<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
FOR THE PERIOD ENDED MARCH 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
Commission File No. 0-19923
STM WIRELESS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-3758983
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification number)
One Mauchly
Irvine, California 92618
(Address of principal executive offices) (Zip code)
(949) 753-7864
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the last 90 days.
Yes No
X
- --- ---
As of May 11, 1998, there were 7,030,593 shares of Common Stock, $0.001 par
value per share, outstanding.
Page 1 of 13
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STM WIRELESS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets at March 31, 1998 and
December 31, 1997 3
Condensed Consolidated Statements of Operations for the three
month periods ended March 31, 1998 and March 31, 1997 4
Condensed Consolidated Statements of Cash Flows for the three
month periods ended March 31, 1998 and March 31, 1997 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-11
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on 8-K 12
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
STM WIRELESS, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- --------
Current assets: (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 9,696 $ 4,095
Short-term investments 2,227 4,527
Accounts receivable, net 12,554 10,937
Inventories, net 16,926 11,211
Current portion of long-term receivables 592 592
Deferred income taxes 3,132 3,132
-------- --------
Total current assets 45,127 34,494
Property & equipment, net 18,170 17,025
Long-term receivables 1,382 1,462
Other assets 2,730 1,436
======== ========
$ 67,409 $ 54,417
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 11,600 7,900
Current portion of long-term debt 323 328
Accounts payable 15,163 11,597
Accrued liabilities 2,081 2,139
Customer deposits 463 130
Income taxes payable 425 425
-------- --------
Total current liabilities 30,055 22,519
Long-term debt 4,513 4,577
Minority Interest 2,872 259
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000
shares authorized, none issued or outstanding -- --
Common stock, $0.001 par value; 20,000,000 shares
authorized; issued and outstanding 7,027,593
shares at March 31, 1998 and 6,448,164 shares
at December 31, 1997 7 6
Additional paid in capital 41,233 34,039
Accumulated deficit (11,054) (6,983)
Accumulated other comprehensive income (217) --
-------- --------
Total Stockholders' equity 29,969 27,062
======== ========
$ 67,409 $ 54,417
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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STM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months
ended March 31,
---------------------
1998 1997
------- -------
<S> <C> <C>
Revenues
Products $ 6,320 $ 7,611
Services 629 617
------- -------
Total revenues 6,949 8,228
Cost of revenues
Products 5,271 5,028
Services 719 337
------- -------
Total cost of revenues 5,990 5,365
Gross profit 959 2,863
Operating costs:
Selling, general & administrative expenses 2,868 1,441
Research & development costs 2,056 1,300
------- -------
Total operating costs 4,924 2,741
Operating income (loss) (3,965) 122
Other income (expense) (54) 17
Interest income 139 150
Interest expense (304) (141)
------- -------
Income from continuing operations, before
minority interest and income taxes (4,184) 148
Income tax expense -- (23)
------- -------
Income (loss) from operations before minority interest (4,184) 125
Minority interest in net loss of consolidated
subsidiaries 113 27
------- -------
Net income (loss) $(4,071) $ 152
======= =======
Net income per share - (1997 restated):
Basic $ (0.62) $ 0.02
----- ======= =======
Diluted $ (0.62) $ 0.02
------- ======= =======
Common shares used in computing per share amounts -
(1997 restated)
Basic 6,619 6,339
-----
Diluted 6,619 6,420
-------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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STM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1998 1997
---- ----
<S> <C> <C>
Net cash used in continuing operations $ (8,787) $ (5,598)
Cash flows from investing activities:
Net decrease in short-term investments 2,300 207
Acquisition of property and equipment (1,567) (246)
-------- --------
Net cash provided by (used in) investing activities 733 (39)
-------- --------
Cash flows from financing activities:
Net decrease in long-term receivables 80 129
Proceeds from issuance of common stock 4,039 228
Proceeds from issuance of preferred stock in
subsidiary 5,905 --
Net increase (decrease) in short-term borrowings 3,700 (1,300)
Repayment of long-term debt (69) (40)
-------- --------
Net cash provided by (used in) financing activities 13,655 (983)
-------- --------
Net increase (decrease) in cash and cash equivalents 5,601 (6,620)
Cash and cash equivalents at beginning of period 4,095 10,453
-------- --------
Cash and cash equivalents at end of period $ 9,696 $ 3,833
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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STM WIRELESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1998 and 1997
(Unaudited)
1. BASIS OF PRESENTATION
These financial statements are unaudited; however, the information contained
herein for STM Wireless, Inc. (the "Company" or "STM") gives effect to all
adjustments (which are normal recurring accruals) necessary, in the opinion
of Company management, to present fairly the financial statements for the
interim periods presented. Results for the period ended March 31, 1997 have
been restated to include the results of Telecom International, Inc. (TI),
which was acquired in December 1997.
The results of operations for the current interim period are not necessarily
indicative of the results to be expected for the current year.
Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"), and these
financial statements should be read in conjunction with the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, which is on file with the SEC.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------- -------
<S> <C> <C>
Raw materials $ 9,183 $ 5,727
Work in process 1,243 980
Finished goods 6,500 4,504
------- -------
$16,926 $11,211
======= =======
</TABLE>
3. NET INCOME (LOSS) PER SHARE
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings per
Share". This statement replaces the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per
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share, basic earnings per share excludes any dilutive effects of options.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. Net income per share for the three months ended
March 31, 1997 has been restated in accordance with SFAS 128. The following
table summarizes the computation of net income (loss) per share (in
thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Net income (loss) $(4,071) $ 152
Basic:
Weighted average common shares outstanding
used in computing basic net income
(loss) per share 6,619 6,339
======= =======
Basic net income (loss) per share $ (0.62) $ 0.02
======= =======
Diluted:
Weighted average common shares outstanding 6,619 6,339
Dilutive options outstanding -- 81
------- -------
Shares used in computing diluted net income
(loss) per share 6,619 6,420
======= =======
Diluted net income (loss) per share $ (0.62) $ 0.02
======= =======
</TABLE>
4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130")
"Reporting Comprehensive Income," which establishes standards for reporting
and disclosures of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997 and requires reclassification of financial statements for
earlier periods to be provided for comparative purposes. The Company has not
determined the manner in which it will present the information required by
SFAS No. 130 in its annual consolidated financial statements for the year
ending December 31, 1998. The Company's total comprehensive income (loss)
for all periods presented herein would not have differed materially from
those amounts reported as net income (loss) in the consolidated statements
of operations.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information." The Statement establishes
standards for the manner in which public business enterprises report
information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. This Statement
is effective for annual financial statements for periods beginning after
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December 15, 1997, and for interim periods after the first year of adoption.
The Company has not yet determined the impact of adopting these disclosure
requirements.
5. ISSUANCE OF SHARES
In March 1998, the Company completed a $10 million equity offering of shares
of STM and its Direc-To-Phone International (DTPI) subsidiary. Concurrently
with and as a condition of this transaction, the Company also invested $5
million of equity in DTPI, extended a $10 million loan and entered into a
Product Supply Agreement with DTPI. The principal on the loan is repayable
by DTPI out of the proceeds of any future financings of DTPI that may occur.
6. SUBSEQUENT EVENT
On May 11, 1998, the Company announced that its majority-owned subsidiary,
Telecom Multimedia Systems, Inc. (TMSI) had entered into a definitive asset
sale agreement with Inter-Tel, Inc. (Inter-Tel), pursuant to which Inter-Tel
has agreed to purchase certain assets and assume certain liabilities of TMSI
for approximately $25 million in cash. The transaction is anticipated to
close by June 30, 1998 and is subject to customary conditions to closing
including regulatory and other approvals.
8
<PAGE> 9
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
General
- -------
STM Wireless, Inc. (the "Company" or "STM"), founded in 1982, is a
developer, manufacturer and provider of wireless-based satellite communications
infrastructure and user terminal products utilized in public and private
telecommunications networks. These networks support data, fax, voice and video
communication and are used to either bypass or extend terrestrial networks or
provide a communications infrastructure where a network does not currently
exist. The Company's product line is based on proprietary hardware and software
and primarily consists of two-way earth stations sometimes referred to as VSATs
(very small aperture terminals), associated infrastructure equipment and
software, transceivers, modems and other networking equipment. The Company
currently focuses its sales efforts on the international marketplace,
particularly developing countries. The Company's subsidiary, Direc-To-Phone
International, Inc. ("DTPI"), provides fixed telephony services in areas of
lower population density in international markets. The Company's subsidiary
Telecom International, Inc. (TI), is a systems integrator within the satellite
communications industry.
Results of Operations
- ---------------------
Combined product and service revenues were $6,949,000 for the
three-month period ended March 31, 1998, compared to $8,228,000 for the
corresponding period of 1997, a decrease of 16%. Product revenues were
$6,320,000 for the three-month period ended March 31, 1998, compared to
$7,611,000 for the corresponding period in 1997, a decrease of 17%. Management
believes that the decline in product revenues relates primarily to the diversion
of management effort to the setting up of the DTPI service business. Recognizing
this, the Company announced a new management structure and company organization
in January 1998. It is believed that this new management structure should lead
to improved levels of revenues, however, there can be no assurance that such
efforts will generate any revenue, or a specific level of revenue. Service
revenues were $629,000 for the three-month period ended March 31, 1998, compared
to $617,000 for the corresponding period in 1997, an increase of 2%.
Combined product and service gross profit margin in the three-month
period ended March 31, 1998 was 14% compared to 35% for the comparable period in
1997. Product gross profit margin in the three-month period ended March 31, 1998
was 17% compared to 34% for the comparable period in 1997. This decrease in
product gross profit margin was primarily due to a higher systems integration
sales content in 1998 compared to 1997, at a relatively lower gross profit
percentage compared to core manufacturing product sales, and a higher level of
relatively fixed costs in 1998 compared to 1997. Service gross profit margin in
the three-month period ended March 31, 1998 was negative 14%, compared to 45%
for the comparable period in 1997. The negative service gross margin was due
primarily to the Company investing in support and installation capabilities
associated with the DTPI service business.
Selling, general and administrative expenses (SG&A) for the three-month
period ended March 31, 1998 increased by $1,427,000 to $2,868,000, or 41% of
revenues, from
9
<PAGE> 10
$1,441,000, or 18% of revenues, in the corresponding period of 1997. The
increase in SG&A was primarily attributable to increased costs associated with
the investment in the infrastructure for the DTPI service business and the
Company's recently acquired systems integration business. In addition, SG&A
for 1997 was reduced by $400,000 due to the reversal of a reserve, no longer
required, for a potential customer concession.
Research and development (R&D) expenses for the three-month period ended
March 31, 1998 increased to $2,056,000, or 30% of total revenues, from
$1,300,000, or 16% of total revenues, in the corresponding period of 1997. The
Company, including the Company's majority owned TMSI subsidiary, experienced a
general increase in R&D activity during the current year period. R&D costs,
including outside services, in-house salaries, equipment and supply costs, and
third party license fees, are subject to wide fluctuations, depending upon the
nature and stage of completion of the various projects.
Interest income decreased by $11,000 to $139,000 for the three-month
period ended March 31, 1998, over the three-month period ended March 31, 1997.
The decrease in interest income was primarily the result of declining long-term
receivable balances partially offset by higher average cash and short-term
investment balances.
Interest expense increased by $163,000 to $304,000 for the three-month
period ended March 31, 1998, over the three-month period ended March 31, 1997.
The increase was primarily due to a higher average level of short-term
borrowings.
Liquidity and Capital Resources
- -------------------------------
In connection with the award of certain long-term service contracts in
Mexico and Venezuela, and due to the capital intensive nature of these
contracts, and other contracts that DTPI may be awarded in the future, the
Company is reviewing financing alternatives to enable it to pursue these
business opportunities in the most beneficial manner. However, there can be no
assurance that such financing will be available, or that such financing will be
available on terms acceptable to the Company.
In March 1998, the Company completed a $10 million equity offering of
shares of STM and DTPI. Concurrently with and as a condition of this
transaction, the Company also invested $5 million of equity in DTPI, extended a
$10 million loan to DTPI and entered into a Product Supply Agreement with DTPI.
The principal on the loan is repayable by DTPI out of the proceeds of any future
financings of DTPI that may occur.
On May 11, 1998, the Company announced that its majority-owned
subsidiary, Telecom Multimedia Systems, Inc. (TMSI) had entered into a
definitive asset sale agreement with Inter-Tel, Inc. (Inter-Tel), pursuant to
which Inter-Tel has agreed to purchase certain assets and assume certain
liabilities of TMSI for approximately $25 million in cash. The transaction is
anticipated to close by June 30, 1998 and is subject to customary conditions to
closing including regulatory and other approvals.
For the first three months of 1998, the Company had negative cash flows
from operating activities of $8,787,000, compared to negative cash flows of
$5,598,000 in the same period of 1997. The increase in negative cash flow was
primarily due to the net loss, increased investments in inventory to support the
Company's anticipated sales backlog and for the Company's DTPI service business,
and an increase in prepaid expenses and deposits, partially offset by an
increase in accounts payable.
10
<PAGE> 11
Cash provided by investing activities in the first three months of 1998
totaled $733,000. Sales and maturities of short-term investments exceeded
purchases of such investments by $2,300,000. The acquisition of fixed assets,
primarily related to DTPI, used $1,567,000.
Cash provided by financing activities during the first three months
totaled $13,655,000. A net increase of short-term borrowings provided
$3,700,000, and a reduction of long-term debt used $69,000. Proceeds from
issuance of common stock related to the exercise of stock options provided
$39,000. Proceeds from the equity offering mentioned above provided a total of
$9,905,000; $4,000,000 from the issuance of common stock in the Company, and
$5,905,000 from the issuance of preferred stock in a subsidiary. A reduction of
long-term receivables provided $80,000.
Overall, the Company's cash, cash equivalents, and short-term
investments totaled $11,923,000 at March 31, 1998, as compared to $8,622,000 at
December 31, 1997. The Company has secured revolving lines of credit with two
banks. The availability under these lines of credit was approximately
$11,600,000 at March 31, 1998, all of which had been drawn down.
Management expects to have sufficient cash generated through
operations, through availability under existing credit lines and through other
sources to meet the anticipated cash requirements for the next 12 months.
RISK FACTORS AND FORWARD LOOKING STATEMENTS
- -------------------------------------------
THIS DOCUMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT INVOLVE RISKS AND
UNCERTAINTIES. IN ADDITION, THE COMPANY MAY FROM TIME TO TIME MAKE FORWARD
LOOKING STATEMENTS, ORALLY OR IN WRITING. THE WORDS "ESTIMATE", "PROJECT",
"POTENTIAL", "INTENDED", "EXPECT", "BELIEVE" AND SIMILAR EXPRESSIONS OR WORDS
ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED OR SUGGESTED IN ANY FORWARD LOOKING STATEMENTS
AS A RESULT OF A WIDE VARIETY OF FACTORS AND CONDITIONS, AMONG OTHERS, LONG TERM
CYCLES INVOLVED IN COMPLETING MAJOR CONTRACTS, PARTICULARLY IN FOREIGN MARKETS,
INCREASING COMPETITIVE PRESSURES, GENERAL ECONOMIC CONDITIONS, TECHNOLOGICAL
ADVANCES, THE TIMING OF NEW PRODUCT INTRODUCTIONS, POLITICAL AND ECONOMIC RISKS
INVOLVED IN FOREIGN MARKETS AND FOREIGN CURRENCIES AND THE TIMING OF OPERATING
AND OTHER EXPENDITURES. REFERENCE IS HEREBY MADE TO "RISK FACTORS" IN THE
COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
BECAUSE OF THESE AND OTHER FACTORS THAT MAY AFFECT THE COMPANY'S
OPERATING RESULTS, PAST FINANCIAL PERFORMANCE SHOULD NOT BE CONSIDERED AN
INDICATOR OF FUTURE PERFORMANCE, AND INVESTORS SHOULD NOT USE HISTORICAL TRENDS
TO ANTICIPATE RESULTS OR TRENDS IN FUTURE PERIODS.
11
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PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits -
10.24 Stock Purchase Agreement, dated March 5, 1998, by and
among the Company, Direct-To-Phone International, Inc.,
Pequot Private Equity Fund, L.P. and Pequot Offshore
Private Equity Fund, Inc.
10.25 Series B Preferred Stock Purchase Agreement, dated
March 5, 1998, by and among the Company and
Direct-To-Phone International, Inc.
10.26 Stock Purchase Agreement, dated March 5, 1998, by and
among the Company, Pequot Private Equity Fund, L.P. and
Pequot Offshore Private Equity Fund, Inc.
10.27 Stockholders Agreement, dated March 5, 1998, by and
among Direct-To-Phone International, Inc. and its
stockholders.
10.28 Registration Rights Agreement, dated March 5, 1998, by
and among Direct-To-Phone International, Inc. and its
stockholders.
(b) Reports on Form 8-K
None
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STM Wireless, Inc.
Date: May 19, 1998 By: JOSEPH WALLACE
--------------
Joseph Wallace
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.24 Stock Purchase Agreement, dated March 5, 1998, by and among the Company,
Direct-To-Phone International, Inc., Pequot Private Equity Fund, L.P. and Pequot
Offshore Private Equity Fund, Inc.
10.25 Series B Preferred Stock Purchase Agreement, dated March 5, 1998, by and among the Company
and Direct-To-Phone International, Inc.
10.26 Stock Purchase Agreement, dated March 5, 1998, by and among the Company, Pequot Private
Equity Fund, L.P. and Pequot Offshore Private Equity Fund, Inc.
10.27 Stockholders Agreement, dated March 5, 1998, by and among Direct-To-Phone International,
Inc. and its stockholders.
10.28 Registration Rights Agreement, dated March 5, 1998, by and among Direct-To-Phone
International, Inc. and its stockholders.
</TABLE>
<PAGE> 1
EXHIBIT 10.24
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of March 5, 1998 (the "Closing Date"), by and among STM WIRELESS, INC., a
Delaware corporation (the "Company"), DIREC-TO-PHONE INTERNATIONAL, INC., a
Delaware corporation and wholly-owned subsidiary of the Company ("DTPI"), PEQUOT
PRIVATE EQUITY FUND, L.P. and PEQUOT OFFSHORE PRIVATE EQUITY FUND, INC.
(referred to individually as the "Purchaser" and collectively as the
"Purchasers").
R E C I T A L S :
WHEREAS, concurrently with the execution hereof, the Company and DTPI are
entering into a Stock Purchase Agreement pursuant to which the Company will
purchase, and DTPI will sell and issue to the Company, One Million (1,000,000)
shares of newly issued Series B Preferred Stock of DTPI, $.0001 par value (the
"Series B Stock"), which, together with the Common Stock of DTPI, $.0001 par
value (the "Common Stock") held by the Company, shall constitute in the
aggregate seventy five percent (75%) of the outstanding capital stock of DTPI on
a Fully Diluted Basis (as defined in Section 6.1 below); and
WHEREAS, the Purchasers desire to purchase, and DTPI desires to sell and
issue to the Purchasers at the Closing, an aggregate amount of One Million Two
Hundred Thousand (1,200,000) shares of newly issued Series A Preferred Stock of
DTPI, $.0001 par value (the "Series A Stock"), which, immediately following the
Closing and giving effect to the issuance of the Series B Stock, shall
constitute twenty five percent (25%) of the outstanding capital stock of DTPI on
a Fully Diluted Basis (as defined in Section 6.1 below); and
WHEREAS, in reliance on this Agreement and the representations, warranties
and agreements of the parties contained herein, each of the parties is entering
into this 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
PURCHASE, SALE AND TERMS OF SHARES
1.1 The Purchased Shares. DTPI has authorized the issuance and sale of
an aggregate of One Million Two Hundred Thousand (1,200,000) shares of Series A
Stock (the "Purchased Stock") to the Purchasers which represents 25% of the
capital stock of DTPI immediately following the Closing on a Fully Diluted Basis
(as defined in Section 6.1 below).
