EXHIBIT 13
PLEDGE AGREEMENT
OF
DIGITAL TRANSMISSION SYSTEMS, INC.
401(K) AND EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
THIS AGREEMENT (the "Agreement") is made and entered into as of the date
subscribed below, by and between (i) DIGITAL TRANSMISSION SYSTEMS, INC. EMPLOYEE
STOCK OWNERSHIP PLAN AND TRUST, a Georgia trust (the "ESOP" or "Trust"), acting
by XXXXX XXXXXXX as Trustee (the "Trustee"), (said Trust being hereinafter
called "Pledgor"), and (ii) WI-LAN, INC., Alberta, Canada (hereinafter called
"Lender").
1. PLEDGE OF STOCK.
1.1 In consideration of the loan in the principal amount of Nine Hundred
Thousand Dollars ($900,000) made by Lender to Pledgor (the "Loan"), as evidenced
by the Note executed simultaneously herewith (the "Note"), and as security for
the payment of the Note, Pledgor hereby assigns, transfers, pledges and grants
to Lender, pursuant to the Georgia Uniform Commercial Code (the "UCC"), a
security interest in 9,000,000 of Shares of the no par value common stock of
Digital Transmission Systems, Inc. to be purchased, by Pledgor in part with
monies received from the Loan ("Shares") which will be acquired by the Trust
under the Note. Shares pledged hereunder shall not have been previously
allocated to participants in the ESOP or in any other way encumbered. Such
assignment and pledge includes any stock rights, rights to subscribe,
liquidation dividends, stock dividends, dividends paid in stock or cash, stock
splits, warrants, options, stock purchase rights, new securities or other
property which Pledgor is or may hereafter become entitled to receive in respect
of, or in exchange for, or in substitution of, or on account of the Shares, and
all proceeds thereof at any time hereafter acquired or issued; provided,
however, prior to the occurrence of any Event of Default (as defined in the
Stock Purchase Agreement of even date herewith), Pledgor shall be entitled to
receive and retain all dividends of cash and noncash property (other than stock
dividends, stock splits, warrants, options and stock purchase rights) and such
dividends shall not constitute part of the Collateral. Upon the occurrence of
any default specified or referred to in the Note or the Stock Purchase
Agreement, Lender, at its discretion, may cause to be transferred to its own
name, or to the name of any other person, firm or corporation, individually or
as secured party or trustee or otherwise, to the extent such would not cause the
Loan to fail as an exempt loan under Section 4975 of the Internal Revenue Code
of 1986 (referred to hereinafter as the "Code") and the regulations thereunder,
the property deposited with it pursuant to this Agreement. Subject to Section
2.1 of this Agreement, all property assigned, transferred to, or pledged with
the Lender and in which Lender is granted a security interest under this
Agreement, including without limitation the Shares, is herein referred to as
"Collateral". This Pledge Agreement is issued pursuant to the terms and
provisions of that certain Stock Purchase Agreement of even date herewith (the
"Stock Purchase Agreement") between Lender and Pledgor and the terms used herein
shall have the same meaning as set out in the Stock Purchase Agreement, unless
otherwise defined
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herein.
2. RELEASE OF COLLATERAL FROM PLEDGE.
2.1 Upon payment of the entire principal amount of the Note, including
interest, or installments thereof, in conformity with arrangements agreed on by
Lender and Pledgor, all (in case of full payment) or a portion (in the case of
partial payment) of Shares of the Collateral shall be released from those
pledged hereunder. If partial payment of the Loan is made, the number of Shares
released shall bear such relation to the total number of Shares then encumbered
hereunder as the principal and interest paid on the Note for such partial
payment bears to the principal and interest paid on the Note for said payment
plus the principal and interest yet to be paid on the Note, without taking into
account any possible extension or renewal periods. After any Shares have been so
released, Lender, or its agent, shall promptly deliver the same to Pledgor and
such Shares shall no longer be Collateral hereunder. Upon release of said Shares
hereunder, Pledgor shall allocate such Shares to participants in the ESOP as
provided in the ESOP Plan and Trust documents.
