EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of March 10, 2004, between DISTINCTIVE DEVICES, INC., a
Delaware corporation (the "Company"), and ______________ (the "Purchaser").
BACKGROUND
WHEREAS, the Company is offering to sell 1,000,000 shares (the "Shares") of
its Common Stock, $.001 par value (the "Common Stock"), at a purchase price of
$1.00 per share (the "Shares"), to the Purchaser;
WHEREAS, the Purchaser desires to purchase the Shares from the Company, on
the terms and conditions set forth below.
NOW THEREFORE, the parties hereto for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged hereby, agree to be
legally bound as follows:
1. Sale of Common Stock; Purchase Price.
1.1 Sale. Subject to the terms and conditions set forth herein, the
Purchaser hereby purchases from the Company, and the Company hereby sells to the
Purchaser, the Shares for the purchase price of One Million Dollars ($1,000,000)
(the "Purchase Price").
1.2 Closing. The closing (the "Closing") of the transaction
contemplated hereby is taking place simultaneously with the execution and
delivery of this Agreement. At the Closing, the parties are making the following
deliveries to each other:
(a) the Company is delivering to the Purchaser a certificate for
the Shares; and
(b) the Purchaser is delivering the Purchase Price in
immediately available funds to the Company by check or wire transfer to an
account designated by the Company, receipt of which is acknowledged by the
Company.
2. Representations, Warranties and Covenants of the Company. The Company
represents and warrants to the Purchaser that:
2.1 Organization; Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified or licensed to do business as a foreign
corporation in good standing in every jurisdiction where the character of its
properties, owned or leased, or the nature of its activities make such
qualification necessary.
2.2 Subsidiaries. Except for the subsidiaries listed on Schedule 2.2
attached hereto (each a "Subsidiary" and collectively the "Subsidiaries"), of
which the Company is the beneficial owner of at least ninety (90%) percent all
of their issued and outstanding shares of voting capital stock, the Company has
no subsidiaries and does not own, of record or beneficially, any capital stock
or equity interest or investment in any corporation, partnership, limited
liability company, association or business entity. Each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of jurisdiction of its formation.
2.3 Corporate Power; Authorization. The Company has all requisite
corporate power to enter into this Agreement, to sell the Shares and to carry
out and perform its obligations under the terms of this Agreement. All corporate
action on the part of the Company necessary for the authorization, execution,
delivery and performance by the Company of this Agreement and for the
authorization, issuance and delivery of the Common Stock issuable upon payment
has been taken. This Agreement constitutes a valid and binding agreement of the
Company enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
2.4 No Restrictive Agreements. The issuance and delivery of the
Shares to the Purchaser is not subject to any preemptive rights. Upon the
delivery of the Shares, the Purchaser will acquire the beneficial and legal,
valid and indefeasible title to the Shares, free and clear of all pledges,
liens, charges, claims or options of any kind, except for restrictions on
transfer under the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws.
2.5 Capitalization. The Company's authorized capital stock, consists
of 50,000,000 shares of Common Stock, and 5,000,000 shares of preferred stock,
$.001 par value, of which 18,071,042 shares of Common Stock and no shares of
Preferred Stock are issued and outstanding (excluding 3,000,000 shares of Common
Stock which are issued and owned by a subsidiary of the Company). The Company
has reserved 6,843,050 shares of Common Stock for issuance upon the exercise of
outstanding options, warrants and other purchase rights. All of the issued and
outstanding shares of Common Stock are validly issued, fully paid and
non-assessable. Except as disclosed in the Company's Reports (as hereinafter
defined) or in Schedule 2.5 attached hereto, there are no outstanding options,
warrants or other rights of any kind to acquire any additional shares of capital
stock of the Company or securities convertible into or exchangeable for, or
which otherwise confer on the holder thereof any right to acquire, any such
additional shares, nor is the Company committed to issue any such option,
warrant, right or security.
2.6 SEC Reports. The Company is subject to filing reports with the
Securities and Exchange Commission (the "SEC") pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
information in the Company's annual report on Form 10-KSB for the fiscal year
ended December 31, 2002, quarterly report on Form 10-QSB for the fiscal quarter
ended September 30, 2003 and current report on Form 8-K for an event of January
14, 2004 (collectively, the "Company's Reports") is in all material respects
complete and correct and present fairly the financial position and results of
operations of the Company at the dates and for the periods to which they relate
(subject, in the case of the unaudited financial statements, to normal year-end
adjustments). The audited financial statements and the unaudited financial
statements contained in the Company's Reports have been prepared in accordance
with generally accepted accounting principles consistently followed throughout
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the periods involved (except as may be otherwise indicated in the notes thereto
and except with respect to unaudited statements as permitted by Form 10-QSB).