1.2 The Closing. Upon the execution of this Agreement, DTPI agrees to
issue and sell to Purchasers, and, subject to and in reliance upon the
representations, warranties, terms and conditions of this Agreement, the
Purchasers jointly and severally agree to purchase the Purchased Stock for the
purchase price of $5.00 per share.
-1-
<PAGE> 2
Upon execution of this Agreement, DTPI shall deliver one or more
certificates evidencing the Purchased Stock, registered in the appropriate
Purchaser's name, evidencing the shares of Series A Stock to be purchased by
such Purchaser as set forth on Schedule A, against payment of the purchase price
therefor by a wire transfer to the account of DTPI or the delivery of a
cashier's check payable to the order of DTPI.
1.3 Use of Proceeds. DTPI shall use the proceeds from the sale of the
Purchased Stock for working capital for DTPI's current and proposed service
contracts and other general corporate purposes.
ARTICLE 2
REPRESENTATIONS OF THE PURCHASERS
2.1 Representations by Purchasers. The Purchasers, jointly and severally
represent and warrant to DTPI and the Company, on and as of the date of this
Agreement, as follows:
(a) Investment.
(i) Purchasers have been advised that all Purchased Stock to
be purchased by Purchasers from DTPI hereunder has not been registered
under the Securities Act nor qualified under any state securities laws on
the ground, among others, that no distribution or public offering of the
Purchased Stock is to be effected, and that in this connection DTPI is
relying in part on the representations of Purchasers set forth herein.
(ii) It is Purchasers' intention to acquire the Purchased
Stock solely for their own respective accounts and that the Purchased
Stock is being and will be acquired for investment purposes only, and not
with a view to distribution or resale of the Purchased Stock.
(iii) Each Purchaser is able to bear the economic risk of an
investment in the Purchased Stock acquired by it pursuant to this
Agreement and can afford to sustain a total loss on such investment.
(iv) Each 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 Purchased Stock. Neither Purchaser has been formed or
organized for the specific purpose of acquiring the Purchased Stock. Each
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 Purchased Stock. Each Purchaser
represents and warrants that it is aware that DTPI is a start up company
which commenced operations in July 1997 and has a limited operating
history and limited historical financial information upon which to base an
evaluation of DTPI's performance and that each Purchaser is basing its
investment decision on its own independent evaluation of DTPI's business
prospects and without reliance on any projections of future results that
may have been provided from time to time by DTPI or the Company to the
Purchasers. Each Purchaser further represents and warrants that the nature
and amount of the Purchased Stock it is purchasing is consistent with its
investment objectives, abilities and resources.
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(v) Each Purchaser understands that it may not be readily
able to sell or dispose of the Purchased Stock and may thus have to bear
the risk of its investment for a substantial period of time, or forever.
Each Purchaser is aware that the Purchased Stock 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 Purchased Stock for at least 1
year. Among the conditions for use of Rule 144 is the availability of
current information to the public about DTPI.
(vi) Each Purchaser is an "accredited investor" for purposes
of Regulation D promulgated by the Commission under the Securities Act
and, by reason of its business or financial experience or the business or
financial experience of its professional advisors (who are unaffiliated
with and who are not compensated by DTPI or any Affiliate or selling agent
of DTPI, directly or indirectly), has the capacity to protect its own
interests in connection with the purchase of the Purchased Stock.
(vii) Each Purchaser acknowledges that the certificates
representing the Purchased Stock, when issued, shall contain the following
legend:
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 AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT
OF 1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
(b) Authorization.
(i) Each Purchaser is duly organized, validly existing and
in good standing under and by virtue of the laws of the jurisdiction in
which it is organized and has all requisite power and authority to enter
into and perform its obligations under this Agreement, the Stockholders
Agreement, in the form attached hereto as Exhibit A, and the Registration
Rights Agreement, in the form attached hereto as Exhibit B;
(ii) Each Purchaser has duly authorized, executed and
delivered this Agreement, the Stockholders Agreement and the Registration
Rights Agreement;
(iii) This Agreement, the Stockholders Agreement and the
Registration Rights Agreement constitute the valid and binding obligations
of the Purchasers, enforceable against them in accordance with their
respective terms, in each case except as such enforceability may be
limited by (A) bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally, (B) the general
principles of equity, regardless of whether asserted in a proceeding in
equity or at law, and (C) considerations of public policy, with respect to
provisions of the Registration Rights Agreement relating to indemnity and
contribution for matters involving violations of the federal securities
laws;
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(iv) No consents or approvals of any Person are required in
connection with the execution, delivery and performance of this Agreement,
the Stockholders Agreement and the Registration Rights Agreement by the
Purchasers which have not heretofore been obtained, except for consents
and approvals, the failure of which to receive would not, individually or
in the aggregate, have a material adverse effect on the assets, condition
or affairs of DTPI; and
(v) There is no pending Proceeding that has been commenced
against any of the Purchasers, and no event has occurred which challenges,
or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the transactions contemplated by this
Agreement, the Registration Rights Agreement or the Stockholders
Agreement. To Purchasers' knowledge, no such Proceeding has been
threatened. There is no Order to which either of the Purchasers is bound
which may have the effect of enjoining, preventing or prohibiting the
transactions contemplated by this Agreement, the Registration Rights
Agreement or the Stockholders Agreement.
(c) No Conflict. Neither the execution and delivery of this
Agreement, the Stockholders Agreement or the Registration Rights Agreement by
the Purchasers nor the consummation or performance of any of their respective
obligations hereunder and 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 Purchasers' Organizational
Documents; (ii) any resolution adopted by either of the Purchasers; (iii) any
Legal Requirement or Order to which either of the Purchasers may be subject; or
(iv) any contract to which either of the Purchasers is a party or by which
either of the Purchasers 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.
(d) Brokers. The Purchasers represent that no Person has or will
have, as a result of the transactions contemplated by this Agreement, any right,
interest or valid claim upon or against the Company or DTPI for any commission,
fee or other compensation as a finder or broker because of any act or omission
by the Purchasers and Purchasers agrees to indemnify and hold DTPI harmless
against any such commissions, fees or other compensation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND DTPI
The Company and DTPI, jointly and severally, represent and warrant on and
as of the date of this Agreement, except as set forth in the Disclosure Schedule
attached hereto as Schedule B (the "Disclosure Schedule"):
3.1 Organization and Standing of the Company and DTPI. Each of the
Company, DTPI and each subsidiary of DTPI is a duly organized and validly
existing corporation in good standing under and by virtue of the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority for the ownership and operation of its properties and for the carrying
on of its business as presently conducted. The Disclosure Schedule sets forth
the name of each subsidiary of DTPI, the jurisdiction of its organization, and
the percentage of each such subsidiary's capital sock owned by DTPI. Except as
set forth in the Disclosure Schedule, DTPI is duly qualified to conduct
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business as a foreign corporation in each jurisdiction in which the conduct of
its business or the ownership of its assets requires it to be so qualified
except where the failure to qualify could not reasonably be expected to have or
cause a material adverse effect on the assets, condition or affairs of DTPI.
DTPI has furnished to Purchasers or their respective counsel copies of DTPI's
Certificate of Incorporation, as amended to date, and its By-laws, as currently
in effect. The documents so furnished are true, correct and complete copies of
the existing original documents, and contain all modifications, amendments,
deletions and revocations.
3.2 Corporate Action. DTPI has all necessary corporate power and
authority to execute and deliver and perform its obligations under this
Agreement, the Stockholders Agreement and the Registration Rights Agreement, and
all the transactions contemplated hereby and thereby, including the sale and
issuance of the Purchased Stock. All corporate proceedings have been taken and
all corporate authorizations have been secured (with no stockholder approval
required) which are necessary to authorize the execution, delivery and
performance of this Agreement, the Stockholders Agreement and the Registration
Rights Agreement by DTPI. This Agreement, the Registration Rights Agreement, the
Stockholders Agreement and any other agreements and instruments executed in
connection herewith and therewith, are the valid and binding obligations of
DTPI, enforceable in accordance with their respective terms, in each case except
as such enforceability may be limited by (A) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors' rights generally; (B)
the general principles of equity, regardless of whether asserted in a proceeding
in equity or at law, and (C) considerations of public policy, with respect to
provisions of the Registration Rights Agreement relating to indemnity and
contribution for matters involving violations of the federal securities laws.
3.3 Consents. Except as set forth in the Disclosure Schedules attached
hereto, no authorization, consent, approval, license, exemption 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 offer, issuance or sale of the
Purchased Stock, or the execution or delivery by DTPI, or for the performance by
it of its obligations under, this Agreement, the Stockholders Agreement or the
Registration Rights Agreement, 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
DTPI to consummate the transactions contemplated by this Agreement, the
Stockholders Agreement or the Registration Rights Agreement. The Restated
Certificate of Incorporation has been duly filed with the Secretary of State of
the State of Delaware.
3.4 No Conflict. Except as set forth in the Disclosure Schedule attached
hereto, neither the execution and delivery of this Agreement, the Stockholders
Agreement or the Registration Rights Agreement by DTPI nor the consummation or
performance of any of its obligations hereunder and 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 DTPI's
Organizational Documents; (ii) any resolution adopted by DTPI's board of
directors; (iii) any Legal Requirement or Order to which DTPI is subject; or
(iv) any contract to which DTPI is a party or by which 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
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DTPI or on the ability of DTPI to consummate the transactions contemplated by
this Agreement, the Stockholders Agreement or the Registration Rights Agreement.
3.5 Validity of Service Contracts. Except as set forth in the Disclosure
Schedule attached hereto, all of the service contracts entered into by DTPI
since the date of its inception are valid and binding obligations of DTPI,
enforceable against it in accordance with their respective terms, in each case
except as such enforceability may be limited by (A) bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting creditors' rights
generally and (B) the general principles of equity, regardless of whether
asserted in a proceeding in equity or at law.
3.6 Absence of Certain Changes. Since December 31, 1997, there has been
no material adverse change in the business, prospects, or condition, financial
or otherwise, of DTPI.
3.7 Validity of Purchased Stock. The Purchased Stock will be, when
issued upon the terms and for the consideration specified in this Agreement,
validly issued and outstanding, fully paid and nonassesable.
3.8 Absence of Undisclosed Liabilities. Except (i) as set forth in the
Disclosure Schedule attached hereto or (ii) as set forth on that Balance Sheet
dated as of December 31, 1997 (the "Balance Sheet"), DTPI and its subsidiaries
have not incurred since its inception, and none of their respective assets or
properties are subject to, any material liabilities (accrued, absolute,
contingent, or otherwise), other than unsecured accounts payable arising in the
ordinary course of business, federal and state income taxes accrued in respect
of the operations of DTPI and its subsidiaries, or other normal expenses and
liabilities accrued in the ordinary course of business.
3.9 Contracts; Absence of Undisclosed Commitments to the Company. Except
for the supply agreement attached hereto as Exhibit E and except as set forth in
the Disclosure Schedule attached hereto, DTPI is not a party to any material
commitment or agreement with the Company or any of its subsidiaries. Section 3.9
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.
3.10 Litigation. Except as described in the Disclosure 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.
3.11 Compliance with Laws. Except as set forth in the Disclosure
Schedule, since the date of its respective incorporation, each of DTPI and its
subsidiaries has complied in all material
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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. Except as set forth in the Disclosure Schedule,
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
listed on Schedule 3.11 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 cause a material adverse effect on the assets, conditions and affairs
(financial or otherwise) of DTPI or any of its subsidiaries or joint ventures.
3.12 Authorized Capital Stock of DTPI. Immediately prior to the Closing,
the authorized capital stock of DTPI consists of 1,500,000 shares, of which
1,000,000 shares are designated Common Stock, $.0001 par value ("Common Stock"),
and 500,000 shares are designated Preferred Stock, $.0001 par value ("Preferred
Stock"). Immediately prior to the Closing, 50,000 shares of Common Stock, and no
shares of Preferred Stock, are issued and outstanding. All issued and
outstanding Common Stock is duly authorized and issued, fully paid and
nonassessable, and free of any preemptive rights. Giving effect to the Closing,
2,600,000 shares of Common Stock, 1,200,000 shares of Series A Stock, and
1,000,000 shares of Series B Stock, will be issued and outstanding, and
1,200,000 shares of Common Stock will be reserved for issuance upon conversion
of Series A Stock, 1,000,000 shares of Common Stock will be reserved for
issuance upon conversion of Series B Stock, 847,059 shares of Common Stock will
be reserved for issuance upon the exercise of options outstanding under the
Option Plan, and 847,059 shares of Common Stock are reserved for issuance upon
exercise of options available for grant under the Option Plan (such amounts to
be increased by adjustments pursuant to the terms of the Restated Certificate of
Incorporation or the Option Plan, as the case may be). Other than the Series A
Stock, the Series B Stock, and options outstanding under the Option Plan, DTPI
is not a party to any contractual obligations (present or future, fixed or
contingent) to issue shares of its capital stock.
3.13 No Brokers and Finders. 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 the Purchasers for
any commission, fee or other compensation as a finder or broker as a result of
the transactions contemplated by this Agreement; and the Company agrees to
indemnify and hold the Purchasers harmless against any such commissions, fees or
other compensation.
3.14 Subsidiaries. Except for its overseas subsidiary and joint venture
companies as disclosed to the Purchasers and except as set forth in the
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.
3.15 ERISA. Except as set forth in the Disclosure 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
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sharing or other similar plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
3.16 Taxes. DTPI has filed all tax returns required to be filed in 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 on 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.
3.17 Environmental and Safety Laws. To the best of its knowledge, 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.
3.18 Contribution of Assets. The Company has contributed all contracts
and other intangibles required for the operation of DTPI as it is presently
conducted or proposed to be conducted.
3.19 Offering. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 2.1 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.
3.20 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.
3.21 Disclosure. The Company has fully provided the Purchasers with all
the information that such Purchasers have requested for deciding whether to
purchase the Purchased Stock and all information that DTPI believes is
reasonably necessary to enable such Purchasers to make such decision. Neither
this Agreement, the Stockholders 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.
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3.22 Organizational Costs. The Company has paid, or hereby agrees that it
shall promptly pay upon receipt of invoices for, all of the costs associated
with the organization and initial capitalization of DTPI set forth on the
Disclosure Schedule. Except as set forth on the Disclosure Schedule, or the
Balance Sheet, neither DTPI nor the Company has incurred any material costs
associated with the organization or the initial capitalization of DTPI.
ARTICLE 4
COVENANTS
4.1 Noncompetition.
(a) For a period of 10 years following the date hereof, except as
permitted otherwise hereinbelow, the Company shall not engage in a "Competing
Business." The Company agrees that it shall not enter into an agreement to be
acquired pursuant to an Acquisition of the Company which constitutes a Sale of
the Company, unless (i) the purchaser therein agrees not to use the Company, the
Company's products or the Confidential Information (as defined below) to engage
in a Competing Business, or (ii) such acquiring Person agrees to make a cash
payment to DTPI at the closing of such Sale of the Company as follows. If such
Sale of the Company occurs (i) within 12 months after the consummation of the
Second Financing, the cash payment shall be $25 million, (ii) between 13 and 24
months after the consummation of the Second Financing, the cash payment shall be
$15 million and (iii) between 25 and 36 months after the consummation of the
Second Financing, the cash payment shall be $5 million. If such Sale of the
Company occurs after 36 months following the consummation of the Second
Financing, then such acquiring Person shall be permitted to engage in a
Competing Business through the Company or its products without having to make
any cash payment to DTPI. As used herein, "Confidential Information" shall mean
any proprietary or secret information relating to the business of DTPI,
including, without limitation, the proprietary rights, operations, business
plans, customer lists, or other work product developed by or for DTPI, whether
on the premises of DTPI or elsewhere.
(b) For a period of 5 years following the date hereof, so long as
Pequot Affiliates shall hold 10% of the Securities of DTPI, Pequot Private
Equity Fund, L.P. shall not make any direct equity investments in excess of 5%
of the outstanding Securities of a Competing Service, except for public
companies in which the investment shall not exceed 9.9%. Nothing herein shall
preclude or limit the Pequot Private Equity Fund, L.P. from acquiring Securities
of a Competing Service in open market transactions.
ARTICLE 5
DELIVERIES AT CLOSING
5.1 Deliveries to the Purchasers. Simultaneously with the execution of
this Agreement, DTPI shall deliver to the Purchasers all of the following, each
in form and substance reasonably satisfactory to Purchasers and their counsel:
(a) A copy of all charter documents of DTPI and a certificate of
good standing with respect to DTPI certified by the Delaware Secretary of State,
a certified copy of the resolutions of the Board of Directors evidencing
approval of this Agreement, the Stockholders Agreement, the Registration Rights
Agreement, the authorization for issuance of the Purchased Stock and other
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matters contemplated hereby and thereby, a certified copy of the By-laws of
DTPI, and certified copies of all documents evidencing other necessary corporate
or other action and governmental approvals, if any, with respect to consummation
of the transactions contemplated by this Agreement.
(b) A certificate of the Secretary or an Assistant Secretary of
DTPI stating the names of the officers of DTPI authorized to sign this
Agreement, the certificates for the Purchased Stock, and the other documents or
certificates to be delivered pursuant to this Agreement by DTPI or any of its
officers, together with the true signatures of such officers.
(c) A compliance certificate from the President or Chief Financial
Officer of DTPI stating that the representations and warranties of DTPI
contained in Article III hereof are, to the best of his knowledge, true and
correct as of the date hereof, and that no condition or event has occurred or is
continuing or will result from the execution and delivery of this Agreement or
the issuance and sale of the Purchased Stock, which constitutes a breach of this
Agreement or would constitute a breach of this Agreement but for the requirement
that notice be given or time elapse, or both.
(d) An opinion of Stradling Yocca Carlson & Rauth, dated the date
hereof, as to the matters referred to in the first sentence of Section 3.1 and
in Sections 3.2, 3.7 and 3.19, subject to customary qualifications.
(e) Such other documents relating to the transactions contemplated
by this Agreement as the Purchasers or their counsel may reasonably request.
5.2 Deliveries to DTPI. Simultaneously with the execution of this
Agreement, the Purchasers shall deliver to DTPI all of the following, each in
form and substance reasonably satisfactory to Purchasers and their counsel:
(a) A copy of all Organizational Documents of the Purchasers and a
certificate of good standing with respect to each Purchaser from the secretary
of state of the jurisdiction of its formation, a certified copy of the
resolutions of the officers of each Purchaser evidencing approval of this
Agreement, the Stockholders Agreement, the Registration Rights Agreement and
certified copies of all documents evidencing other necessary action and
governmental approvals, if any, with respect to consummation of the transactions
contemplated by this Agreement.
(b) A certificate of the Secretary or an Assistant Secretary of
each Purchaser stating the names of the officers of such Purchaser authorized to
sign this Agreement and the other documents or certificates to be delivered
pursuant to this Agreement by DTPI or any of its officers, together with the
true signatures of such officers.
(c) A compliance certificate from the President of each Purchaser
stating that the representations and warranties of such Purchaser contained in
Article II hereof are, to the best of his knowledge, true and correct as of the
date hereof, and that no condition or event has occurred or is continuing or
will result from the execution and delivery of this Agreement or the issuance
and sale of the Purchased Stock, which constitutes a breach of this Agreement or
would constitute a breach of this Agreement but for the requirement that notice
be given or time elapse, or both.
(d) An opinion of Fried, Frank, Harris, Shriver & Jacobson, dated
the date
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hereof, as to the matters referred to in Section 2.1(b)(i)-(iii), subject to
customary qualifications.
(e) Such other documents relating to the transactions contemplated
by this Agreement as DTPI or its counsel may reasonably request.
5.3 Other Deliveries and Filings. Simultaneously with the execution of
this Agreement, the following agreements and instruments shall be executed
and/or delivered, as appropriate:
(a) Stockholders Agreement. A Stockholders Agreement among DTPI,
the Company and the Purchasers in the form attached hereto as Exhibit A.
(b) Registration Rights Agreement. A Registration Rights Agreement
among DTPI, the Company and the Purchasers in the form attached hereto as
Exhibit B.
