EXHIBIT 10.1
NOTE PURCHASE AGREEMENT
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AGREEMENT, dated as of April 20, 2004, by and between distinctive
devices, inc., a Delaware corporation (the "Company"), and twinkle international
fze, an entity formed under the laws of the United Arab Emirates (the
"Purchaser").
WHEREAS, subject to the terms and conditions herein, the Company
desires to issue and sell to the Purchaser an Unsecured Promissory Note in the
principal amount of $4,000,000 (the "Note"), in the form attached hereto as
Exhibit A, together with warrants (the "Warrants") to purchase up to 800,000
shares of the Company's Common Stock, $.001 par value (the "Common Stock"),
pursuant to a Warrant Purchase Agreement (the "Warrant Agreement"), in the form
attached hereto as Exhibit B; and
WHEREAS, the Purchaser desires to purchase the Note and Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company and the Purchaser, hereby
agree as follows:
SECTION 1
PURCHASE, CLOSING
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1.1 Sale and Purchase. Subject to the terms and conditions herein, and
in reliance upon the representations, warranties and agreements contained
herein, the Company hereby issues and sells to the Purchaser, and the Purchaser
hereby purchases from the Company, the Note and the Warrants (sometimes,
collectively, the "Securities") for $4,000,000 (the "Purchase Amount") set forth
on the signature page hereto.
1.2 Payment. Upon execution of this Agreement, the Purchaser is paying
the Purchase Amount to the Company by wire transfer of immediately available
funds or such other form of payment as shall be mutually agreed upon by the
Company and the Purchaser, and the Company is delivering the Note and the
Warrant Agreement to the Purchaser. In addition, the Company is causing Earl
Anderson, Winfried M. Klimek and Sanjay Mody, in furtherance of the obligations
of the Company under the Note, to pledge certain stock option agreements under
which they were granted options to purchase up to 2,500,000 shares of the
Company's Common Stock, pursuant to a Pledge Agreement (the "Pledge") in the
form attached hereto as Exhibit C.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company hereby represents and warrants to the Purchaser as follows:
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. The Company is the direct or indirect beneficial
owner of at least ninety (90%) percent of all of the issued and outstanding
shares of voting capital stock of the subsidiaries (the "Subsidiaries") listed
on Exhibit 21 to its Form 10-KSB for the fiscal year ended December 31, 2003
(the "2003 Form 10-KSB"). Other than the Subsidiaries listed on such Exhibit 21,
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 Capitalization. The Company's authorized capital stock, as of
March 31, 2004, consisted of 50,000,000 shares of Common Stock, and 5,000,000
shares of preferred stock, $.001 par value (the "Preferred Stock"), of which
20,433,902 shares of Common Stock and no shares of Preferred Stock were issued
and outstanding. The Company has reserved 7,530,550 shares of Common Stock for
issuance upon the exercise of outstanding options and warrants, including the
shares of Common Stock underlying the Warrants (the "Warrant Shares"). All of
the issued and outstanding shares of Common Stock are validly issued, fully paid
and non-assessable. All of the shares of the Common Stock underlying the
Warrants that would be issued to the Purchaser pursuant to due exercise of the
Warrant Agreement upon issuance will be validly issued, fully paid and
non-assessable shares of Common Stock. Except as disclosed in the 2003 Form
10-KSB, 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.
2.4 Corporate Power. The Company has all requisite corporate power to
enter into this Agreement and the Warrant Agreement, issue the Note, grant the
Warrants, and carry out and perform its obligations under the terms of this
Agreement, the Note and the Warrant Agreement, and also to own properties owned
by it and to conduct business as being conducted by it.
2.5 No Restrictive Agreements. Upon the delivery of the Warrants and
the Warrant Shares in the manner contemplated thereunder, the Purchaser will
acquire the beneficial and legal, valid and indefeasible title thereto, free and
clear of all pledges, liens, charges, claims or options of any kind, except for
restrictions on transfer under federal and state securities laws. There are no
agreements relating to the voting, purchase or sale of capital stock between or
among the Company and any of its stockholders, except as disclosed in the 2003
Form 10-KSB.
2.6 Authorization. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance by the
Company of this Agreement, the Note and the Warrant Agreement and for the
authorization, issuance and delivery of the Note, the Warrants and the Warrant
Shares has been taken. Each of this Agreement, the Note and the Warrant
Agreement has been duly executed by the Company and when delivered shall
constitute a valid and binding agreement of the Company enforceable in
accordance with its respective terms, except as such enforceability may be
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limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
2.7 Financial Information. The Company's 2003 Form 10-KSB and its
Current Reports on Form 8-K filed since October 1, 2003 (collectively, the
"Company's Reports") 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 contained in the Company's
Reports have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved (except as may
be otherwise indicated in the notes thereto).
