-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KDC1osR0k9fAK1ssOk2TZtXIuaYbihgZDxMKA86uYkXK/wQCvPH0QK+a++X3EAb2 tkOmu/bTAiKIgAaejYW5kQ== 0000950120-04-000307.txt : 20040429 0000950120-04-000307.hdr.sgml : 20040429 20040429153650 ACCESSION NUMBER: 0000950120-04-000307 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040420 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DISTINCTIVE DEVICES INC CENTRAL INDEX KEY: 0000059963 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 131999951 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02749 FILM NUMBER: 04764765 BUSINESS ADDRESS: STREET 1: ONE BRIDGE PLAZA SUITE 100 CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 5612744233 MAIL ADDRESS: STREET 1: ONE BRIDGE PLAZA SUSITE 100 CITY: FORT LEE STATE: NJ ZIP: 07024 FORMER COMPANY: FORMER CONFORMED NAME: LMC DATA INC DATE OF NAME CHANGE: 19761021 8-K 1 d591508.txt CURRENT REPORT - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) - April 20, 2004 -------------- DISTINCTIVE DEVICES INC. ------------------------ (Exact name of the registrant as specified in its charter) Delaware 0-2749 13-1999951 - ---------------------------- -------------------------- -------------------- (State or other jurisdiction (Commission file number) (I.R.S Employer of incorporation) Identification No.) One Bridge Plaza, Suite 100, Fort Lee, New Jersey 07024 ------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code - (201) 363-9922 -------------- - ------------------------------------------------------------------------------- ITEM 5. OTHER EVENTS On April 20, 2004, Distinctive Devices Inc., a Delaware corporation (the "Company"), pursuant to a Note Purchase Agreement issued and sold to one investor an Unsecured Promissory Note (the "Note") in the principal amount of $4,000,000. The Note bears interest at the rate of 8% per annum, and is repayable, together with interest, on October 18, 2004, subject to prepayment by the Company. Pursuant to the Note Purchase Agreement, the Company issued to the investor warrants to purchase 800,000 shares of the shares of the Company's Common Stock, $0.001 par value, exercisable for five years at a price of $1.00 per share, subject to customary anti-dilution provisions. To induce the investor to purchase the Note, three executive officers and directors of the Company have granted to the investor, as collateral security for the repayment of the Note, a limited pledge in certain stock options they hold for the purchase of up to an aggregate of 2,500,000 shares of the Company's Common Stock, exercisable at $0.70 per share, under Amended and Restated Stock Option Agreements. Approximately $1 million of the proceeds from the issuance and sale of the Note will be utilized by the Company and its recently acquired wholly owned subsidiary, galaxis technology AG, a German stock corporation ("galaxis"), to fulfill outstanding orders for delivery of Set-Top-Boxes ("STBs"), and for working capital. The remaining $3 million in proceeds will be used to support the issuance of letters of credit as part of the arrangements by galaxis with manufacturers of STBs. The Company did not use a placement agent in connection with the issuance and sale of the Note. For more information regarding this transaction, reference is made to the Exhibits filed with this report. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 10.1 Note Purchase Agreement, dated April 20, 2004, between the Company and the investor. 10.2 Unsecured Promissory Note in the principal amount of US$4,000,000 from the Company. 10.3 Warrant Purchase Agreement, dated April 20, 2004, between the Company and the investor. 10.4 Pledge Agreement, dated April 20, 2004, by and among optionholders, the investor and Thelen Reid & Priest LLP, as Pledge Agent. 10.5 Form of Amended and Restated Stock Option Agreement. 99.1 Press Release, dated April 22, 2004. 2 SIGNATURE 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. DISTINCTIVE DEVICES, INC. By: /s/ Sanjay Mody -------------------------------- Name: Sanjay Mody Title: President and CEO Dated: April 26, 2004 EXHIBIT INDEX ------------- EXHIBIT - ------- 10.1 Note Purchase Agreement, dated April 20, 2004, between the Company and the investor. 10.2 Unsecured Promissory Note in the principal amount of US$4,000,000 from the Company. 10.3 Warrant Purchase Agreement, dated April 20, 2004, between the Company and the investor. 10.4 Pledge Agreement, dated April 20, 2004, by and among certain optionholders, the investor and Thelen Reid & Priest LLP, as Pledge Agent. 10.5 Form of Amended and Restated Option Agreement. 99.1 Press Release, dated April 20, 2004. EX-10 2 exh10_1.txt EXH. 10.1 - NOTE PURCHASE AGREEMENT EXHIBIT 10.1 NOTE PURCHASE AGREEMENT ----------------------- 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 ----------------- 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 --------------------------------------------- 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 2 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. 3 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 4 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 ----------------------------------------------- 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 5 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. 6 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 7 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): __________________________ EX-10 3 exh10_2.txt EXH. 10.2 - UNSECURED PROMISSORY NOTE DISTINCTIVE DEVICES, INC. ------------------------- UNSECURED PROMISSORY NOTE ------------------------- $4,000,000. April 20, 2004 FOR VALUE RECEIVED, the undersigned, DISTINCTIVE DEVICES, INC., a Delaware corporation (the "Company"), for value received, hereby promises to pay to the order of TWINKLE INTERNATIONAL FZE, an entity formed under the laws of the United Arab Emirates (the "Holder"), in lawful money of the United States of America, the principal sum of FOUR MILLION DOLLARS ($4,000,000), together with interest at the rate of eight (8%) percent per annum thereon. The principal on this Note, together with accrued interest thereon, shall be paid at the address of the Company listed above, or at such other place as may be specified by the Holder in its notice. This Note is being issued pursuant to a Note Purchase Agreement, dated as of the date hereof, between the Holder and the Company (the "Purchase Agreement"). As additional consideration for this Note, the Company is issuing to the initial Holder warrants (the "Warrants") evidencing the right initially to purchase up to 800,000 shares of Common Stock, $.001 par value, of the Company, at an initial exercise price of One Dollar ($1.00) per share, and exercisable for five years, pursuant to a Warrant Purchase Agreement (the "Warrant Agreement"). 1. Payment. 1.1 Principal. The outstanding principal amount on this Note shall be due and payable in full on October 18, 2004 (the "Maturity Date"), subject to prepayment as set forth in Section 2. 1.2 Interest. Interest shall accrue on the outstanding principal amount and be paid in full on the Maturity Date. 2. Prepayment. The Company may prepay the then outstanding principal amount, in whole or in part, together with accrued interest on the principal amount being prepaid, at any time, without premium or penalty. If less than the entire principal amount of this Note at the time outstanding shall be called for optional prepayment, the Company shall cancel this Note and issue a new Note for the remaining principal amount, and dated the last day through which interest was paid hereon. 3. Covenants of the Company. The Company agrees and covenants that until such time as this Note has been paid in full, the Company will comply with the following covenants: 3.1 Payment of Principal and Interest. The Company will duly and punctually pay the principal of and interest on this Note in accordance with the terms of this Note. 3.2 Use of Proceeds. The Company will use the proceeds received by it from the sale of this Note as follows: (a) $1,000,000 of the proceeds will be used for general working capital and corporate purposes and (b) $3,000,000 of the proceeds will be used to support the issuance of 30 to 60 day bank letters of credit, which shall be used by the Company and its subsidiaries to purchase additional inventory. 