(c) Restated Certificate of Incorporation. The Restated
Certificate of Incorporation in the form attached hereto as Exhibit C which has
been filed with the Delaware Secretary of State.
(d) Supply Agreement. A Supply Agreement between DTPI and the
Company in the form attached hereto as Exhibit D.
(e) The Company's Private Placement. A Stock Purchase Agreement
among the Company and the Purchasers in connection with a private placement of
the Company's Common Stock in the form attached hereto as Exhibit E.
(f) Consulting Agreement. A Consulting Agreement among DTPI and
the Purchasers in the form attached hereto as Exhibit F.
(g) Series B Stock. The purchase by the Company and the sale of
DTPI of an aggregate of $5 million of Series B Stock shall have been completed
on the terms previously furnished to Purchasers.
ARTICLE 6
DEFINITIONS AND ACCOUNTING TERMS
6.1 Certain Defined Terms. As used in this Agreement, unless the context
requires otherwise, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
"Acquisition" means the purchase by or of any Person or any of its
Subsidiaries or of all or substantially all of the assets or stock
of any such Person, whether by means of an asset acquisition, stock
purchase, merger or otherwise.
"Agreement" means this Stock Purchase Agreement as from time to time
amended and in effect between the parties.
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"Board of Directors" means the board of directors of DTPI.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means DTPI's common stock, $.0001 par value.
"Company" means STM Wireless, Inc., a Delaware corporation, and its
successors and assigns.
"Competing Business" shall mean the engagement or participation as a
service provider using satellites to provide fixed station telephony
services using the intellectual property of the Company.
"Competing Service" shall mean the engagement or participation as a
service provider using satellites to provide fixed station telephony
services.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" shall mean taking into account all shares of
Common Stock outstanding and all shares potentially required to be
issued by reason of any outstanding rights, options, warrants or
other instruments or securities exchangeable for or convertible into
Common Stock or evidencing any right to subscribe for, purchase or
otherwise acquire Common Stock as of the date of determination. For
purposes of computing the capital stock of DTPI on a Fully Diluted
Basis immediately following the Closing, the shares of Common Stock
subject to the DTPI's Option Plan shall be disregarded, whether or
not any options have been issued under such plan at such time.
"GAAP" means generally accepted accounting principles, consistently
applied.
"holder" means, with respect to Purchased Stock, any Person who
holds such Purchased Stock regardless of whether any express
assignment of rights under this Agreement was made to such Person.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute or treaty.
"Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any
court, administrative agency or other governmental body or by any
arbitrator.
"Organizational Documents" shall mean (a) the articles or
certificate of incorporation, all certificates of determination and
designation, and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate or
articles of limited partnership of a limited partnership; (d) the
operating agreement, limited liability company agreement and the
certificate or articles of organization or
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formation of a limited liability company; (e) any charter or similar
document adopted or filed in connection with the creation, formation
or organization of a Person (including, without limitation, any
trust); and (f) any amendment to any of the foregoing.
"Pequot Affiliates" means, collectively, Pequot and its Affiliates,
and any other Person controlled by an Affiliate of Pequot, and any
successor to any of the foregoing.
"Person" shall be construed broadly and shall include an individual,
a partnership, a corporation, an association, a joint stock company,
a limited liability company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Proceeding" shall mean any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought,
conducted or heard by or before, or otherwise involving, any
governmental body or arbitrator.
"Purchased Stock" shall have the meaning assigned to that term in
Section 1.1
"Purchasers" means Pequot Private Equity Fund, L.P. and Pequot
Offshore Private Equity Fund, L.P., and their respective successors
and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement entered into by the parties hereto as from time to time
amended.
"Sale of the Company" shall have the meaning assigned to that term
in the Stockholders Agreement.
"Second Financing" means a sale by DTPI of its debt or equity
securities to persons, other than the holders of the Series A
Preferred Stock, for aggregate proceeds of at least $20 million.
"Securities" means, with respect to any Person, such Person's
"securities" as defined in Section 2(1) of the Securities Act of
1933, as amended, and includes such Person's capital stock or other
equity interests or any options, warrants or other securities that
are directly or indirectly convertible into, or exercisable or
exchangeable for, such Person's capital stock or other equity
interests. Whenever a reference herein to Securities is referring to
any derivative Securities, the rights of a Stockholder shall apply
to such derivative Securities and all underlying Securities directly
or indirectly issuable upon conversion, exchange or exercise of such
derivative securities.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission (or of any other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at
the time.
-13-
<PAGE> 14
"Series A Stock" means DTPI's Series A Preferred Stock, $.0001 par
value.
"Stockholders Agreement" means the Stockholders Agreement entered
into by the parties hereto as from time to time amended.
"Subsidiary" of any Person means any other Person (i) whose
Securities having a majority of the general voting power in electing
the board of directors or equivalent governing body of such other
Person (excluding Securities entitled to vote only upon the failure
to pay dividends thereon or the occurrence of other contingencies)
are, at the time as of which any determination is being made, owned
by such Person either directly or indirectly through one or more
other entities constituting Subsidiaries or (ii) more than a 50%
interest in the profits or capital of whom is, at the time as of
which any determination is being made, owned by such Person either
directly or indirectly through one or more other entities
constituting Subsidiaries.
6.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all other financial data
submitted pursuant to this Agreement shall be prepared and calculated in
accordance with such principles.
ARTICLE 7
MISCELLANEOUS
7.1 No Waiver; Cumulative Remedies. No failure or delay on the part of
DTPI, the Company, the Purchasers or any other party having rights hereunder in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
7.2 Amendments, Waivers and Consents. Except as otherwise provided
herein, changes in or additions to this Agreement may be made, and compliance
with any covenant or provision herein or therein set forth may be omitted or
waived only if DTPI, the Company and the holder of a majority of the shares of
Purchased Stock shall consent in writing thereto. Any waiver or consent may be
prospective or retroactive and may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
7.3 Addresses for Notices, etc. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telegraphic
or facsimile communication) and mailed, by certified or registered mail, or
telegraphed, or sent by facsimile transmission, or delivered to the applicable
party at the address indicated below:
If to DTPI:
Emil Youssefzadeh
Chief Executive Officer
Direct-To-Phone International, Inc.
One Mauchly
-14-
<PAGE> 15
Irvine, California 92618-2305
Facsimile: 714-753-0808
With a copy to:
K.C. Schaaf, Esquire
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Facsimile: 714-725-4100
-15-
<PAGE> 16
If to the Company:
Emil Youssefzadeh
President and Chief Executive Officer
STM Wireless, Inc.
One Mauchly
Irvine, California 92618-2305
Facsimile: 714-753-0808
With a copy to:
K.C. Schaaf, Esquire
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Facsimile: 714-725-4100
If to the Purchasers:
Amiel M. Peretz
Pequot Private Equity Partners, LLC
354 Pequot Avenue
Southport, Connecticut 06490
Facsimile: 203-255-2558
With a copy to:
Robert Schwenkel
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Facsimile: (212) 859-4000
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when sent by facsimile transmission with confirmation of
transmission, or personally delivered, be effective upon facsimile transmission
or personal delivery.
-16-
<PAGE> 17
7.4 Costs, Expenses and Taxes. The Company and DTPI shall bear their own
costs and expenses incurred in connection with the investigation, preparation,
execution and delivery of this Agreement, the Stockholders Agreement, the
Registration Rights Agreement and the other instruments and documents to be
delivered hereunder and thereunder and the transactions contemplated hereby and
thereby. DTPI shall pay for the reasonable costs and expenses of the Purchasers,
up to $150,000, incurred in connection with the investigation, preparation,
execution and delivery of this Agreement, the Stockholders Agreement, the
Registration Rights Agreement and the other instruments and documents to be
delivered hereunder and thereunder and the transactions contemplated hereby and
thereby.
7.5 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of DTPI, the Company and the Purchasers and their
respective successors and assigns.
7.6 Survival of Representations and Warranties. All representations and
warranties made in this Agreement, or any other instrument or document delivered
in connection herewith, shall survive the execution and delivery hereof for a
period of one year from the date of this Agreement.
7.7 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements,
representations, discussions or understandings concerning the subject matter
thereof.
7.8 Severability. The invalidity or unenforceability of any provision
hereto shall in no way affect the validity or enforceability of any other
provision.
7.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
7.10 Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
7.12 Further Assurances. From and after the date of this Agreement, upon
the request of the Purchasers, DTPI and the Company shall execute and deliver
such instruments, documents and other writings as may be necessary or desirable
to confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
7.13 Waiver of Jury Trial; Consent to Jurisdiction. Each of the parties
irrevocably (a) waives any and all right to trial by jury in any legal
proceeding arising out of this Agreement, or any of the transactions
contemplated hereby, (b) submits to the nonexclusive personal jurisdiction in
the State of California, the courts thereof and the United States District
Courts sitting therein, for the enforcement of this Agreement, (c) waives any
and all personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
-17-
<PAGE> 18
within the State of California for the purpose of litigation to enforce this
Agreement, and (d) agrees that service of process may be made upon it in the
manner prescribed in Section 7.3 for the giving of notices to the parties.
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.
By:_________________________________________
Name:
Title:
DIREC-TO-PHONE INTERNATIONAL, INC.
By:_________________________________________
Name:
Title:
PEQUOT PRIVATE EQUITY FUND, L.P.
By: Pequot Private Equity Partners, LLC,
General Partner
By:_________________________________________
Lawrence D. Lenihan,
Managing Member
PEQUOT OFFSHORE PRIVATE EQUITY FUND, INC.
By: Pequot Private Equity Partners, LLC,
Investment Manager
By:_________________________________________
Lawrence D. Lenihan,
Managing Member
-18-
<PAGE> 19
SCHEDULE A
<TABLE>
<CAPTION>
Name of Investor Number of Shares Payment Amount
- ---------------- ---------------- --------------
<S> <C> <C>
Pequot Private Equity Fund, L.P. 1,065,141 $5,325,707
Pequot Offshore Private Equity Fund, Inc. 134,859 $ 674,293
Total Investment $6,000,000
</TABLE>
<PAGE> 1
EXHIBIT 10.25
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of March 5, 1998 (the "Closing Date"), by and among STM
WIRELESS, INC., a Delaware corporation (the "Purchaser"), and DIREC-TO-PHONE
INTERNATIONAL, INC., a Delaware corporation and wholly-owned subsidiary of the
Company ("DTPI").
R E C I T A L S :
WHEREAS, concurrently with the execution hereof, DTPI and Pequot Private
Equity Fund, L.P. and Pequot Offshore Private Equity Fund, L.P. (collectively,
"Pequot") are entering into a Stock Purchase Agreement (the "Purchase
Agreement") pursuant to which Pequot will purchase, and DTPI will sell and issue
to Pequot, an aggregate of One Million Two Hundred Thousand (1,200,000) shares
of newly issued Series A Preferred Stock of DTPI, $.0001 par value, which shall
constitute in the aggregate twenty five percent (25%) of the outstanding capital
stock of DTPI on a Fully Diluted Basis; and
WHEREAS, the Purchaser desires to purchase, and DTPI desires to sell and
issue to the Purchaser at the Closing, an aggregate amount of one million
(1,000,000) shares of newly issued Series B Preferred Stock of DTPI, $.0001 par
value (the "Series B Stock"), which, together with the Common Stock of DTPI,
$.0001 par value (the "Common Stock") held by the Company, shall constitute in
the aggregate seventy five percent (75%) of the outstanding capital stock of
DTPI on a Fully Diluted Basis (as defined in Section 6.1 below); and
WHEREAS, in reliance on this Agreement and the representations, warranties
and agreements of the parties contained herein, each of the parties is entering
into this 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
PURCHASE, SALE AND TERMS OF SHARES
1.1 The Purchased Shares. DTPI has authorized the issuance and sale of
an aggregate of one million (1,000,000) shares of Series B Stock (the "Purchased
Stock") to the Purchaser which represents 25% of the capital stock of DTPI
immediately following the Closing on a Fully Diluted Basis (as defined in the
Purchase Agreement).
1.2 The Closing. Upon the execution of this Agreement, DTPI agrees to
issue and sell to Purchaser, and, the Purchaser agrees to purchase the Purchased
Stock for the purchase price of $5.00 per share.
Upon execution of this Agreement, DTPI shall deliver one or more
certificates evidencing the Purchased Stock, registered in the name of
Purchaser, evidencing the shares of Series
<PAGE> 2
B Stock to be purchased by the Purchaser, against payment of the purchase price
therefor by cancellation of indebtedness that is due and owing to the Purchaser
from DTPI.
ARTICLE 2
REPRESENTATIONS OF THE PURCHASERS
2.1 Representations by Purchasers. The Purchaser represents and warrants
to DTPI, on and as of the date of this Agreement, as follows:
(a) Investment.
(i) Purchaser has been advised that all Purchased Stock to
be purchased by Purchaser from DTPI hereunder has 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 Purchased Stock is to be
effected, and that in this connection DTPI is relying in part on the
representations of Purchaser set forth herein.
(ii) It is Purchaser's intention to acquire the Purchased
Stock solely for its own account and that the Purchased Stock is being and
will be acquired for investment purposes only, and not with a view to
distribution or resale of the Purchased Stock.
(iii) Purchaser is able to bear the economic risk of an
investment in the Purchased Stock acquired by it pursuant to this
Agreement and can afford to sustain a total loss on such investment.
(iv) 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 Purchased Stock. Purchaser has not been formed or organized for the
specific purpose of acquiring the Purchased Stock. 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 Purchased Stock.
(v) Purchaser understands that it may not be readily able to
sell or dispose of the Purchased Stock and may thus have to bear the risk
of its investment for a substantial period of time, or forever. Purchaser
is aware that the Purchased Stock 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 Purchased Stock for at least 1 year. Among the
conditions for use of Rule 144 is the availability of current information
to the public about DTPI.
(vi) Purchaser is an "accredited investor" for purposes of
Regulation D promulgated by the Commission under the Securities Act and,
by reason of its business or financial experience or the business or
financial experience of its professional advisors (who are unaffiliated
with and who are not compensated by DTPI or any Affiliate or selling agent
of DTPI, directly or indirectly), has the capacity to protect its own
interests in connection with the purchase of the Purchased Stock.
-2-
<PAGE> 3
(vii) Purchaser acknowledges that the certificates
representing the Purchased Stock, when issued, shall contain the following
legend:
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 AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT
OF 1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
(b) Authorization.
(i) Purchaser is a duly organized and validly 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, the Stockholders Agreement,
in the form attached hereto as Exhibit A, and the Registration Rights
Agreement, in the form attached hereto as Exhibit B;
(ii) Purchaser has duly authorized, executed and delivered
this Agreement, the Stockholders Agreement and the Registration Rights
Agreement;
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND DTPI
DTPI represents and warrants on and as of the date of this Agreement,
except as set forth in the Disclosure Schedule attached hereto as Schedule B
(the "Disclosure Schedule"):
3.1 Organization and Standing of DTPI. DTPI is a duly organized and
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 for
the ownership and operation of its properties and for the carrying on of its
business as presently conducted.
3.2 Corporate Action. DTPI has all necessary corporate power and
authority to execute and deliver and perform its obligations under this
Agreement, the Stockholders Agreement and the Registration Rights Agreement, and
all the transactions contemplated hereby and thereby, including the sale and
issuance of the Purchased Stock.
3.3 Validity of Purchased Stock. The Purchased Stock will be, when
issued upon the terms and for the consideration specified in this Agreement,
validly issued and outstanding, fully paid and nonassesable.
ARTICLE 4
DELIVERIES AT CLOSING
4.1 Deliveries and Filings. Simultaneously with the execution of this
Agreement, the following agreements and instruments shall be executed and/or
delivered, as appropriate:
-3-
<PAGE> 4
(a) Stockholders Agreement. A Stockholders Agreement among DTPI,
Pequot and the Purchaser in the form attached hereto as Exhibit A.
(b) Registration Rights Agreement. A Registration Rights Agreement
among DTPI, Pequot and the Purchaser in the form attached hereto as Exhibit B.
(c) Restated Certificate of Incorporation. The Restated
Certificate of Incorporation in the form attached hereto as Exhibit C which has
been filed with the Delaware Secretary of State.
(d) Supply Agreement. A Supply Agreement between DTPI and the
Purchaser in the form attached hereto as Exhibit D.
ARTICLE 5
MISCELLANEOUS
5.1 No Waiver; Cumulative Remedies. No failure or delay on the part of
DTPI or the Purchaser or any other party having rights hereunder in exercising
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
5.2 Amendments, Waivers and Consents. Except as otherwise provided
herein, changes in or additions to this Agreement may be made, and compliance
with any covenant or provision herein or therein set forth may be omitted or
waived only if DTPI and the Purchaser shall consent in writing thereto. Any
waiver or consent may be prospective or retroactive and may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
5.3 Addresses for Notices, etc. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telegraphic
or facsimile communication) and mailed, by certified or registered mail, or
telegraphed, or sent by facsimile transmission, or delivered to the applicable
party at the address indicated below:
If to DTPI:
Emil Youssefzadeh
Chief Executive Officer
Direct-To-Phone International, Inc.
One Mauchly
Irvine, California 92618-2305
Facsimile: 714-753-0808
-4-
<PAGE> 5
With a copy to:
K.C. Schaaf, Esquire
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Facsimile: 714-725-4100
If to the Purchaser:
Emil Youssefzadeh
President and Chief Executive Officer
STM Wireless, Inc.
One Mauchly
Irvine, California 92618-2305
Facsimile: 714-753-0808
With a copy to:
K.C. Schaaf, Esquire
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Facsimile: 714-725-4100
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, sent by facsimile transmission with confirmation of
transmission, or personally delivered, be effective upon facsimile transmission
or personal delivery.
5.4 Costs, Expenses and Taxes. The Purchaser and DTPI shall bear their
own costs and expenses incurred in connection with the investigation,
preparation, execution and delivery of this Agreement, the Stockholders
Agreement, the Registration Rights Agreement and the other instruments and
documents to be delivered hereunder and thereunder and the transactions
contemplated hereby and thereby.
5.5 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of DTPI and the Purchaser and their respective successors
and assigns.
5.6 Survival of Representations and Warranties. All representations and
warranties made in this Agreement, or any other instrument or document delivered
in connection herewith, shall survive the execution and delivery hereof for a
period of one year from the date of this Agreement.
5.7 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements,
representations, discussions or understandings concerning the subject matter
thereof.
-5-
<PAGE> 6
5.8 Severability. The invalidity or unenforceability of any provision
hereto shall in no way affect the validity or enforceability of any other
provision.
5.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
5.10 Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
5.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.12 Further Assurances. From and after the date of this Agreement, upon
the request of the Purchaser, DTPI shall execute and deliver such instruments,
documents and other writings as may be necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.
5.13 Waiver of Jury Trial; Consent to Jurisdiction. Each of the parties
irrevocably (a) waives any and all right to trial by jury in any legal
proceeding arising out of this Agreement, or any of the transactions
contemplated hereby, (b) submits to the nonexclusive personal jurisdiction in
the State of California, the courts thereof and the United States District
Courts sitting therein, for the enforcement of this Agreement, (c) waives any
and all personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of California for the purpose of litigation to enforce this
Agreement, and (d) agrees that service of process may be made upon it in the
manner prescribed in Section 5.3 for the giving of notices to the parties.
-6-
<PAGE> 7
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.
By:_________________________________________
Name:
Title:
DIREC-TO-PHONE INTERNATIONAL, INC.
By:_________________________________________
Name:
Title:
-7-
<PAGE> 1
EXHIBIT 10.26
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of March 5,
1998, by and among STM WIRELESS, INC., a Delaware corporation (the "Company"),
PEQUOT PRIVATE EQUITY FUND, L.P., and its affiliated entities as set forth on
the signature page hereto (referred to individually as the "Purchaser" and
collectively as the "Purchasers").
