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EXHIBIT 10.25
SECOND AMENDMENT TO DEBENTURE PURCHASE AGREEMENT
This Second Amendment to Debenture Purchase Agreement ("Amendment") is
made and entered into as of the 5th day of February, 1999, by and between
DIGITAL TRANSMISSION SYSTEMS, INC. (the "Company"), a Delaware corporation, and
SIRROM CAPITAL CORPORATION d/b/a Tandem Capital (the "Purchaser"), a Tennessee
corporation.
WITNESSETH:
WHEREAS, the Purchaser and the Company have previously executed that
Debenture Purchase Agreement dated September 25, 1997, as amended by that First
Amendment to Debenture Purchase Agreement dated as of October 21, 1998 (the
"Purchase Agreement"; capitalized terms used in this Amendment have the meanings
assigned in the Purchase Agreement if not otherwise defined herein);
WHEREAS, the Purchaser and the Company wish to further amend the
Purchase Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are acknowledged, it is agreed as follows:
1. Concurrently with the effectiveness of this Amendment, the
principal amount of the Debenture shall be reduced, without penalty or premium,
(i) by $1,000,000 in connection with the Company's sale of the stock of
SouthTech, Inc., a wholly-owned subsidiary of the Company, to Chapala
Communications, Inc., a Georgia corporation, and (ii) by an additional
$1,000,000 through the conversion of that amount of principal debt into the
Company's Series A Convertible Preferred Stock at an exchange rate of $1.00 of
debt for one share of stock. As so reduced, the Debenture shall have a remaining
outstanding principal balance of $2,000,000. All accrued and unpaid interest as
of the effective date hereof, which totals $314,333.32 as of February 5, 1999,
shall further be converted into the Company's Series A Convertible Preferred
Stock at an exchange rate of $1.00 of debt for one share of stock. The
conversion of the total $1,314,333.32 of debt for 1,314,333 shares of Series A
Convertible Preferred Stock shall occur by the operation of this Amendment
and the issuance of the stock certificate to the Purchaser, and no additional
documents or actions shall be necessary to give effect to this conversion.
2. The Purchase Agreement is hereby amended to provide that the
"Conversion Price," as defined therein, shall be the "Conversion Price," as
defined in the [charter amendment or declaration] establishing the rights and
preferences of the Series A Convertible Preferred Stock issued to the Company
pursuant to Section 1 above.
3. The Debenture has been amended in certain respects by that Second
Amendment to Subordinated Debenture executed by the Company and the Purchaser
dated as of the date hereof, which amendments include the change of interest
rate and payment terms including, but not limited to, the amendment of the final
maturity thereof to February 5, 2004.
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4. Section 1.1 of the Purchase Agreement is hereby amended to
include the following as a final sentence thereof.
Notwithstanding the foregoing, upon and after February 5, 1999, the
Debentures shall bear interest and be payable as provided therein as
amended by that Second Amendment to Subordinated Debenture between the
Company and the Purchaser dated February 5, 1999.
5. The Purchaser hereby consents to the acquisition by MicroTel
International, Inc. of up to 100% of the common stock of the Company and to the
sale of all of the issued and outstanding stock of SouthTech, Inc., a
wholly-owned subsidiary of the Company, to Chapala Communications, Inc., a
Georgia corporation.
6. The obligations of the Company under the Debenture and under the
Purchase Agreement, as they are amended, continue to be secured by that Security
Agreement dated October 21, 1998, executed by the Company and the Purchaser. To
further evidence this security interest as to certain types of property, the
Company shall enter into an Intellectual Property Security Agreement in favor of
the Purchaser concurrently with the execution of this Amendment.
7. Section 1.2 of the Purchase Agreement is hereby amended by
deleting the exiting language and replacing it in full with the following:
1.2 Optional Redemption. The Debentures may be redeemed at the option
of the Company at any time at the same price provided for under Section
1.3 hereof respecting mandatory redemptions.
8. The Purchase Agreement is hereby amended to include an additional
Section 5.22 thereof, providing in full as follows:
5.22 Cash Flow Projections. No later than thirty (30) days prior to
each February 5, the Company shall deliver to the Purchaser
comprehensive cash flow projections for at least the next following
twelve month period, which shall be in form acceptable to the
Purchaser, in its reasonable discretion. The projections shall include
projections of the Company's "EBITDA," defined as net income plus
expenses taken in the relevant period for interest, income taxes,
depreciation and amortization. If the Company fails to achieve, for any
fiscal quarter ending on or before March 31, 2001, an amount of EBITDA
that is less than 90% of the EBITDA so projected, the Company shall be
obligated to redeem the Debenture as a mandatory redemption in the
manner provided in Section 1.3 of the Purchase Agreement.
