EXHIBIT 99.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of June 17, 1999, by and among Pequot Private Equity Fund, L.P., Pequot
Offshore Private Equity Fund, Inc. (each, a "Purchaser" and, collectively, the
"Purchasers"), and STM WIRELESS, INC., a Delaware corporation (the "Company").
R E C I T A L S
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A. The Company will own 1,500,000 shares of Series A Preferred Stock of
Direc-To-Phone International, Inc., a Delaware corporation and a subsidiary of
the Company ("DTPI"), immediately prior to the Closing (as defined below).
B. The Company desires to sell to Purchasers, at the Closing, five
hundred thousand (500,000) shares of Series A DTPI Preferred Stock for the
consideration set forth herein.
C. Concurrently with this Agreement, and as a condition to this
Agreement, REMEC, Inc., ("Remec"), is, at the Closing, lending DTPI $5,000,000
pursuant to a Loan Agreement and purchasing 912,000 shares of DTPI Series A
Preferred Stock (with an option for a further 88,000 shares of DTPI Series A
Preferred Stock) from the Company pursuant to a Stock Purchase Agreement
(collectively, the "Remec Agreements").
D. Concurrently with this Agreement, and as a condition to the Closing,
Purchasers and DTPI will enter into a Loan Agreement, pursuant to which
Purchasers will, subject to the terms and conditions set forth therein, lend to
DTPI a principal amount of $2,500,000 (the "Loan Agreement").
E. The Company, DTPI and Purchasers are parties to that certain
Stockholders Agreement dated March 8, 1999 (the "Stockholders Agreement"), which
will be restated and amended at the Closing, to, among other things, give
Purchasers the rights contemplated by the commitment letter dated May 15, 1999
between Purchasers and DTPI (the "Amended and Restated Stockholders Agreement").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein, and subject to the terms and conditions hereinafter set forth, the
parties hereby agree as follows:
ARTICLE 1
THE PURCHASE
1.1 The Purchased Shares. On the Closing Date, subject to the terms
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and conditions of this Agreement, each Purchaser shall, severally and not
jointly, purchase from the Company the number of shares of Series A Preferred
Stock of DTPI set forth opposite such Purchaser's name on Schedule I attached
hereto (the "Purchased Stock" or the "Securities") at the purchase price set
forth opposite such Purchaser's name on Schedule I. The aggregate purchase price
to be paid by the Purchasers for the Series
A Preferred Stock of DTPI purchased by them hereunder is as set forth on
Schedule I as Total Purchase Price (the "Purchase Price").
ARTICLE 2
THE CLOSING
2.1 The Closing.
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(a) The transactions contemplated in this Agreement shall be
consummated at the closing (the "Closing"), which shall take place on the date
of this Agreement, at the offices of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, 000
Xxxxxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx, 00000, or at such other time
and place (the "Closing Date"), unless extended by mutual written consent of the
parties.
(b) At the Closing, the Company shall deliver to each Purchaser a
certificate or certificates representing the shares of Series A Preferred Stock
of DTPI purchased by such Purchaser, registered in the name of such Purchaser or
its nominee. Delivery of such certificates to a Purchaser shall be made against
receipt at the Closing by the Company from such Purchaser of the purchase price
therefor, which shall be paid by check or wire transfer to an account designated
by the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Purchaser represents and warrants to the Company, on and as of
the date of this Agreement, severally and not jointly, as to itself only, as
follows:
3.1 Investment Representations.
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(a) Each Purchaser has been advised that the Securities to be
purchased by each Purchaser from the Company hereunder have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), nor
qualified under any state securities laws on the ground, among others, that no
distribution or public offering of the Securities is to be effected, and that in
this connection the Company is relying in part on the representations of each
Purchaser set forth herein.
(b) It is such Purchaser's intention to acquire the Securities solely
for its own account and that the Securities are being and will be acquired for
investment purposes only, and not with a view to distribution or resale.
(c) Such Purchaser is able to bear the economic risk of an investment
in the Securities acquired by it pursuant to this Agreement and can afford to
sustain a total loss on such investment.
(d) Such Purchaser is an experienced and sophisticated investor, is
able to fend for itself in the transactions contemplated by this Agreement, and
has such knowledge and experience in financial and business matters that it is
capable of evaluating the risks and merits of acquiring the Securities. Such
Purchaser has not been formed or organized for the specific purpose of acquiring
the Securities.
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(e) Such Purchaser understands that it may not be readily able to
sell or dispose of the Securities and may thus have to bear the risk of its
investment for a substantial period of time, or forever. Such Purchaser is aware
that the Securities may not be sold pursuant to Rule 144 under the Securities
Act unless certain conditions have been met and until such Purchaser has held
the Securities for at least 1 year. Among the conditions for use of Rule 144 is
the availability of current information to the public about DTPI.
(f) Such Purchaser acknowledges that the certificates representing
the Securities, when issued, shall contain a legend substantially in the
following form.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN
ACQUIRED BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
IN ACCORDANCE WITH THE SECURITIES ACT OF 1933 AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER OR AN EXEMPTION THEREFROM.