2.7 Absence of Certain Changes. Except to the extent set forth in the
Company Reports or in the schedules hereto, at all times since September 30,
2003, there has not been any event or condition of any character which has
adversely affected, or may be expected to adversely affect, the Company's
business or prospects, as a whole, including but not limited to:
(a) any material adverse change in the condition, assets, liabilities
(existing or contingent) or business of the Company from that shown on the
Company's Reports;
(b) any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially adversely
affecting the business or plans of the Company;
(c) any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(d) any actual or threatened cancellation or adverse modification of
any contract, licensing agreement, manufacturing agreement, marketing agreement
or strategic partnering agreement to which the Company is a party; or
(e) any labor trouble, or any other event or condition of any
character, materially adversely affecting the business or plans of the Company.
2.8 Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service and with the States of Delaware and New
Jersey and (except to the extent that the failure to file would not have a
material adverse effect on the condition or operations of the Company) with all
other jurisdictions where such filing is required by law. The Company has paid,
or made adequate provision for the payment of, all taxes, interest, penalties,
assessments or deficiencies shown to be due or claimed to be due on or in
respect of such tax returns and reports. The Company's federal income tax
returns have not, to the best of the Company's knowledge and belief, been
audited by the Internal Revenue Service.
2.9 Litigation. There is neither pending nor, to the Company's
knowledge, threatened any action, suit, proceeding or claim to which the Company
or any Subsidiary is or may be named as a party or its property is or may be
subject and in which an unfavorable outcome, ruling or finding in any such
matter or for all such matters taken as a whole might have a material adverse
effect on the condition, financial or otherwise, and operations or prospects of
the Company taken as a whole. The Company has no knowledge of any unasserted
claim which, if asserted and granted might have a material adverse effect on the
condition, financial or otherwise, operations or prospects of the Company taken
as a whole.
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2.10 Consents. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority is required in
connection with the Company's execution, delivery or performance of this
Agreement.
2.11 Compliance. The execution, delivery and performance of this
Agreement by the Company does not conflict with or cause a breach under any of
the terms or conditions of (i) its Certificate of Incorporation or By-Laws or
(ii) any mortgage, indenture, contract, agreement, instrument, judgment, decree,
order, statute, rule or regulation to which the Company is subject and a breach
or violation of which might have a material adverse effect on the condition,
financial or otherwise, operations or prospects of the Company. To the best
knowledge of the Company, the operations of the Company and each Subsidiary have
complied and are in compliance in all material respects with all applicable
federal, state and local laws, and where appropriate, foreign laws, except to
the extent any failure to so comply would not have a material adverse effect on
the condition, financial or otherwise, operations or prospects of the Company
taken as a whole. The Company possesses all permits, licenses and approvals of
governmental authorities which are required in the operation of its business,
except for those the failure of which to hold might have a material adverse
effect on the Company's business and prospects taken as a whole. To the best
knowledge of the Company, the Company is in compliance in all material respects
with the terms and conditions of such permits, licenses and approvals.
2.12 Intellectual Property. The Company owns or has valid, adequate
and subsisting rights to use and exploit all patents, patent licenses, trade
secrets, copyrights, trademarks and service marks necessary for the conduct of
the business of the Company as described in the Company's Reports (collectively,
the "Intellectual Property") free and clear of any pledge, lien, charge, claim
or option. None of the processes currently used by the Company or any of the
properties or products currently sold by the Company or trademarks, trade names,
labels or other marks or copyrights used by the Company, to the best knowledge
of the Company, infringes the patent, industrial property, trademark, trade
name, label, other mark, right or copyright of any other person or entity. The
Company has not received any written notice of adverse claim with respect to any
of the Intellectual Property, and, to the Company's best knowledge, no basis
exists for any such claim.
2.13 No Undisclosed Liabilities; Etc. Neither the Company nor any
Subsidiary has any material liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which were not fully reflected or reserved
against in the balance sheet included in the September 30, 2003 Form 10-QSB (the
"Balance Sheet"), except for liabilities and obligations incurred in the
ordinary course of business and consistent with past practice since the date
thereof, or pursuant to its business plan, and the reserves reflected in the
Balance Sheet are adequate, appropriate and reasonable or otherwise disclosed on
a Schedule to this Agreement.