R E C I T A L S
WHEREAS, the Purchasers desires to purchase, and the Company desires to
sell and issue to the Purchasers at the Closing an aggregate amount of Five
Hundred Seventy One Thousand Four Hundred and Twenty-Nine (571,429) shares of
newly issued Common Stock of the Company, $.001 par value (the "STM Common
Stock"), each purchasing the number of shares set forth opposite its name on
Schedule 1 attached hereto; and
WHEREAS, concurrently with, and as a condition to, the closing of the
transactions contemplated by this Agreement, Direc-To-Phone International, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Company ("DTPI"),
and the Purchasers are executing that certain Stock Purchase Agreement (the
"DTPI Stock Purchase Agreement") pursuant to which the Purchasers will purchase
an aggregate amount of 1,200,000 shares of newly issued Series A Preferred Stock
of DTPI, $.0001 par value (the "DTPI Preferred Stock") which shall constitute
twenty five percent (25%) (on a Fully Diluted Basis as defined in Section 6.1
herein) of the outstanding capital stock of DTPI.
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
PURCHASE, SALE AND TERMS OF SHARES
1.1 Sale of the Stock. Subject to the terms and conditions hereof, the
Company will issue and sell to the Purchasers, and the Purchasers will purchase
an aggregate of 571,429 shares of STM Common Stock (the "Issued Stock"), at a
price per share equal to $7.00 (the "Purchase Price").
1.2 The Closing. Simultaneously with the execution of this Agreement,
the Company shall issue and sell to the Purchasers, and, subject to and in
reliance upon the representations, warranties and other terms of this Agreement,
each Purchaser shall purchase that number of shares of Issued Stock set forth
opposite its name in Schedule A hereto, for the Purchase Price.
Such purchase and sale shall take place simultaneously with the execution
of this Agreement at a closing (the "Closing") to be held concurrently with the
closing of the transactions contemplated by the DTPI Stock Purchase Agreement.
At the Closing, the Company shall deliver certificates, registered in the
appropriate Purchaser's name, evidencing the shares of the Common Stock to be
purchased by such Purchaser at such Closing, against payment of the purchase
price therefor by a
-1-
<PAGE> 2
wire transfer to the account of the Company or the delivery of a cashier's check
payable to the order of the Company.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
2.1 Representations by the Purchasers. The Purchasers, jointly and
severally, represent and warrant, on and as of the date of this Agreement, that:
(a) Investment.
(i) Each Purchaser has been advised that all the Issued
Stock to be purchased by such Purchaser from the Company
hereunder has not been registered under the Securities
Act nor qualified under any state securities laws on the
ground, among others, that no distribution or public
offering of the Issued Stock is to be effected, and that
in this connection the Company is relying in part on the
representations of the Purchasers set forth herein.
(ii) It is each Purchaser's intention to acquire the Issued
Stock solely for its own account and that the Issued
Stock is being and will be acquired for investment
purposes only, and not with a view to distribution or
resale of the Issued Stock.
(iii) Each Purchaser is able to bear the economic risk of an
investment in the Issued Stock acquired by it pursuant
to this Agreement and can afford to sustain a total loss
on such investment.
(iv) Each 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 Issued Stock. None of the Purchasers has
been formed or organized for the specific purpose of
acquiring the Issued Stock. Each 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
Issued Stock and for verifying the accuracy of any
information furnished to it or to which it had access.
Each Purchaser represents and warrants that it is basing
its investment decision on current and historical
information relating to the Company and the
representations and warranties of the Company contained
herein and not on projections of future performance
furnished to the Purchasers by the Company. Each
Purchaser further represents and warrants that the
nature and amount of the Issued Stock it is purchasing
is consistent with its investment objectives, abilities
and resources.
-2-
<PAGE> 3
(v) Each Purchaser understands that it may not be readily
able to sell or dispose of the Issued Stock and may thus
have to bear the risk of its investment for a
substantial period of time, or forever. Each Purchaser
is aware that the Issued Stock 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 Issued Stock for at least 1 year. Among the
conditions for use of Rule 144 is the availability of
current information to the public about the Company.
(vi) Each Purchaser is an "accredited investor" for purposes
of Regulation D promulgated by the Commission under the
Securities Act and, by reason of its business or
financial experience or the business or financial
experience of its professional advisors (who are
unaffiliated with and who are not compensated by the
Company or any Affiliate or selling agent of the
Company, directly or indirectly), has the capacity to
protect its own interests in connection with the
purchase of the Issued Stock.
(vii) Each Purchaser acknowledges that the certificates
representing the Issued Stock, when issued, shall
(subject to removal as provided in the final sentence of
Section 6.4(c) contain the following legend:
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 AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT
OF 1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
(b) Authorization. Each Purchaser further represents that:
(i) It is duly organized, validly existing and in good
standing under and by virtue of the laws of the
jurisdiction in which it is organized and has all
requisite power and authority to enter into and perform
its obligations under this Agreement;
(ii) It has duly authorized, executed and delivered this
Agreement;
(iii) This Agreement constitutes the valid and binding
obligations of such Purchaser, enforceable against it in
accordance with their respective terms;
(iv) No consents or approvals of any Person are required in
connection with the execution, delivery and performance
of this Agreement by such Purchaser which have not
heretofore been obtained;
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(v) Execution and performance of this Agreement shall not
result in a default under other material agreements or
instruments by such Purchaser; and
(vii) There is no pending Proceeding that has been commenced
against such Purchaser that challenges, or may have the
effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the transactions
contemplated by this Agreement. There is no Order to
which such Purchaser is bound and no event has occurred
which may have the effect of enjoining, preventing or
prohibiting the transactions contemplated by this
Agreement.
(c) No Conflict. Neither the execution and delivery of this
Agreement by either Purchaser nor the consummation or performance of any of the
transactions by any of the Purchasers will give any Person the right to prevent,
delay or otherwise interfere with any of the transactions contemplated hereby
pursuant to: (i) any provision of any Purchaser's Organizational Documents; (ii)
any resolution adopted by any of the Purchasers; (iii) any Legal Requirement or
Order to which any of the Purchasers may be subject; or (iv) any contract to
which any of the Purchasers is a party or by which any of the Purchasers may be
bound, except in the case of each of clauses (iii) and (iv) above, for such
contraventions, conflicts, violations, liabilities, reassessments, revaluations,
breaches or creations of encumbrances which, individually and in the aggregate,
would not have a material adverse effect on the Company.
(d) Brokers. Each Purchaser represents that no Person has or will
have, as a result of the transactions contemplated by this Agreement, any right,
interest or valid claim upon or against the Company for any commission, fee or
other compensation as a finder or broker because of any act or omission by such
Purchaser and the Purchasers agree to indemnify and hold the Company harmless
against any such commissions, fees or other compensation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, on and as of the date of this
Agreement, that:
3.1 Organization and Standing of the Company. The Company is a duly
organized and validly existing corporation in good standing under and by virtue
of the laws of the jurisdiction in which it is organized and has all requisite
corporate power and authority for the ownership and operation of its properties
and for the carrying on of its business as presently conducted. The Company has
furnished to Purchasers or their respective counsel copies of the Company's
Certificate of Incorporation, as amended and restated to date, and its By-laws,
as currently in effect. The documents so furnished are true, correct and
complete copies of the existing original documents, and contain all
modifications, amendments, deletions and revocations.
3.2 Corporate Action. The Company has all necessary corporate power and
authority to execute and deliver and perform its obligations under this
Agreement and all the transactions contemplated hereby, including the sale and
issuance of the Issued Stock. All corporate proceedings
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<PAGE> 5
have been taken and all corporate authorizations have been secured (with no
stockholder approval required) which are necessary to authorize the execution,
delivery and performance of this Agreement by the Company. This Agreement and
any other agreements and instruments executed in connection herewith are the
valid and binding obligations of the Company, enforceable in accordance with
their respective terms.
3.3 Approvals and Material Agreements. No authorization, consent,
approval, license, exemption 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 offer, issuance, sale of the Issued Stock, or the execution or
delivery by the Company, or for the performance by it of its obligations under,
this Agreement except for filings to be made, if any, to comply with regulations
of the FTC or with exemptions from registration or qualification under federal
and state securities laws. Neither the offer, issuance or sale of the Issued
Stock, the execution, delivery and performance of this Agreement nor the
consummation of any of the transactions contemplated hereby, conflicts or will
conflict with, or constitutes or will constitute a breach of, or a default
under, any material agreement, indenture, lease or other instrument to which the
Company is a party or by which the Company or any of its properties may be
bound, or violates or will violate any judgment, injunction, order or decree
applicable to the Company or any of its properties.
3.4 Securities and Exchange Commission Reports of the Company. The
Company has furnished the Purchasers with copies of its Annual Reports on Form
10-K for the fiscal years ended December 31, 1995 and December 31, 1996 and its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30,
1997 and September 30, 1997, the Proxy Statement for its last annual meeting of
stockholders and all Current Reports on Form 8-K since January 1, 1997, as filed
with the Commission (collectively the "SEC Filings"). As of the date the SEC
Filings were made, the SEC Filings (i) were accurate and complete in all
material respects, (ii) were in compliance in all material respects with the
provisions of the Securities Act and the Exchange Act, respectively, and the
rules and regulations of the Commission promulgated under the Securities Act and
the Exchange Act, respectively, and (iii) did not contain any untrue statement
of material fact or omit to state any material information required to be set
forth therein, or necessary in order to make the statements contained therein,
in light of the circumstances under which they were made, not misleading. The
Company has filed with the Commission all reports required to be filed by its
since January 1, 1997, including, without limitation, all Current Reports on
Form 8-K.
3.5 No Brokers and Finders. The Company has taken no action and knows of
no such act or omission by any Person which would give rise to any right,
interest or valid claim against or upon the Company or the Purchasers for any
commission, fee or other compensation as a finder or broker as a result of the
transactions contemplated by this Agreement; and the Company agrees to indemnify
and hold the Purchasers harmless against any such commissions, fees or other
compensation.
3.6 Securities Act. Assuming the accuracy of the representations and the
warranties of the Purchasers contained in Section 2.1 hereof, the offer, issue,
and sale of the Issued Stock are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and have been registered or qualified (or are exempt from
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<PAGE> 6
registration and qualification) under the registration, permit, or qualification
requirements of all applicable securities laws.
ARTICLE 4
DELIVERIES AT CLOSING
4.1 Deliveries by the Company. The Purchasers shall have received prior
to or at the Closing all of the following, each in form and substance reasonably
satisfactory to the Purchasers and their respective counsel:
(i) A copy of all charter documents of the Company and a
certificate of good standing with respect to the Company
certified by the Delaware Secretary of State, a
certified copy of the resolutions of the Board of
Directors evidencing approval of this Agreement, the
authorization for issuance of the Issued Stock and other
matters contemplated hereby, a certified copy of the
By-laws of the Company, and certified copies of all
documents evidencing other necessary corporate or other
action and governmental approvals, if any, with respect
to consummation of the transactions contemplated by this
Agreement.
(ii) A certificate of the Secretary or an Assistant Secretary
of the Company stating the names of the officers of the
Company authorized to sign this Agreement, the
certificates for the Issued Stock, and the other
documents or certificates to be delivered pursuant to
this Agreement by the Company or any of its officers,
together with the true signatures of such officers.
(iii) A compliance certificate from the President or Chief
Financial Officer of the Company stating that the
representations and warranties of the Company contained
in Article III hereof and otherwise made by the Company
in writing in connection with the transactions
contemplated hereby are, to the best of his knowledge,
true and correct as of the date hereof and that all
covenants and agreements required to be performed by the
Company prior to or at the Closing have been performed,
and that no condition or event has occurred or is
continuing or will result from the execution and
delivery of this Agreement or the issuance and sale of
the Issued Stock, which constitutes a breach of this
Agreement or would constitute a breach of this Agreement
but for the requirement that notice be given or time
elapse, or both.
(iv) An opinion of Stradling Yocca Carlson & Rauth, dated the
date hereof, with respect to matters to be agreed upon
by the parties.
(v) Such other documents (including, but not limited to, an
executed copy of the DTPI Stock Purchase Agreement)
relating to the transactions contemplated by this
Agreement as the Purchasers or the Purchasers' counsel
may reasonably request.
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<PAGE> 7
4.2 Deliveries by the Purchasers. The Company shall have received prior
to or at the Closing all of the following, each in form and substance reasonably
satisfactory to the Company and its counsel:
(i) A copy of all organizational documents of the Purchasers
and a certificate of good standing with respect to each
Purchaser certified by the Delaware Secretary of State,
a certified copy of the resolutions evidencing approval
of this Agreement, a certified copy of the operating
agreement of each Purchaser, and certified copies of all
documents evidencing other necessary action and
governmental approvals, if any, with respect to
consummation of the transactions contemplated by this
Agreement.
(ii) A certificate of the Secretary or an Assistant Secretary
of each Purchaser stating the names of the officers of
such Purchaser authorized to sign this Agreement, and
the other documents or certificates to be delivered
pursuant to this Agreement by such Purchaser or any of
its officers, together with the true signatures of such
officers.
(iii) A compliance certificate from the President or Chief
Financial Officer of each Purchaser stating that the
representations and warranties of the Purchasers
contained in Article II hereof and otherwise made by the
Purchasers in writing in connection with the
transactions contemplated hereby are, to the best of his
knowledge, true and correct as of the date hereof and
that all covenants and agreements required to be
performed by the Purchasers prior to or at the Closing
have been performed, and that no condition or event has
occurred or is continuing or will result from the
execution and delivery of this Agreement, which
constitutes a breach of this Agreement or would
constitute a breach of this Agreement but for the
requirement that notice be given or time elapse, or
both.
(iv) Such other documents (including, but not limited to, an
executed copy of the DTPI Stock Purchase Agreement)
relating to the transactions contemplated by this
Agreement as the Company or the Company's counsel may
reasonably request.
ARTICLE 5
REGISTRATION RIGHTS
5.1 Shelf Registration
(a) The Company agrees to file with the Commission as soon as
practicable after the date hereof, a Shelf Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Issued Stock. The Shelf Registration Statement shall initially be on Form
S-3 under the Securities Act or another appropriate form permitting registration
of such Issued Stock for resale by the Purchasers in the manner or manners
reasonably designated by them. The Company shall use its reasonable efforts to
cause the Shelf Registration Statement to be
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<PAGE> 8
declared effective pursuant to the Securities Act as promptly as is practicable
following the filing thereof, with a goal of having the Shelf Registration
Statement declared effective on or prior to the 90th day following the date
hereof, and to keep the Shelf Registration Statement continuously effective
under the Securities Act thereafter (except during periods following the filing
of a post effective amendment thereto and prior to the declaration of the
effectiveness of such post effective amendment; provided the Company shall use
its reasonable efforts to cause any such post effective amendment to be declared
effective as soon as practicable) (subject to extension pursuant to clause (b)),
until the earlier of (i) the date on which all of the Issued Stock has been
registered effectively pursuant to the Securities Act and disposed of pursuant
to the Shelf Registration Statement relating to it, or (ii) the date on which
the shares of Issued Stock are saleable pursuant to Rule 144(k) promulgated by
the Commission pursuant to the Securities Act (the "Effectiveness Period").
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective (except during periods
following the filing of a post effective amendment thereto and prior to the
declaration of the effectiveness of such post effective amendment; provided, the
Company shall use its reasonable best efforts to cause any such post effective
amendment to be declared effective as soon as practicable) by supplementing and
amending the Shelf Registration Statement as required by the rules, regulations
or instructions applicable to the registration form used for such Shelf
Registration Statement if required by the Securities Act or reasonably requested
by the Purchasers.
5.2 Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall effect such registration on the appropriate form available for
the sale of the Issued Stock to permit the sale of the Issued Stock in
accordance with the method or methods of disposition thereof specified by the
Purchasers, and pursuant thereto the Company shall as expeditiously as
reasonably possible:
(a) No fewer than five Business Days prior to the initial filing
of the Shelf Registration Statement or Prospectus and, if practical, no fewer
than two Business Days prior to the filing of any amendment or supplement
thereto (other than any document that would be incorporated or deemed to be
incorporated therein by reference), furnish to the Purchasers, copies of all
such documents proposed to be filed, which documents, if practical (other than
those incorporated or deemed to be incorporated by reference) will be subject to
the review of such Purchasers. The Company shall not file such Shelf
Registration Statement or related Prospectus or any amendments or supplements
thereto to which the Purchasers covered thereby shall reasonably object on a
timely basis;
(b) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Shelf Registration Statement as may
be necessary to keep such Shelf Registration Statement continuously effective
for the Effectiveness Period; cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such Shelf Registration Statement during such period in
accordance with the intended methods of disposition by the Purchasers
contemplated hereby.
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<PAGE> 9
(c) Notify the Purchasers promptly (as in the case of an event
specified by clause (i)(A) of this paragraph, if practical, in no event fewer
than two Business Days prior to such filing), and (if requested by any
Purchaser) confirm such notice in writing, (i)(A) when a Prospectus or any
Prospectus Supplement or post-effective amendment is proposed to be filed, and
(B) with respect to the Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
Commission or any other federal or state governmental authority for amendments
or supplements to the Shelf Registration Statement or related Prospectus or for
additional information, (iii) of the issuance by the Commission, any state
securities commission, any other governmental agency or any court of any stop
order, order or injunction suspending or enjoining the use or the effectiveness
of the Shelf Registration Statement or the Initiation of any proceedings for
that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Issued Stock for sale in any jurisdiction, or the initiation or
threat of any proceeding for such purpose, and (v) of the happening of any event
that makes any statement made in such Shelf Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such Shelf Registration Statement, Prospectus or documents so that,
in the case of the Shelf Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, not
misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(d) If reasonably requested by the Purchasers, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as Purchasers indicate relates to them or otherwise reasonably
request be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however, that
the Company shall not be required to take any action pursuant to this Section
5.2(e) that would, in the opinion of counsel for the Company, violate applicable
law;
(e) Furnish to each Purchaser without charge, at least one
conformed copy of the Shelf Registration Statement and each amendment thereto,
including financial statements (but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference);
(f) Deliver to each Purchaser as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Purchaser reasonably requests; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the Purchasers in connection with the offering and sale of the Issued
Stock covered by such Prospectus and any amendment or supplement thereto;
(g) Comply with applicable rules and regulations of the Commission
and make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act), no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) commencing on the first day
of the first fiscal
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<PAGE> 10
quarter after the effective date of the Shelf Registration Statement, which
statement shall cover said period, consistent with the requirement of Rule 158;
and
(h) List all Issued Stock covered by such Shelf Registration
Statement on the exchange or system, if any, on which the Common Stock of the
Company is then listed.
The Company may require each Purchaser of the Issued Stock as to which any
registration is being effected to: (i) furnish to the Company such information
regarding the distribution of such Issued Stock as is required by law to be
disclosed in the Shelf Registration Statement and (ii) provide to the Company a
signed writing accepting and acknowledging its rights and obligations hereunder.
The Company may exclude from such registration the Issued Stock of any Purchaser
of Issued Stock who unreasonably fails to furnish such information or signed
writing at least 5 Business Days prior to the effective date of such Shelf
Registration Statement.
Each Purchaser agrees by acquisition of the Issued Stock that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5.2(c)(ii), 5.2(c)(iii), 5.2(c)(iv), or 5.2(c)(v) hereof,
such Purchaser will forthwith discontinue disposition of such Issued Stock
covered by such Shelf Registration Statement or Prospectus until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
The registration rights of the Purchaser pursuant to this Agreement and
the ability to offer and sell Issued Stock pursuant to the Shelf Registration
Statement are subject to the conditions and limitations contained in this
paragraph, and each Purchaser will be deemed to have agreed with the Company
that if the Board of Directors of the Company determines in its good faith
judgment, as evidenced by a resolution of the Board of Directors, that the use
of any Prospectus would require the disclosure of material information that the
Company has a bona fide business purpose for preserving as confidential or the
disclosure of which would impede the Company's ability to consummate a
significant transaction, and that the Company is not otherwise required by
applicable securities laws or regulations to disclose, upon written notice of
such determination by the Company, the rights of the Purchasers to offer, sell
or distribute any Issued Stock pursuant to the Shelf Registration Statement or
to require the Company to take action with respect to the registration or sale
of any Issued Stock pursuant to the Shelf Registration Statement shall be
suspended until the date upon which the Company notifies the Purchasers in
writing that suspension of such rights for the grounds set forth in this
paragraph is no longer necessary subject to the limits set forth herein, and the
Company agrees to give such notice as promptly as practicable following the date
that such suspension of rights is no longer necessary.