3.2 Authorization. Such Purchaser is a duly organized and validly
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existing corporation in good standing under and by virtue of the laws of the
State of Delaware and has all requisite power and authority to enter into and
perform its obligations under this Agreement and the agreements and transactions
contemplated hereby.
3.3 Binding Effect. This Agreement and the agreements contemplated
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hereby are valid and binding obligations of such Purchaser and are enforceable
against such Purchaser in accordance with their respective terms, except as they
may be limited by bankruptcy, insolvency, moratorium, and other laws of general
application affecting the enforcement of creditors rights.
3.4 No Conflict. Neither the execution and delivery of this
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Agreement, the Amended and Restated Stockholders Agreement or the Loan Agreement
or any document executed in connection herewith or therewith by such Purchaser
nor the consummation or performance of any of their obligations hereunder or
thereunder will give any person the right to prevent, delay or otherwise
interfere with any of the transactions hereunder and thereunder pursuant to: (i)
any provision of such Purchaser's organizational documents; (ii) any resolution
adopted by such Purchaser's investment manager; (iii) any legal requirement or
order to which such Purchaser is subject; or (iv) any contract to which such
Purchaser is a party or by which such Purchaser may be bound, except with
respect to clauses (iii) and (iv) above, for matters which would not,
individually or in the aggregate, have a material adverse effect on the assets,
condition or affairs of such Purchaser or on the ability of such Purchaser to
consummate the transactions contemplated by this Agreement, the Amended and
Restated Stockholders Agreement or the Loan Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser as follows:
4.1 Organization and Standing. The Company is a duly organized and
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validly existing corporation in good standing under and by virtue of the laws of
the State of Delaware and has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement and the agreements
and transactions contemplated hereby.
4.2 Binding Effect. This Agreement and the agreements contemplated
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hereby are valid and binding obligations of the Company and are enforceable
against the Company in accordance with their respective terms, except as they
may be limited by bankruptcy, insolvency, moratorium and other laws of general
application affecting the enforcement of creditors rights. The execution,
delivery and performance of this Agreement by the Company do not violate any of
the following: (i) any of the Company's organizational documents, (ii) any
contract or other instrument to which the Company is a party or by which any of
the Company's assets (including the Purchased Stock) are bound, or (iii) any
law, regulation, order, injunction or decree.
4.3 Title to Shares. The Company is the record and beneficial owner
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of the Purchased Stock, free and clear of all liens, claims, encumbrances,
pledges, options and any other adverse interests, restrictions on transfer or
defects in title of any kind or nature whatsoever, except for restrictions on
transfer imposed by federal and state securities laws (collectively,
"Encumbrances"). At the Closing, each Purchaser will acquire good and marketable
title to the Purchased Stock free and clear of all Encumbrances (other than the
Amended and Restated Stockholders Agreement). None of the Purchased Stock is
subject to any stockholders agreement (other than the Amended and Restated
Stockholders Agreement), proxy, or other agreement, arrangement or
understanding. The Purchased Stock was not issued in violation of the pre-
emptive or other rights of any person or entity.
ARTICLE 5
ADDITIONAL REPRESENTATIONS AND WARRANTIES
The Company makes the following additional representations and warranties
to each Purchaser:
5.1 Organization and Standing; Articles and Bylaws. DTPI is a
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corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and has full power and authority to own and
operate its properties and assets and to carry on its business as presently
conducted. DTPI is duly qualified and authorized to do business, and is in good
standing as a foreign corporation, in each jurisdiction where the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except where the failure to so qualify would not have a
material adverse effect upon its business and operations.
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5.2 Capitalization. Upon (a) consummation of the transactions
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contemplated by the STM Agreement (as defined in Section 6.1(f)) and (b)
amendment to the DTPI's Certificate of Incorporation as contemplated herein, the
authorized capital stock of DTPI shall consist of 6,500,000 shares of Common
Stock, $0.0001 par value per share, 2,100,000 of which will be issued and
outstanding, and 3,000,000 shares of Preferred Stock, 2,700,000 of which will be
issued and outstanding, all of which will be shares of Series A Preferred Stock.
All issued and outstanding shares of the capital stock of DTPI have been duly
authorized and validly issued, and are fully paid and nonassessable. Except for
options to purchase 1,106,800 shares of DTPI Common Stock outstanding under
DTPI's Incentive Stock Option, Nonqualified Stock Option and Restricted Stock
Purchase Plan, which includes commitments to issue 640,000 options to Xxxxxx
Xxxxxx and 175,000 options to Xxxxxxxx Xxxxxx under their respective employment
agreements, all of which are described in Section 5.2 of the Disclosure
Schedule, and except as contemplated by the Amended and Restated Stockholders
Agreement, there are no outstanding rights of first refusal, preemptive rights
or other rights, options, warrants, conversion rights, or other agreements
either directly or indirectly for the purchase or acquisition of any shares of
the capital stock of DTPI. All of the outstanding shares of capital stock of
DTPI have been duly and validly issued in compliance with all applicable federal
and state securities laws.
