EXHIBIT 99.3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of June 17, 1999, by and between REMEC, INC., a California
corporation ("Purchaser"), and STM WIRELESS, INC., a Delaware corporation (the
"Company").
R E C I T A L S :
- - - - - - - -
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 Purchaser, at the Closing,
nine hundred and twelve thousand (912,000) shares of DTPI Series A Preferred
Stock ("Preferred Stock"), as well as an option to purchase eighty-eight
thousand (88,000) shares of DTPI Series A Preferred Stock for the consideration
set forth herein.
C. Concurrently with this Agreement, and as a condition to
this Agreement, Pequot Private Equity Fund, L.P. and Pequot Offshore Private
Equity Fund, Inc. (collectively, "Pequot"), will loan the Company $2,500,000
pursuant to a Loan Agreement and will purchase 500,000 shares of DTPI Series A
Preferred Stock from the Company pursuant to a Stock Purchase Agreement
(collectively, the "Pequot Agreements").
E. Concurrently with this Agreement, and as a condition to the
Closing, Purchaser and DTPI will enter into a Loan Agreement, pursuant to which
Purchaser will, subject to the terms and conditions set forth therein, lend to
DTPI a principal amount of $5,000,000 (the "Loan Agreement").
F. The Company, DTPI and Pequot 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 the
Purchaser the rights contemplated by the commitment letter (the "Commitment
Letter") dated May 15, 1999 between the Purchaser 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 and Option. On the Closing Date,
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subject to the terms and conditions of this Agreement, the Purchaser shall
purchase from the Company the following securities (collectively, the
"Securities"):
(a) nine hundred and twelve thousand (912,000) shares of Series
A Preferred Stock of DTPI (the "Purchased Stock"); and
(b) an option to purchase from the Company 88,000 shares of
Series A Preferred Stock at an exercise price of $5.00 per share (the "Option").
1.2. Consideration for the Purchased Shares and Option. At the
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Closing, in exchange for the Purchased Stock and the Option, Purchaser shall
deliver to the Company by check (the "Check") an amount equal to four million
five hundred sixty thousand dollars ($4,560,000) (the "Purchase Price").
1.3. Grant and Terms of Option. Simultaneously with the Closing,
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the Company automatically shall be deemed to have granted the Purchaser the
Option. The Option shall be exercisable, in whole or in part, on or prior to the
date of the First Qualified Financing (as defined below), and if not exercised,
will expire. The Company shall give Purchaser at least ten (10) days advance
notice of the closing of the First Qualified Financing. Purchaser shall exercise
the Option by delivery of funds sufficient to pay the exercise price of the
number of Option shares being exercised to the Company on or before the closing
date by wire transfer or check.
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 Purchaser a
certificate or certificates representing the shares of Series A Preferred Stock
of DTPI purchased by Purchaser, registered in the name of Purchaser or its
nominee. Delivery of such certificates to Purchaser shall be made against
receipt at the Closing by the Company from Purchaser of the purchase price
therefor, which shall be paid by check to the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company, on and as
of the date of this Agreement, as follows:
3.1. Investment Representations.
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(a) Purchaser has been advised that the Securities to be
purchased by 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
Purchaser set forth herein.
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(b) It is 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) 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) 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.
Purchaser has not been formed or organized for the specific purpose of acquiring
the Securities. Purchaser hereby acknowledges that it has, or its
representatives have, received all such information as it considers necessary
for evaluating the risks and merits of acquiring the Securities.
(e) 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. 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) 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. Organization and Authorization. Purchaser 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 California 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 the Purchaser and are enforceable
against the 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 Purchaser nor
the consummation or performance of any of their obligations hereunder or
thereunder will give any person the right to
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prevent, delay or otherwise interfere with any of the transactions hereunder and
thereunder pursuant to: (i) any provision of Purchaser's organizational
documents; (ii) any resolution adopted by the board of directors of Purchaser;
(iii) any legal requirement or order to which Purchaser is subject; or (iv) any
contract to which Purchaser is a party or by which 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 Purchaser or on the ability of Purchaser to
consummate the transactions contemplated by this Agreement, the Amended and
Restated Stockholders Agreement or the Loan Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the 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, the 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. Upon exercise of the Option and
payment in full of the exercise price relating thereto, the Company shall assign
and deliver to Purchaser the shares of Preferred Stock underlying the Option,
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 and the Amended and Restated Stockholders
Agreement.