5.3 Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by it whether or not the Shelf
Registration Statement is filed or becomes effective and whether or not any
securities are issued or sold pursuant to the Shelf Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation, (a) all registration and filing fees (including, without limitation,
fees and expenses in compliance with securities or "Blue Sky" laws (b) printing
expenses (including, without
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limitation, expenses or printing Prospectuses), and (c) fees and expenses of all
other Persons retained by the Company. Notwithstanding the foregoing or anything
in this Agreement to the contrary, each Purchaser shall pay all underwriting
discounts and commissions of any underwriters or broker-dealers with respect to
any Issued Stock sold by it.
5.4 Indemnification
(a) The Company agrees to indemnify and hold harmless each
Purchaser and his representatives and agents (an "Indemnified Person"), from and
against any and all losses, claims, damages, liabilities and judgments caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement, Prospectus or form of Prospectus or in any
amendment or supplement thereto or in any preliminary Prospectus, or caused by
(i) any omission or alleged omission to state therein, in the case of any
Prospectus or form of Prospectus or supplement thereto, in the light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished to the Company by or on
behalf of such Indemnified Person or (ii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state securities law provided that the foregoing indemnity with respect to
any preliminary Prospectus shall not inure to the benefit of any Indemnified
Person from whom the Person asserting such losses, claims, damages, liabilities
and judgments purchased securities if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary Prospectus is
eliminated or remedied in the Prospectus and a copy of the Prospectus shall not
have been furnished to such Person in a timely manner provided such failure is
not as a result of an action or inaction on the part of the Indemnifying Person.
(b) In case any action shall be brought against any Indemnified
Person, based upon the Shelf Registration Statement or any such Prospectus or
any amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Any Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel for the Indemnified Parties
or (iii) the named parties to any such action (including any impleaded parties)
include both such Indemnified Person and the Company and such Indemnified Person
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company (in which case the Company shall not have the right to assume the
defense of such action on behalf of such Indemnified Person), provided, however,
that the Company shall not, in connection with any such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys for all such Indemnified
Persons, which firm shall be designated in writing by such Indemnified Persons;
and provided, however, that all such fees and expenses shall be reimbursed as
they are incurred. The Company shall not be liable
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<PAGE> 12
for any settlement of any such action effected without its written consent. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(c) In connection with the Shelf Registration Statement, the
Purchasers participating in such Shelf Registration Statement agree jointly and
severally to indemnify and hold harmless the Company, its directors, its
officers and any Person controlling the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to each Indemnified Person but only
with reference to information relating to such Indemnified Person furnished by
or on behalf of such Indemnified Person. In case any action shall be brought
against the Company, any of its directors, any such officer or any Person
controlling the Company based on such Shelf Registration Statement and in
respect of which indemnity may be sought against any Indemnified Person, the
Indemnified Person shall have the rights and duties given to the Company (except
that if the Company shall have assumed the defense thereof, such Indemnified
Person shall not be required to do so, but may employ separate counsel therein
and participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person), and the Company, its
directors, any such officers and any Person controlling the Company shall have
the rights and duties specified for Indemnified Persons in Section 5.4(b)
hereof; provided, however, that the liability of each such Purchaser hereunder
shall be limited to the net proceeds received by such Purchaser from the sale of
the Issued Stock under such Shelf Registration Statement. In no event will any
Purchaser be required to enter into any agreement or undertaking in connection
with any registration under this Article 5 providing for any indemnification or
contribution obligations on the part of such Purchaser greater than such
Purchaser's obligations under this Section 5.4(c).
(d) If the indemnification provided for in this Section 5.4 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claim, damages,
liabilities and judgments in such proportion as is appropriate to reflect the
relative fault of the Company and each such Indemnified Person in connection
with the statements, omissions or violations which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company and each such
Indemnified Person shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Company
or such Indemnified Person and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 5.4(d) were determined by pro
rata allocation (even if the Indemnified Persons were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to
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include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5.4, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the total net proceeds received by it in
connection with the sale of the Issued Stock pursuant to this Agreement exceeds
the amount of any damages which such Indemnified Person has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The Indemnified Persons' obligations to contribute pursuant
to this Section 5.4(d) are several in proportion to the respective amount of
Issued Stock included in any such Shelf Registration Statement by each
Indemnified Person and not joint.
5.5 Rule 144
The Company shall use its reasonable best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time it is not required to file such reports
but in the past had been required to or did file such reports, it will, upon the
request of any Purchaser, make available other information as required by, and
so long as necessary to permit, sales of its Issued Stock pursuant to Rule 144.
ARTICLE 6
DEFINITIONS AND ACCOUNTING TERMS
6.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"AFFILIATE" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
"AGREEMENT" means this Stock Purchase Agreement as from time to time
amended and in effect between the parties.
"BUSINESS DAY" means with respect to any act to be performed
hereunder, each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in New York, New York or
other applicable place where such act is to occur are authorized or
obligated by applicable law, regulation or executive order to close.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, $.001 par value.
"COMPANY" means STM Wireless, Inc., a Delaware corporation, and its
successors and assigns.
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<PAGE> 14
"DTPI" means Direc-To-Phone International, Inc., a Delaware
corporation, and its successors and assigns.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission
pursuant thereto.
"FULLY DILUTED BASIS" shall mean taking into account all shares of
Common Stock outstanding and all shares potentially required to be
issued by reason of any outstanding rights, options, warrants or
other instruments or securities exchangeable for or convertible into
Common Stock or evidencing any right to subscribe for, purchase or
otherwise acquire Common Stock as of the date of determination. For
purposes of computing the capital stock of DTPI on a Fully Diluted
Basis immediately following the Closing, the shares of Common Stock
subject to the DTPI's Option Plan shall be disregarded, whether or
not any options have been issued under such plan at such time.
"GAAP" means generally accepted accounting principles, consistently
applied.
"HOLDER" means, with respect to the Issued Stock, any Person who
holds such Issued Stock regardless of whether any express assignment
of rights under this Agreement was made to such Person.
"ISSUED STOCK" shall have the meaning assigned to that term in
Section 1.1.
"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute or treaty
"ORDER" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any
court, administrative agency or other governmental body or by any
arbitrator.
"ORGANIZATIONAL DOCUMENTS" shall mean (a) the articles or
certificate of incorporation, all certificates of determination and
designation, and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate or
articles of limited partnership of a limited partnership; (d) the
operating agreement, limited liability company agreement and the
certificate or articles of organization or formation of a limited
liability company; (e) any charter or similar document adopted or
filed in connection with the creation, formation or organization of
a Person (including, without limitation, any trust); and (f) any
amendment to any of the foregoing.
"PROCEEDING" shall mean any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought,
conducted or heard by or before, or otherwise involving, any
governmental body or arbitrator.
-14-
<PAGE> 15
"PERMITTED TRANSFEREES" means any partner of any Purchasers which is
a partnership and any trust for the benefit of a Purchaser or his or
her ancestors or descendants or spouse.
"PERSON" means an individual, corporation, partnership, joint
venture, trust, or unincorporated organization, or a government or
any agency or political subdivision thereof.
"PROSPECTUS" means the prospectus included in the Shelf Registration
Statement (including, without limitation, a prospectus that
discloses information previously omitted form a prospectus filed as
part of an effective registration statement in reliance upon Rule
430A promulgated pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms
of the resale of any portion of the Issued Stock covered by such
Shelf Registration Statement, and all other amendments and
supplements to any such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to
be incorporated by reference, if any, in such prospectus.
"PURCHASERS" means Pequot Private Equity Fund, L.P. and its
affiliated entities as set forth on the signature page hereto.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the
Commission as a replacement thereto having substantially the same
effect as such rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such rule may be amended form time to time,
or any similar rule or regulation hereafter adopted by the
Commission as a replacement thereto having substantially the same
effect as such rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission (or of any other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at
the time.
"SHELF REGISTRATION STATEMENT" means the registration statement of
the Company that covers the resale of any of the Issued Stock
pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre-and post-effective
amendments, all exhibits thereto, and all material incorporated by
reference or deemed to be incorporated by reference, if any, in such
registration statement.
6.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all other financial data
submitted pursuant to this Agreement shall be prepared and calculated in
accordance with such principles.
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<PAGE> 16
ARTICLE 7
MISCELLANEOUS
7.1 No Waiver; Cumulative Remedies. No failure or delay on the part of
the Company, the Purchasers or any other party having rights hereunder in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
7.2 Amendments, Waivers and Consents. Changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein or
therein set forth may be omitted or waived only if the Company and the holder of
a majority of the shares of Issued Stock shall consent in writing thereto. Any
waiver or consent may be prospective or retroactive and may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
7.3 Addresses for Notices, etc. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telegraphic
or facsimile communication) and mailed, by certified or registered mail, or
telegraphed, or sent by facsimile transmission, or delivered to the applicable
party at the address indicated below:
If to the Company:
Emil Youssefzadeh
President and Chief Executive Officer
STM Wireless, Inc.
One Mauchly
Irvine, California 92718-2305
Facsimile: 714-753-1122
With a copy to:
K.C. Schaaf, Esquire
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Facsimile: 714-725-4100
If to the Purchasers:
Robert Schwenkel, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Facsimile: (212) 859-4000
-16-
<PAGE> 17
With a copy to:
Amiel M. Peretz
Pequot Private Equity Partners, LLC
354 Pequot Avenue
Southport, Connecticut 06490
Facsimile: 203-255-2558
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when mailed, be effective 48 hours following deposit in
the mails, addressed as aforesaid, or when telegraphed, sent by facsimile
transmission with confirmation of transmission, or personally delivered, be
effective upon delivery to the telegraph company, facsimile transmission or
personal delivery.
7.4 Costs, Expenses and Taxes. Each of the parties hereto shall bear
their own costs and expenses incurred in connection with the investigation,
preparation, execution and delivery of this Agreement, and other instruments and
documents to be delivered hereunder and thereunder and the transactions
contemplated hereby and thereby.
7.5 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company and the Purchasers and their respective
successors and assigns. Notwithstanding the foregoing, the registration rights
granted by the Company to the Purchasers hereunder are specific to the
Purchasers and may not be assigned by the Purchasers without the prior written
consent of the Company.
7.6 Survival of Representations and Warranties. All representations and
warranties made in this Agreement or any other instrument or document delivered
in connection herewith, shall survive the execution and delivery hereof for a
period of one year from the date of this Agreement.
7.7 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements,
representations, discussions or understandings concerning the subject matter
thereof.
7.8 Severability. The invalidity or unenforceability of any provision
hereto shall in no way affect the validity or enforceability of any other
provision.
7.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
7.10 Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute once and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
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<PAGE> 18
7.12 Further Assurances. From and after the date of this Agreement, upon
the request of the Purchasers, the Company shall execute and deliver such
instruments, documents and other writings as may be necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
7.13 Waiver of Jury Trial; Consent to Jurisdiction. Each of the parties
irrevocably (a) waives any and all right to trial by jury in any legal
proceeding arising out of this Agreement, or any of the transactions
contemplated hereby, (b) submits to the nonexclusive personal jurisdiction in
the State of California, the courts thereof and the United States District
Courts sitting therein, for the enforcement of this Agreement, (c) waives any
and all personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of California for the purpose of litigation to enforce this
Agreement, and (d) agrees that service of process may be made upon it in the
manner prescribed in Section 7.3 for the giving of notices to the parties.
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<PAGE> 19
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.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
PEQUOT PRIVATE EQUITY FUND, L.P.
By: Pequot Private Equity Partners, LLC,
General Partner
By:_________________________________________
Lawrence D. Lenihan,
Managing Member
PEQUOT OFFSHORE PRIVATE EQUITY FUND, INC.
By: Pequot Private Equity Partners, LLC,
Investment Manager
By:_________________________________________
Lawrence D. Lenihan,
Managing Member
-19-
<PAGE> 20
SCHEDULE A
PURCHASERS
<TABLE>
<CAPTION>
NUMBER OF SHARES PAYMENT
---------------- -------
<S> <C> <C>
Pequot Private Equity Fund, L.P. 507,211 $3,550,477
Pequot Offshore Private Equity Fund, Inc. 64,218 $ 449,526
</TABLE>
B-1
<PAGE> 1
EXHIBIT 10.27
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT dated as of March 5, 1998, among
DIREC-TO-PHONE INTERNATIONAL, INC., a Delaware corporation (the "Corporation"),
and the Stockholders (as hereinafter defined).
RECITALS
A. Attached hereto as Exhibit A is a copy of the Restated
Certificate of Incorporation of the Corporation as filed with the Secretary of
State of the State of Delaware and in effect on the date hereof. It is deemed to
be in the best interest of the Corporation and the Stockholders that provision
be made for the continuity and stability of the business and policies of the
Corporation and its Subsidiaries, as the same may exist from time to time
(collectively, the "Company"), and, to that end, the Corporation and the
Stockholders desire to set forth their agreement with respect to the shares of
capital stock of the Corporation owned by them.
ACCORDINGLY, in consideration of the mutual covenants and agreements
contained in this Agreement, the sufficiency of which is hereby acknowledged,
the parties agree as follows:
1. DEFINITIONS
1.1 Definitions.
Unless the context requires otherwise, capitalized terms used in this
Agreement have the meanings ascribed to them below:
"Acquisition" means the purchase by or of any Person or any of its
Subsidiaries or of all or substantially all of the assets or stock of any such
Person, whether by means of an asset acquisition, stock purchase, merger or
otherwise.
"Affiliate" means, with respect to any Person, (i) a director or executive
officer of such Person, (ii) a spouse, parent, sibling or descendant of such
Person (or a spouse, parent, sibling or descendant of any director or executive
officer of such Person), and (iii) any other Person that, directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. As used in this definition, the term "control"
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. When such term is used in the context of a
Regulatory Problem, it also has the meaning ascribed to it in any Applicable
Law.
"Applicable Law," with respect to any Person, means all provisions of all
laws, statutes, ordinances, rules, regulations, permits, certificates or orders
of any Governmental Authority
<PAGE> 2
applicable to such Person or any of its assets or property or to which such
Person or any of its assets or property is subject, and all judgments,
injunctions, orders and decrees of all courts and arbitrators in proceedings or
actions in which such Person is a party or by which it or any of its assets or
properties is or may be bound or subject.
"Available Securities" has the meaning ascribed to it in Section 4.1(c).
"Business Day" means any day that is not a Saturday, Sunday or day on
which banks are permitted to close in the State of California.
"Bylaws" means the Bylaws of the Corporation, as amended, modified,
supplemented or restated and in effect from time to time. The Bylaws of the
Corporation as in effect on the date hereof are attached hereto as Exhibit B and
are hereby ratified, confirmed, adopted and approved by the Stockholders.
"Charter" means the Restated Certificate of Incorporation, as filed with
the Secretary of State of the State of Delaware and in effect on the date
hereof, a copy of which is attached hereto as Exhibit A, as the same may
hereafter be amended, modified, supplemented or restated and in effect from time
to time.
"Common Stock" means, collectively, all of the Common Stock, $.001 par
value, of the Corporation.
"Common Stock Equivalent" means one share of Common Stock or the right to
acquire, whether or not such right is immediately exercisable, one share of
Common Stock, whether evidenced by an option, warrant, convertible security or
other instrument or agreement.
"Company" has the meaning ascribed to it in the second paragraph of the
Preamble of this Agreement and shall include any of the Corporation and any
Subsidiary of the Corporation.
"Corporation" has the meaning ascribed to it in the caption on the first
page of this Agreement.
"Dawson-Samberg" means Dawson-Samberg Capital Management, Inc.
"Excluded Securities" has the meaning ascribed to it in Section 4.2.
"Fully Diluted Basis" shall mean taking into account all shares of Common
Stock outstanding and all shares potentially required to be issued by reason of
any outstanding rights, options, warrants or other instruments or securities
exchangeable for or convertible into Common Stock or evidencing any right to
subscribe for, purchase or otherwise acquire Common Stock as of the date of
determination. For purposes of computing the capital stock of DTPI on a Fully
Diluted Basis immediately following the Closing, the shares of Common Stock
subject to the DTPI's Option Plan shall be disregarded, whether or not any
options have been issued under such plan at such time.
"Initial Public Offering" means the initial Public Offering of equity
Securities of the Corporation.
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<PAGE> 3
"Investor Designees" has the meaning ascribed to it in Section 2.1(b).
"Joinder Agreement" has the meaning ascribed to it in Section 3.1(a).
"Offered Securities" has the meaning ascribed to it in Section 4.1(a).
"Option" means an option to purchase shares of Common Stock granted under
the Option Plan.
"Option Plan" shall mean the Corporation's incentive stock option plan for
officers, directors or employees of, or consultants to, the Corporation in
effect on the date hereof in the form previously furnished to Pequot or as
approved from time to time by the affirmative vote of at least two-thirds of the
members of Board of Directors.
"Other Stockholders" has the meaning ascribed to it in Section 3.2(a).
"Pequot" means, collectively, Pequot Private Equity Fund, L.P. and Pequot
Offshore Private Equity Fund, Inc., a British Virgin Islands corporation, and
any successors thereto.
"Pequot Affiliates" means, collectively, Pequot and its Affiliates, and
any other Person controlled by an Affiliate of Pequot, and any successor to any
of the foregoing.
"Pequot Investors" means, collectively, Pequot and any other Person who
acquires Stock from Pequot in accordance with the applicable provisions of this
Agreement.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.
"Preferred Stock" means all of the Series A Preferred Stock and Series B
Preferred Stock of the Corporation.
"Proportionate Percentage" means, with respect to any Stockholder, the
fraction, expressed as a percentage, the numerator of which is the total number
of shares of Voting Stock held by such Stockholder and the denominator of which
is the total number of shares of Voting Stock of the Corporation outstanding at
the time of determination.
"Public Offering" means the closing of a public offering of the
Corporation's Common Stock pursuant to a registration statement declared
effective under the Securities Act at a per share price of at least $10.00
(adjusted for any Stock Recapitalizations between the date hereof and the date
of such offering), for aggregate proceeds to the Corporation of at least $20
million.
"Public Sale" means any sale, occurring simultaneously with or after a
Public Offering, of Securities to the public pursuant to an offering registered
under the Securities Act or to the public through a broker, dealer or market
maker (pursuant to the provisions of Rule 144 or otherwise).
-3-
<PAGE> 4
"Purchase Period" has the meaning ascribed to it in Section 4.1(b).
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the date hereof entered into simultaneously with the execution and
delivery of this Agreement between the Corporation and the other parties named
therein.
"Requisite Stockholders" means those Stockholders who hold in the
aggregate in excess of 66 2/3 percent of the outstanding Voting Power.
"Restricted Securities" means all Shares, Options, shares of capital stock
received in respect thereof, and other Securities of the Corporation, in each
case which have not theretofore been Transferred in a Public Sale.
"Rule 144" means Rule 144 (including Rule 144(k) and all other
subdivisions thereof) promulgated by the Securities and Exchange Commission
under the Securities Act as such rule may be amended from time to time, or any
similar rule then in force.
"Sale of the Company" means, with respect to any Person, the sale of such
Person to a third party who is not an Affiliate of such Person, whether by way
of the sale of all or substantially all of the consolidated assets of such
Person or the sale of Securities of such Person (whether directly or by way of
merger, consolidation or reorganization) resulting in the purchaser acquiring
more than fifty percent (50%) of the voting power of such Person immediately
prior to such transaction and acquiring control (as such term is used in the
definition of "Affiliate") of such Person. A sale (or multiple related sales) of
one or more Subsidiaries of the Corporation (whether by way of merger,
consolidation, reorganization or sale of all or substantially all assets or
securities) which constitutes all or substantially all of the consolidated
assets of such Person shall be deemed a Sale of the Company.