5.3 Financial Statements. The unaudited financial statements of DTPI
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as at and for the year ended December 31, 1998 consisting of a consolidated
balance sheet and related consolidated statement of income (including any
related schedules and/or notes) and the unaudited financial statements of DTPI
as at and for the three months ended March 31, 1999 consisting of a consolidated
balance sheet and related consolidated statement of income (including any
related schedules and/or notes) (the "Financial Statements") are attached in
Section 5.3 of the Disclosure Schedule. The Financial Statements have been
prepared in accordance with generally accepted accounting principles
consistently followed (except with respect to the absence of notes) throughout
the periods involved and fairly present in all material respects the
consolidated financial condition and results of operations of DTPI as of the
respective dates thereof and for the respective periods then ended.
5.4 Consents. No authorization, consent, approval, license, exemption
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of or filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality or any person not a party
hereto is or will be necessary for, or in connection with, the sale of the
Purchased Stock, or the execution or delivery by the Company or DTPI, or for the
performance by either of their obligations under, this Agreement, the Amended
and Restated Stockholders Agreement, the Loan Agreement or any document executed
in connection herewith or therewith, except for filings to be made, if any, to
comply with exemptions from registration or qualification under federal and
state securities laws and except for authorizations, consents, approvals,
licenses or filings which would not, individually or in the aggregate, have a
material adverse effect on the assets, condition or affairs of DTPI or on the
ability of the Company or DTPI to consummate the transactions contemplated by
this Agreement, the Amended and Restated Stockholders Agreement or the Loan
Agreement.
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5.5 No Conflict. Neither the execution and delivery of this
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Agreement, the Amended and Restated Stockholders Agreement or the Loan Agreement
or any document executed in connection herewith or therewith by the Company or
DTPI nor the consummation or performance of any of their obligations hereunder
or thereunder will give any person the right to prevent, delay or otherwise
interfere with any of the transactions hereunder and thereunder pursuant to: (i)
any provision of the Company's or DTPI's organizational documents; (ii) any
resolution adopted by the Company's or DTPI's board of directors; (iii) any
legal requirement or order to which the Company or DTPI is subject; or (iv) any
contract to which the Company or DTPI is a party or by which the Company or DTPI
may be bound, except with respect to clauses (iii) and (iv) above, for matters
which would not, individually or in the aggregate, have a material adverse
effect on the assets, condition or affairs of DTPI or on the ability of the
Company or DTPI to consummate the transactions contemplated by this Agreement,
the Amended and Restated Stockholders Agreement or the Loan Agreement.
5.6 Absence of Certain Changes. Except as set forth in Section 5.6 of
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the Disclosure Schedule attached hereto, since December 31, 1998, there has been
no material adverse change in the business, prospects, or condition, financial
or otherwise, of DTPI.
5.7 Absence of Undisclosed Liabilities. Except as set forth in
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Section 5.7 of the Disclosure Schedule attached hereto and except as set forth
on DTPI's balance sheet dated as of Xxxxx 00, 0000, XXXX does not have any
indebtedness or any other liability (absolute or contingent, asserted or
unasserted, known or unknown) that would be required to be reflected on or
reserved against in such balance sheet, prepared in accordance with GAAP
consistently applied (except for the absence of notes). Except as set forth in
Section 5.7 of the Disclosure Schedule or on DTPI's balance sheet dated as of
Xxxxx 00, 0000, XXXX will not have on the Closing Date any outstanding
indebtedness or any other liability except for the transactions contemplated
hereby (absolute or contingent, asserted or unasserted, known or unknown) other
than those incurred since March 31, 1999 in the ordinary course of business or
those that are not individually or in the aggregate, material.
5.8 Contracts; Absence of Undisclosed Commitments to the Company.
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Except as set forth in the Disclosure Schedule attached hereto, neither DTPI nor
any of its subsidiaries is a party to any material commitment or agreement with
the Company or any of its subsidiaries. Section 5.8 of the Disclosure Schedule
attached hereto sets forth a complete list of all material contracts, including,
without limitation, all service contracts, to which DTPI or any of its
subsidiaries is a party.
5.9 Litigation. Except as described in Section 5.9 of the Disclosure
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Schedule attached hereto, there are no claims, actions, suits or proceedings
pending, or to the best knowledge of the Company and DTPI, threatened against or
affecting any of its assets or properties, or any investigations pending with
respect to, DTPI or any of its subsidiaries, at law or in equity or before or by
any country or foreign, federal, state, municipal or governmental department,
commission, board, agency or instrumentality, which would result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition or affairs of DTPI (financially or otherwise) as presently
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conducted or proposed to be conducted. DTPI is not subject to any continuing
court or administrative order, writ, injunction or decree applicable to it or to
its business, property or employees, and DTPI is not in default with respect to
any order, writ, injunction or decree or any court or foreign, federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality which is material to the financial condition, operations, or
business of DTPI.