9. The Company hereby represents and warrants to the Purchaser that
all of the representations made in Section 3 of the Purchase Agreement are true
and correct as of the date
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hereof, except as modified or supplemented by Schedule A attached hereto and
incorporated herein by this reference. Without limiting the foregoing, the
Company specifically warrants and represents that it has no capital stock
outstanding and has no warrants or options for the purchase of its stock
outstanding (except in favor of the Purchaser) other than as set forth in the
Purchase Agreement, as supplemented by Schedule A hereto.
10. The effectiveness of this Amendment are subject to the
requirements that the Purchaser receive each of the following documents, in form
and substance acceptable to the purchaser:
(a) Second Amendment to Subordinated Debenture.
(b) Stock Purchase Warrant respecting the issuance of ten
percent (10%) of the Company's common stock.
(c) Certificate evidencing the preferred stock to be issued
pursuant to Section 1 hereof.
(d) Registration Rights Agreement.
(e) Co-Sale Rights Agreement executed by MicroTel International
Inc.
(f) Evidence satisfactory to the Purchaser that MicroTel
International, Inc. will acquire at least a 43% interest in the
Company's common stock concurrently with the effectiveness of this
Amendment.
(g) The Company's cash flow projections for the succeeding
twelve month period in form and substance acceptable to the Purchaser.
(h) Pledge Agreement granting to the Purchaser a first
priority perfected security interest in the stock of the Company owned
by Microtel International, Inc. together with stock powers and
irrevocable proxies.
(i) An opinion of the Company's counsel, in form and substance
satisfactory to Lender's counsel.
(j) An Intellectual Property Security Agreement.
(k) an Authorization Agreement for Pre-Authorized Payments
(Debit).
(1) Closing Statement evidencing the disbursement of funds.
(m) Evidence satisfactory to the Purchaser that the related
transaction with Chapala Communications, Inc. has closed and funded to
provide the $1,000,000 payment described in Section 1 above.
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11. The Company warrants and represents that its execution, delivery
and performance hereof and of all documents required herein have been duly
authorized by all necessary corporate action and do not (i) violate or conflict
with the Company's corporate charter or bylaws, (ii) violate any applicable law
or regulation, (iii) violate any order, writ, judgment or decree by which the
Company or any of its assets are bound, or (iv) violate, constitute a breach of,
or occasion any rights or remedies under any other loan agreement, lease,
indenture or other agreement by which the Company or any of its assets are
bound.
12. The Company warrants and represents that the Debenture, the
Purchase Agreement and all related documents executed in favor of the Purchaser
with respect thereto (a) are valid, binding and enforceable against the Company
according to their terms, subject to principles of equity and laws applicable to
the rights of creditors generally, including bankruptcy laws, and (b) are not
subject to any counterclaim, defense or right of setoff, and the Company hereby
releases Lender from any claim, known or unknown, that the Company may have
against Lender as of the execution of this Amendment.
13. This Amendment and the other written documents between the
parties evidence their entire agreement and may be amended only by written
instrument signed by the parties. This Amendment shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
Georgia.
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Executed as of the date stated above.
DIGITAL TRANSMISSION SYSTEMS, INC.
By: /s/
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Title: /s/
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SIRROM CAPITAL CORPORATION
d/b/a Tandem Capital
By: /s/
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Title: Vice President
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Schedule A
Rights To Acquire DTS stock
Warrants were issued during IPO - March 5, 1996 - see Prospectus
Registration rights held by Peregrine Ventures II LP, Xxxxx X. Xxxxxxxxxxx and 2
other stockholders - see Prospectus
Warrants issued (60,000) to Silicon Valley Bank - March 16, 1998
The Company's Board of Director's have resolved to pay certain fiscal year 1999
employee and Board of Director compensation with DTS stock. Total amount of
stock to be issued in conjunction with this agreement approximates 419,000
shares.
Stock options granted to employees of the Company. Total options outstanding
under these agreements approximates 746,000 shares.
