WIRELESS RONIN® TECHNOLOGIES, INC. AMENDMENT NO. 1 TO AMENDED AND RESTATED CONVERTIBLE DEBENTURE AGREEMENT AND DEBENTURE DATED SEPTEMBER 7, 2005
EXHIBIT 10.17
WIRELESS RONIN® TECHNOLOGIES, INC.
AMENDMENT NO. 1
TO
AMENDED AND RESTATED CONVERTIBLE DEBENTURE AGREEMENT
AND
DEBENTURE DATED SEPTEMBER 7, 2005
TO
AMENDED AND RESTATED CONVERTIBLE DEBENTURE AGREEMENT
AND
DEBENTURE DATED SEPTEMBER 7, 2005
February 27, 2006
SPIRIT LAKE TRIBE
Spirit Lake Tribal Council ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Spirit Lake Tribal Council ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Convertible Debenture Purchase
Agreement between SPIRIT LAKE TRIBE (the “Purchaser”) and WIRELESS RONIN® TECHNOLOGIES, INC., a
Minnesota corporation (the “Company”), dated September 7, 2005 (the “CDA”), pursuant to which
Purchaser purchased, and the Company has issued, a 10% fixed rate Convertible Debenture due
December 31, 2009 in the principal amount of $3,000,000 (the “Debenture”). The CDA is hereby
amended and restated as of the date set forth above, to set forth additional terms and amendments
to the CDA and the Debenture. This amendment shall be deemed to be a supplementary agreement
within the meaning of Section 15 of the CDA. All capitalized terms not otherwise defined herein
shall have the meanings described or defined in the CDA. In consideration of the mutual agreements
provided below, the Company and Purchaser agree as follows:
1. The Debenture. The Company and Purchaser agree that the CDA shall be
amended as follows:
(a) Conversion of Debenture. The third paragraph of Section 1 of the CDA is deleted
and the following inserted in substitution therefor:
The Debenture is convertible in whole at any time prior to its
payment at the option of the Purchaser into fully paid and
nonassessable shares of Common Stock of the Company constituting
thirty percent (30%) of all classes of the Common Stock of the
Company on a fully diluted basis, as further explained in Section
10.2 of the CDA. In addition, as further explained in paragraph
3(b) of the Debenture, the Debenture is convertible in part at any
time prior to its payment at the option of the Purchaser into fully
paid and nonassessable shares of Common Stock of the Company
constituting a proportionate percentage of thirty
percent (30%) of
all classes of the Common Stock of the Company on a fully diluted
basis in the ratio that the amount of the Debenture being converted
bears to the total amount of the Debenture acquired by the
Purchaser. Under no circumstances shall paragraph 3(b) of the
Debenture be read to entitle the Purchaser to shares of Common Stock
of the Company constituting less than 30% of all classes of the
Common Stock of the Company on a fully diluted basis upon conversion
in full of the Debenture. Notwithstanding the provisions of the
third paragraph of the Debenture and Section 3 of the Debenture, and
subject to the following paragraph, if the Company issues $500,000
or more of its 12% Convertible Promissory Notes (“Bridge Notes”) and
warrants to investors in a private placement transaction on or
before September 30, 2006, this Debenture is convertible at any time
prior to payment at the option of the Holder into fully paid and
nonassessable shares of Common Stock of the Company equal to thirty
percent (30%) of the Company’s outstanding Common Stock on a
fully-diluted basis, including the exercise of all convertible debt
securities that are currently outstanding and/or that are issued in
lieu of payment of principal and/or interest payments or penalties
upon notes and obligations of the Company; excluding, however,
Common Stock issued or issuable upon conversion of the Bridge Notes,
or Common Stock issuable upon exercise of warrants issued to
purchasers of the Bridge Notes. In addition, and subject to the
following paragraph, if the Company issues $500,000 or more of its
12% Convertible Promissory Notes (“Bridge Notes”) and warrants to
investors in a private placement transaction on or before September
30, 2006, this Debenture is convertible in part at any time prior to
its payment at the option of Holder into fully paid and
nonassessable shares of Common Stock of the Company constituting a
proportionate percentage of 30% of all classes of the Common Stock
of the Company on a fully-diluted basis (excluding, however, Common
Stock issued or issuable upon conversion of the Bridge Notes, or
Common Stock issuable upon
exercise of warrants issued to purchasers of the Bridge Notes) in
the ratio that the amount of the Convertible Debenture being
converted bears to the total amount of the Convertible Debenture
acquired by the Holder.