3.3 Maintenance of Office or Agency. The Company will maintain an office in the State of New Jersey where this Note may be presented or surrendered for payment, where this Note may be surrendered for transfer or exchange and where notices and demands to or upon the Company in respect of this Note may be served. The Company will give prompt written notice to the Holder of the location, and of any change in the location, of such office. 3.4 Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon it or upon its income, profits or property, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon its property; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. 3.5 Maintenance of Properties. The Company will cause all the properties used or useful in the conduct of the business of the Company and its subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation and maintenance of any of its or its subsidiaries' properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not disadvantageous in any material respect to the Holder. 3.6 Corporate Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchise and that of its subsidiaries; provided, however, that the Company shall not be required to preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holder. 3.7 Financial Statements and Information. The Company will mail or deliver to the Holder copies of all such financial statements, reports and proxy statements as the Company shall send to or make available to its stockholders. 2 4. Remedies. 4.1 Events of Default. "Event of Default", wherever used herein means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any principal or interest upon this Note for a period of five (5) days after it becomes due and payable, whether on the Maturity Date or upon prepayment; or (2) default in the performance, or breach, of any covenant of the Company in the Warrant Agreement or this Note (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of ten (10) business days after written notice has been given to the Company specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (3) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under the Federal Bankruptcy Code or any other applicable Federal or State law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days; or (4) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable Federal or State law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (5) the Company shall be in default in the payment of in excess of $500,000 of money borrowed in any one transaction or pursuant to any one agreement or series of related agreements or transactions, the lender thereof shall have exercised its rights to declare said sum due and payable and such default shall not 3 have been cured or contested in good faith for a period of sixty (60) days after such declaration; or (6) the Company shall have entered against it a final judgment by a court having jurisdiction which, if satisfied, would have a material adverse effect on the financial condition of the Company and its subsidiaries as a whole, and the same shall remain undischarged for a period of thirty (30) days during which execution shall not be effectively stayed or bonded; then and in each and every case, the Holder may by notice in writing to the Company declare the unpaid balance of the Note to be forthwith due and payable, and thereupon such balance, including accrued interest hereon, shall become so due and payable without presentation, protest or further demand or notice of any kind, all of which are hereby expressly waived. 4.2 Enforcement of Remedies. In case any one or more of the Events of Default specified in Section 4.1 shall have occurred and be continuing, the Holder may proceed to protect and enforce its rights either by suit in equity or by action at law, or otherwise proceed to enforce payment of such Note or to enforce any other legal or equitable right of the Holder of this Note, including, but not limited to, its rights under a Pledge Agreement, dated as of the date hereof, among the Company, Winfried M. Klimek, Sanjay Mody, the Holder and Thelen Reid & Priest LLP, as agent. 4.3 Waiver by Company. To the extent permitted by applicable law, the Company hereby agrees to waive, and does hereby absolutely and irrevocably waive and relinquish the benefit and advantage of any valuation, stay, appraisal, extension or redemption laws now existing or which may hereafter exist, which, but for this provision might be applicable to any sale made under the judgment, order or decree of any court or otherwise, based on the Note or any claim for interest on the Note. 4.4 Amendments and Waivers. No course of dealing between the Company and the Holder and no delay on the part of the Holder hereunder in exercising any rights under this Note shall operate as a waiver of the rights of the Holder hereunder. No covenant or other provision of this Note nor any default or Event of Default in connection therewith may be waived otherwise than by a written instrument signed by the Holder so waiving such covenant or other provision or default or Event of Default. 4.5 Cost and Expense of Collection. The Company covenants and agrees that if default be made in any payment or prepayment of principal of, or interest on, the Note, it will, to the extent permitted under applicable law, pay to the Holder such further amount as shall be sufficient to cover the cost or expense of collection, including reasonable compensation to the attorneys of the Holder for all services rendered in that connection. 5. Payment; Exchange and Transfer; Lost Notes. 5.1 Payments. Interest and principal to be paid in respect of this Note shall be paid at the place provided herein, without any presentment or notation of payment. The amount of principal so paid on this Note shall be regarded as having been retired and cancelled at the time of payment. At the 4 time of payment in full on this Note the Holder shall surrender the Note to the Company for cancellation. 5.2 Exchange and Transfer. The Holder may, prior to maturity or prepayment thereof, surrender the Note for exchange, at the office designated by the Company pursuant to Section 6. Within a reasonable time thereafter and without expense (other than transfer taxes, if any) to the Holder, the Company shall issue in exchange thereof, or in exchange for the portion thereof not surrendered in payment as aforesaid (as the case may be), in such denominations and made payable to such person or persons, or order, as the Holder shall designate, a Note or Notes for the same aggregate principal amount as the unpaid principal amount of the Note or Notes so surrendered, having the same maturity and rate of interest, containing the same provisions and subject to the same terms and conditions as the Note or Notes as surrendered, provided, that should a portion of the principal amount of this Note be assigned to a third party, as a condition of such assignment the Company may request that the Holder and the assignee enter into an agreement regarding their joint action for enforcement of this Note. 5.3 Lost, etc., Notes. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of indemnity satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such Note. 6. Notice. Any notice, presentation or demand to or upon the Company or to the Holder in respect of this Note may be given or made in writing to the addresses set forth below, and shall be deemed to be duly given if personally delivered with receipt acknowledged, if mailed by registered or certified mail, first class, postage prepaid, or if delivered by a nationally recognized overnight courier service to such address, or, if any other address shall at any time be designated for this purpose by the Company or the Holder in writing to the other, to such other address. (a) If to the Holder: Twinkle International FZE W-1-105 Dubai Airport Free Zone P.O. Box 54404 Dubai, UAE Attn: _____________________ (b) If to the Company: Distinctive Devices, Inc. One Bridge Plaza, Suite 100 Fort Lee, NJ 07024 Attn: Sanjay Mody, President 5 7. Governing Law. The provisions of this Note shall be construed and interpreted, and all rights and obligations hereunder determined, in accordance with the laws of the State of Delaware, without reference to the conflict of laws principles thereof. 