5.10 Compliance with Laws. Since the date of its respective
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incorporation, each of DTPI and its subsidiaries has complied in all material
respects with all applicable, foreign, federal, state, municipal and other
political subdivision or governmental agency statutes, ordinances and
regulations ("Laws"), including, without limitation, those imposing taxes, in
every applicable jurisdiction, in respect of the ownership of its assets and
properties and the conduct of its business where the effect of failure to so
comply would have a material adverse effect on the business, operations or
financial condition of DTPI. DTPI has all governmental licenses and permits,
foreign and domestic, required for the operation of its business as currently
conducted and as proposed to be conducted. To the knowledge of DTPI and the
Company, DTPI's foreign partners have complied in all material respects with all
applicable laws and have all governmental licenses and permits required for the
operation of their joint business as currently conducted and as proposed to be
conducted, except where the failure to comply could not reasonably be expected
to have or causes a material adverse effect on the assets, conditions and
affairs (financial or otherwise) of DTPI or any of its subsidiaries or joint
ventures.
5.11 No Brokers and Finders. Except as set forth in Section 5.11 of
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the Disclosure Schedule, neither the Company nor DTPI has taken any action or
knows of any such act or omission by any person which would give rise to any
right, interest or valid claim against or upon DTPI or a Purchaser for any
commission, fee or other compensation as a finder or broker as a result of the
transactions contemplated by this Agreement, the Loan Agreement or the Remec
Agreements. The Company agrees to indemnify and hold DTPI and each Purchaser
harmless against any such commissions, fees or other compensation (including any
asserted under the arrangement described in Section 5.11 of the Disclosure
Schedule).
5.12 Subsidiaries. Except as set forth in Section 5.12 of the
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Disclosure Schedule attached hereto, DTPI does not control, directly or
indirectly, any other corporation, association, partnership or other business
entity or own any shares of capital stock or other securities of any other
person.
5.13 ERISA. Except as set forth in Section 5.13 of the Disclosure
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Schedule attached hereto and except for the existence of health and welfare
plans which are not subject to ERISA, DTPI does not maintain or participate in
and has not at any time maintained or participated in any pension, profit
sharing or other similar plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
5.14 Taxes. DTPI has filed all tax returns required to be filed in the
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applicable jurisdictions, which returns were correct in all material respects.
DTPI has
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collected and withheld all amounts required to be collected and withheld, and
any such amounts that are required to be remitted to any taxing authority have
been so remitted. Except as set forth in Section 5.14 of the Disclosure
Schedule: (a) there is no action, suit, proceeding, investigation, audit, claim
or assessment, pending proposed, or, to the best knowledge of the Company or
DTPI, threatened with respect to any liability for taxes relating to DTPI; (b)
no taxing authority in a jurisdiction where DTPI does not file tax returns has
made a claim, assertion or threat that such non-filing entity is or may be
subject to taxation by such jurisdiction.
5.15 Environmental and Safety Laws. To the best of its knowledge, DTPI
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is not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and, to the best of its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation or resulting from any past
such violation.
5.16 Offering. Assuming the accuracy of the representations and
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warranties of the Purchasers contained in Section 3.1 hereof, the offer, issue,
and sale of the Purchased Stock and the underlying Common Stock are and will be
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit, or qualification requirements of all applicable state
securities laws.
5.17 Rights in Proprietary Information. DTPI has sufficient right,
---------------------------------
title and interest in and to all patents, trademarks, service marks, trade
names, and other proprietary rights necessary for its business as now conducted
or as proposed to be conducted, without any known conflict or infringement of
the rights of others. After inquiry, DTPI is not aware that it has violated or,
by conducting its business as proposed, would violate any of the trademarks,
service marks or trade names, and has not received any communications alleging
that DTPI has or would violate, any patents or other proprietary rights, of any
other person or entity, nor does DTPI have reason to believe that it has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, or other proprietary rights of
any person or entity.
5.18 Title to Assets and Properties; Insurance.
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(a) DTPI has good and marketable title, or a valid leasehold interest
in or contractual right to use, all of its assets and properties used or
required in the conduct of its business as currently conducted or as proposed to
be conducted, free and clear of any mortgages, judgments, claims, liens,
security interests, pledges, escrows, charges or other encumbrances of any kind
or character whatsoever ("Encumbrances") except in each case for such defects in
title and such other liens and Encumbrances which do not individually or in the
aggregate materially detract from the value to DTPI of such properties and
assets.
(b) DTPI maintains through the Company insurance in such amounts (to
the extent available in the public market), including self-insurance, retainage
and deductible arrangements, and of such a character as is reasonable for
companies engaged
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in the same or similar business similarly situated. Section 5.18 of the
Disclosure Schedule sets forth a list of all insurance coverage carried by DTPI,
identifying the carrier and terms and amount of coverage.
5.19 Products. The representations and warranties contained in
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Sections 4 and 8 of the Product Supply Agreement dated as of March 5, 1998
between the Company and DTPI, as amended by the Mutual Release and Amendment No.
