OR RELATING TO THIS NOTE OR ANY AGREEMENT SECURING OR RELATED TO THIS NOTE SHALL BE THE COUNTY COURT OR CIRCUIT COURT LOCATED IN HILLSBOROUGH COUNTY, FLORIDA, AND MAKER HEREBY WAIVES ANY RIGHT TO SUE OR BE SUED IN ANY OTHER COUNTY IN FLORIDA OR ANY OTHER STATE. MAKER AND JABIL KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ALL RIGHTS TO A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION ARISING UNDER OR RELATING TO THIS NOTE OR ANY AGREEMENT RELATING TO THIS NOTE. MAKER AND JABIL HAVE FULLY DISCUSSED THIS PROVISION AND AGREE THAT THIS WAIVER IS SUBJECT TO NO EXCEPTIONS AND WAS A MATERIAL INDUCEMENT FOR JABIL TO AGREE TO ACCEPT THIS NOTE.

10.    Miscellaneous. The headings preceding the text of the sections of this Note have been inserted solely for convenience of reference and do not limit or affect the meaning, interpretation, or effect of this Note or the sections. The validity, construction, interpretation, and enforceability of this Note are governed by the laws of the State of Florida, excluding its laws relating to the resolution of conflicts of laws of different jurisdictions. Each required notice, consent, or approval, if any, under this Note will be valid only if it is given in writing (or sent by telex, telegram, or telecopy and promptly confirmed in writing) and addressed by the sender to the recipient’s address that is listed in this Note or to such other address as either party may designate by written notice to the other party. A validly given notice, consent, or approval will be effective on receipt if hand delivered to the recipient or the day it (or the written confirmation of it) is postmarked for dispatch by first class, postage prepaid, United States mail. These notice provisions apply only if a notice is required by this Note. They do not apply if no notice is required. This Note is not assignable by Maker.

 

 

	 	DIGITAL LIGHTWAVE, INC.
	 	 
	 	By: /s/ James R. Green
	 	

	 	Name: James R. Green
	 	 
	 	Title: CEO

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