"Second Financing" means sale by the Corporation of its debt or equity
securities to persons, other than the holders of the Series A Preferred Stock,
for aggregate proceeds of at least $20 million.
"Securities" means, with respect to any Person, such Person's "securities"
as defined in Section 2(1) of the Securities Act of 1933, as amended, and
includes such Person's capital stock or other equity interests or any options,
warrants or other securities that are directly or indirectly convertible into,
or exercisable or exchangeable for, such Person's capital stock or other equity
interests. Whenever a reference herein to Securities is referring to any
derivative Securities, the rights of a Stockholder shall apply to such
derivative Securities and all underlying Securities directly or indirectly
issuable upon conversion, exchange or exercise of such derivative securities.
"Securities Act" means the Securities Act of 1933 or any successor federal
statute, and the rules and regulations of the Securities and Exchange Commission
thereunder, all as the same shall be in effect from time to time.
"Securities and Exchange Commission" means the Securities and Exchange
Commission or any Governmental Authority succeeding to the functions thereof.
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<PAGE> 5
"Securities Exchange Act" means the Securities Exchange Act of 1934 or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as the same shall be in effect
from time to time.
"Series A Preferred Stock" has the meaning ascribed to it in the Charter.
"Series B Preferred Stock" has the meaning ascribed to it in the Charter.
"Shares" means any shares of Stock issued by the Corporation and purchased
or otherwise acquired by any Stockholder. As to any particular Securities
constituting Shares, such Securities will cease to be Shares for all purposes of
this Agreement when they have (a) been transferred in a Public Sale or (b)
ceased to be outstanding.
"STM" means STM Wireless, Inc., a Delaware corporation.
"STM Directors" has the meaning ascribed to it in Section 2.1(b).
"STM Indebtedness" means any amounts due and owing from the Corporation to
STM pursuant to the Unsecured Promissory Note in the original principal amount
of $10.0 million dated as of March 5, 1998 and executed by the Corporation in
favor of STM.
"Stock" means the Common Stock, Preferred Stock and any and all other
capital stock or equity Securities (including derivative Securities therefor) of
the Corporation.
"Stockholders" means the holders of Common Stock and the holders of Stock
Equivalents who are parties hereto, and shall include any other Person who
hereafter becomes a party to this Agreement as a Stockholder pursuant to a
Joinder Agreement executed and delivered pursuant to Section 3.1(a).
"Stock Recapitalization" means any stock dividend or distribution, stock
split, reverse stock split or combination or other similar pro rata
recapitalization event affecting any class or series of Stock.
"Subsidiary" of any Person means any other Person (i) whose Securities
having a majority of the general voting power in electing the board of directors
or equivalent governing body of such other Person (excluding Securities entitled
to vote only upon the failure to pay dividends thereon or the occurrence of
other contingencies) are, at the time as of which any determination is being
made, owned by such Person either directly or indirectly through one or more
other entities constituting Subsidiaries or (ii) more than a 50% interest in the
profits or capital of whom is, at the time as of which any determination is
being made, owned by such Person either directly or indirectly through one or
more other entities constituting Subsidiaries.
"Transfer" of Securities shall be construed broadly and shall include any
issuance, sale, assignment, transfer, participation, gift, bequest,
distribution, or other disposition thereof, or any pledge or hypothecation
thereof, placement of a lien thereon or grant of a security interest therein or
other encumbrance thereon, in each case whether voluntary or involuntary or by
operation of law or
-5-
<PAGE> 6
otherwise. "Transferor" means a Person Transferring Securities, and "Transferee"
means a Person acquiring Securities through a Transfer.
"Voting Power" on any date means the aggregate number of votes by holders
of Voting Stock that would be entitled to be cast as of such date on all matters
submitted to the Corporation's Stockholders.
"Voting Stock" means any Stock that is entitled to vote generally together
with holders of Common Stock.
2. BOARD OF DIRECTORS; VOTING AGREEMENTS
2.1 Election of Directors.
a. From the date hereof until such time as the Second Financing
shall have been consummated, the parties to this Agreement agree to take all
necessary action and use their best efforts as Stockholders to set the number of
directors of the Corporation at five (5) and to elect a Board of Directors which
shall include two (2) directors who shall be designated by the Pequot Investors
and three (3) directors who shall be designated by STM.
b. On the date of consummation of the Second Financing and
thereafter, the parties to this Agreement agree to take all necessary action and
use their best efforts as Stockholders to set the number of directors of the
Corporation at seven (7) and to elect a Board of Directors which shall include
two (2) directors who shall be designated by the Pequot Investors (the "Investor
Designees"), three (3) directors who shall be designated by STM (the "STM
Directors"), and the remaining two (2) directors shall be mutually agreed to
between the Pequot Investors, on the one hand, and STM, on the other hand;
provided, however, neither of such two (2) mutually agreed to directors shall be
an Affiliate of any of STM, any Pequot Investor or the Corporation.
c. In the event that the Pequot Investors are entitled to
designate one or more directors pursuant to clauses (a) or (b) of this Section
2.1, and any of the Investors Designees is not an employee of Dawson-Samberg,
for so long as such designee is not an employee of Dawson-Samberg,
Dawson-Samberg shall be entitled to receive notices of any and all Board of
Directors meetings in accordance with the Bylaws of the Corporation as if
Dawson-Samberg were a member of such Board of Directors, and shall be entitled
to have a representative attend as an observer all such Board of Directors
meetings, subject to (i) the ability of the Board of Directors to exclude such
representative for specific matters to protect the attorney-client privilege and
(ii) such representative's execution and delivery of a confidentiality agreement
in the Company's standard form.
2.2 Voting Agreements. The Corporation shall not, and shall ensure that
each Subsidiary shall not, take any of the following actions without the
affirmative vote of at least two-thirds of the members the Board of Directors
except as otherwise specifically provided herein:
a. elect, appoint or remove any chief executive officer, chief
financial officer, president or chief operating officer of the Corporation;
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<PAGE> 7
b. approve the Company's annual operating budget, capital
expenditure budget, business plan and strategic plan and any material amendments
thereto, or expend any material amounts in excess of $200,000 not set forth in
an annual operating budget or capital expenditure budget approved in accordance
with the preceding clause;
c. enter into any Sale of the Company or an Acquisition of any
Person (other than an Affiliate of the Corporation);
d. create or transfer assets in any Subsidiary other than in the
ordinary course of business;
e. enter into or amend any partnership or joint venture other
than in the ordinary course of business;
f. make an assignment for the benefit of creditors, resolve to
subject the Corporation or any Subsidiary to any proceedings under any
bankruptcy or insolvency law, resolve to avail the Corporation or any Subsidiary
of the benefits of any other legislation for the benefit of debtors, or take
steps to liquidate, dissolve or wind-up the Corporation;
g. make a material change in the nature of the Corporation's
business as carried on the date hereof or enter into any new line of unrelated
business;
h. expand the size of the Board of Directors or create or expand
the size of any committee thereof;
i. consummate a Public Offering;
j. merge or consolidate with or into another entity (other than
mergers of wholly-owned Subsidiaries and mergers of a wholly-owned Subsidiary
with and into the Corporation where the Corporation is the surviving
corporation);
k. amend the Charter or Bylaws;
l. enter into transactions with Affiliates (other than the sale
of securities to any Affiliate pursuant to the Second Financing or any
subsequent sale by the Corporation of its securities to purchasers which include
third parties who are not Affiliates, on the same terms as the other purchasers
in any such financing transaction); provided, that any transaction with an
Affiliate shall require the approval of at least a majority of the members of
the Board of Directors who are not officers, directors, employees, designees, or
10% stockholders of such Affiliate.
m. incur or create any indebtedness in excess of $200,000;
n. declare or pay any dividends upon the Stock other than as
required under the terms of the Series A Preferred Stock or Series B Preferred
Stock;
o. register the Transfer of any Stock by any Stockholder unless
such Transfer is made in accordance with the provisions of this Agreement;
-7-
<PAGE> 8
p. issue options to purchase shares of Common Stock, except for
an Option granted under the Option Plan;
q. approve the terms or consummate the Second Financing; or
r. enter into, revise or amend any contract, agreement or
transaction with any of its officers, directors or management employees, except
for any employment or compensation agreements with individuals with an annual
expense to the Corporation of less than $150,000.
3. TRANSFERS OF STOCK
3.1 General; Joinder Agreement.
a. The provisions regarding Transfers of Stock contained in this
Article 3 shall apply to all shares of Stock now owned or hereafter acquired by
a Stockholder, including shares of Stock acquired by reason of original
issuance, dividend, distribution, exchange, conversion and acquisition of
outstanding shares of Stock from another Person, and such provisions shall apply
to any shares of Stock obtained by a Stockholder upon the exercise, exchange or
conversion of any option, warrant or other derivative Security. No Stockholder
shall Transfer any Stock to a Person not already a party to this Agreement as a
Stockholder unless and until such Person executes and delivers to the
Corporation a joinder agreement in substantially the form attached hereto as
Exhibit C (the "Joinder Agreement"), and otherwise in form and substance
reasonably acceptable to the Corporation, pursuant to which such Person will
thereupon become a party to, and be bound by and obligated to comply with the
terms and provisions of, this Agreement and the Registration Rights Agreement.
b. No Stockholder shall, without the prior written consent of the
Corporation, Transfer any Securities of the Corporation, or any interest
therein, to any Person who is directly or indirectly engaged in any business or
activity that competes with the Company, whether such engagement shall be as an
employee, director, officer, consultant, partner, owner or other participant in
any such business or activity.
3.2 Rights of First Offer
a. Except as otherwise expressly permitted herein without
observance of this Section, on or after the date hereof until the termination of
this Agreement, each Stockholder shall comply with the following procedures in
this Section 3.2 (as well as the other applicable provisions of this Agreement)
in connection with any Transfer by such Stockholder of its Securities.
b. Such Stockholder (the "Offeror") shall first simultaneously
deliver to the Company and each other Stockholder a written notice (the "Notice
of Offer"), which shall be irrevocable for a period of 45 days after delivery
thereof (the "Pre Offer Period"), offering (the "Offer") to the Company and the
Stockholders other than the Offeror (the "Offerees") all of the Securities
proposed to be Transferred by the Offeror at the purchase price and on the terms
specified therein (which Notice of Offer shall include all relevant terms of the
proposed Transfer). The Offeror shall also furnish to the Company and such other
Stockholders such additional information relating to the Offer as they may
reasonably request. The Corporation shall have the first right and option, for a
period of 30 days after delivery of the Notice of Offer by the Offeror, to
accept all or
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any portion of the Securities so offered at the purchase price and on the terms
stated in the Notice of Offer. The Corporation shall, if it does not elect to
purchase all of the offered Securities, immediately upon such election deliver
notice thereof to the Offerees. Each Offeree shall have the right and option,
for a period of 15 days after the expiration of the 30-day period provided
above, (x) to accept all or any of its Proportionate Percentage of the
Securities so offered at the purchase price and on the terms stated in the
Notice of Offer and (y) to offer, in any written notice of acceptance, to
purchase any Securities not accepted by the other Offerees, in which case the
Securities not accepted by the other Offerees shall be deemed on the same terms
and conditions to be reoffered from time to time during such 15-day period to
and accepted by the Offerees who exercised their option under this clause (y)
pro rata in accordance with their respective Proportionate Percentages (computed
without including the Offerees who have not exercised their option to purchase
Securities under this clause (y)), until all such Securities are fully
subscribed or until all such Offerees have subscribed for all such offered
Securities which they desire to purchase.
c. Transfers of Securities under the terms of this Section 3.2
shall be made at the offices of the Corporation on a mutually satisfactory
Business Day within 15 days after the expiration of the 45-day time period
provided for above. Delivery of certificates or other instruments evidencing
such Securities, duly endorsed for transfer, shall be made on such date against
payment of the purchase price therefor.
d. Subject to paragraph e of this Section 3.2, if the Corporation
and the Offerees shall not have accepted all the Securities offered for sale
pursuant to the Notice of Offer, then the Offeror may Transfer to a third party
that number of the Securities not accepted by the Corporation and the Offerees
at a price and on such other terms and conditions not more favorable to such
third party than those contained in the original Notice of Offer, at any time
within 180 days after the expiration of the Offers required by Section 3.2(b).
In the event the Securities are not Transferred by the Offeror on such terms
during such 180-day period, the restrictions of this Section 3.2 shall again
become applicable to any Transfer of Securities by the Offeror. Nothing in this
Section 3.2 shall preclude any Stockholder from engaging in discussions with any
investment banker, potential transferee of Securities or other Person with
respect to a possible purchase of Securities from them, so long as the
provisions of this Section 3.2 are complied with prior to the consummation of
any Transfer to which this Section applies.
e. The Offeror may specify in the Notice of Offer that the Offer
mentioned therein is conditioned upon receipt from the Corporation and all of
the Offerees, or any one of them, of written notices of binding acceptance with
respect to all Securities mentioned in such Notice of Offer. If the Offeror
specifies in the Notice of Offer that the Offer is conditioned upon receipt of
binding acceptances from the Corporation and all of the Offerees with respect to
all of the Securities mentioned in such Notice of Offer, and binding acceptances
are received from less than all of the Corporation and all of the Offerees as to
all of the Securities mentioned in the Notice of Offer, then the Offeror shall
be entitled to sell to a third party all of the Securities subject to the Offer
on terms no more favorable to the third party than the terms contained in the
Notice of Offer at any time during the 180-day period after the expiration of
the Offers required by Section 3.2b.
f. Anything contained in this Section 3.2 to the contrary
notwithstanding, this Section 3.2 shall not apply to any Transfer by a
Stockholder to one of its Affiliates that is made in accordance with the
applicable provisions of Section 3.1.
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g. The rights of an Offeree hereunder are not assignable, except
that any Offeree may assign its rights hereunder to any of its Affiliates.
4. RIGHTS TO SUBSCRIBE FOR SECURITIES
4.1 General.
a. On or after the date hereof until termination of this
Agreement, except in the case of Excluded Securities (as hereinafter defined),
the Corporation shall not, and shall cause its Subsidiaries not to, at any time
prior to the consummation of an Initial Public Offering, issue, sell or
exchange, agree to issue, sell or exchange, or reserve or set aside for
issuance, sale or exchange (i) any equity Security of such Company, (ii) any
debt Security of such Company which by its terms is convertible into or
exchangeable for any equity Security of such Company, or (iii) any option,
warrant or other right to subscribe for, purchase or otherwise acquire any
equity Security or any debt Security referred to in clause (i) or (ii) (each of
(i), (ii) and (iii), an "Equity Sale"), unless in each case the Corporation
shall have first offered or caused such Subsidiary to offer (the "Preemptive
Offer") to sell such Securities to the Stockholders (the "Offered Securities")
by delivery to such Stockholders of written notice of such offer (the
"Preemptive Offer Notice") stating that such Company proposes to sell such
Offered Securities, the number or amount of the Offered Securities proposed to
be sold, the proposed purchase price therefor and any other terms and conditions
of such offer. The Preemptive Offer shall by its terms remain open and
irrevocable for a period of 30 days from the date it is delivered by such
Company (the "Preemptive Offer Period").
b. Each Stockholder shall have the option, exercisable at any
time during the Preemptive Offer Period by delivering written notice to the
Corporation (a "Preemptive Offer Acceptance Notice"), to subscribe for (i) the
number or amount of such Offered Securities up to its Proportionate Percentage
(not including for purposes of this calculation Common Stock Equivalents issued
under the Option Plan) of the total number or amount of Offered Securities
proposed to be issued and (ii) up to its Proportionate Percentage of the Offered
Securities not subscribed for by other Stockholders as specified in its
Preemptive Offer Acceptance Notice. Any Offered Securities not subscribed for by
a Stockholder shall be deemed to be re-offered to and accepted by the
Participating Stockholders exercising their options specified in clause (ii) of
the immediately preceding sentence with respect to the lesser of (A) the amount
specified in their respective Preemptive Offer Acceptance Notices and (B) an
amount equal to their respective Proportionate Percentages with respect to such
deemed offer. Such deemed offer and acceptance procedures described in the
immediately preceding sentence shall be deemed to be repeated until either (x)
all of the Offered Securities are accepted by the Participating Stockholders or
(y) no Participating Stockholder desires to subscribe for more Offered
Securities. The Corporation shall notify each Participating Stockholder within
five days following the expiration of the Preemptive Offer Period of the number
or amount of Offered Securities which such Participating Stockholder has
subscribed to purchase. Anything contained herein to the contrary
notwithstanding, the Corporation or its Subsidiary offering such Offered
Securities may elect to abandon the Equity Sale in which event the Corporation
shall not be obligated to issue and sell the Offered Securities pursuant to the
Preemptive Offer Acceptance Notice.
c. If Preemptive Offer Acceptance Notices are not given by the
Stockholders for all the Offered Securities, the Company making such Preemptive
Offer shall have 180 days from
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the expiration of the Preemptive Offer Period to sell all or any part of such
Offered Securities as to which Preemptive Offer Acceptances Notices have not
been given by the Stockholders (the "Refused Securities") to any other Persons,
but only upon terms and conditions in all respects, including unit price and
interest rates, which are no more favorable, in the aggregate, to such other
Persons or less favorable to such Company than those set forth in the Preemptive
Offer. Upon the closing, which shall include full payment to such Company, of
the sale to such other Persons of all the Refused Securities, the Stockholders
shall purchase from such Company, and such Company shall sell to the
Stockholders, the Offered Securities in respect of which Preemptive Offer
Acceptance Notices were delivered by the Stockholders, at the terms specified in
the Preemptive Offer. In each case, any Offered Securities not purchased by the
Stockholders or any other Persons in accordance with this Section 4.1 may not be
sold or otherwise disposed of until they are again offered to the Stockholders
under the procedures specified in this Section 4.1.
4.2 Excluded Securities.
The rights of the Stockholders under Section 4.1a., b. and c. shall not
apply to the following Securities (the "Excluded Securities"):
a. options granted to, and shares of Stock issued upon exercise
of options granted to, officers, employees or directors of, or consultants to,
the Company pursuant to an Option Plan;
b. warrants issued to lenders providing debt financing to the
Company that would otherwise not be available to the Company on substantially
similar terms in absence of such warrants, and shares of Stock issued up the
exercise, conversion or exchange of such warrants in accordance with their
stated terms;
c. any Securities issued by the Company solely in connection with
an Acquisition or in connection with the Second Financing;
d. any Securities issued by the Company in a Public Offering;
e. Securities issued upon the exercise or conversion of Common
Stock Equivalents issued in compliance with (or not otherwise in violation of)
Section 3 and this Article 4;
f. shares of Stock issued in a Stock Recapitalization;
g. shares of Stock issued upon conversion of other shares of
capital stock of the Corporation pursuant to the Charter;
h. Securities issued to Persons entering into "corporate partner"
relationship in which the issuance of Securities to the other Persons is a
fundamental part of the transaction, where the principal purpose of the
transaction is not capital raising.
5. SECURITIES LAW COMPLIANCE; LEGENDS
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5.1 In addition to any other restrictions on the Transfer of any
Securities contained in this Agreement, the Stockholders shall not Transfer any
Restricted Securities except in compliance with the conditions specified in this
Article 5.
5.2 Restrictive Legends.
Each certificate for the Restricted Securities shall (unless otherwise
provided by the provisions of Section 5.4) be stamped or otherwise imprinted
with a legend in substantially the following terms:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT OR LAWS."