3. PRESERVATION AND PROTECTION OF COLLATERAL.
3.1 Lender shall be under no duty or liability with respect to the
collection, protection or preservation of the Collateral or otherwise, beyond
the use of reasonable care in the custody and preservation thereof while in its
possession, or in the possession of its agent.
4. SALE OR TRANSFER OF NOTE.
4.1 Upon transfer of all or any part of the indebtedness, provided such
transfer shall be subject to any applicable provisions of ERISA and the Code in
order to maintain the qualification of the ESOP Plan and Trust, Lender may
transfer all or any part of the Collateral, and shall be fully discharged from
all liability and responsibility accruing thereafter, with respect to such
Collateral so transferred, and the transferee shall be vested with all the
rights and powers of Lender hereunder with respect to such Collateral so
transferred; but with respect to any Collateral not so transferred, Lender shall
retain all rights and powers hereby given.
5. DEFAULT.
5.1 Should any default specified in the Note and/or Stock Purchase
Agreement occur, Lender or any holder of the indebtedness secured hereby is
given full power and authority, then or at any time thereafter, at its election,
to sell, assign and deliver or collect all or such portion of the Collateral, or
any substitute therefor or any addition thereto, to the extent such would not
cause the Loan to fail as an exempt loan under Section 4975 of the Code and the
regulations thereunder, in one or more sales, with or without any previous
demands or demand of performance (except for any notice required by the Stock
Purchase Agreement) or notice of advertisement, in such order as Lender may
elect; and any such sale may be made either at public or private sale at
Lender's place of business or
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elsewhere, either for cash or upon credit or for future delivery with such sale
being governed by the applicable provisions of the Uniform Commercial Code; and
Lender may be purchaser of any or all Collateral so sold and hold the same
thereafter in its own right free from any claim of Pledgor or right of
redemption. Upon termination of the Trust, all of the Collateral shall be
applied to discharge the indebtedness secured hereby. All demands, notices and
advertisements are hereby waived to the extent permitted by law. Any sales
hereunder may be conducted by an auctioneer or any officer or agent of Lender or
of any holder of the indebtedness secured hereby.
5.2 Notwithstanding any other provisions of this Pledge Agreement, in case
of an Event of Default as provided in the Note and/or Stock Purchase Agreement,
Lender shall have no right to receive payment from any assets of the Trust, or
any recourse against any assets of the Trust, other than, to the extent
permitted under Treasury Regulation 54.4975-7(b)(5): the Collateral;
contributions (other than contributions of "employer stock", as defined in
Section 409(l) of the Code) that are made to the Trust to enable the Trust to
meet its obligations under the Note; earnings attributable to the Collateral and
investment of such contributions; and the Loan proceeds prior to purchase of the
Shares (as defined in the Loan Agreement) and any earnings thereon.
6. PROCEEDS OF SALE.
6.1 The proceeds of the sale of any of the Collateral and all sums received
or collected from or on account of such Collateral shall be applied to payment
of expenses incurred or paid by Lender or such other holder in connection with
any sale, transfer or delivery of the Collateral to the payment of any other
costs, charges, reasonable attorneys' fees or expenses provided for in the Note
or the Stock Purchase Agreement, and to the payment of the Note or any part
thereof, all in such order and manner as Lender or such holder in its discretion
may determine. Lender or such holder shall notify Trustee of any balance, and
shall pay any balance to Trustee or to the person or persons entitled thereto
upon proper demand being made therefor.
7. PRESENTMENTS, ETC.
7.1 Lender shall be under no duty or obligation whatsoever to make or give
any presentment, demand for performance, notice of nonperformance, protest,
notice of protest or notice of dishonor in connection with any obligation or
evidence of indebtedness held by Lender as Collateral, or in connection with any
obligations or evidence of indebtedness which constitute in whole or in part the
indebtedness secured hereunder.