In addition, if the Company completes an underwritten initial public
offering of its Common Stock on or before September 30, 2006, the
entire principal balance of the Debenture shall, without further
action of the Company or the Holder, be converted into a number of
shares of Common Stock of the Company equal to fully paid and
nonassessable shares of Common Stock of the Company constituting 30%
of all classes of the Common Stock of the Company on a fully-diluted
basis, as described in paragraph 3(b) of the Debenture excluding,
however, (a) shares of Common Stock issued or issuable upon
conversion of the Bridge Notes or shares issuable upon exercise of
warrants issued to purchasers of the Bridge Notes; and (b)
securities of the Company issued in connection with such public
offering, including shares issuable upon exercise of warrants issued
to underwriters of such public offering. In such event, Holder
shall be paid the pro rata interest associated with this Debenture
to the date of conversion.
2
(b) Sections Modified or Deleted. The second paragraph of Section 10.2 is hereby
amended to read as follows:
The Debenture is convertible in whole at any time prior to its
payment at the option of the Purchaser into fully paid and
nonassessable shares of Common Stock of the Company constituting
thirty percent (30%) of all classes of Common Stock of the Company
on a fully diluted basis, as further explained in paragraph 3(b) of
the Debenture. In addition, as further explained in paragraph 3(b)
of the Debenture, the Debenture is convertible in part at any time
prior to its payment at the option of the Purchaser into fully paid
and nonassessable shares of Common Stock of the Company constituting
a proportionate percentage of thirty percent (30%) of all classes of
the Common Stock of the Company on a fully diluted basis in the
ratio that the amount of the Debenture being converted bears to the
total amount of the Debenture acquired by the Purchaser. Under no
circumstances shall paragraph 3(b) of the Debenture be read to
entitle the Purchaser to shares of Common Stock of the Company
constituting less than 30% of all classes of the Common Stock of the
Company on a fully diluted basis upon full conversion of the
Debentures. Notwithstanding the provisions of the third paragraph
of the Debenture and Section 3 of the Debenture, and subject to the
following paragraph, if the Company issues $500,000 or more of its
12% Convertible Promissory Notes (“Bridge Notes”) and
warrants to investors in a private placement transaction on or
before September 30, 2006, this Debenture is convertible at any time
prior to payment at the option of the Holder into fully paid and
nonassessable shares of Common Stock of the Company equal to thirty
percent (30%) of the Company’s outstanding Common Stock on a
fully-diluted basis, including the exercise of all convertible debt
securities that are currently outstanding and/or that are issued in
lieu of payment of principal and/or interest payments or penalties
upon notes and obligations of the Company; excluding, however,
Common Stock issued or issuable upon conversion of the Bridge Notes,
or Common Stock issuable upon exercise of warrants issued to
purchasers of the Bridge Notes. In addition, and subject to the
following paragraph, if the Company issues $500,000 or more of its
12% Convertible Promissory Notes (“Bridge Notes”) and warrants to
investors in a private placement transaction on or before September
30, 2006, this Debenture is convertible in part at any time prior to
its payment at the option of Holder into fully paid and
nonassessable shares of Common Stock of the Company constituting a
proportionate percentage of 30% of all classes of the Common Stock
of the Company on a fully-diluted basis (excluding, however, Common
Stock issued or issuable upon conversion of the Bridge Notes, or
Common Stock issuable upon exercise of warrants issued to purchasers
of the Bridge Notes) in the ratio that the amount of the Convertible
Debenture being converted bears to the total amount of the
Convertible Debenture acquired by the Holder.
In addition, if the Company completes an underwritten initial public
offering of its Common Stock on or before September 30, 2006, the
entire principal balance of the Debenture shall, without further
action of the Company or the Holder, be converted into a number of shares of Common Stock of the
3
Company equal to fully paid and
nonassessable shares of Common Stock of the Company constituting 30%
of all classes of the Common Stock of the Company on a fully-diluted
basis, as described in paragraph 3(b) of the Debenture excluding,
however, (a) shares of Common Stock issued or issuable upon
conversion of the Bridge Notes or shares issuable upon exercise of
warrants issued to purchasers of the Bridge Notes; and (b)
securities of the Company issued in connection with such public
offering, including shares issuable upon exercise of warrants issued
to underwriters of such public offering. In such event, Holder
shall be paid the pro rata interest associated with this Debenture
to the date of conversion.
Section 10.3 of the CDA is hereby amended and follows:
Subject to Section 10.2, the number of shares of Common Stock
issuable upon full conversion of the Debenture will be as set forth
in the Form of Debenture, which is equal to thirty percent (30%) of
all classes of the Common Stock of the Company on a fully diluted
basis, and the number of shares of the Common Stock of the Company
issuable upon partial conversion shall be equivalent to the ratio
that the amount of the Debenture being converted bears to
$3,000,000.