2.8 Absence of Certain Changes. At all times since March 31, 2004,
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.
2.9 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.
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2.10 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.
2.11 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, the Note, the Warrant Agreement or the Warrants.
2.12 Compliance. The execution, delivery and performance of this
Agreement, the Note and the Warrant 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.
2.13 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, intellectual 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.
2.14 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 sheets included in the 2003 Form 10-KSB and the Form
8-K/A for an event of January 14, 2004 (the "Balance Sheets"), except for
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liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date thereof and the reserves reflected
in the Balance Sheets are adequate, appropriate and reasonable.
2.15 Title to Properties; Encumbrances. 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 Sheets (except for personal property sold since the dates of the
respective Balance Sheets 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 dates of the respective Balance Sheets. All
properties and assets reflected in the Balance Sheets are free and clear of all
title defects or objections, liens, claims, charges, security interests or other
encumbrances of any nature whatsoever including, without limitation leases,
chattel mortgages, conditional sales contracts, collateral security arrangements
and other title or interest retention arrangements.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
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The Purchaser hereby represents and warrants to the Company as follows:
3.1 Experience. It 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 its investment, and has the ability to bear
the economic risk of the loss of its entire investment. It is an "accredited
investor", as such term is defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act"). The purchase of the Securities is
consistent with its investment objectives.
3.2 Investment. It is acquiring the Securities for investment for its
own account and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Securities 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 its investment intent as expressed herein. It
acknowledges that the Company may place restrictive legends on, and stop
transfer orders against, the certificates representing the Securities being
acquired by it.
3.3 Rule 144. It acknowledges that the Securities must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. It 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 Warrant Shares. It also has been advised on the limited public
market for the Company's Common Stock, and that there is no market for the Note
or the Warrants.
3.4 Authority. It has full power and authority under all applicable
laws to enter into this Agreement and to consummate the transactions herein and
has taken all action necessary to authorize its execution and performance of
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this Agreement, the Warrant Agreement and the Pledge. Each of this Agreement,
the Warrant Agreement and the Pledge, when executed and delivered, will be duly
executed and will constitute a legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its respective 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.
3.5 Access to Data. It is fully familiar with the Company's business,
operations and financial history as set forth in the Company's Reports. It also
is aware of significant risks involved with its investment in the Securities. It
has had an opportunity to discuss the Company's business, operations and
financial affairs with its management.
3.6 Brokers. It has not entered into an agreement for the payment of
any broker's or finder's fee or commission in connection with its purchase of
the Securities. 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, or any of its employees or representatives,
is responsible.
SECTION 4
MISCELLANEOUS
4.1 Governing Law. This Agreement shall be governed by and construed
with the laws of the State of Delaware, without giving effect to conflicts of
law.
4.2 Survival. The representations and warranties made in Sections 2
and 3 herein shall survive the Closing for a period of one year.
4.3 Successors and Assigns. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective successors,
assigns, heirs, executors and administrators.
4.4 Entire Agreement; Amendment. This Agreement, the Note and the
Warrant Agreement constitute the full and entire understanding and agreement
between the Company and the Purchaser with regard to the subject matter hereof,
and supersede all prior agreements (whether written or oral). Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
except by a written instrument signed by the Company and the Purchaser.
4.5 Notices, etc. 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 (a) if to the Purchaser, as indicated on the signature page
hereto, 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.
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4.6 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
4.7 Information Confidential. The Purchaser acknowledges that the
information received by it pursuant to this Agreement may be confidential and is
for the Purchaser's use only. It will not use such confidential information in
violation of the Securities Exchange Act of 1934 or otherwise, or reproduce,
disclose or disseminate such information to any other person (other than its
employees or agents having a need to know the contents of such information, and
its attorneys and financial advisors), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or the Purchaser is required to disclose such
information by a governmental body.
4.8 Expenses. The Company and the Purchaser shall bear their own
expenses and legal fees incurred on their behalf with respect to this Agreement
and the transactions contemplated hereby, except as otherwise provided herein.
4.9 Titles and Gender. The titles of the Sections and Subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. Whenever used herein, the singular
member includes the plural, the plural includes the singular, and the use of any
gender shall include all genders.
4.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
REMAINDER OF PAGE LEFT BLANK
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective proper and duly authorized officers
as of the day and year first above written.
DISTINCTIVE DEVICES, INC.
By:__________________________________
Sanjay Mody, President
PURCHASER:
TWINKLE INTERNATIONAL FZE
_____________________________________
By:
Title:
Address: Twinkle International FZE0
W-1-105
Dubai Airport Free zone
P.O. Box 54404
Dubai, UAE
(FAX): ____________________________
(PHONE): __________________________