5.3 Notice of Transfer.
The holder of any Restricted Securities, by its acceptance or purchase
thereof, agrees, prior to any Transfer of any such Restricted Securities (except
pursuant to an effective registration statement), to give written notice to the
Corporation of such holder's intention to effect such transfer and agrees to
comply in all other respects with the provisions of this Article 5. Each such
notice shall describe the manner and circumstances of the proposed Transfer and,
unless waived by the Corporation, shall be accompanied by the written opinion,
addressed to the Corporation, of counsel for the holder of such Restricted
Securities (which counsel shall be reasonably satisfactory to the Corporation),
stating that in the opinion of such counsel (which opinion shall be reasonably
satisfactory to the Corporation) such proposed Transfer does not involve a
transaction requiring registration or qualification of such Restricted
Securities under the Securities Act or the securities laws of any state of the
United States. Subject to complying with the other applicable provisions hereof,
such holder of Restricted Securities shall be entitled to consummate such
Transfer in accordance with the terms of the notice delivered by it to the
Corporation if the Corporation does not object (on the basis that such transfer
violates the provisions of this Article 5) to such transfer within five days
after the delivery of such notice. Each certificate or other instrument
evidencing the securities issued upon the transfer of any Restricted Securities
(and each certificate or other instrument evidencing any untransferred balance
of such securities) shall bear the legend set forth in Section 5.2) unless (i)
in such opinion of such counsel registration of future transfer is not required
by the applicable provisions of the Securities Act or the securities laws of any
state of the United States or (ii) the Corporation shall have waived the
requirement of such legend.
5.4 Removal of Legends, Etc.
Notwithstanding the foregoing provisions of this Article 5, the
restrictions imposed by Sections 5.1, 5.2 and 5.3 upon the transferability of
any Restricted Securities shall cease and terminate when (i) such Restricted
Securities are sold or otherwise disposed of in accordance with the intended
method of disposition by the seller or sellers thereof set forth in a
registration statement
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or are sold or otherwise disposed of in a transaction contemplated by Section
5.3 which does not require that the securities transferred bear the legend set
forth in Section 5.2. Whenever the restrictions imposed by Sections 5.1, 5.2 and
5.3 shall terminate, as herein provided, the holder of any Restricted Securities
shall be entitled to receive from the Corporation, without expense, a new
certificate not bearing the restrictive legend set forth in Section 5.2 and not
containing any other reference to the restrictions imposed by Sections 5.1, 5.2
and 5.3.
5.5 Additional Legend.
Each certificate evidencing Shares and each certificate issued in exchange
for or upon the Transfer of any Shares (if such shares remain Shares as defined
herein after such Transfer) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT DATED AS OF MARCH 5, 1998, AMONG THE ISSUER OF SUCH
SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. THE
TERMS OF SUCH STOCKHOLDERS AGREEMENT INCLUDE, AMONG OTHER THINGS, VOTING
AGREEMENTS, REPURCHASE AGREEMENTS AND RESTRICTIONS ON TRANSFERS. A COPY OF
SUCH STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Corporation shall imprint such legends on certificates evidencing shares
outstanding prior to the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be Shares in
accordance with the terms of this Agreement.
6. MATTERS RELATING TO SECOND FINANCING, STM SERVICES AND COVENANTS OF THE
CORPORATION
6.1 Investors for Second Financing; Consulting and Management Team.
a. The Pequot Investors hereby covenant and agree to utilize
their reasonable best efforts to assist the Corporation in identifying investors
for the Second Financing. The Pequot Investors shall also use their reasonable
best efforts to assist the Corporation in structuring the terms of such Second
Financing and negotiating and closing the Second Financing with such investors
identified by the Pequot Investors. In addition, the Pequot Investors shall use
their reasonable best efforts to assist the Corporation and STM to identify and
retain members of the executive management team of the Corporation.
b. STM hereby covenants and agrees to utilize its reasonable best
efforts to identify investors for, and to assist the Corporation in
consummating, the Second Financing prior to July 1, 1998.
c. STM, with the assistance of the Purchasers, will assist in a
search effort to put in place the executive management team of the Corporation.
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d. In the event of a dissolution or liquidation of the
Corporation, STM hereby agrees to subordinate the STM Indebtedness to the
liquidation preference payable to the holders of Series A Preferred Stock.
Nothing in this Section 6.1(d) shall prevent the payment of the STM Indebtedness
from the proceeds of the Second Financing or any other debt or equity financing
obtained by the Corporation.
6.2 Covenants of the Corporation. The Corporation hereby covenants that:
a. within ninety (90) days after the end of each fiscal year of
the Corporation, it shall provide each Stockholder of at least 5% of its Voting
Stock (a "Major Stockholder") with a balance sheet (together with compliance
certificates) as of the end of such fiscal year and the related statements of
operations and cash flow for such fiscal year;
b. it will promptly provide each Major Stockholder with notices
of material defaults by the Company under contracts and commencement of material
litigation by or against the Company and with copies of filings with the SEC.
c. it will preserve and keep in full force and effect its
corporate existence and any rights material to its business.
d. it will comply in all material respects with all applicable,
foreign, federal, state, municipal and other political subdivision or
governmental agency statutes, ordinances and regulations, 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 is reasonably
expected to have a material adverse effect on its business, operations or
financial condition.
e. it shall timely pay all federal, state and local income,
property or other taxes and all accounts payable resulting from the conduct of
its business, except where it is contesting such taxes in good faith by
appropriate proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with the provisions of
GAAP.
f. it shall promptly obtain and maintain a policy of directors
and officers insurance.
7. NONCOMPETITION
7.1 General.
a. For a period of 10 years following the date hereof, except as
permitted otherwise hereinbelow, STM shall not engage in a "Competing Business."
STM agrees that it shall not enter into an agreement to be acquired pursuant to
an Acquisition of STM which constitutes a Sale of the Company, unless (i) the
purchaser therein agrees not to use STM, STM's products or the Confidential
Information (as defined below) to engage in a Competing Business, or (ii) such
acquiring Person agrees to make a cash payment to the Corporation at the closing
of such Sale of the Company as follows: If such Sale of the Company occurs (i)
within 12 months after the consummation of the Second Financing, the cash
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payment shall be $25 million, (ii) between 13 and 24 months after the
consummation of the Second Financing, the cash payment shall be $15 million and
(iii) between 25 and 36 months after the consummation of the Second Financing,
the cash payment shall be $5 million. If such Sale of the Company occurs after
36 months following the consummation of the Second Financing, then such
acquiring Person shall be permitted to engage in a Competing Business without
having to make any cash payment to the Corporation. As used herein,
"Confidential Information" shall mean any proprietary or secret information
relating to the business of the Corporation, including, without limitation, the
proprietary rights, operations, business plans, customer lists, or other work
product developed by or for the Corporation, whether on the premises of the
Corporation or elsewhere.
b. For a period of 5 years following the date hereof, so long as
Pequot Affiliates shall hold 10% of the Securities of the Corporation, Pequot
Private Equity Fund, L.P. shall not make any direct equity investments in excess
of 5% of the outstanding capital of a Competing Service except for public
companies in which event the investment shall not exceed 9.9%. Nothing herein
shall preclude or limit the Pequot Private Equity Fund, L.P. from acquiring
Securities of a Competing Service in open market transactions.
c. For purposes of this Section 7.1, the term (i) "Competing
Business" shall mean the engagement or participation as a service provider using
satellites to provide fixed station telephony services using the intellectual
property of the Company and (ii) "Competing Service" shall mean the engagement
or participation as a service provider using satellites to provide fixed station
telephony services.
7.2 Obligation to Fund Optional Repurchase.
If (a) STM is acquired pursuant to an Acquisition of STM that constitutes
a Sale of the Company, (b) STM then holds greater than 50% of the Corporation's
Voting Stock and (c) the Corporation has not consummated a Public Offering, then
the Pequot Investors may, at their option, elect (the "Repurchase Election") to
have the Corporation repurchase their shares of Series A Preferred Stock (or the
Common Stock issued on conversion thereof) at a purchase price equal to the
Series A Liquidation Preference (as defined in the Charter) (or, if such Series
A Preferred Stock has been converted into Common Stock, then an amount equal to
the Series A Liquidation Preference immediately prior to such conversion). In
the event the Pequot Investors exercise their Repurchase Election, STM or its
successor shall be obligated, if required under applicable law, to contribute or
otherwise make available sufficient cash to the Corporation to enable it to
legally repurchase such Series A Preferred Stock on the terms described herein.
8. AMENDMENT AND WAIVER
8.1 Amendment.
Except as expressly set forth herein, the provisions of this Agreement may
only be amended or waived with the prior written consent of (i) the Corporation
and (ii) the Requisite Stockholders; provided, however, that Schedule I to this
Agreement shall be deemed to be automatically amended from time to time to
reflect Transfers of Stock made in accordance with Section 3.1(a) without
requiring the consent of any party, and the Corporation will, from time to time,
distribute to the Stockholders a revised Schedule I to reflect any such changes.
8.2 Waiver.
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No course of dealing between the Corporation, its Subsidiaries and the
Stockholders (or any of them) or any delay in exercising any rights hereunder
will operate as a waiver of any rights of any party to this Agreement. The
failure of any party to enforce any of the provisions of this Agreement will in
no way be construed as a waiver of such provisions and will not affect the right
of such party thereafter to enforce each and every provision of this Agreement
in accordance with its terms.
8.3 Certain Consents.
In the event that the consent, waiver or approval of the Pequot Investors
is required under any provision of this Agreement with respect to any action,
event or condition, such consent, waiver or approval shall be deemed to have
been given if such action, event or condition is approved by the Investor
Designees.
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9. TERMINATION
The provisions of this Agreement, shall terminate upon the first to occur
of (A) the consummation of a Public Offering resulting in aggregate proceeds to
the Corporation of at least $20.0 million at a price per share of Common Stock
at least equal to $10.00 per share (adjusted for any Stock Recapitalizations
between the date hereof and the date of such offering), (B) the dissolution,
liquidation or winding-up of the Corporation (C) at such time as Pequot shall
hold less than 9.9% of the outstanding Shares (determined on a Fully Diluted
Basis), and (D) the approval of such termination by (i) the Corporation and (ii)
each Stockholder who holds at least 5% of the outstanding Shares (determined on
a Fully Diluted Basis). As to any particular Stockholder, this Agreement shall
no longer be binding or of further force or effect as to such Stockholder,
except as noted below or otherwise expressly provided herein, as of the date
such Stockholder has Transferred all such Stockholder's interest in the
Corporation's Securities and the transferees of such securities have, if
required by Section 3.1(a) hereof, executed a Joinder Agreement.
10. MISCELLANEOUS
10.1 Severability.
It is the desire and intent of the parties hereto that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
10.2 Entire Agreement.
This Agreement and the other agreements referred to herein embody the
entire agreement and understanding among the parties hereto with respect to the
subject matter hereof and thereof and supersede and preempt any and all prior
and contemporaneous understandings, agreements, arrangements or representations
by or among the parties, written or oral, which may relate to the subject matter
hereof or thereof in any way.
10.3 Stockholders.
Each Stockholder will note the restrictions contained in this Agreement on
the transfer of Stock and no shares of such common stock or other equity
interests may be transferred to any Person other than in accordance with the
terms and provisions of this Agreement.
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10.4 Successors and Assigns.
Except as otherwise provided herein, this Agreement will bind and inure to
the benefit of and be enforceable by the Corporation and its successors and
assigns and the Stockholders and any subsequent holders of Shares and the
respective successors and assigns of each of them, so long as they hold Shares.
None of the provisions hereof shall create, or be construed or deemed to create,
any right to employment in favor of any Person by the Corporation or any of its
Subsidiaries. This Agreement is not intended to create any third party
beneficiaries.
10.5 Counterparts.
This Agreement may be executed in any number of counterparts, any one of
which need not contain the signatures of more than one party and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts taken together will constitute one and the same agreement.
10.6 Remedies.
a. Each Stockholder shall have all rights and remedies reserved
for such Stockholder pursuant to this Agreement, the Charter and Bylaws and all
rights and remedies which such holder has been granted at any time under any
other agreement or contract and all of the rights which such holder has under
any law or equity. Any Person having any rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law or equity.
b. The parties hereto agree that if any parties seek to resolve
any dispute arising under this Agreement pursuant to a legal proceeding, the
prevailing parties to such proceeding shall be entitled to receive reasonable
fees and expenses (including reasonable attorneys' fees and expenses) incurred
in connection with such proceedings.
c. It is acknowledged that it will be impossible to measure in
money the damages that would be suffered if the parties fail to comply with any
of the obligations herein imposed on them and that in the event of any such
failure, an aggrieved Person will be irreparably damaged and will not have an
adequate remedy at law. Any such person shall, therefore, be entitled to
injunctive relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the provisions
of this Agreement, none of the parties hereto shall raise the defense that there
is an adequate remedy at law.
10.7 Notices.
All notices or other communications which are required or otherwise
delivered hereunder shall be deemed to be sufficient and duly given if contained
in a written instrument (a) personally delivered or sent by telecopier, or (b)
sent by nationally-recognized overnight courier guaranteeing next business day
delivery addressed as follows:
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if to the Company, to:
Direc-To-Phone International, Inc.
One Mauchly
Irvine, California 92618
Telecopy: 714-753-0808
Telephone: 714-753-7864
Attention: Frank T. Connors
with copies to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Telecopy: 714-725-4100
Telephone: 714-725-4000
Attention: K. C. Schaaf, Esq.
if to a Stockholder, to him or it at his or its address set forth on
Schedule I;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (i) when delivered, if
personally delivered or sent by telecopier, or (ii) on the first Business Day
after dispatch, if sent by nationally recognized, overnight courier guaranteeing
next Business Day delivery.
10.8 Governing Law.
All questions concerning the construction, interpretation and validity of
this Agreement shall be governed by and construed and enforced in accordance
with the domestic laws of the State of Delaware, without giving effect to any
choice or conflict of law provision or rule (whether in the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware. In furtherance of the foregoing,
the internal law of the State of Delaware will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
10.9 Further Assurances.
Each party hereto shall do and perform or cause to be done and performed
all such further acts and things and shall execute and deliver all such other
agreements, certificates, instruments' and documents as any other party hereto
reasonably may request in order to carry out the provisions of this Agreement
and the consummation of the transactions contemplated hereby.
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10.10 Representations and Warranties of the Corporation.
The Corporation hereby represents and warrants to the Stockholders that as
of the date of this Agreement:
a. it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, it has full corporate
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby, and the execution, delivery and
performance by it of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action;
b. this Agreement has been duly and validly executed and
delivered by the Corporation and constitutes a legal and binding obligation of
the Corporation, enforceable against the Corporation in accordance with its
terms; and
c. the execution, delivery and performance by the Corporation of
this Agreement and the consummation by the Corporation of the transactions
contemplated hereby will not, with or without the giving of notice or lapse of
time, or both (i) violate any Applicable Law, or (ii) conflict with, or result
in a breach or default under, any term or condition of the Corporations Charter
or Bylaws or any agreement or instrument to which the Corporation is a party or
by which it is bound.
10.11 Representation and Warranties of the Stockholders.
Each Stockholder (as to himself or itself only) represents and warrants to
the Corporation and the other Stockholders that, as of the time such Stockholder
becomes a party to this Agreement:
a. this Agreement (or the separate joinder agreement executed by
such Stockholder) has been duly and validly executed and delivered by such
Stockholder and this Agreement constitutes a legal and binding obligation of
such Stockholder, enforceable against such Stockholder in accordance with its
terms: and
b. the execution, delivery and performance by such Stockholder of
this Agreement and the consummation by such Stockholder of the transactions
contemplated hereby will not, with or without the giving of notice or lapse of
time, or both (i) violate any Applicable Law, or (ii) conflict with, or result
in a breach or default under, any term or condition of any agreement or other
instrument to which such Stockholder is a party or by which such Stockholder is
bound, except for such violations, conflicts, breaches or defaults that would
not, in the aggregate, materially affect the Shareholders ability to perform its
obligations hereunder.
10.12 Conflicting Agreements.
-20-
<PAGE> 21
No Stockholder shall enter into any stockholder agreements or arrangements
of any kind with any Person with respect to any Securities on terms inconsistent
with the provisions of this Agreement (whether or not such agreements or
arrangements are with other Stockholders or with Persons that are not parties to
this Agreement), including agreements or arrangements with respect to the
acquisition or disposition of Securities of the Corporation in a manner which is
inconsistent with this Agreement.
-21-
<PAGE> 22
10.13 Mutual Waiver of Jury Trial.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS
ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON
AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
10.14 Waiver of Jury Trial; Consent to Jurisdiction. Each of the parties
irrevocably (a) waives any and all right to trial by jury in any legal
proceeding arising out of this Agreement, or any of the transactions
contemplated hereby, (b) submits to the nonexclusive personal jurisdiction in
the State of California, the courts thereof and the United States District
Courts sitting therein, for the enforcement of this Agreement, (c) waives any
and all personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of California for the purpose of litigation to enforce this
Agreement, and (d) agrees that service of process may be made upon it in the
manner prescribed in Section 10.7 for the giving of notices to the parties.
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<PAGE> 23
IN WITNESS WHEREOF, the undersigned have duly executed this Stockholders
Agreement as of the date first written above.
DIREC-TO-PHONE INTERNATIONAL, INC.
By:_________________________________________
Name:
Title:
STM WIRELESS, INC.
By:_________________________________________
Name:
Title:
PEQUOT PRIVATE EQUITY FUND, L.P.
By: Pequot Private Equity Partners, LLC,
General Partner
By:_________________________________________
Lawrence D. Lenihan,
Managing Member
PEQUOT OFFSHORE PRIVATE EQUITY FUND, INC.
By: Pequot Private Equity Partners, LLC,
Investment Manager
By:_________________________________________
Lawrence D. Lenihan,
Managing Member
-23-
<PAGE> 24
SCHEDULE I
Stockholders
<TABLE>
<CAPTION>
Shares of Shares of Series A Shares of Series B
Common Stock Preferred Stock Preferred Stock
------------ ------------------ ------------------
<S> <C> <C> <C>
Pequot Private Equity Fund, L.P. 1,065,141
c/o Amiel M. Peretz
Pequot Private Equity Partners, LLC
354 Pequot Avenue
Southport, Connecticut 06490
Fax: (203) 255-2558
Pequot Offshore Private Equity Fund, Inc. 134,859
c/o Amiel M. Peretz
Pequot Private Equity Partners, LLC
354 Pequot Avenue
Southport, Connecticut 06490
Fax: (203) 255-2558
STM Wireless, Inc. 2,600,000 1,000,000
One Mauchly
Irvine, California 92618-2305
Fax: (714) 753-0808
Attn: Emil Youssefzadeh
------------ ------------------ ------------------
Total 2,600,000 1,200,000 1,000,000
</TABLE>
SCHEDULE I-1
<PAGE> 1
EXHIBIT 10.28
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as
of March 5, 1998, by and between Direc-to-Phone International, Inc., a Delaware
corporation ("DTPI"), and the holders of stock of DTPI listed on the signature
page hereto (the "Stockholders").
WHEREAS, in connection with DTPI's issuance of Series A Preferred Stock
and pursuant to that certain Stock Purchase Agreement dated as of the date
hereof (the "Purchase Agreement"), DTPI has agreed to enter into this
Registration Rights Agreement as a condition to the Closing thereunder.
NOW THEREFORE, in consideration of the mutual agreements, covenants and
conditions and releases contained herein, DTPI and the Stockholders hereby agree
as follows:
1. REGISTRATION RIGHTS
DTPI hereby grants to each of the Stockholders the registration rights
set forth in this Section 1, with respect to the Registrable Securities (as
hereinafter defined) owned by such Stockholders. DTPI and the Stockholders agree
that the registration rights provided herein set forth the sole and entire
agreement on the subject matter among DTPI and the Stockholders.
1.1 Definitions. As used in this Section 1:
1.1.1 The terms "register," "registered," and "registration"
refer to a registration effected by filing with the Securities and Exchange
Commission (the "SEC") a registration statement (the "Registration Statement")
in compliance with the Securities Act of 1933, as amended (the "1933 Act"), and
the declaration or ordering by the SEC of the effectiveness of such Registration
Statement.