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4.4. SEC Filings. The Company has filed with the Securities and
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Exchange Commission (the "SEC") all required forms, reports, registration
statements and documents required to be filed by it with the SEC (collectively,
the "Company SEC Reports") since January 1, 1996. All of the Company SEC Reports
complied as to form, when filed, in all material respects with the applicable
provisions of the Securities Act and the Exchange Act. Accurate and complete
copies of the Company SEC Reports have been made available to Purchaser. As of
their respective dates, the Company SEC Reports (including all exhibits and
schedules thereto and documents incorporated by reference therein) did not
contain any untrue statement of a material fact regarding DTPI or omit to state
a material fact regarding DTPI required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE 5
ADDITIONAL REPRESENTATIONS AND WARRANTIES
The Company makes the following additional representations and
warranties to 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.
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 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
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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.
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
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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 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 and the Pequot
Agreements. The Company agrees to indemnify and hold DTPI and Purchaser harmless
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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
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the applicable jurisdictions, which returns were correct in all material
respects. DTPI has 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,
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DTPI 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,
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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.
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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 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 Purchaser at the Closing.
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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:
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(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 Note. Purchaser and DTPI shall have executed
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and delivered to each other the Loan Agreement. DTPI shall have executed and
delivered to Purchaser a convertible promissory note, dated the date hereof, in
a principal amount of $5,000,000, in favor of Purchaser (the "Note").
(c) Pequot Agreements. Pequot and the Company shall each have
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executed and delivered to each other the Pequot Agreements and consummated the
transactions contemplated thereby on the terms set forth in the Pequot
Agreements.
(d) Purchased Stock. The Company shall have executed and delivered to
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Purchaser, along with the Purchased Stock, executed stock powers or other
instruments of transfer reasonably satisfactory to Purchaser.
(e) Stockholders Agreement. The Company, Pequot and DTPI shall have
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executed and delivered to the Purchaser 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 Purchaser to provide for
(a) 3,000,000 shares of Preferred Stock, (b) 6,500,000 shares of Common Stock
and (c) 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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Purchaser 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) Amendment of STM Note. The STM Note shall have been amended as
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contemplated by Section 7.6 and as contemplated by Section 6.1(d) of the Amended
and Restated Stockholders Agreement.
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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 Purchaser 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. Purchaser shall have executed and delivered to
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the Company the Loan Agreement.
(c) Pequot Agreements. Pequot shall have executed and delivered to
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the Company the Pequot Agreements.
(d) Purchase Price. Purchaser shall have delivered by check to the
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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) reclassification of the
Series B Preferred Stock as Series A Preferred Stock.
ARTICLE 7
COVENANTS
7.1. The Company. Immediately following the Closing, the Company
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covenants that it will not cash or negotiate the Check, and will endorse the
Check back over to Purchaser.
7.2. Application of Proceeds. Immediately upon receipt of the Check
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from the Company pursuant to Section 7.1, Purchaser covenants to take all action
necessary to apply $2,000,000 of the Check to satisfy and discharge $2,000,000
of the total amount of the Company's accounts payable owed to Purchaser as of
the Closing Date. Within 45 days after the Closing Date, Purchaser and the
Company shall agree on a reconciliation of the balance of the accounts payable
owing by the Company to Purchaser as of the Closing Date. If Purchaser has an
accounts payable amount owing to Purchaser as of the Closing Date as determined
by the reconciliation in excess of the $2,000,000 payment towards such accounts
payable made as provided above, then the remaining balance of the Check shall be
applied to satisfy and discharge that amount then owed by the Company. If
Purchaser has an accounts payable amount owing to Purchaser as of the Closing
Date as determined by the reconciliation less than the $2,000,000 payment
towards such accounts payable made as provided above, then the difference of
$2,000,000 from such accounts payable amount shall be deemed to be an advance
payment for products and/or services to be delivered by Purchaser to the Company
after the Closing Date. In
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addition, the balance of the Check remaining after application of the
reconciliation of the accounts payable owed by the Company to Purchaser as of
the Closing Date shall be retained by Purchaser and applied to satisfy and
discharge accounts payable owing by the Company to Purchaser after the Closing
Date for products and services delivered by Purchaser to the Company. For
purposes of cash application, invoice amounts for new products shipped by
Purchaser to the Company shall be due and payable 60 days after shipment by
Purchaser and invoice amounts for return material authorization (RMA) products
shipped back from Purchaser to the Company shall be due and payable on the date
of shipment by Purchaser.