8. WAIVER BY PLEDGOR.
8.1 Pledgor waives any right to require Lender to (a) proceed against any
person, (b) proceed against or exhaust the Collateral or any other collateral or
security for the Note, or (c) pursue any other remedy in Lender's power,
including but not limited to pursuit of any rights which Lender may have against
any person or against any other collateral, security or guaranty, and Pledgor
waives any defense arising by reason of any disability or other defense of any
person, or by reason of the cessation from any cause whatsoever of the
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liability of any other person. Until all indebtedness to the Lender shall have
been paid in full, Pledgor shall have no right of subrogation, and Pledgor
waives any right to enforce any remedy which it now has or may hereafter have
against any other person and waives any benefit of and any right to participate
in any collateral or security whatsoever now or hereafter held by Lender except
as otherwise specified herein.
8.2 Lender may at any time deliver the Collateral or any part thereof to
Pledgor and the receipt of Pledgor shall be a complete and full acquittance for
the Collateral so delivered, and Lender shall be discharged from any liability
or responsibility therefor accruing thereafter.
9. VOTING RIGHTS.
9.1 Subject to any applicable provisions of ERISA, Lender may, after a
default in payment of principal or interest under the Note or any other default
under the Note, cause the Collateral to be voted, by a proxy designated by
Lender, for or against any corporate action or for the election of any officer
or director as Lender in its discretion shall deem desirable.
10. POWER OF SALE.
10.1 Until all indebtedness of Pledgor to Lender shall have been paid in
full, the power of sale and other rights, powers and remedies granted to Lender
hereunder shall continue to exist and may be exercised at any time and from time
to time irrespective of the fact that any such indebtedness or any part thereof
may have become barred by any statute of limitations, or the personal liability
of Pledgor may have ceased.
11. OTHER RIGHTS.
11.1 The rights, powers and remedies given to Lender by this Agreement
shall be in addition to all rights, powers and remedies given to Lender by
virtue of any statute or rule of law. Any forbearance or failure or delay by
Lender in exercising any right, power or remedy hereunder shall not be deemed to
be a waiver of such right, power or remedy, and any single or partial exercise
of any remedy hereunder shall not preclude the further exercise thereof; and
every right, power and remedy of Lender shall continue in full force and effect
until such right, power or remedy is specifically waived by Lender in an
instrument in writing.
12. GOVERNING LAW.
12.1 The validity and interpretation of this Agreement and performance of
the parties hereto of their respective duties and obligations hereunder shall be
governed by the laws of the State of Delaware, except with respect to interest
which shall be governed by and construed in accordance with applicable Federal
laws, if such laws permit a greater rate than Delaware law, and except as
otherwise provided in the Stock Purchase Agreement.
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13. EXEMPT LOAN.
13.1 It is expressly agreed and acknowledged that the Trust is an "employee
stock ownership plan" within the meaning of Section 4975 of the Code, the
applicable provisions of ERISA and regulations thereunder and that the Loan is
intended to be an "exempt loan" in full compliance with Section 4975 of the
Code, the applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and all regulations thereunder. To the extent that
any provision of this Pledge Agreement conflicts with the provisions of Section
4975 of the Code, ERISA, or regulations thereunder, or would (i) cause the Loan
to fail to qualify as an "exempt loan", or (ii) cause the Trust to fail as an
"employee stock ownership plan", (as all of these terms are defined
hereinabove), the provision shall where possible be deemed amended from date of
execution hereof to comply with the requirements of Section 4975 of the Code,
ERISA and the regulations thereunder, or where amendment is not possible, said
provision will be stricken as if never contained herein and treated as null and
void from the date of execution hereof, with all remaining provisions continuing
in effect; provided, however, that no such amendments or deletions shall be
permitted or made hereto if, and to the extent that, such amendments or
deletions would adversely effect Lender's rights to collect the indebtedness
evidenced by the Note in the amounts and at the times specified in the Note or
in any of the other Loan Documents.
EXECUTED as of this 31st day of December, 2001, at Atlanta, Georgia, the
parties acting by and through their respective duly authorized officers.
PLEDGOR:
DIGITAL TRANSMISSION SYSTEMS, INC.
401(K) AND EMPLOYEE STOCK OWNERSHIP
PLAN AND TRUST
BY: /s/ Illegible
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TITLE: Trustee
LENDER:
WI-LAN, INC.
BY: /s/ X. Xxxxxxxx
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TITLE: Chairman, President & CEO