8. Successors. This Note shall be binding on the Company and its successors and assigns, and inure to the benefit of Holder and its successors and assigns; provided that Company may not assign this Note without the written consent of the Holder other than by operation of law or the sale of all or substantially all of the assets of the Company to an entity which expressly assumes in writing the obligations of the Company under this Note. 9. Amendment. This Note sets forth the entire agreement between the Holder and the Company with respect to the matters herein; and may not be amended, modified or terminated except by a writing executed by the Company and the Holder. IN WITNESS WHEREOF, the Company has duly executed this Note on the day and year first above written. DISTINCTIVE DEVICES, INC. ________________________________ By: Sanjay Mody Title: Chief Executive Officer, President and Chief Financial Officer EX-10 4 exh10_3.txt EXH. 10.3 - WARRANT PURCHASE AGREEMENT EXHIBIT 10.3 VOID AFTER 5:00 P.M., EASTERN TIME, ON APRIL 20, 2009 DISTINCTIVE DEVICES, INC. WARRANT PURCHASE AGREEMENT -------------------------- 800,000 Shares DISTINCTIVE DEVICES, INC., a Delaware corporation (the "Company"), hereby certifies that TWINKLE INTERNATIONAL FZE, an entity formed under the laws of the United Arab Emirates (the "Initial Holder"), is entitled, subject to the terms set forth below, has been granted warrants (the "Warrants") to purchase from the Company Eight Hundred Thousand (800,000) shares (the "Shares") of fully paid and non-assessable Common Stock at an exercise price of One Dollar ($1.00) per Share, subject to adjustment from time to time pursuant to Section 3 hereof (the "Exercise Price"). The term "Shares" means, unless the context otherwise requires, shares of the Company's Common Stock, par value $.001 per share, or other securities or property at the time deliverable upon the exercise of the Warrants. The Warrants are being granted by the Company as additional consideration for the purchase by the Initial Holder from the Company of an Unsecured Promissory Note, dated April 20, 2004, (the "Note"), in the initial principal amount of $4,000,000, pursuant to a Note Purchase Agreement, dated April 20, 2004 between the Initial Holder and the Company. 1 Exercise. -------- 1.1 Timing of Exercise. The Warrants shall be exercisable in whole or in part from time to time commencing as of April 20, 2004 (the "Commencement Date"), and expiring at 5:00 P.M., New York time, on April 20, 2009 (the "Expiration Date"), subject to earlier termination as provided herein, and may not be exercised thereafter. 1.2 Manner of Exercise. The purchase rights evidenced by this Warrant Agreement shall be exercised by the Initial Holder or any person permitted by Section 6.1 herein (collectively, "the Holder"), by surrendering this Warrant Agreement, with the Notice of Exercise in the form of Exhibit A hereto duly executed by the Holder, to the Company at its principal office (or such other office as may be designated by the Company to the Holder), accompanied by payment (in cash, by wire transfer or by certified or official bank check or by reduction in outstanding principal amount of the Note) of the Exercise Price. 1.3 Partial Exercise. This Warrant Agreement may be exercised for less than the full number of shares of Common Stock at the time called for hereby. Upon any such partial exercise, the Company at its expense will forthwith issue to the Holder a new Warrant Agreement of like tenor calling for the number of shares of Common Stock as to which rights have not been exercised, such Warrant Agreement to be issued in the name of the Holder. 2. Delivery of Stock Certificates Upon Exercise. As soon as practicable after the exercise of the Warrants, and in any event within ten (10) business days thereafter, the Company, at its expense, will cause to be issued in the name of and delivered to the Holder a certificate or certificates for the number of fully paid and non-assessable shares of Common Stock to which the Holder shall be entitled upon such exercise. Any shares of Common Stock as to which the Warrants are exercised shall be deemed issued on and as of the date of such exercise, and the Holder shall thereupon be deemed to be the owner of record of such shares. 3. Anti-Dilution Adjustments. 3.1 Change in Capitalization. In case of any stock split, stock dividend or similar transaction which increases or decreases the number of outstanding shares of Common Stock, appropriate adjustment shall be made by the Board of Directors of the Company to the number of Shares or the Exercise Price per Share, or both, which may be purchased under this Warrant Agreement. 3.2 Consolidation, Merger and Sale of Assets. (a) In case of any consolidation of the Company with or a merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, upon any such consolidation, merger, sale or conveyance (i) the surviving entity is a publicly traded company and (ii) the consideration to be received by the holders of the Company's Common Stock includes publicly traded equity interests in the surviving entity or its parent corporation, the Company agrees that a condition of such transaction will be that the successor or purchasing corporation, as the case may be, shall assume the obligations of the Company hereunder in writing. In the case of any such consolidation, merger or sale or conveyance, the Holder shall have the right until the Expiration Date upon payment of the Exercise Price in effect immediately prior to such action, to receive the kind and amount of shares and other securities and/or property which it would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrants been exercised immediately prior to such action, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3. The provisions of this Section 3.2(a) shall similarly apply to successive consolidations, mergers, sales or conveyances. (b) In case of any consolidation of the Company with or a merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, upon any such consolidation, merger, sale or conveyance (i) the surviving entity is a non-publicly traded company or (ii) the consideration to be received by the holders of the Company's Common Stock does not include any publicly traded equity interests in the surviving entity or its parent corporation, the Company agrees that a condition of such transaction will be that the Company shall mail to the Holder at the earliest applicable time (and, in any event not less than ten (10) days before any record date for determining the persons entitled to receive the consideration payable in such 2 transaction) written notice of the transaction. Such notice shall also set forth facts as shall indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Exercise Price of and the kind and amount of the shares of stock and other securities and property deliverable upon exercise of the Warrants. Upon the closing of the transaction referenced in the foregoing notice, this Warrant Agreement to the extent then unexercised shall terminate. 3.3 Exchanges and Distributions With Respect to Common Stock. If the Company shall exchange for its Common Stock or distribute with respect to its Common Stock other securities issued by it, the Company shall give notice thereof to the Holder, and the Holder shall have the right thereafter (until the expiration of this Warrant) to exercise the Warrants for the kind and amount of shares of stock and other securities retained or received by a holder of the number of shares of Common Stock of the Company into which the Warrants might have been exercised immediately prior to such exchange or distribution, subject to adjustment as provided hereinabove. 3.4 Officer's Certificate. Whenever the Exercise Price per Share or the number of shares of Common Stock subject to this Warrant Agreement is adjusted, the Company shall promptly mail to the Holder of this Warrant Agreement a notice of adjustment, which notice shall include a brief statement of the facts requiring the adjustment and the manner of computing it and shall be certified by the chief financial officer of the Company. The determination of the adjustment shall be made by the Company in its sole discretion and shall be final and binding upon the Holder. 