St. Petersburg Times, Mar. 1, 2003
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Mar. 1–CLEARWATER, Fla.–Scrambling for cash to keep afloat, Digital Lightwave took out $2.4-million in high-interest loans from its chairman over the last two weeks.
Digital, a maker of portable testing equipment for fiber-optic networks, will pay an annual interest rate of 10 percent to Optel LLC, an entity controlled by founder and majority shareholder Bryan Zwan.
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The troubled company will use about $1.4-million for general corporate purposes and the rest to secure a bond related to a legal dispute with a former employee, it said Friday in a filing with federal securities regulators.
The disclosure comes one month after Digital said it might borrow up to $10-million from Zwan and that it had recently cut 83 staff positions, reducing its payroll to 106. It comes a week after the company announced the resignation of chief financial officer Mark Scott.
Digital Lightwave’s fortunes have tumbled since the telecom boom of the late 1990s, when its stock surged and put Zwan on Forbes magazine’s list of the 400 richest Americans. The company was later dogged by legal problems, a federal investigation and investor concerns about Zwan’s close ties to the Church of Scientology.
Under Digital’s recent agreement with Optel, two of the three loans will come due July 31, 2004. If before that, however, the company expects to file for bankruptcy or be sold or acquired it must repay the loans immediately. If it is unable to pay, the loans are secured by a “first priority security interest in substantially all” of the company’s assets, the agreement said.
A Tampa appeals court is reviewing Digital’s appeal of an arbitration award of $3.8-million plus lawyers’ fees to former executive Seth Joseph, a Miami attorney the company let go in 1998.
An attempt to reach Chief Executive James Green on Friday evening was unsuccessful.