7.3. Manufacturing Agreement. Concurrently with the execution of this
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Agreement, Purchaser and the Company will commence negotiation of a
manufacturing agreement ("Manufacturing Agreement"), pursuant to which the
Company will outsource the manufacturing of its SES and SpaceWeb terminals to
Purchaser. The Manufacturing Agreement will contain mutually acceptable terms,
including a $60 increase on SES and SpaceWeb units to be delivered under
existing purchase orders, but excluding any consequential damages.
Notwithstanding anything to the contrary, the Manufacturing Agreement will
provide that upon a change in control of the Company, the Company (or its
successor corporation) may terminate the Manufacturing Agreement without penalty
upon nine months written notice, provided that, at the date of termination, the
Company will have purchased not less than $50 million of products from the date
of the letter under existing and future purchase orders. If the manufacturing
agreement is terminated upon a change of control of the Company (and such
termination is not as a result of Purchaser's default under the manufacturing
agreement) or upon a default by the Company under the manufacturing agreement,
Purchaser will have a nonexclusive and fully paid license to the technology and
intellectual property rights to the SES and SpaceWeb RF units. Purchaser agrees
that with respect to future orders from the Company, it will attempt to reduce
costs on manufacturing and such cost savings shall be shared equally between
Purchaser and the Company.
7.4. First Qualified Financing. In the event that, subsequent to the
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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 Purchaser agrees that, except as set forth herein,
it shall participate in such First Qualified Financing by converting any
outstanding principal and interest then due and owing under the Loan Agreement
into equity securities of DTPI on the same terms as other persons participating
in such financing. Purchaser shall have no obligation to participate in a
Qualified Financing except as described in the previous sentence. Nothing in
this Agreement shall adversely affect Purchaser's preemptive rights to subscribe
for securities of DTPI contained in the Amended and Restated Stockholders
Agreement.
7.5. STM Management Fees. The Company agrees that the $414,296
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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
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shall be entitled to or seek reimbursement for any expenses relating to any
future management or consulting services (including attending any 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.
7.6. Payment of STM Note.
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(a) Mandatory Payments. The Company agrees that any amounts due and
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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.
(b) Optional Payments. Notwithstanding anything to the contrary in
-----------------
Section 7.6(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 7.6(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 7.6(b).
7.7. Advisory Fees. The Company agrees to pay in full any obligations
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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.
13
7.8. 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 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 7.8 to be consistent with such adjustments.
7.9. 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.
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ARTICLE 8
INDEMNIFICATION
8.1. Indemnification by the Company. The Company shall indemnify and
------------------------------
hold harmless Purchaser against any and all losses, liabilities, claims and
expenses, including reasonable attorneys' fees ("Losses"), sustained by
Purchaser 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. Notwithstanding the foregoing, the Company shall not be liable
for any of Purchaser's lost profits or any incidental or consequential damages.
8.2. Indemnification by Purchaser. Purchaser shall indemnify and hold
----------------------------
harmless the Company against any and all Losses sustained by the Company
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 Purchaser contained in this Agreement.
Notwithstanding the foregoing, Purchaser shall not be liable for any of the
Company's 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 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
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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 Commitment Letter, the
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exhibits hereto, and the other documents delivered pursuant hereto constitute
the full and entire
15
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. 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
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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
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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 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
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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
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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.
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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:
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One Mauchly By: _______________________
Xxxxxx, Xxxxxxxxxx 00000 Name:
Title:
REMEC, INC.
Address:
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0000 Xxxxxxxxxx Xxxxx By: _______________________
San Diego, California Name:
Title:
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