EXHIBIT 12
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 31st day of December, 2001, by and between (i) Wi-LAN, INC., a Canadian
corporation with a principal office address located at 0000 Xxxxxxxx Xxx, XX,
Xxxxxxx, Xxxxxxx, X0X-0X0 XXXXXX (the "Seller"), (ii) DIGITAL TRANSMISSION
SYSTEMS, INC. 401(K) AND EMPLOYEE STOCK OWNERSHIP PLAN, (the "Buyer") and (iii)
DIGITAL TRANSMISSION SYSTEMS, INC. (the "Corporation" or the "Guarantor").
WITNESSETH:
WHEREAS, Seller currently owns 6,532,314 shares of the common stock of
Digital Transmission Systems, Inc. ("Common Stock"), $721,102 Debentures
convertible into 721,102 shares of common stock of the Corporation
("Debentures") and 8,049,568 shares of Preferred Stock convertible into
2,784,954 shares of common stock of the Corporation ("Preferred Stock"), for a
total of 10,038,370 shares of common stock; and
WHEREAS, Seller currently owns 702,615 warrants of the Corporation
convertible into 702.615 shares of common stock of the Corporation at a strike
price of $1.00 (the "Warrants");
WHEREAS, Buyer is an employee benefit plan and trust, qualified under
Sections 401 and 501 of the Internal Revenue Code (the "Code") and an employee
stock ownership plan within the meaning of Section 4975(e)(7) of the Code and
the Regulations thereunder ("ESOP Plan" and "ESOP Trust") and governed by a plan
and trust document (the "ESOP Governing Documents");
WHEREAS, Seller wishes to sell all 10,038,370 shares of said stock, on a
fully converted basis, to Buyer and to return the Warrants to the Corporation
for cancellation, and Buyer wishes to purchase said stock under the terms and
conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, and in consideration
of the mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Purchase of Stock. Seller agrees to sell to Buyer, and Buyer hereby
agrees to purchase from Seller, 10,038,370 common shares of Seller's stock in
Digital Transmission Systems, Inc. (the "Shares"). On the Closing Date, Seller
agrees to irrevocably convert its Debentures and Preferred Stock into common
shares and to return the Warrants to the Corporation for cancellation. Execution
of this Agreement shall serve as notice to the Corporation of Seller's intent to
convert such Debentures and Preferred Stock into common shares at the Closing
and of the cancellation of the Warrants.
2. Purchase Price. The purchase price ("Purchase Price") for the Shares set
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forth in Section 1 above shall be $1,003,837.
3. Payment of Purchase Price, Guarantee and Pledge. The Purchase Price set
forth in Section 2 above shall be paid by Buyer to Seller upon the Closing of
the transaction as follows:
a. $103,837 in cash; and
b. A 10-year Promissory Note for $900,000 with an interest rate of
6.0%, of even date herewith and incorporated by reference (the
"Note" and/or the "Loan").
c. The Corporation agrees to guarantee the performance of the
obligations of the Buyer by making contributions to the ESOP
Trust in such amounts and on such dates as shall enable the ESOP
Trust to pay all amounts payable under the Note on or before the
date on which such payments are due under the Note. Provided,
however, that in the event the Shares are ever returned to the
Seller and the amount due pursuant to the Note is extinguished,
there shall be no requirement for the Corporation to make
contributions to the ESOP Trust except as may be provided under
the provisions of the ESOP Trust's Governing Documents.
d. The Buyer will pledge as collateral for the Note (the
"Collateral") 9,000,000 of the Shares as security for its
obligations hereunder, pursuant to a certain pledge agreement of
even date herewith and incorporated by reference (the "Pledge").
The Seller agrees to release from the Pledge, any Shares pledged
as Collateral which the Buyer must allocate under the ESOP
Governing Documents. (This Agreement, the Note and the Pledge are
referred to herein as the "Transaction Documents").