2. Disclosure. Purchaser is familiar with the Company’s business and
financial condition and has had an opportunity to obtain, and has received, additional
information concerning the Company and has an opportunity to ask questions of, and
receive answers from, the Company, to the extent deemed necessary by Purchaser in order
to make a decision concerning Purchaser’s agreement to be a party to this Agreement.
Purchaser understands that the Company is in an early stage and that the purchase of
its shares involves a high degree of risk, including the risk of receiving no return on
Purchaser’s investment and of the losing of Purchaser’s entire investment in the
Company. Purchaser is able to bear the economic risk of investment in the Debenture
and any shares acquired upon conversion of the Debenture. Purchaser is aware that
there is not currently any market for the Debenture or the Company’s common stock, and
there is no assurance that a public market for the Company’s common stock will develop.
Purchaser believes that investment in the shares acquired upon conversion of the
Debenture, and any additional shares received upon conversion of accrued interest on
the Debenture, meets Purchaser’s investment objectives and financial needs, and
Purchaser has adequate means of providing for Purchaser’s current financial needs and
contingencies, and has no need for liquidity of investment with respect to common stock
acquired upon conversion of the Debenture.
3. Confidentiality. The information contained in this Agreement relative
to the Company’s proposed bridge debt financing and public offering are highly
confidential. Purchaser agrees that all discussions with the Company relative to the
foregoing financing will be held in the strictest of confidence and will not be
disclosed without the consent of the Company, or as required by law. Such
confidentiality restriction shall continue until the Company advises Purchaser that it
no longer intends to pursue a public offering, or the Company’s public disclosure of
the proposed public offering. Purchaser has been advised that a breach of this
disclosure obligation may jeopardize the Company’s proposed financing.
4
Purchaser may
disclose the terms of this Agreement to any attorney or other advisor of Purchaser who
agrees in writing to be bound by these confidentiality terms.
| 4. | Registration Rights. Section 5.23 is hereby amended to read as follows: |
The Company has not agreed to register any of its authorized or
outstanding securities under the Securities Act; provided, however,
that the Company intends to issue into one or more purchase
agreements In connection with the sale of up to $2,000,000 principal
amount of 12% Convertible Bridge Notes (plus $500,000 over
allotment) (“Bridge Notes”). Financing pursuant to which it will
agree to register common stock issuable pursuant to a conversion of
Bridge Notes and warrants issued in connection with such offering,
within 60 days following its completion of in initial public
offering (“IPO”). The Company shall have the right to enter into
one or more or such registration rights agreements with purchasers
of Bridge Notes (the “Bridge Note Registration”). The Company may
also enter into one or more agreements with other holders of the
Company’s convertible debt securities to include their shares in the
Bridge Note Registration. The Company agrees, upon their request of
Purchaser, to include all shares of common stock issuable to
Purchaser pursuant to the Debenture in the Bridge Note Registration.
Purchaser will be bound by the terms and conditions of registration
rights granted to the Bridge Note purchasers.
5. Effect of Agreement. Except for the amendments and understandings
provided in this Agreement, the terms and conditions of the CDA not inconsistent with
this Agreement shall remain in full force and effect.
6. Waiver of Covenant Violations. The Company has advised Purchaser that
it has failed to comply with Section 8.8 of the CDA by failing to pay all principal and
interest when due on the Company’s outstanding convertible debt securities. The
Company has advised Purchaser that it intends to enter into one or more note conversion
agreements with such holders providing, among other things, for the automatic
conversion of the principal amount of such debt securities into the Company’s common
stock upon the closing of the IPO, and for the deferral of the payment of any principal
or interest due on such securities until the later of the closing of the IPO or
September 30, 2006. Based upon such representations, Purchaser agrees to waive the
Company’s default under the provisions of Section 8.8 of the CDA with respect to
payment defaults on the Company’s convertible securities until September 30, 2006.
5
If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed
counterpart of this letter and return the same to the undersigned, whereupon this letter shall
become a binding contract between you and the undersigned.
| Very truly yours, | ||||||
| WIRELESS RONIN® TECHNOLOGIES, INC. | ||||||
| By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
|
||||||
| President and CEO | ||||||
| By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
||||||
| Executive Vice President | ||||||
| The foregoing Agreement is hereby accepted as | ||||||
| of the date first above written. | ||||||
| SPIRIT LAKE SIOUX TRIBE | ||||||
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ | |||||
| ▇▇▇▇ ▇▇▇▇▇▇▇, | ||||||
| Chairperson | ||||||
6