4. Shares to Be Fully Paid; Reservation of Capital Stock Issuable Upon Exercise of Warrants. The Company covenants and agrees that any shares issued hereunder will, upon issuance, be fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof. The Company shall at all times reserve and keep available out of its authorized but unissued capital stock, solely for the issuance and delivery upon the exercise of the Warrant Agreement, such number of its duly authorized shares of Common Stock as from time to time shall be issuable upon the exercise of the Warrants. 5. Fractional Shares. The Company shall not issue fractions of shares of Common Stock upon exercise of this Warrant Agreement or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 5, be issuable upon exercise of the Warrants, then the number of shares of Common Stock to be issued shall be rounded up or down to the nearest whole share. 6. Transfer Restrictions 6.1 Transfer. A Holder, including the Initial Holder or any subsequent Holder, may transfer this Warrant Agreement only to (i) any other Holder of Warrants that were part of the Initial Warrants, (ii) any entity controlled by, controlling or under common control of the Holder, or for which the Holder is acting as the representative, (iii) to one or more shareholders, directors, officers or employees of the Holder or (iv) any member of the immediate family (which shall be deemed to include a spouse, parent, or child) of an individual Holder or trust for the benefit of any such individual. Prior to any such transfer, the Holder must deliver the Assignment Form in the form of Exhibit B 3 hereto and provide information to the Company, in writing, regarding the proposed transferee sufficient for the Company to determine the eligibility of such transferee under this Section 6 and for such transferee to be entitled to the benefits of Section 7 in accordance with Section 7.11 herein. 6.2 Securities Laws. The Holder of this Warrant Agreement, by accepting delivery of the same, hereby: (a) acknowledges that any shares of Common Stock issued pursuant to the exercise of the Warrants may not be registered under the Securities Act of 1933, as amended (the "Securities Act"), at the time issued; (b) agrees that, upon the exercise of the Warrants, if the Shares subject to the exercise are not then covered by an effective Registration Statement filed under the Securities Act, it shall make the customary representations and warranties as may be requested by counsel to the Company in order for the Company to properly rely upon Section 4(2) of the Securities Act regarding exemption from registration thereunder, and, in connection with such exemption, that any certificates representing shares of Common Stock issued upon exercise of the Warrants would reflect an appropriate legend regarding restrictions upon transferability; and (c) agrees to indemnify the Company, and hold it harmless from and against, any and all losses, expenses (including attorneys' fee), costs and damages arising from or relating to any violation of applicable state securities or "blue sky" laws in connection with the issuance, sale, delivery or exercise of the Warrants and the issuance, sale and delivery of shares of Common Stock upon any exercise of the Warrants. 7. Registration Under the Securities Act of 1933. --------------------------------------------- 7.1 Piggyback Registration. If at any time and from time to time after the Commencement Date and prior to the Expiration Date, 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; or (iii) a registration of securities proposed to be issued in exchange for other securities 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 Holder of its intention to do so and of the Holder's rights under this Section 7.1 (the "Section 7.1 Notice"). The rights are referred to in this Section 7.1 are "Piggyback Registration Rights". Upon the written request of the Holder to the Company, to be received by the Company within ten (10) days after the giving of any Section 7.1 Notice, setting forth the number of Shares intended to be disposed of by the Holder and the intended method of disposition thereof, the Company will include in the Registration Statement the Shares which the Holder has requested to register, to the extent provided in this Section 7. The Company shall be obligated to file and cause the effectiveness of only two (2) Piggyback 4 Registrations. (The Shares set forth in the Section 7.1 Notice or the Section 7.2 Demand being for purposes of this Section 7, the "Registrable Shares".) 7.2 Demand Registration. ------------------- (a) If at any time and from time to time after the Commencement Date and prior to the Expiration Date, the Holder desires to effect the registration under the Securities Act of its Shares, the Holder may make a written request that the Company effect such registration (a "Demand Registration"); provided that such registration covers at least 51% of the Shares initially issuable upon exercise in full of the Warrants issued with the Note, (the "Section 7.2 Demand"). The Section 7.2 Demand shall specify the number of Registrable Shares proposed to be sold and will also specify the intended method of disposition thereof. The Company will use its commercially reasonable efforts to file, within sixty (60) days of its receipt of such Demand, the registration under the Securities Act of the Registrable Shares which the Company has been so requested to register by the Holder. (b) Notwithstanding Section 7.2(a), the Company shall not be obligated to file a Registration Statement relating to a registration request pursuant to this Section 7.2 at any time during the period commencing upon the filing of another Registration Statement filed by the Company (other than a Registration Statement on Form S-4 or Form S-8 or any successor or similar form) and ending upon the earlier of the withdrawal of such Registration Statement or six months after the effective date thereof. The Company shall be obligated to file and cause the effectiveness of only one (1) Demand Registration. 7.3 Suspension in Filing. -------------------- (a) If the Company determines, in its good faith reasonable judgment, that it Company should not file any Demand Registration otherwise required to be filed pursuant to Section 7.2(a) or should withdraw any previously filed Registration Statement filed pursuant to Section 7.1 or 7.2 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 7, 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 Holder written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. If the Company shall so postpone the filing or effect the withdrawal of the Registration Statement, the Holder shall have the right to withdraw the Section 7.2 Demand within thirty (30) days after receipt of the notice of postponement. The Company's right to delay a request for registration or to withdraw a Registration Statement pursuant to this Section 7.3 may not be exercised more than once in any twelve (12) month period. 5 (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 Holder shall forthwith discontinue use of the prospectus contained in such Registration Statement. In addition, if so directed by the Company, the Holder 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 Holder shall return all drafts of the prospectus covering such Registrable Shares. (c) If any Disadvantageous Condition shall cease to exist, the Company shall promptly notify the Holder to such effect. If any Demand Registration shall have been withdrawn, the Company shall, if requested by the Holder, at such time as it is possible or, if earlier, at the end of the 180-day period following such withdrawal, file a new Registration Statement covering the Registrable Shares that were covered by such withdrawn Registration Statement, and the effectiveness of such Registration Statement shall be maintained for such time as may be necessary so that the period of effectiveness of such new Registration Statement, when aggregated with the period during which such withdrawn Registration Statement was effective, if any, shall be such time as may be otherwise required by this Agreement. 7.4 Company Covenants. Whenever required under this Section 7 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 Holder have completed the distribution of all its 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 periodic reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (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. 