4. Representations, Warranties and Covenants of Seller. Seller hereby
represents, warrants and covenants to Buyer the following items, each of which
is understood as being an inducement to Buyer entering into this Agreement.
a. On conversion of the Preferred Shares and the Debenture, Seller
will be the true and lawful owner of 10,038,370 shares of the
issued and outstanding Stock of Digital Transmission Systems,
Inc., on a fully converted basis.
b. Seller is the owner of the described securities of Digital
Transmission Systems, Inc. free and clear of any liens or
encumbrances, including any pledges or assignments of such
securities.
c. Seller has not entered into any other agreements, which would
interfere with its ability to freely transfer the unencumbered
and marketable securities.
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d. Seller has taken appropriate corporate action to authorize it to
enter into this Agreement and Seller is a corporation validly
organized and existing under the laws of Alberta.
5. Representations, Warranties and Covenants of Buyer. Buyer hereby
represents, warrants and covenants to Seller the following items, each of which
is understood as being an inducement to Seller entering into this Agreement.
a. Buyer constitutes a validly existing trust under the laws of the
state of Georgia, established and adopted by the Corporation, and
constitutes a qualified tax exempt employee retirement plan and
trust under Sections 401(a) and 501(a) of the Code, subject to
any changes required by the Internal Revenue Service in the
process of obtaining an initial determination letter. Xx. Xxxxx
Xxxxxxx is the ESOP Plan's Trustee and has all requisite power
and authority to act for and on behalf of the Buyer in
authorizing, approving and consummating the transactions
contemplated by the Transaction Documents, and to execute and
deliver, for and on behalf of the Buyer, and to bind the Buyer to
the terms of the Transaction Documents. The Buyer constitutes an
"employee stock ownership plan" within the meaning of Section
4975 of the Code. The Loan constitutes an "exempt loan" as
defined in, and meeting the requirements of Section 4975 of the
Code and Treasury Regulations Section 54.4975-7. Neither the
Loan, nor the Stock Purchase Agreement, nor any other transaction
contemplated by the Transaction Documents constitutes or will
constitute a prohibited transaction under Section 4975 of the
Code or Section 406 of ERISA. The Loan and the Stock Purchase
Agreement will constitute and remain, valid and proper fiduciary
decisions by each of the responsible fiduciaries of the Buyer,
and such transaction does not constitute, nor will it constitute,
a breach of any duty or responsibility imposed upon any fiduciary
for the Buyer by ERISA or the Code, nor will it adversely affect
the tax qualified status of the Buyer under the Code.
b. Buyer has taken appropriate action through its plan fiduciaries
to authorize it to enter into this Agreement.
c. Buyer has not entered into any other agreement or transaction,
which would interfere with its obligations hereunder.
6. Representations, Warranties and Covenants of Guarantor. Guarantor hereby
represents, warrants and covenants to Seller the following items, each of which
is understood as being an inducement to Seller entering into this Agreement.
a. Guarantor has taken appropriate corporate action to authorize it
to enter into this Agreement and to guarantee Buyer's obligations
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hereunder.
b. Guarantor is a corporation validly organized and existing under
the laws of the State of Delaware.
7. Closing. The Closing Date shall be December 31, 2001.
8. Items to be Delivered at Closing.
a. Buyer shall deliver $103,837 in cash and the executed Note to the
Seller.
b. Seller shall deliver its certificates of Common Stock,
Debentures, and Preferred Stock to the Buyer and its certificates
for the Warrants to the Corporation.
9. Right of Rescission and Right to Return of Shares in Cancellation of the
Note.
The Buyer and Seller shall each have the right to rescind this Agreement, and
Seller shall have the right to require the return of the pledged Shares in
cancellation of the Note, in the following cases and in accordance with the
following procedures:
a. Rescission.