1.1.2 The term "Registrable Securities" means (i) common Stock
of DTPI, including but not limited to, common stock issued or issuable upon
conversion of the shares of Series A Preferred Stock and Series B Preferred
Stock issued to the Stockholders, and (ii) any common stock of DTPI issued as
(or issuable upon the conversion or exercise of any warrant, right, or other
security that is issued as) a dividend or other distribution with respect to, or
in exchange or in replacement of, such Registrable Securities. In the event of
any recapitalization by DTPI, whether by stock split, reverse stock split, stock
dividend or the like, the number of shares of Registrable Securities used
throughout this Agreement for various purposes shall be proportionately
increased or decreased. Any security shall cease to be a Registrable Security at
such time as it is publicly saleable without restriction, pursuant to Rule
144(k) of the SEC, or any successor statute, rule or regulation.
1.1.3 The term "STM" means STM Wireless, Inc., a Delaware
corporation.
1.1.4 The term "Pequot Investors" means, collectively, Pequot
Private Equity Fund, L.P., a Delaware limited partnership, and Pequot Offshore
Private Equity Fund, Inc., a British Virgin Islands corporation.
<PAGE> 2
1.2 Demand Registration.
1.2.1 If (i) registration pursuant to section 1.9 hereof
cannot be effected and (ii) DTPI shall receive from either STM or the Pequot
Investors (the "Demanding Stockholder") a written demand (a "Demand
Registration") that DTPI effect a registration on Form S-1 under the 1933 Act of
at least 50% of the Registrable Securities held by such Demanding Stockholder,
then DTPI, within ten (10) days of the receipt thereof, shall give written
notice of such request to the Stockholder out of STM and the Pequot Investors
that is not the Demanding Stockholder (the "Other Stockholder"), and subject to
the limitations of this Section 1.2, shall use all reasonable commercial efforts
to effect as soon as practicable, and in any event within 120 days of the
receipt of such request, the registration under the Securities Act for resale of
all Registrable Securities which the Demanding Stockholder and the Other
Stockholder request to be registered within twenty (20) days of the mailing of
such notice by DTPI in accordance with Section 2.3 hereof, provided, however,
that DTPI shall not be obligated to take any action to effect any such
registration, pursuant to this Section 1.2
(a) At any time prior to the consummation of DTPI's
initial public underwritten offering;
(b) Within 90 days immediately following the
effective date of any Registration Statement pertaining to an underwritten
public offering of securities of DTPI for its own account, or 180 days in the
case of DTPI's initial public offering (other than a registration on Form S-4 or
a registration relating solely to employee benefit plans);
(c) If the Demand Registration is requested by the
Pequot Investors and DTPI has already effected two Demand Registrations
requested by the Pequot Investors pursuant to this Section 1.2 or if the Demand
Registration is requested by STM and DTPI has already effected two Demand
Registrations requested by STM pursuant to this Section 1.2 pursuant to which
all of the Registrable Securities requested by the Pequot Investors or STM, as
the case may be, to be included in such Demand Registration were actually sold;
or
(d) If DTPI shall furnish to the Stockholders a
certificate signed by the President of DTPI, stating that in the good faith
judgment of the Board of Directors of DTPI, after consultation with DTPI
counsel, that the filing of the Registration Statement at the date filing would
be required would require the disclosure of facts the disclosure of which, at
such time, would be seriously detrimental to DTPI and its stockholders, in which
case DTPI shall have an additional period of not more than 120 days within which
to file such Registration Statement; provided, however, that DTPI shall not use
this right more than once in any twelve month period.
1.2.2 If the Demanding Stockholder intends to distribute the
Registrable Securities covered by its demand by means of an underwriting, it
shall so advise DTPI as part of its demand made pursuant to this Section 1.2.
DTPI shall, together with the Stockholders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Demanding
Stockholder and reasonably acceptable to the Other
2
<PAGE> 3
Stockholder and DTPI. In the case of an underwritten offering, the right of any
Stockholder to include Registrable Securities in such registration shall be
conditioned upon such Stockholder's participation in such underwriting on
customary terms. Notwithstanding any other provision of this Section 1.2, if the
underwriter shall advise such Stockholders in writing that marketing factors
(including, without limitation, an adverse effect on the per share offering
price) require a limitation of the number of shares to be underwritten, the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be reduced accordingly and shall be
allocated among all Stockholders thereof in proportion (as nearly as
practicable) to the amounts of Registrable Securities owned by each Stockholder,
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
proposed to be included in such registration are first entirely excluded from
the underwriting. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration.
1.3 Company Registration.
1.3.1 If at any time or from time to time DTPI shall determine
to register any of its securities, either for its own account or the account of
security holders (including the Stockholders), other than a registration
relating solely to employee benefit plans, a registration on Form S-4, or a
registration pursuant to Section 1.2 hereof, DTPI will:
(a) promptly give to each of the Stockholders
written notice thereof (which shall include a list of the jurisdictions in which
DTPI intends to attempt to qualify such securities under the applicable blue sky
or other state securities laws); and
(b) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from DTPI,
by any of the Stockholders, except as set forth in Section 1.3.2 below.
1.3.2 If the registration of which DTPI gives notice is for a
registered public offering involving an underwriting, DTPI shall so advise each
of the Stockholders as a part of the written notice given pursuant to Section
1.3.1(a). In such event, the right of any of the Stockholders to registration
pursuant to this Section 1.3 shall be conditioned upon such Stockholders'
participation in such underwriting and the inclusion of such Stockholders'
Registrable Securities in the underwriting to the extent provided herein. Each
of the Stockholders proposing to distribute their securities through such
underwriting shall, together with DTPI and the other parties distributing their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by DTPI, including without limitation indemnification by the
selling Stockholders of the underwriters. Notwithstanding any other provision of
this Section 1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting, or may exclude Registrable Securities entirely from such
registration and underwriting subject to the terms of this paragraph. In such
event, DTPI shall so advise the Stockholders of DTPI's securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
shares of such securities, including Registrable Securities, that may be
included in the registration and underwriting shall be allocated in the
3
<PAGE> 4
following manner: shares, other than securities to be offered by the Company for
its own account (which shall have priority) and other than Registrable
Securities, requested to be included in such registration by other stockholders
shall be excluded, and if a limitation on the number of shares is still
required, the number of Registrable Securities that may be included pursuant to
this Section 1.3 shall be allocated to the Stockholders with respect to their
Registrable Securities in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by each such Stockholder at
the time of filing the Registration Statement (excluding any Registrable
Securities included pursuant to Section 1.2 hereof). For purposes of any
underwriter cutback, all Registrable Securities held by a Stockholder which is a
partnership or corporation shall also include any Registrable Securities held by
the partners, retired partners, stockholders or affiliated entities of such
Stockholder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons, and
such Stockholder and other persons shall be deemed to be a single "Selling
Stockholder," and any pro rata reduction with respect to such "Selling
Stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Selling Stockholder," as defined in this sentence. No securities excluded from
the underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any of the Stockholders disapproves of the
terms of the underwriting, it may elect to withdraw therefrom by written notice
to DTPI and the underwriter. The Registrable Securities so withdrawn shall also
be withdrawn from registration.
1.4 Expenses of Registration. All expenses incurred in connection
with registration effected pursuant to Sections 1.2, 1.3 and 1.9, including
without limitation all registration, filing, and qualification fees (including
blue sky fees and expenses), printing expenses, escrow fees, fees and
disbursements of counsel for DTPI, and expenses of any special audits incidental
to or required by such registration, shall be borne by DTPI; provided, however,
that DTPI shall not be required to pay stock transfer taxes, underwriters'
discounts or commissions relating to Registrable Securities. Notwithstanding
anything to the contrary above, DTPI shall not be required to pay for any
expenses of any registration proceeding under Section 1.2 if the registration
request is subsequently withdrawn at the request of the Demanding Stockholder,
unless such Demanding Stockholder agrees to forfeit its right to a demand
registration pursuant to Section 1.2. In the absence of such an agreement to
forfeit, such Demanding Stockholder shall bear all such expenses.
Notwithstanding the preceding sentence, however, (a) if at the time of the
withdrawal, such Demanding Stockholder has learned of a material adverse change
in the condition, business, or prospects of DTPI from that known to such
Demanding Stockholder at the time of its request, or (b) in the event that such
withdrawal is requested on account of the Registration Statement not being
declared effective within at least ninety (90) days of the date of its filing
with the SEC, then such Demanding Stockholder shall not be required to pay any
of said expenses and shall retain their rights pursuant to Section 1.2.
1.5 Obligations of DTPI. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, DTPI shall, as
expeditiously as reasonably possible:
1.5.1 Prepare and file with the SEC a Registration Statement
with respect to such Registrable Securities and use its diligent best efforts to
cause such Registration Statement to become effective, and keep such
Registration Statement effective for up to ninety (90) days or until the
Stockholders have completed the distribution relating thereto, provided however,
that (i) such 90-day period shall be extended for a period of time equal to the
period the Stockholder refrains from selling any securities included in such
registration at the request of an underwriter of Common
4
<PAGE> 5
Stock (or other securities) of DTPI; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 90-day period shall be extended, if necessary,
to keep the Registration Statement effective until all such Registrable
Securities are sold not to exceed a total period of 360 days, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (a) includes any prospectus required by
Section 10(A)(3) of the 1933 Act or (b) reflects facts or events representing a
material or fundamental change in the information set forth in the Registration
Statement, the incorporation by reference of information required to be included
in (i) and (ii) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), in the Registration Statement.
1.5.2 Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such Registration Statement.
1.5.3 Furnish to the Stockholders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
1.5.4 Use its reasonable best efforts to register and qualify
the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Stockholders, provided that DTPI shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
1.5.5 In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each of the
Stockholders participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
1.5.6 Notify each of the Stockholders covered by such
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.5.7 Cause all such Registrable Securities registered
hereunder to be listed on each securities exchange on which similar securities
issued by DTPI are then listed.
1.5.8 Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
5
<PAGE> 6
1.5.9 Furnish, at the request of any of the Stockholders, if
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to each Stockholder requesting registration of Registrable
Securities, and (ii) to the extent permitted under the rules of the AICPA, a
letter, dated such date, from the independent accountants of the Company, in
form and substance as is customarily given by independent accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to each Stockholder requesting registration of Registrable
Securities.
1.6 Indemnification.
1.6.1 DTPI will, and does hereby undertake to, indemnify and
hold harmless each Stockholder, each of such Stockholder's officers, directors,
partners and agents, and each person controlling such Stockholder, with respect
to any registration, qualification, or compliance effected pursuant to this
Section 1, and each underwriter, if any, and each person who controls any
underwriter, of the Registrable Securities held by or issuable to such
Stockholder, against all claims, losses, damages, and liabilities (or actions in
respect thereto) to which they may become subject under the 1933 Act, the 1934
Act, or other federal or state law arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular, or other similar document (including any related
Registration Statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any violation
or alleged violation by DTPI of any federal, state or common law rule or
regulation applicable to DTPI in connection with any such registration,
qualification, or compliance, and will reimburse, as incurred, each Stockholder,
each underwriter, and each director, officer, partner, agent and controlling
person, for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability, or
action; provided that DTPI will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense, arises out of or is
based on any untrue statement or omission based upon written information
furnished to DTPI by an instrument duly executed by any of the Stockholders or
underwriter and stated to be specifically for use therein.
1.6.2 Each Stockholder will, if Registrable Securities held by
or issuable to such Stockholder are included in such registration,
qualification, or compliance, severally and not jointly, indemnify DTPI, each of
its directors, and each officer who signs a Registration Statement in connection
therewith, and each person controlling DTPI, each underwriter, if any, and, each
person who controls any underwriter, of DTPI's securities covered by such a
Registration Statement, against all claims, losses, damages, and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the
6
<PAGE> 7
statements therein not misleading, and will reimburse, as incurred, DTPI, and
each such underwriter or other person, for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) was made in such Registration Statement,
prospectus, offering circular, or other document, in reliance upon and in
conformity with written information furnished to DTPI by an instrument duly
executed by such Stockholder and stated to be specifically for use therein;
provided, however, that the liability of each such Stockholder hereunder shall
be limited to the net proceeds received by such Stockholder from the sale of
securities under such Registration Statement. In no event will any Stockholder
be required to enter into any agreement or undertaking in connection with any
registration under this Section 1 providing for any indemnification or
contribution obligations on the part of such Stockholder greater than such
Stockholder's obligations under this Section 1.6.
1.6.3 Each party entitled to indemnification under this
Section 1.6 (the "Indemnified Party") shall give notice to the party required to
provide such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense with its separate counsel at the Indemnifying
Party's expense if representation of such Indemnified Party would be
inappropriate due to actual or reasonably likely differing interests between
such indemnified party and any other party represented by such counsel in such
proceeding; and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1, except to the extent that such failure to give
notice shall materially adversely affect the Indemnifying Party in the defense
of any such claim or any such litigation. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff therein, to such Indemnified Party, of a release from all
liability in respect to such claim or litigation.
1.7 Information by the Stockholders. If any Stockholder includes
Registrable Securities in any registration, such Stockholder shall furnish to
DTPI such information regarding such Stockholder, and the distribution proposed
by such Stockholder, as DTPI may reasonably request in writing and as shall be
required in connection with any registration, qualification, or compliance
referred to in this Section 1.
1.8 Transfer of Registration Rights. The rights of the Stockholders
contained in Sections 1.2, 1.3 and 1.9 hereof, to cause DTPI to register the
Registrable Securities, may be assigned or otherwise conveyed to a transferee or
assignee of Registrable Securities, who shall be considered a "Stockholder," as
applicable, for purposes of this Section 1; provided that such transferee or
assignee (a) receives such securities as an officer, employee, director,
partner, shareholder, or member of a Holder, or (b) holds at least 100,000
shares of Registrable Securities held by the transferring Holder; and, provided
further that the transfer or assignment complied with the provisions of Section
3.2 of the Stockholders Agreement, to the extent applicable, and DTPI is
7
<PAGE> 8
given written notice by such Stockholder at the time of or within a reasonable
time after said transfer stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned. Nothing in this Section 1.8 shall cause an increase
in the number of Demand Registrations described in Section 1.2.1.
1.9 Form S-3. If DTPI's stock becomes publicly traded, DTPI shall
use its reasonable best efforts to qualify for registration on Form S-3. After
DTPI has qualified for the use of Form S-3, the Stockholders shall have the
right to request registrations on Form S-3 under this Section 1.9. Subject to
the foregoing, DTPI will use its reasonable best efforts to effect promptly the
registration of shares of Registrable Securities on Form S-3, as the case may
be, to the extent requested in writing by the holders of at least 20%; provided,
however, that DTPI shall not be obligated to effect any such registration (i) if
the Stockholders propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than $1,000,000,
(ii) more than twice during any twelve (12) month period or (iii) in the event
that the conditions set forth in Section 1.2.1 (b) and (d) are met (but subject
to the limitations set forth therein).
1.10 Delay of Registration. No Stockholder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.11 Rule 144 Reporting. With a view to making available to the
Stockholders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, DTPI agrees to use its reasonably best efforts to:
1.11.1 Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the 1933 Act, at all times commencing ninety (90) days
after the effective date of the first registration filed by DTPI for an offering
of its securities to the general public;
1.11.2 File with the SEC, in a timely manner, all reports and
other documents required of DTPI under the 1933 Act and 1934 Act; and
1.11.3 So long as a Stockholder owns any Registrable
Securities, furnish to such Stockholder upon request: a written statement by
DTPI as to its compliance with the reporting requirements of said Rule 144 of
the 1933 Act, and of the 1934 Act (at any time after it has become subject to
such reporting requirements); a copy of the most recent annual or quarterly
report of DTPI; and such other reports and documents as a Stockholder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
1.12 "Market Stand-Off" Agreement. Each Stockholder hereby agrees
that during the 180-day period following the effective date of a Registration
Statement of DTPI filed under the 1933 Act covering the initial public offering
of DTPI's common stock, and during the 90-day period following the effective
date of a Regulation Statement under the 1933 Act covering any other offering,
he, she or it shall not, to the extent requested by DTPI and any underwriter,
sell or otherwise transfer or dispose of (other than to donors who agree to be
similarly bound) any common stock of DTPI held by him, her or it at any time
during such period except common stock included in such registration; provided,
however, that all officers and directors of DTPI and all other persons
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with registration rights (whether or not pursuant to this Agreement) enter into
substantially identical agreements. In order to enforce the foregoing covenant,
DTPI may impose stop-transfer instructions with respect to the Registrable
Securities of each Stockholder (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
1.13 Amendment of Registration Rights. Any provision of this Section
1 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of DTPI and the Stockholders owning a majority of the
Registrable Securities owned by all Stockholders, provided, however, that any
such amendment, modification or waiver that would adversely affect the rights
hereunder of any Stockholder without similarly affecting the rights hereunder of
all Stockholders shall not be effective as to such Stockholder without its prior
written consent. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Stockholder, each future holder of
Registrable Securities and DTPI.
1.14 Expiration of Rights. The registration rights granted under this
Section 1 shall expire on the earlier of (i) five (5) years from the first sale
of common stock of DTPI to the public pursuant to a firm underwriting, which
sale is effected pursuant to a Registration Statement filed with, and declared
effective by, the SEC under the 1933 Act, that results in DTPI's common stock
being listed on a national exchange or the Nasdaq National Market (a "Qualified
Offering") or (ii) with respect to any Stockholder at such time as all
Registrable Securities of such Stockholder may be publicly sold without
restriction pursuant to Rule 144.
2. MISCELLANEOUS
2.1 Governing Law. All questions concerning the construction,
interpretation and validity of this Agreement shall be governed by and construed
and enforced in accordance with the domestic laws of the State of Delaware,
without giving effect to any choice or conflict of law provision or rule
(whether in the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware. In furtherance of the foregoing, the internal law of the State of
Delaware will control the interpretation and construction of this Agreement,
even if under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
2.2 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof.
2.3 Notices. Any notice, request or other communication required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given if personally delivered or if telegraphed, or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth on the signature page hereto and shall be deemed to have been received
when delivered. Any party hereto may by notice so given change its address for
future notices hereunder.
2.4 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 and the same instrument.
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2.5 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
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2.6 Captions. The captions and headings to Sections of this
Agreement have been inserted for identification and reference purposes only and
shall not be used to construe the meaning or the interpretation of this
Agreement.
2.7 Conflicting Agreements. DTPI shall not enter into any other
agreements or grant any other rights that are inconsistent with the rights of
the Stockholders hereunder, or that would impair the exercise of those rights.
2.8 Waiver of Jury Trial; Consent to Jurisdiction. Each of the
parties irrevocably (a) waives any and all right to trial by jury in any legal
proceeding arising out of this Agreement, or any of the transactions
contemplated hereby, (b) submits to the nonexclusive personal jurisdiction in
the State of California, the courts thereof and the United States District
Courts sitting therein, for the enforcement of this Agreement, (c) waives any
and all personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of California for the purpose of litigation to enforce this
Agreement, and (d) agrees that service of process may be made upon it in the
manner prescribed in Section 2.3 for the giving of notices to the parties.
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IN WITNESS WHEREOF, this Registration rights agreement has been duly
executed and delivered by the parties as of the date first above written.
DTPI
Address: DIREC-TO-PHONE INTERNATIONAL, INC.
One Mauchly
Irvine, California 92618 By:______________________________________
Facsimile: (714) 753-0808
Attention: Emil Youssefzadeh Its:_____________________________________
STOCKHOLDERS
Address: PEQUOT PRIVATE EQUITY FUND, L.P.
Amiel M. Peretz By: Pequot Private Equity Partners, LLC,
Pequot Private Equity Partners, LLC General Partner
354 Pequot Avenue
Southport, Connecticut 06490 By:______________________________________
Facsimile: 203-255-2558 Lawrence D. Lenihan,
Managing Member
Address: PEQUOT OFFSHORE PRIVATE EQUITY FUND, INC.
Amiel M. Peretz By: Pequot Private Equity Partners, LLC,
Pequot Private Equity Partners, LLC Investment Manager
354 Pequot Avenue
Southport, Connecticut 06490
Facsimile: 203-255-2558 By:______________________________________
Lawrence D. Lenihan,
Managing Member
Address: STM WIRELESS, INC.
One Mauchly
Irvine, California 92618 By:______________________________________
Facsimile: (714) 753-0808
Attention: Emil Youssefzadeh Its:_____________________________________
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