2.14 Title to Properties. Each of the Company and its Subsidiaries
has good, valid and marketable title to all the properties and assets which it
purports to own (personal and mixed, tangible and intangible), including,
without limitation, all the properties and assets reflected in the Balance Sheet
(except for personal property sold since the date of the Balance Sheet in the
ordinary course of business and consistent with past practice), and all the
properties and assets purchased by the Company and its Subsidiaries since the
date of the Balance Sheet.
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2.15 Disclosure. The Company has fully provided the Purchaser with
all the information that the Purchaser requested for deciding whether to
purchase the Common Stock and all information that the Company believes is
reasonably necessary to enable the Purchaser to make such decision. Neither this
Agreement nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company that:
3.1 Knowledge. The Purchaser is aware of the current business and
affairs of the Company, its past losses and need for additional capital, its
recent acquisition of galaxis technology ag, and has reviewed the Company
Reports and has had the opportunity to discuss the Company's prospects and
proposed financing transactions with its management. The Purchaser acknowledges
that the Company has not made any representations (written or oral) other than
as set forth or specifically referred to in this Agreement. In addition, the
Purchaser understands an investment in the Shares is highly speculative.
3.2 Experience. The Purchaser is experienced in evaluating and
investing in companies such as the Company, and has such knowledge and
experience in evaluating the merits and risks of his investment, and has the
ability to bear the economic risk of the loss of his entire investment. He is an
"accredited investor," as such term is defined in Regulation D under the
Securities Act. The purchase of the Common Stock is consistent with his
investment objectives.
3.3 Investment. The Purchaser is acquiring the Shares for investment
for his own account and not with the view to, or for resale in connection with,
any distribution thereof. He understands that the Shares have not been
registered under the Securities Act by reason of specified exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of his investment intent as expressed herein. He
acknowledges that the Company may place restrictive legends on, and stop
transfer orders against, the certificates representing the Shares, including the
legends set forth in Section 5.7 hereof, because of the restrictions on resale
or other transfer of the Shares.
3.4 Rule 144. The Purchaser acknowledges that the Shares must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. He has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions and that such Rule may not become available
for resale of the Purchased Shares. He has separately negotiated for the
registration rights in Section 4 hereof. He also has been advised of the limited
public market for the Company's Common Stock.
3.5 Authority. This Agreement when executed and delivered by the
Purchaser will be duly executed and will constitute a legal, valid and binding
obligation of the Purchaser, enforceable against him in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement or creditors' rights
generally and general principles of equity.
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3.6 Brokers. The Purchaser has not entered into an agreement for the
payment of any broker's or finder's fee or commission in connection with his
purchase of the Shares. The Purchaser agrees to indemnify and hold the Company
and its officers, directors, employees and agents harmless against any liability
for commissions, fees or other compensation in the nature of a broker's or
finder's fee to any broker or other nature of a broker's or finder's fee to any
broker or other person or firm (and the costs and expenses of defending against
such liability) for which the Purchaser is responsible.
3.7 Confidentiality. The Purchaser acknowledges that the information
received by him, other than the Company Reports, pursuant to this Agreement may
be confidential and is for the Purchaser's use only. He will not use such
confidential information in violation of the Securities Exchange Act of 1934
(the "Exchange Act") or otherwise, or reproduce, disclose or disseminate such
information to any other person, except in connection with his rights under this
Agreement or is required to disclose by a governmental body, unless the Company
has made such information available to the public generally.
4. Registration Under the Securities Act.
4.1 Piggyback Registration. (a) If at any time and from time to time
after March 10, 2005 and prior to March 10, 2007, the Company proposes to
register shares of its Common Stock under the Securities Act on any form for
registration thereunder (the "Registration Statement") for the account of
stockholders (other than one relating to (i) a registration of shares of Common
Stock underlying a stock option, restricted stock, stock purchase or
compensation or incentive plan or of stock issued or issuable pursuant to any
such plan, or a dividend investment plan; (ii) a registration of securities
proposed to be issued in exchange for securities or assets of, or in connection
with a merger or consolidation with, another corporation or other entity; (iii)
a registration of securities proposed to be issued in exchange for other
securities of the Company; or (iv) a registration of shares of Common Stock for
the sale of such Common Stock where the Company intends to use the proceeds from
such a sale to repay existing indebtedness of the Company) in a manner which
would permit registration of the Shares for sale to the public under the
Securities Act (a "Piggyback Registration"), it will at such time give prompt
written notice to the Purchaser of its intention to do so and of the Purchaser's
rights under this Section 4.1 (the "Section 4.1 Notice"). The rights referred to
in this Section 4.1 are "Piggyback Registration Rights." The Piggyback
Registration Rights constitute the only rights the Purchaser shall have to
include the Shares in a Registration Statement. The Purchaser shall be entitled
to include his Shares in one (1) Piggyback Registration. In addition, the
Purchaser does not have any "demand registration rights."