The Buyer shall have the right to rescind the transaction in the
event that it is unable to obtain an independent opinion of an
appraiser that the price paid for the Shares is no more than fair
market value and that the transaction is fair to the Buyer from a
financial point of view (the "Appraisal"). Within 30 days of
receipt of the Appraisal which states that the price paid exceeds
the fair market value, or if the Buyer is unable to obtain an
Appraisal, but in no event later than February 28, 2002, the
Buyer must in writing notify Seller that the transaction is
rescinded. In the event such notice is given, the parties shall
have the following options:
i. The parties can adjust the terms of the transaction and
the balance due on the Note so that the Buyer has paid
no more than fair market value for the Shares;
ii. The Buyer shall have the ability to keep $103,837 of
Shares at such price as determined by the Appraisal and
to return the balance of the Shares pledged as
collateral for the Note to the Seller in return for
cancellation of the Note; or
iii. The parties shall have the right to reverse the
transaction and return all cash paid by the Buyer to
the Buyer and return all Shares received by the Buyer
to the Seller, and the
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cancellation of all obligations pursuant to the
Transaction Documents.
In the event the parties are unable to agree to one of the
above-referenced options, or in the event the Buyer is unable to
obtain an Appraisal, the parties agree that the transaction will
be reversed in accordance with Section 9(a)(iii) of this
Agreement.
b. Return of Shares and Cancellation of Note.
The Buyer shall notify the Seller by November 30, 2002 of its
intent to refinance the Note or of its inability to refinance the
Note. If the Buyer is unable to refinance the Note by December
31, 2002 with a financial institution or the Corporation, the
Seller shall have the right to terminate the Loan as follows:
i. If the fair market value of the Shares serving as Collateral
as of the date of the Loan termination (excluding any Shares
serving as Collateral which have been purchased but not yet
released in accordance with the terms of the Transaction
Documents) (the "Pledged Shares") as determined by the
valuation and fairness opinion obtained by the Buyer exceeds
the outstanding principal amount on the Loan, then the
Seller shall receive a number of Shares which would equal in
value such outstanding principal amount due on the Loan; or
ii. If the fair market value of the Pledged Shares as determined
by the valuation and fairness opinion obtained by the Buyer
does not exceed the outstanding principal amount on the
Loan, then the Seller shall receive the Pledged Shares;
and the Note and all of the Buyer's obligations under said Notes
and this Agreement shall be cancelled. If the Note is refinanced,
then the Buyer shall cause the entire amount of the Note then
outstanding to be prepaid in accordance with the terms of Section
12 (k) below, on or before December 31, 2002.
10. Events of Default. The occurrence of any of the following events with
respect to the Buyer shall constitute a default hereunder:
a. failure by the Buyer to pay to the Seller any obligation when due
and payable in accordance with the terms of the Note; if such
failure shall continue for thirty (30) days after Seller notifies
Buyer of such event.
11. Remedies Upon Event of Default. Upon the occurrence of any event of
default, the outstanding balance due on the Note, at the option of Seller, and
without any notice or demand, shall become due and payable immediately; and
Seller shall have all
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rights and remedies for default provided by law and in this or any other
instrument of the Buyer to the Seller or to which the Buyer and the Seller are
parties, except to the extent such remedies would cause the Loan to fail as an
exempt loan under Section 4975 of the Code and the regulations thereunder.
12. Miscellaneous.
a. Waiver. A party's failure to insist on compliance or enforcement
of any provision of this Agreement, shall not affect the validity
or enforceability or constitute a waiver of future enforcement of
that provision or of any other provision of this Agreement by
that party or any other party.
b. Governing Law. This Agreement shall, in all respects, be subject
to, and governed by, the laws of the State of Delaware without
regard to conflicts of laws provisions.
c. Severability. The invalidity or unenforceability of any provision
in this Agreement shall not in any way affect the validity or
enforceability of any other provision and this Agreement shall be
construed in all respects as if such invalid or unenforceable
provision had never been in the Agreement.
d. Assignment. The Buyer shall have the unilateral right to assign
any and all of its rights under this Agreement to one or more
third parties. This Agreement, together with any amendment to it,
shall be binding upon, and shall inure to the benefit of, the
parties and their respective successors, assigns, heirs and
personal representatives.
e. Amendments. This Agreement may be modified or amended at any time
by the mutual consent of the parties, with any such modification
or amendment to be invalid unless in writing, signed by the
parties hereto.
f. Entire Agreement. This Agreement, the Note, and the Pledge
contain the entire understanding by and between the Seller and
Buyer with respect to the matters covered herein, and no
representations, promises, agreements or understandings, written
or oral, relating to the purchase of Shares by Buyer from the
Seller not contained in this Agreement shall be of any force or
effect.
g. Headings. The various headings in this Agreement are inserted for
convenience only and are not to be used in interpreting this
Agreement.