6 (c) Furnish to the Holder 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 Holder. (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 Holders; 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 Holder, 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 Securities 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 Securities 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. (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. 7.5 Furnish Information. It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Section 7 with respect to the Registrable Shares that the Holder shall furnish to the Company such information regarding the Holder, the Registrable Shares held by the Holder, the intended method of disposition of such securities and such other information as shall be reasonably required by the Company or any underwriter to effect the registration of the Holder's Registrable Shares. 7 7.6 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 7.1 or 7.2 for the Holder, 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 Holder. Notwithstanding the foregoing, the Holder shall pay all registration expenses that it is required to pay under applicable law. 7.7 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 7.1 or 7.2 to include any of the Holder's Registrable Shares in such underwriting unless the Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (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 Holder 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 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 Securities, 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 Securities 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. 7.8 Delay of Registration. No Holder 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 7. 7.9 Indemnification. In the event that any Registrable Shares are included in a Registration Statement under this Section 7. (a) To the extent permitted by law, the Company will indemnify and hold harmless the Holder, any underwriter (as defined in the Securities Act) for the Holder and each person, if any, who controls the Holder 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 8 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 Holder, 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 7.9(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 or the Placement Agent 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 Holder, underwriter or controlling person. (b) To the extent permitted by law, the Holder 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 Holder expressly for use in connection with such registration; and the Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 7.9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 7.9(b) 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 Holder, which consent shall not be unreasonably withheld; provided, further, that, in no event shall any indemnity under this Section 7.9(b) exceed the cash value of the gross proceeds from the offering received by the Holder. (c) Promptly after receipt by an indemnified party under this Section 7.9 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 7.9, 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 9 the indemnifying party and approved by the indemnified party (whose approval 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 7.9, 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 7.9. (d) If the indemnification provided for in this Section 7.9 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 Holder under this Section 7.9 shall survive the completion of any offering of Registrable Shares in a Registration Statement under this Section 7, and otherwise. 7.10 Reports Under Securities Exchange Act of 1934. With a view to making available to the Holder the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the Holder to sell shares of the Company's Common Stock to the public without registration, the Company agrees to use its best efforts 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 10 (c) furnish to the Holder, so long as the Holder owns any Registrable Securities, 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 any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 7.11 Permitted Transferees. The rights to cause the Company to register Registrable Shares granted to the Holder by the Company under this Section 7 may be assigned in full by a Holder in connection with a transfer by the Holder of its Registrable Securities if: (a) the Holder gives prior written notice to the Company; (b) such transferee agrees to comply with and be bound by the terms and provisions of this Agreement; (c) such transfer is otherwise in compliance with this Agreement and (d) such transfer is otherwise effected in accordance with applicable securities laws. Except as specifically permitted by this Section 7.11, the rights of a Holder with respect to Registrable Shares as set out herein shall not be transferable to any other person, and any attempted transfer shall cause all rights of the Holder therein to be forfeited. 7.12 Termination of Registration Rights. The right of the Holder to request or demand inclusion in any registration pursuant to Section 7.1 and Section 7.2 shall terminate if all Shares held by the Holder may immediately be sold under Rule 144(k) after if the Warrants have then been exercised in full. 8. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Agreement and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement, and if requested by the Board of Directors, a bond in an amount reasonably satisfactory to it, or (in the case mutilation) upon surrender and cancellation hereof, the Company will issue in lieu thereof a new Warrant Agreement of like tenor. 9. Rights as a Warrant Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity except with respect to certificates representing shares of Common Stock issued upon exercise of the Warrants. The rights of the Holder are limited to those expressed in this Warrant Agreement and are not enforceable against the Company except to the extent set forth herein. Prior to due presentment for transfer of this Warrant Agreement, the Company may deem and treat the Holder as the absolute owner of this Warrant Agreement for purposes of any exercise hereof and for all other purposes and such right of the Company shall not be affected by any notice to the contrary. 10. Subdivision of Rights. This Warrant Agreement (as well as any new warrant agreement issued pursuant to the provisions of this Section) is exchangeable upon the surrender hereof by the Holder at the principal office of the Company for any number of new warrants of like tenor and date representing in the aggregate the right to subscribe for and purchase the number of shares of Common Stock of the Company that may be subscribed for and purchased hereunder. 11 11. Sending of Notices. All notices and other communications with respect to this Warrant Agreement shall be in writing and sent by express mail or courier service or by personal delivery, if to the Holder, to the address set forth at the end of this Warrant, and if to the Company, to One Bridge Plaza, Suite 100, Fort Lee, New Jersey 07024, or to such other address as either party hereto may duly give to the other. 12. Headings. The headings in this Warrant Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning of the terms hereof. 