1 dated as of the date hereof (the "Product Supply Agreement") are true and
correct as of the date hereof and are incorporated herein by reference.
5.20 Pro-forma Balance Sheet. Attached to Section 5.20 of the
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Disclosure Schedule is a balance sheet for DTPI as of April 30, 1999, as
adjusted for (i) material cash transactions from April 30, 1999 through the
Closing Date and (ii) intercompany charges from April 30, 1999 through May 31,
1999 (the "Pro Forma Balance Sheet"). The cash balance on the Pro Forma Balance
Sheet is materially accurate as of the Closing Date and the intercompany balance
on the Pro Forma Balance Sheet is materially accurate as of May 31, 1999 (as
adjusted for the transactions contemplated herein).
5.21 Disclosure. The Company has fully provided each Purchaser with
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all the information that such Purchaser has requested for deciding whether to
purchase the Purchased Stock and all information that the Company believes is
reasonably necessary to enable such Purchaser to make such decision. Neither
this Agreement, the Amended and Restated Stockholders Agreement, the Loan
Agreement nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements herein or
therein not misleading.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of the Purchasers at the Closing. Each
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Purchaser's obligations hereunder are subject to the fulfillment, at or prior to
the Closing, of all of the following conditions:
(a) Representations and Warranties True; Performance of Obligations.
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The representations and warranties made by the Company in Sections 4 and 5
hereof shall be true and correct on the date of the Closing with the same force
and effect as if they had been made on and as of said date; and the Company
shall have performed all obligations herein required to be performed by it on or
prior to the Closing.
(b) Loan Agreement and Notes. Purchasers and DTPI shall have executed
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and delivered to each other the Loan Agreement. DTPI shall have executed and
delivered to each Purchaser a convertible promissory note, dated the date
hereof, in a principal amount set forth opposite such Purchasers' name on
Schedule I to the Loan Agreement, in favor of such Purchaser (collectively, the
"Notes").
(c) Remec Agreements. Remec and the Company shall each have executed
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and delivered to each other the Remec Agreements, all of which shall be in
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form and substance satisfactory to Purchasers, and consummated the transactions
contemplated thereby on the terms set forth in the Remec Agreements. The option
granted by the Company to Remec shall specify that if the option is not
exercised by Remec prior to the date of the First Qualified Financing, such
option shall lapse.
(d) Purchased Stock. The Company shall have executed and delivered to
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the Purchasers, along with the Purchased Stock, executed stock powers or other
instruments of transfer reasonably satisfactory to Purchaser.
(e) Stockholders Agreement. The Company, Remec, Purchasers and DTPI
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shall have executed and delivered to the Purchasers the Amended and Restated
Stockholders Agreement.
(f) STM Agreement. The Company shall have entered into an Agreement
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with DTPI (the "STM Agreement") pursuant to which the Company shall have
received 500,000 shares of Series B Preferred Stock of DTPI in consideration for
(a) the cancellation of DTPI's minimum purchase commitment under its product
supply agreement with the Company, (b) a $1,600,000 credit from the Company to
DTPI towards the purchase of equipment under the product supply agreement
between DTPI and the Company and (c) the cancellation of 500,000 shares of
Common Stock of DTPI currently owned by the Company.
(g) Charter Amendment. The Certificate of Incorporation of DTPI shall
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have been amended and restated in the form supplied to the Purchasers to provide
for (a) 3,000,000 shares of Preferred Stock, (b) 6,500,000 shares of Common
Stock and (c) the reclassification of the Series B Preferred Stock as Series A
Preferred Stock.
(h) Legal Opinion. The Company shall have caused to be delivered to
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Purchasers an opinion of Xxxxxxx Xxxxxxxxxx, general counsel to the Company, in
form and substance satisfactory to Purchaser, with respect to the matters set
forth in Sections 4.1, 4.2, 4.3, 5.1, 5.2, 5.4, 5.5. 5.9 and 5.10 hereof.
(i) Chief Executive Officer of DTPI. The Board of Directors of DTPI
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shall have elected Xxxxxx Xxxxxx the Chief Executive Officer and Chairman of
DTPI.
(j) Consulting Agreement. DTPI shall have paid $100,000 to Pequot
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Capital Management, Inc. ("PCMI") which represents all fees (not including out-
of-pocket expenses) owing to PCMI through March 5, 1999 under the Consulting
Agreement dated as of March 5, 1998 between DTPI and PCMI (as successor by
assignment to Xxxxxx-Xxxxxxx Capital Management, Inc.) (the "Consulting
Agreement").
(k) Amendment of STM Note. The STM Note shall have been amended as
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contemplated by Section 7.3 and as contemplated by Section 6.1(d) of the Amended
and Restated Stockholders Agreement.
(l) Letter Agreement. The Letter Agreement dated the date hereof among
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the Company, Purchasers and DTPI with respect to financing commitments (the
"Letter Agreement") shall have been executed and delivered to Purchasers.