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h. Counterparts. This Agreement may be executed concurrently in one
or more counterparts, any one of which need not contain the
signatures of more than one party but all of which taken together
shall constitute one and the same Agreement.
i. Remedies. Each of the parties represent and acknowledge that the
failure of any party to carry out his or its obligations to
consummate the transactions contemplated by this Agreement on the
Closing Date would cause irreparable injury to the other parties
to this Agreement. Each of the parties accordingly agree that, in
addition to any other remedies available to any party at law or
equity, to be cumulatively enforced, any such failure by any
party to perform this Agreement which constitutes a breach of the
party's representations, warranties or covenants contained herein
shall be subject to the remedy of specific performance.
j. Board Observer Status. Seller's representatives will resign from
the Corporation's Board of Directors at the Closing Date. The
Seller will be permitted a Board of Director observer status
after the Closing Date, and as an observer will be entitled to
notices of all meetings of Directors, to attend all meetings of
Directors and Shareholders and to all materials provided to
Directors. As of the Closing Date, the Buyer will assume all the
Corporation's Board of Director seats vacated by the Seller at
that date.
k. Pre-Payment Terms. The Buyer or its assignees, at any time, can
pre-pay the Note before the December 31, 2002 on a net present
value basis, at a 6% annual discount rate.
l. The Buyer's Indemnity. Seller shall indemnify and hold the Buyer
harmless, to any extent, from and against any and all claims,
demands, obligations, damages, recoveries, liabilities, losses or
deficiencies, whether accrued, absolute, contingent, known,
unknown or otherwise (including, without limitation, any and all
penalties, interest, reasonable attorneys' fees and other costs
and expenses relating to any and all actions, suits, proceedings,
demands, assessments and judgments), which arise out of, result
from, or relate to: Seller's ownership or use of the Shares
during any time at or prior to the Closing Date; or any
misrepresentation, breach of warranty, breach of covenant or
nonfulfillment of any agreement on the part of Seller under this
Agreement.
m. The Seller's Indemnity. The Buyer shall indemnify and hold Seller
harmless from and against any and all claims, demands,
obligations, damages, recoveries, liabilities, losses or
deficiencies, whether
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accrued, absolute, contingent, known, unknown or otherwise
(including, without limitation, any and all penalties, interest,
reasonable attorneys' fees and other costs and expenses relating
to any and all actions, suits, proceedings, demands, assessments
and judgments), which arise out of, result from, or relate to:
The Buyer's ownership or use of the Shares at any time after the
Closing Date; or any misrepresentation, breach of warranty,
breach of covenant or nonfulfillment of any agreement on the part
of the Buyer under this Agreement.
n. Anti-Dilution Provisions. Except for the conversion of the
Debentures and the Preferred Stock into common shares, the
Guarantor, the Buyer and its assignees, agree to support
restricting any common stock issuance of the Corporation until
December 31, 2002 to no more than 20% of the total outstanding
fully diluted shares as of the Closing Date.
IN WITNESS WHEREOF, Seller, Buyer, and Guarantor have duly executed this
Agreement as of the day and year first above written.
SELLER:
Wi-LAN, INC.
By: /s/ X. Xxxxxxxx
---------------------------------------
Title: Chairman
BUYER:
DIGITAL TRANSMISSION SYSTEMS, INC.
401(K) AND EMPLOYEE STOCK OWNERSHIP
PLAN
By: /s/ Illegible
---------------------------------------
Title: Trustee
GUARANTOR:
DIGITAL TRANSMISSION SYSTEMS, INC.
By: /s/ Illegible
---------------------------------------
Title: Chief Executive Officer
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