13. Change, Waiver, Discharge or Termination. This Warrant Agreement sets forth the entire agreement between the Company and the Holder with respect to the matters herein. Neither this Warrant Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 14. Governing Law. This Warrant shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to the principles of conflicts of law. DISTINCTIVE DEVICES, INC. By: ___________________________________ Dated: April 20, 2004 Sanjay Mody, Chief Executive Officer, President and Chief Financial Officer Agreed to: April 20, 2004 TWINKLE INTERNATIONAL FZE By:______________________________ Name: Title: Twinkle International FZE W-1-105 Dubai Airport Free Zone P.O. Box 54404 Dubai, UAE Attn: ____________________ 12 EXHIBIT A --------- NOTICE OF EXERCISE ------------------ (To be executed by a Holder desiring to exercise the right to purchase Shares pursuant to Warrants.) The undersigned Holder of Warrants hereby: (a) Irrevocably elects to exercise the Warrant to the extent of purchasing _______ Shares; (b) Makes payment in full of the aggregate Exercise Price for those Shares in the amount of $___________ by wire transfer or the delivery of certified funds or a bank cashier's check in the amount of $___________; (c) Requests that a certificate for such Shares be issued in the name of the undersigned, or, if the name and address of some other person is specified below, in the name of such other person: ___________________________________________________ ___________________________________________________ ___________________________________________________ (Name and address of person other than the undersigned in whose name Shares are to be registered.) (d) Requests, if the number of Shares purchased are not all the Shares purchasable pursuant to the unexercised portion of the Warrants, that a new Warrant Agreement of like tenor for the remaining Shares purchasable pursuant to the Warrants be issued and delivered to the undersigned at the address stated below. _________________________________ Employer ID Number: Dated:___________________________ By:______________________________ Name: Title: (This signature must conform in all respects to the name of the Holder as specified on the face of the Warrant Agreement.) Address:___________________________________ ___________________________________________ Stock Warrant No.: ## 13 EXHIBIT B --------- ASSIGNMENT FORM --------------- FOR VALUE RECEIVED, the undersigned, ________________________________, hereby sells, assigns and transfers unto: Name: ________________________________________________ (Please type or print in block letters.) Address: _____________________________________________ _______________________________________________________ the right to purchase ______________ shares (the "Shares") of Distinctive Devices, Inc. (the "Company") pursuant to the terms and conditions of the Warrant Agreement held by the undersigned. The undersigned hereby authorizes and directs the Company (i) to issue and deliver to the above-named assignee at the above address a new Warrant Agreement pursuant to which the rights to purchase being assigned may be exercised, and (ii) if there are rights to purchase Shares remaining pursuant to the undersigned's Warrant Agreement after the assignment contemplated herein, to issue and deliver to the undersigned at the address stated below a new Warrant Agreement evidencing the right to purchase the number of Shares remaining after issuance and delivery of the Warrant Agreement to the above-named assignee. Except for the number of Shares purchasable, the new Warrant Agreement to be issued and delivered by the Company is to contain the same terms and conditions as the undersigned's Warrant Agreement. This Assignment is subject to receipt by the Company of such investment representations by the assignee, as may be reasonably required under the Securities Act of 1933, as amended and other provisions governing transfer set forth in the Warrant Agreement. To complete the assignment contemplated by this Assignment Form, the undersigned hereby irrevocably constitutes and appoints ______________________________ as the undersigned's attorney-in-fact to transfer the Warrant Agreement and the rights thereunder on the books of the Company with full power of substitution for these purposes. ______________________________ Dated:___________________________ By:_______________________________________ Name: Title: (This signature must conform in all respects to the name of the Holder as specified on the face of the Warrant Agreement.) Address:___________________________________ ___________________________________________ Tax Identification No.:____________________ 14 EX-10 5 exh10_4.txt EXH. 10.4 - PLEDGE AGREEMENT EXHIBIT 10.4 PLEDGE AGREEMENT ---------------- AGREEMENT, dated as of April 20, 2004, by and among WINFRIED M. KLIMEK and SANJAY MODY ("Mody"), on behalf of himself and as agent for the benefit of Earl Anderson (collectively, the "Co-Pledgors" and each a "Co-Pledgor"), for the benefit of TWINKLE INTERNATIONAL FZE, an United Arab Emirates company ("Pledgee"), and THELEN REID & PRIEST LLP, a California limited liability partnership, as Agent ("Agent"). WITNESSETH WHEREAS, Distinctive Devices, Inc., a Delaware corporation ("DDI"), and the Pledgee have entered into a Note Purchase Agreement, dated the date hereof (the "Purchase Agreement"), in which the Pledgee has agreed to loan (the "Loan") to DDI the principal amount of US$4,000,000 pursuant to an Unsecured Promissory Note (the "Note"); WHEREAS, the Co-Pledgors and Earl Anderson ("Anderson") are executive officers and directors of DDI and its wholly-owned subsidiary galaxis technology ag, a German corporation, and hold options (the "Options") to purchase shares of DDI Common Stock, $.001 par value ("Common Stock"), pursuant to option agreements (the "Option Agreements"), as set forth on Schedule A hereto; WHEREAS, to induce the Pledgee to enter into the Purchase Agreement and to make the Loan, each Co-Pledgor is willing to pledge the Pledged Collateral (defined below) in furtherance of the obligations of DDI under the Note, pursuant to the terms specified herein; WHEREAS, Anderson has pledged and delivered his Option Agreement, with its respective Notice of Assignment duly executed in favor of the Pledgee, to the Agent, with the intention that it constitute part of the Pledged Collateral, and has asked Mody to act as his agent under this Agreement, and accordingly, Mody shall make the representations, warranties and covenants contained herein on Anderson's behalf, with respect to his portion of the Pledged Collateral; and WHEREAS, the Co-Pledgors have a direct interest in the financial affairs and well being of DDI and its subsidiaries and will benefit from the Loan contemplated by the Purchase Agreement, and accordingly, each Co-Pledgor desires to execute and deliver this Agreement; NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Co-Pledgors and Pledgee hereby agree as follows: 1. Pledge and Grant of Security Interests. -------------------------------------- 1.1 Grant. Each of the Co-Pledgors hereby pledges, assigns, hypothecates and transfers to Pledgee, its successors and assigns, for the benefit of Pledgee, his respective Option Agreement representing the respective Options, together with a Notice of Assignment duly executed in favor of the Pledgee ("Pledged Collateral"), as collateral security for the payment or other satisfaction by DDI of its indebtedness (the "DDI Indebtedness") under the Note. 1.2 Delivery. Each Co-Pledgor shall deliver or cause to be delivered to the Agent his portion of the Pledged Collateral. 2. Obligations Unconditional. The obligations of the Co-Pledgors under this Agreement, which are limited solely to the Pledged Collateral, shall be absolute and unconditional and shall remain in full force and effect until the DDI Indebtedness shall have been paid in full or otherwise satisfied. Such obligations of the Co-Pledgors shall not be affected, modified or impaired by any statement of facts or by the happening from time to time of any event, such as modification or extension of the Note, whether or not such event shall occur with notice to, or the consent of, any of the Co-Pledgors. 3. Waiver of Co-Pledgors. Each of the Co-Pledgors hereby waives notice of the issuance of the Note. Each of the Co-Pledgors also waives presentment, demand for payment, protest and notice of nonpayment or dishonor and all other notices and demands whatsoever relating to the Note, other than notice of an Event of Default thereunder and notices as required by this Agreement. 4. Use of Collateral. Prior to payment in full of the Note, each Co-Pledgor shall be entitled to exercise the Options, in whole or in part, with respect to the Pledged Collateral. In the event a Co-Pledgor exercises the Options, in whole or in part, he shall cause DDI to deliver the certificates for the shares of DDI Common Stock issued upon such exercise to the Agent to be held as additional Pledged Interests under this Agreement. 