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(m) PCMI Letter Agreement. The Letter Agreement dated the date hereof
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between PCMI and DTPI extending the term of the Consulting Agreement for one
year (the "PCMI Letter Agreement") shall have been executed and delivered to the
Purchasers, and DTPI shall have paid to PCMI accrued fees (not including out-of-
pocket expenses) for the period from March 5, 1999 through June 30, 1999 due to
PCMI under the Consulting Agreement.
(n) Other Documents. Purchasers shall have received such other
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documents as the Purchasers or their counsel may reasonably request.
6.2 Conditions to Obligations of the Company at the Closing. The
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Company's obligations hereunder are subject to the fulfillment, at or prior to
the Closing, of all of the following conditions:
(a) Representations and Warranties True; Performance of Obligations.
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The representations and warranties made by Purchasers in Section 3 hereof shall
be true and correct at the date of the Closing, with the same force and effect
as if they had been made on and as of said date; and Purchaser shall have
performed all obligations herein required to be performed by it at or prior to
the Closing.
(b) Loan Agreement. Purchasers shall have executed and delivered to
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the Company the Loan Agreement.
(c) Remec Agreements. Remec shall have executed and delivered to the
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Company the Remec Agreements.
(d) Purchase Price. Purchasers shall have delivered by check or wire
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transfer (to an account designated by the Company) the Purchase Price.
(e) STM Agreement. DTPI shall have executed and delivered the STM
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Agreement to the Company.
(f) Charter Amendment. The Certificate of Incorporation of DTPI shall
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have been amended and restated to provide for (a) 3,000,000 shares of Preferred
Stock, (b) 6,500,000 shares of Common Stock and (c) the reclassification of the
Series B Preferred Stock as Series A Preferred Stock.
ARTICLE 7
COVENANTS
7.1 First and Second Qualified Financings.
-------------------------------------
(a) First Qualified Financing. In the event that, subsequent to the
-------------------------
date of this Agreement, DTPI effects the closing of a sale of shares of equity
securities or securities convertible or exercisable into equity securities for
cash to persons other than the existing stockholders of DTPI in one transaction
or a series of related transactions (a "Qualified Financing"), pursuant to which
DTPI receives aggregate net proceeds of at least $12,500,000 (the "First
Qualified Financing"), then Purchasers agree that, except as set forth herein,
they shall participate in such First Qualified Financing on the same terms
11
as such other persons in an aggregate minimum amount of $2,500,000. To the
extent the amount due under the Loan Agreement shall be converted into equity
securities of DTPI in connection with the First Qualified Financing in
accordance with the Loan Agreement, such conversion shall be deemed to satisfy
Purchasers' obligation under the preceding sentence.
(b) Second Qualified Financing. In the event that, subsequent to the
--------------------------
date of the First Qualified Financing, DTPI effects the closing of a Qualified
Financing pursuant to which DTPI receives aggregate net proceeds of at least
$20,000,000 (the "Second Qualified Financing"), then Purchasers agree that,
except as set forth herein, they shall participate in such Second Qualified
Financing on the same terms as such other persons in an aggregate minimum amount
of $2,500,000. To the extent Purchasers shall convert debt of DTPI held by it
into equity in connection with the Second Qualified Financing, such conversion
shall be deemed to satisfy Purchasers' obligation under the preceding sentence.
7.2 STM Management Fees. The Company agrees that the $414,296
-------------------
aggregate payment made in fiscal year 1999 by DTPI to the Company shall satisfy
all payment obligations of DTPI to the Company in connection with the Company's
rendering of consulting and management services to DTPI (including attending any
industry or trade shows on behalf of DTPI or costs associated with attendance by
DTPI's employees or representatives at such industry or trade shows) during 1999
and any prior periods. Neither the Company nor DTPI shall be entitled to or seek
reimbursement for any expenses relating to any future management or consulting
services (including attending industry or trade shows on behalf of the other
party or costs associated with attendance by the other party's employees or
representatives at such industry or trade shows) except as may be agreed to in
writing by the parties prior to the rendering of such services or except for
expenses incurred after the date hereof by personnel of the party seeking such
reimbursement, solely or primarily in connection with bona fide services to, and
requested by, the other party.
7.3 Payment of STM Note.
-------------------
(a) Mandatory Payments. The Company agrees that any amounts due and
------------------
owing from DTPI to the Company under the Unsecured Promissory Note, dated as of
March 5, 1998, in the original principal amount of $10,000,000 executed by DTPI
in favor of the Company (as amended and restated on the date hereof) (the "STM
Note") may be paid immediately following the Closing Date with the proceeds of
the Loan Agreement in an amount up to $2,500,000. The STM Note shall be amended
at the Closing to provide that, except as set forth in Section 7.4(b) below, no
payments shall be made thereon following such $2,500,000 payment except as
follows:
(i) an amount equal to the cash amount invested in DTPI subsequent to
the Closing pursuant to a Qualified Financing, up to $3,000,000; and
(ii) an amount equal to 20% of the excess over $15,000,000 of cash
invested in DTPI subsequent to the Closing pursuant to a Qualified
Financing, up to the remaining unpaid balance due on the STM Note.