(b) Upon the written request of the Purchaser to the Company, to
be received by the Company within ten (10) days after the giving of any Section
4.1 Notice, setting forth the number of the Shares the Purchaser intends to
include in the Piggyback Registration (which may not be less than 250,000 shares
as presently constituted) and the intended method of disposition thereof, the
Company will include in the Registration Statement the Shares which the
Purchaser has requested to register, to the extent provided in this Section 4.
The number of Shares set forth in the Purchaser's Section 4.1 Notice are for
purposes of this Section 4, the "Registrable Shares."
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4.2 Suspension in Filing. (a) If the Company determines, in its good
faith reasonable judgment, that the Company should withdraw any previously filed
Registration Statement because the Company is engaged in or in good faith plans
to engage in any financing, acquisition or other material transaction which
would be adversely affected by the filing or maintenance of a Registration
Statement otherwise required to be filed or maintained pursuant to this Section
4, or that the Company is in the possession of material nonpublic information
required to be disclosed in such Registration Statement or an amendment or
supplement thereto, the disclosure of which in such Registration Statement would
be materially disadvantageous to the Company (a "Disadvantageous Condition"),
the Company shall be entitled to postpone for the shortest reasonable period of
time (but not exceeding 180 days from the date of the determination), the filing
of such Registration Statement or, if such Registration Statement has already
been filed, may withdraw such Registration Statement and shall promptly give the
Purchaser written notice of such determination, containing a general statement
of the reasons for such postponement and an approximation of the anticipated
delay. The Company's right to delay a request for registration or to withdraw a
Registration Statement pursuant to this Section 4.2 may not be exercised more
than once in any one-year period.
(b) If the Company determines to take any action pursuant to
Sub-section (a) above after a Registration Statement is filed, upon receipt of
any notice of suspension, the Purchaser shall forthwith discontinue use of the
prospectus contained in such Registration Statement. In addition, if so directed
by the Company, the Purchaser shall deliver to the Company all copies of the
prospectus then covering such Registrable Shares current at the time of receipt
of such notice. If no Registration Statement has yet been filed, at the request
of the Company the Purchaser shall return all drafts of the prospectus covering
such Registrable Shares.
4.3 Company Covenants. Whenever required under this Section 4 to
include Registrable Shares in a Registration Statement, the Company shall, as
expeditiously as reasonably possible:
(a) Use its commercially reasonable efforts to cause such
Registration Statement to become effective and cause such Registration Statement
to remain effective until the earlier of the Purchaser having completed the
distribution of all his Registrable Shares described in the Registration
Statement or six (6) months from the effective date of the Registration
Statement (or such later date by reason of suspensions the effectiveness as
provided hereunder). The Company will also use its commercially reasonable
efforts to, during the period that such Registration Statement is required to be
maintained hereunder, file such post-effective amendments and supplements
thereto as may be required by the Securities Act and the rules and regulations
thereunder or otherwise to ensure that the Registration Statement does not
contain any untrue statement of material fact or omit to state a fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they are made, not misleading; provided,
however, that if applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permits, in lieu of filing a
post-effective amendment that (i) includes any prospectus required by Section
10(a)(3) of the Securities Act or (ii) reflects facts or events representing a
material or fundamental change in the information set forth in the Registration
Statement, the Company may incorporate by reference information required to be
included in (i) and (ii) above to the extent such information is contained in
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periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in
the Registration Statement.
(b) 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 Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
(c) Furnish to the Purchaser such numbers of copies of a
prospectus, including a preliminary prospectus as amended or supplemented from
time to time, in conformity with the requirements of the Securities Act, and
such other documents as it may reasonably request in order to facilitate the
disposition of Registrable Shares owned by the Purchaser.
(d) Use its commercially reasonable efforts to register and
qualify the securities covered by such Registration Statement under such other
federal or state securities laws of such jurisdictions as shall be reasonably
requested by the Purchaser; provided, however, that the Company 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, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
(e) 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.