5. Representations and Warranties. To induce the Pledgee to make the Loan and enter into this Agreement, and for other good and valuable consideration, each Co-Pledgor hereby represents and warrants to with the Pledgee that: (a) he has full legal power and authority to enter into this Agreement and to perform his obligations herein; (b) this Agreement constitutes the legal, valid and binding obligation of such Co-Pledgor, enforceable in accordance with its terms, except as such enforceability may be affected by bankruptcy, insolvency, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (regardless of whether enforcement is sough in a proceeding in equity or at law); (c) the execution, delivery and performance of this Agreement does not and will not violate or contravene any agreement, commitment, arrangement or instrument to which, as of any date, he is a party; and (d) he is the exclusive legal and beneficial owner of his Option Agreement, free and clear of all claims, liens, security interests and other encumbrances, other than restrictions on transfer under the Securities Act of 1933, as amended, with respect to the Options and the underlying shares of Common Stock ("Option Shares"). 2 6. Co-Pledgors' Covenants. ---------------------- 6.1 No Other Pledges. Each Co-Pledgor covenants and agrees that he will not create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of his portion of the Pledged Collateral, or any of such Co-Pledgor's Option Shares, or any proceeds thereof, prior to the satisfaction of the Note. 6.2 No Transfer. Each Co-Pledgor covenants and agrees that he will not transfer, assign, hypothecate, encumber, pledge or otherwise alienate his portion of the Pledged Collateral, or enter into any agreement with respect to the foregoing, including, without limitation, any of such Co-Pledgor's Option Shares, prior to satisfaction of the Note. 6.3 Further Assurance. Each Co-Pledgor covenants and agrees that he will, upon the reasonable request of the Pledgee, execute and deliver all such instruments and agreements as may be necessary or appropriate to give effect to his obligations under this Agreement. 7. Rights and Remedies upon Default. The Pledgee shall have the following rights and remedies: 7.1 Rights. If any Event of Default under the Note shall occur, and is still continuing for five (5) Business Days (a "Business Day" being any weekday, not otherwise a bank holiday in New York City), which has not been otherwise waived in writing, the Pledgee shall notify ("Default Notice") each Co-Pledgor and the Agent in writing of such Event of Default and its intention to obtain the transfer of the Pledged Collateral. If no notice objecting to the Event of Default or the transfer of the Pledged Collateral ("Notice of Objection"), made in good faith, is received by both the Agent and the Pledgee, from any of the Co-Pledgors within seven (7) Business Days from the date each such Default Notice is received by the respective Co-Pledgors, the Agent shall deliver to the Pledgee the Pledged Collateral. The Agent shall have no duty to sell or otherwise realize the Pledged Collateral. If any Notice of Objection is received that objects to the transfer of all or a portion of the Pledged Collateral pursuant to this Section 7, the Agent shall retain that portion of the Pledged Collateral specified in any such Notice of Objection, until such objection is resolved (a) through a final resolution and agreement among the Co-Pledgors and the Pledgee indicated by a joint written instruction of the Co-Pledgors and the Pledgee to the Agent, or (b) in a final unappealable order of a court of competent jurisdiction. Notwithstanding anything in this Agreement to the contrary, the Pledgee understands that upon an Event of Default by DDI under the Note, the Pledged Collateral shall represent the Pledgee's only recourse against the Co-Pledgors (including Anderson) in respect of this Agreement and the Note, as the Pledgee shall have no recourse against any Co-Pledgor (including Anderson) for an obligation or claim arising out of or based upon the Agreement other than as to the Pledged Collateral. 7.2 Application of Pledged Collateral. The Options and the Option Shares, if any, received by the Pledgee pursuant to this Agreement shall be applied to the DDI Indebtedness, valued as agreed between the Pledgee and DDI. This Agreement is entered into by the Co-Pledgors for the benefit of the Pledgee, and its successors and assigns, as the Pledgee of the Note and may be 3 enforced by any subsequent Pledgee of the Note in accordance with the provisions of this Agreement. This Agreement shall not be deemed to create any right in, or to be in whole or in part for the benefit of, any person other than such Pledgee, the Co-Pledgors, DDI and their respective successors, assigns, heirs and administrators. 8. Release of Pledged Collateral. Upon payment in full and satisfac- tion of the Note, the Pledgee shall promptly take all action necessary to terminate the security interest in the Pledged Collateral, and the Agent shall deliver to each Co-Pledgor his portion of the Pledged Collateral, including returning Anderson his portion of the Pledged Collateral. 9. Agent. Acceptance by the Agent of its duties under this Agreement is subject to the following terms and conditions, which the parties to this Agreement hereby agree shall govern and control the rights, duties and immunities of the Agent: (a) the duties and obligations of the Agent shall be determined solely by the express provisions of this Agreement (except and to the extent otherwise expressly provided herein) and the Agent shall not be bound by the provisions of any other agreement; (b) notwithstanding anything to the contrary herein, the duties and obligations of the Agent hereunder shall extent only to the delivery of the Pledged Collateral pursuant to Sections 7.1 and 8 above and such duties and obligations will terminate upon such delivery; (c) the Agent shall not be responsible for any failure or inability of the parties to this Agreement, or of anyone else, to deliver any of the Pledged Collateral, including Option Shares which may become Pledged Collateral, or other property to the Agent or otherwise to honor any of the provisions of this Agreement; (d) the Agent shall be fully protected in acting on and relying upon any written notice, direction, request, waiver, consent, receipt or other paper or document which the Agent in good faith believes to be genuine and to have been signed or presented by the proper party or parties from time to time; (e) the Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith or for any mistake in fact or law, or for anything which it may do or refrain from doing in connection herewith, except its own willful misconduct or gross negligence; (f) the Agent may seek the advice of legal counsel in the event of any dispute or question as to the construction of any of the provisions of this Agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the written opinion of such counsel; and (g) in the event of ambiguity in the provisions governing the Note, the Pledged Collateral or this Agreement or uncertainty on the part of the Agent as to how to proceed, such that the Agent, in its sole and absolute judgment, deems it necessary for its protection so to do, the Agent may refrain from taking any action other than to retain custody of the Pledged Collateral 4 deposited hereunder until it shall have received joint written instructions signed by the Pledgee and each Co-Pledgor in accordance with the provisions of this Agreement. 10. Resignation or Removal of Agent. ------------------------------- 10.1 The Agent may resign at any time by giving thirty (30) days' written notice thereof to the Pledgee and each Co-Pledgor. Within thirty (30) days after receiving such notice, the Pledgee and each Co-Pledgor shall appoint a successor escrow agent (the "Successor Agent") at which time the Agent shall deliver the Pledged Collateral to the Successor Agent. After appointment of the Successor Agent and delivery of the Pledged Collateral by the Agent to the Successor Agent, the Agent shall have no further duties or responsibilities in connection herewith. 10.2 The Pledgee and each Co-Pledgor, acting jointly, may remove the Agent upon written notice to the Agent stating such removal and designating a Successor Agent, and, upon delivery of the Pledged Collateral to the Successor Agent, the Agent shall thereupon be discharged from all obligations under this Agreement and shall have no further duties or responsibilities in connection herewith. 