12
(b) Optional Payments. Notwithstanding anything to the contrary
-----------------
contained in Section 7.3(a), if the Company shall not have transferred any of
the shares of common stock of DTPI owned as of the Closing Date by it (other
than transfers to DTPI under this Section 7.3(b)), at the Company's option, it
may demand payment of the unpaid balance of the STM Note from DTPI in an amount
up to the net proceeds of any Qualified Financing; provided, that for each
dollar of payment out of the net proceeds of any Qualified Financing demanded in
excess of the amount that would be due with respect to such Qualified Financing
pursuant to Section 7.3(a), DTPI shall be entitled to purchase from STM 0.56
shares of the common stock of DTPI held by STM for a purchase price of $0.28
(the "Buyback Shares"). If the Company shall re-loan to DTPI (on the same terms)
the amount so demanded within 90 days of receiving payment from DTPI, the
Company shall be entitled to repurchase the Buyback Shares for the same purchase
price paid by DTPI pursuant to this Section 7.3(b)
7.4 Advisory Fees. The Company agrees to pay in full any obligations
-------------
of DTPI existing as of the Closing Date (or arising as a result of the
transactions consummated at the Closing of the transactions contemplated hereby
or by the Loan Agreement) with respect to fees payable by DTPI to any advisors,
including, without limitation, any advisory fees and expenses (if any) in
connection with the letter agreement dated October 12, 1998 between the Company
and CIBC Xxxxxxxxxxx Corp. Purchasers represent to the Company that they have
not retained any advisors to provide services to DTPI.
7.5 Intercompany Debt. The Company agrees and acknowledges that as of
-----------------
the date hereof, in addition to any amounts owing under the STM Note, as of May
31, 1999, DTPI owes the Company an aggregate of $3,171,109 (including purchases
under the Product Supply Agreement and other intercompany charges) (the
"Outstanding Debt"). The Company agrees that nothing herein shall be deemed to
diminish DTPI's rights or the Company's obligations under the warranty
provisions of the Product Supply Agreement. The Company acknowledges that (i)
$170,000 of the Outstanding Debt relating to Products (as defined in the Product
Supply Agreement) shipped to Mexico in December 1998 (the "Mexico Products")
shall be due and payable, with respect to each item of the Mexico Products, 60
days after deployment of such item, (ii) $700,300 of the Outstanding Debt
relating to Products shipped to Venezuela in the fourth quarter of 1998 (the
"Guatemala Products") shall be due and payable, with respect to each item of the
Guatemala Products, 30 days after such item is shipped at DTPI's request to
Guatemala or otherwise deployed by DTPI, (iii) $249,100 of the Outstanding Debt
relating to Products shipped to Venezuela in the fourth quarter of 1998 that are
to be sent back to the United States for retrofitting and then resent to
Venezuela (the "Venezuela Products") shall be paid within 60 days after such
Venezuela Products are resent to Venezuela by the Company, (iv) $80,000 of the
Outstanding Debt relating to Products in Mexico that DTPI is returning to the
Company shall not be paid on the date hereof and shall be deducted from the
Outstanding Debt upon the return of such Products to the Company and (v)
$571,709 of the Outstanding Debt will be paid ratably over the course of six
months beginning in July 1999, provided, however, that any unpaid amount
remaining due under this clause (v) shall be made promptly after the
consummation of the First Qualified Financing. The Company agrees that the
calculation of the Outstanding Debt is based on the Company's and DTPI's
schedule, a copy of which is attached as Appendix A to the
13
Product Supply Agreement, of the amount owed by DTPI to the Company as of May
31, 1999 (after the offset of $401,257 that was due DTPI from the Company and
assuming the balance of the STM Note immediately prior to the date hereof to be
$10,000,000). The Company agrees to the extent that after the date hereof, if
the Company and DTPI conclude that any adjustments (whether upwards or
downwards) are necessary to be made to the Outstanding Debt to reflect other
intercompany transactions not reflected in the above-referenced Appendix A, the
Company agrees to amend the terms of this Section 7.5 to be consistent with such
adjustments.
7.6 DTPI Credit. The Company shall grant DTPI a $1,600,000 credit
-----------
(the "Credit") towards the future purchase of Products under the Product Supply
Agreement. The Company agrees that the Credit shall be applied towards future
purchases of Products as follows: with respect to each purchase order, the
lesser of (a) 75% of the purchase price with respect to such purchase order and
(b) the then existing balance of the Credit, shall be deemed paid by a charge to
the Credit (a "Credit Charge") and DTPI shall pay the Company an amount in cash
(on the payment terms set forth in the Product Supply Agreement) equal to the
purchase price with respect to such purchase order less the Credit Charge.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Company. The Company shall indemnify and
------------------------------
hold harmless each Purchaser and each of its agents, officers, directors,
representatives, or affiliates (collectively, the "Purchaser Indemnitees")
against any and all losses, liabilities, claims and expenses, including
reasonable attorneys' fees ("Losses"), sustained by Purchaser Indemnitees
resulting from, arising out of, or connected with any material inaccuracy in,
breach of, or nonfulfillment of any representation, warranty, covenant or
agreement made by or other obligation of the Company contained in this Agreement
(including the Schedules) or in any document delivered in connection herewith.