(f) Notify the Purchaser, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, (i) when the
Registration Statement or any post-effective amendment and supplement thereto
has become effective; (ii) of the issuance by the SEC of any stop order or the
initiation of proceedings for that purpose (in which event the Company shall
make every effort to obtain the withdrawal of any order suspending effectiveness
of the Registration Statement. at the earliest possible time or prevent the
entry thereof); of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iv) 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.
(g) Cause all such Registrable Shares registered hereunder to be
listed on each securities exchange or quotation service on which similar
securities issued by the Company are then listed or quoted.
4.4 Furnish Information. It shall be a condition precedent to the
obligation of the Company to take any action pursuant to this Section 4 with
respect to the Registrable Shares that the Purchaser shall furnish to the
Company such information regarding the Purchaser, the Registrable Shares held by
the Purchaser, the intended method of disposition of such securities and such
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other information as shall be reasonably required by the Company to effect the
registration of the Purchaser's Registrable Shares.
4.5 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Shares with respect to the registrations effected
pursuant to Section 4.1 for the Purchaser, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Registrable Shares; provided, however, that the Company
shall not bear the cost of any professional fees or costs of accounting,
financial or legal advisors to the Purchaser. Notwithstanding the foregoing, the
Purchaser shall pay all registration expenses that it is required to pay under
applicable law.
4.6 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 4.1 to include any of the Purchaser's
Registrable Shares in such underwriting unless the Purchaser accepts the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by the Company (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company, and the Purchaser enters into such lock-up agreements as may be
required of other selling stockholders in such Registration Statement. If the
total amount of securities, including Registrable Shares, requested by
stockholders to be included in such offering exceeds the amount of securities to
be sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Shares, which the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders). For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder who is a
holder of Registrable Shares and is a partnership or corporation, the partners,
retired partners and stockholders of such holder, 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 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.
4.7 Delay of Registration. The Purchaser shall not 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 4.
4.8 Indemnification. In the event that any Registrable Shares are
included in a Registration Statement under this Section 4:
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(a) To the extent permitted by law, the Company will indemnify
and hold harmless the Purchaser, any underwriter (as defined in the Securities
Act) for the Purchaser and each person, if any, who controls the Purchaser or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, or the Exchange Act, insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the 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 (iii) any Violation or alleged
Violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and the
Company will pay to the Purchaser, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 4.8(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
the Purchaser, underwriter or controlling person or the gross negligence or
willful misconduct of the Purchaser, underwriter or controlling person, as the
case may be.
(b) To the extent permitted by law, the Purchaser will indemnify
and hold harmless the Company, its directors, officers, and each person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act, any underwriter, any other holder selling securities in such
Registration Statement and any controlling person of any such underwriter or
other holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Purchaser expressly for use in connection with such
registration; and the Purchaser will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 4.8(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
Section 4.8 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 4.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel selected by
the indemnifying party and approved by the indemnified party (whose approval
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shall not be unreasonably withheld); provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
4.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4.8.
(d) If the indemnification provided for in this Section 4.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and the Purchaser under this
Section 4.8 shall survive the completion of any offering of Registrable Shares
in a Registration Statement under this Section 4, and otherwise.
4.9 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Purchaser the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit the Purchaser to sell shares
of the Company's Common Stock to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
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(c) furnish to the Purchaser, so long as the Purchaser owns any
Registrable Shares, forthwith upon request (i) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (ii) such other information as may be reasonably requested
in availing the Purchaser of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
5. Call Option; Resale Restrictions.
5.1 Company's Call Option. The Company has the right, but not the
obligation, to require the Purchaser to sell all or any of the Shares to the
Company (the "Call Option") for a period of one (1) year, commencing on the date
hereof and ending on the first anniversary of the date hereof (the "Call
Period"), for a price of Five Dollars ($5.00) per share; provided that in the
event of any stock split, stock dividend, recapitalization, reorganization or
other adjustment in the Common Stock, the purchase price and/or the Shares shall
be equitably adjusted.
5.2 Notice Requirement. The Company's right to exercise its Call
Option under Section 5.1 hereof is subject to the requirement that it provide
the Purchaser with twenty (20) days' written notice of its intent to make such a
purchase, including the number of Shares to be purchased and the proposed
closing date (the "Call Notice").
5.3 Obligations of Purchaser. If the Purchaser receives proper notice
of Company's intent to make a purchase of Shares under Section 5.1 of this
Agreement, the Purchaser shall sell to the Company the number of Shares the
Company indicates in the Call Notice.
5.4 Restrictions. Except for sales made pursuant to Section 5.1
hereof, during the Call Period, the Purchaser shall not have the right to sell,
pledge, assign, donate, hypothecate or otherwise transfer the Shares. Except for
sales made pursuant to Section 5.1 hereof, during the Call Period, the Purchaser
shall not have the right to enter into any agreement to sell, pledge, assign,
donate, hypothecate or otherwise transfer the Shares, other than pursuant to the
Call Option.
5.5 Closing of the Company's Call Option. The closing of any purchase
pursuant to the exercise of the Company's Call Option pursuant to this Section 5
(the "Option Closing") shall take place at the executive offices of the Company
at such time and on such date as specified in the Call Notice or as otherwise
may be mutually agreed. At such Option Closing, the Company shall pay to the
Purchaser the total purchase price to be paid for the Shares being purchased by
check or wire transfer of immediately available funds to an account designated
by the Purchaser, and the Purchaser shall deliver to the Company a certificate
or certificates representing the Shares being purchased, endorsed in blank or
accompanied by stock powers duly endorsed in blank, free and clear of all liens,
claims, charges and encumbrances.
5.6 Suspension of Closing. In the event that the Company is unable to
effect the Option Closing, the Purchaser shall have the right, exercisable
within ten (10) days after receiving notice of the suspension of the Closing, to
have the Company's Call Option exercise rescinded and to maintain ownership of
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the Shares, subject to any future exercise under this Section 5 during the
Option Period.
5.7 Legends.
(a) Each certificate representing the Shares shall bear legends
in substantially the following form:
"THESE SHARES WERE ISSUED IN A PRIVATE PLACEMENT, WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THEY MAY NOT BE SOLD, ASSIGNED, PLEDGED, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS THEY ARE REGISTERED UNDER SAID
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
"THESE SHARES ARE SUBJECT TO A CALL OPTION AND OTHER TRANSFER
RESTRICTIONS THAT PROHIBIT THE HOLDER FROM SELLING,
TRANSFERRING, OR OTHERWISE DISPOSING OF THESE SHARES FOR A
PERIOD OF ONE YEAR, COMMENCING ON MARCH 10, 2004 AND ENDING ON
MARCH 10, 2005."
6. Miscellaneous.
6.1 Survival. All representations and warranties made by the Company
and the Purchaser in this Agreement shall survive the Closing for a period of
one (1) year.
6.2 Additional Action. Each of the Purchaser and the Company shall,
upon the request of the other, from time to time, execute and deliver promptly
to the other party all instruments and documents of further assurances or
otherwise and will do any and all such acts and things as may be reasonably
required to carry out the obligations of such party hereunder and to consummate
the transactions contemplated hereby.
6.3 Successor and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective estates, heirs,
executors, successors and assigns at the extent provided herein.
6.4 Governing Law. This Agreement shall in all respects be governed
by the laws of the State of Delaware, without giving effect to the principles of
conflicts of law thereof.
6.5 Entire Agreement. This Agreement constitutes the entire
arrangement between the parties with respect to the subject matter herein and
cannot be changed, modified, discharged or terminated except by a writing signed
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by the party against whom enforcement of any change, modification, discharge or
termination is sought.
6.6 Waiver. No waiver shall be deemed to be made by any party of any
of his or its rights hereunder unless the same shall be in writing, and each
waiver, if any, shall be a waiver only with respect to the specific instance
involved and shall in no way impair the rights of the waiving party of the
obligations of the other party in any other respect at any other time.
6.7 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or by express courier, or delivered either by hand or by
messenger, addressed as follows: (a) if to the Purchaser, c/o
________________________, or at such other address as the Purchaser shall have
furnished to the Company in writing, or (b) if to the Company, at One Bridge
Plaza, Fort Lee, New Jersey 07024, attn: President, or at such other address as
the Company shall have furnished to the Purchaser in writing.
6.8 Captions. The captions used in this Agreement are for convenience
only and shall not be deemed as, or construed as, a part of this Agreement.
6.9 Counterparts, Facsimile Execution. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, and all
of which shall constitute one and the same instrument. Facsimile execution and
delivery of this Agreement is legal, valid and binding execution and delivery
for all purposes.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the date first above written.
DISTINCTIVE DEVICES, INC.
-----------------------------
By: Sanjay S. Mody
Title: President
-----------------------------
[purchaser]
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