Notwithstanding the foregoing, the Company shall not be liable for any of
Purchaser Indemnitees' lost profits or any incidental or consequential damages.
8.2 Indemnification by Purchasers. Purchasers shall, severally and
-----------------------------
not jointly, indemnify and hold harmless the Company and each of its agents,
officers, directors, representatives or affiliates (collectively, the "Company
Indemnitees") against any and all Losses sustained by the Company Indemnitees
resulting from, arising out of, or connected with any material inaccuracy in,
breach of, or nonfulfillment of any representation, warranty, covenant or
agreement made by or other obligation of such Purchaser contained in this
Agreement. Notwithstanding the foregoing, Purchasers shall not be liable for any
of the Company Indemnitees' lost profits or any incidental or consequential
damages.
8.3 Procedures. In the event any third party asserts any claim with
----------
respect to any matter as to which the indemnities in this Agreement relate, the
party against whom the claim is asserted (the "Indemnified Party") shall give
prompt notice to the other party (the "Indemnifying Party"), and the
Indemnifying Party shall have the right at its election to take over the defense
or settlement of the third party claim at its
14
own expense by giving prompt notice to the Indemnified Party. If the
Indemnifying Party does not give such notice and does not proceed diligently so
to defend the third party claim within 30 days after receipt of the notice of
the third party claim, the Indemnifying Party shall be bound by any defense or
settlement that the Indemnified Party may make as to those claims and shall
reimburse the Indemnified Party for its Losses and expenses related to the
defense or settlement of the third party claim. The parties shall cooperate in
defending against any asserted third party claims. For purposes of this Section
8, the indemnification of the Indemnified Party shall also include the
indemnification of the Indemnified Party's employees, agents, affiliates, and
third parties performing services for the Indemnified Party, and the reference
to this Agreement includes any certificate, schedule, list, summary or other
information provided or delivered to a party by the Indemnifying Party or its
agents and affiliates in connection with this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California.
9.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
9.3 Entire Agreement. This Agreement, the exhibits hereto, and the
----------------
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and no party shall be liable or bound to any other party in any manner by any
representations, warranties, covenants, or agreements except as specifically set
forth herein or therein. Except as set forth in Section 8.1, nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
9.4 Separability. In case any provision of this Agreement shall be
------------
invalid, illegal, or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
9.5 Amendment and Waiver. Any term of this Agreement may be amended
--------------------
and the observance of any term of this Agreement may be waived only with the
written consent of the parties hereto.
9.6 Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or on the third day following mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed: (a) if to
Purchaser, at its address as set forth at the end of this Agreement, or at such
other address as Purchaser shall have
15
furnished to the Company in writing or (b) if to the Company, at its address as
set forth at the end of this Agreement, or at such other address as it shall
have furnished to Purchaser in writing.
9.7 Finders' Fees. Each party hereto represents and warrants that it
-------------
has retained no finder or broker in connection with the transactions
contemplated by this Agreement and hereby agrees to indemnify and to hold
harmless the other party from any liability for any commission or compensation
in the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses, including reasonable attorneys' fees, of defending against
such liability or asserted liability) for which such other party or any of its
employees or representatives is responsible.
9.8 Headings. The headings of the paragraphs and subparagraphs of
--------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
9.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
STM WIRELESS, INC.
Address:
-------
By:_________________________________
One Mauchly Name:
Xxxxxx, Xxxxxxxxxx 00000 Title:
PEQUOT PRIVATE EQUITY FUND, L.P.
By: Pequot Capital Management, Inc.,
its investment manager
Address:
-------
By:_________________________________
000 Xxxxx Xxxx Xxxx Name:
Xxxxxxxx, XX 00000 Title:
c/o Hemisphere Management Limited PEQUOT OFFSHORE PRIVATE
Hemisphere House EQUITY FUND, INC.
0 Xxxxxx Xxxxxx
X.X. Xxx XX000 By: Pequot Capital Management, Inc.,
Xxxxxxxx XX DX Bermuda its investment manager
Attention: Xxxxxx X. Xxxxx
Phone: (000) 000-0000 By:_________________________________
Fax: (000) 000-0000 Name:
Title:
17
SCHEDULE I
SCHEDULE OF PURCHASERS
Number of Shares
of Series A Preferred
Purchaser Name Stock Purchased Purchase Price
-------------- --------------- --------------
Pequot Private Equity Fund, L.P. 443,809 $2,219,045
Pequot Offshore Private Equity Fund, Inc. 56,191 280,955
------- --------
Totals 500,000 $2,500,000
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