10.3 If after thirty (30) days from the date of delivery of its written notice of intent to resign, or of the parties joint notice of removal, the Agent has not received a written designation of a Successor Agent, the Escrow Agent's sole responsibility shall be in its sole discretion either to retain custody of the Pledged Collateral, or to apply to a court of competent jurisdiction for appointment of a Successor Agent and after such appointment to have no further duties or responsibilities in connection herewith. 10.4 The Pledgee acknowledges that the Agent is acting as legal counsel to DDI and to the Co-Pledgors. The Pledgee does not object to the representation of DDI and the Co-Pledgors by the Agent. 11. Indemnity. The Pledgee and each Co-Pledgor will, jointly and severally, keep the Agent harmless and will indemnify the Agent to the fullest extent permitted by law against any claim, action, suit or demand, which may be brought or made against the Agent and any of its partners, employees or agents (each an "Indemnified Party") in connection with the performance by the Agent in its role as Agent in accordance with the terms of this Agreement and will pay any reasonable cost and expense (including without limitation reasonable attorneys' fees payable in advance) incurred by an Indemnified Party in connection with this indemnity, as and when incurred, except to the extent (if any) for matters arising out of the gross negligence or intentional misconduct of the Agent. 12. Expenses. Unless otherwise indicated in this Agreement, the Pledgee and each Co-Pledgor shall each pay their own respective costs, fees and expenses, incurred in connection with this Agreement. 13. Assignment. The Agent, subject to the terms of the this Agreement, shall have the right to assign this Agreement. The Co-Pledgors may not assign, transfer or otherwise dispose of any of its rights or obligations hereunder, by operation of law or otherwise, and any such assignment, transfer or other disposition without the Pledgee's written consent shall be void. All of the 5 rights, privileges, remedies and options given to Pledgee under this Agreement and the Note shall inure to the benefit of any successors and assigns, and all the terms, conditions, covenants, provisions and warranties herein shall inure to the benefit of and bind the permitted successors and assigns of each Co-Pledgor. 14. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered and, if delivered by mail, shall be mailed by recognized international courier or sent by facsimile, and addressed as follows (or to such other address any party hereto may hereafter duly advise the other parties): if to the Co-Pledgors: c/o Sanjay Mody Distinctive Devices, Inc. One Bridge Plaza Suite 100 Fort Lee, New Jersey 07024 Facsimile: (201) 363-9926 if to the Pledgee: Twinkle International FZE W-1-105 Dubai Airport Free Zone P.O. Box 54404 Dubai, UAE Attn: ___________ Facsimile: __________________ if to Agent: Thelen Reid & Priest LLP 40 West 57th Street New York, NY 10019 Attn: Bruce A. Rich, Esq. Fax Number: (212) 603-2001 15. Miscellaneous. This Agreement (i) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; (ii) may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; (iii) may be terminated, amended or modified only by an instrument in writing signed by the duly authorized representatives of the parties; (iv) shall be binding upon the parties hereto, and their respective heirs, administrators, successors and assigns, and (v) shall be governed in all respects, including validity, interpretation and effect, by, and shall be enforceable in accordance with, the law of the State of Delaware, without giving effect to principles of conflicts of law. If any provision of this Agreement shall be held to be invalid by any 6 court of competent jurisdiction, the invalidity of such provisions shall not affect any of the remaining provisions. 16. Headings. The descriptive headings hereunder used are for convenience only and shall not be deemed to limit or otherwise effect the construction of any provision hereof. IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. ---------------------------------- WINFRIED M. KLIMEK ---------------------------------- SANJAY MODY AGREED TO AND ACCEPTED: TWINKLE INTERNATIONAL FZE By:____________________________________ Its:___________________________________ THELEN REID & PRIEST LLP, as Agent By:____________________________________ Its:___________________________________ 7 SCHEDULE A ---------- 1. Option Agreement, dated as of January 14, 2004, and amended as of April 20, 2004, between Distinctive Devices, Inc. and Earl Anderson for 250,000 shares of Common Stock. 2. Option Agreement, dated as of January 14, 2004, and amended as of April 20, 2004, between Distinctive Devices, Inc. and Winfried M. Klimek for 1,250,000 shares of Common Stock. 3. Option Agreement, dated as of January 14, 2004, and amended as of April 20, 2004, between Distinctive Devices, Inc. and Sanjay Mody for 1,000,000 shares of Common Stock. 8 EX-10 6 exh10_5.txt EXH. 10.5 - AMENDED AND RESTATED STOCK OPT AGR AMENDED AND RESTATED STOCK OPTION AGREEMENT ------------------------------------------- AGREEMENT dated as of January 14, 2004, and amended and restated as of April 20, 2004, by and between DISTINCTIVE DEVICES, INC., a Delaware corporation, (the "Company"), and __________ (the "Optionee") . W I T N E S S E T H - - - - - - - - - - WHEREAS, in consideration of the services provided to the Company by the Optionee, including his services in connection with the Company's acquisition of galaxis technology ag, the Company desires to provide the Optionee with an opportunity to acquire shares of the Company's Common Stock, par value $.001 per share (the "Common Stock"), and thereby obtain a greater proprietary interest in the progress and success of the business of the Company, and the Optionee desires to obtain such a proprietary interest in the Company, subject to the terms and conditions herein; NOW, THEREFORE, in consideration of the premises, the mutual covenants herein set forth and other good and valuable consideration, the Company and the Optionee hereby agree as follows; 1. Grant of Option. The Company hereby grants to the Optionee an option (the "Option") to purchase an aggregate of _________ shares (the "Option Shares") of Common Stock at an exercise price of seventy cents ($0.70) per share (the "Exercise Price"), and the Optionee accepts the grant of the Option, subject to adjustment as provided in Section 5 herein. 2. Vesting of Option. This Option shall vest as to all of the Option Shares commencing on ____________ (the "Vesting Date"), provided that the Optionee is then an officer and/or director of the Company. 3. Exercise of Option. The Option may be exercised at any time, or from time to time, commencing on the Vesting Date and terminating on the fifth anniversary of the date hereof (the "Expiration Date"). The Option may be exercised, as provided in this Section 3, by notice and payment to the Company as provided in Section 7 hereof. 4. Non-Transferability. The Option shall not be transferable in whole or in part by the Optionee, except by will or the laws of descent or distribution, and shall be exercised during the lifetime of the Optionee only by him; provided, however, the Optionee shall have the right to pledge or otherwise hypothecate the Option pursuant to a Pledge Agreement, dated April 20, 2004, among the Company, the Optionee and other option holders (the "Pledge"), for the benefit of Twinkle International FZE (the "Holder"), in connection with the issuance and sale by the Company of an Unsecured Promissory Note, dated April 20, 2004 (the "Note"), to the Holder, and upon the Event of Default by the Company under Section 4.1 of the Note, and in accordance with the Pledge, the Optionee shall have the right to transfer or assign all or part of the Option and this Agreement to the Holder or its designee. Any transfer or attempted transfer, except as provided for herein, of all or part of the Option in violation of this Agreement shall be null and void, and, at the discretion of the Company, the Option shall then be terminated. 5. Adjustments. In the event of a stock dividend, stock split-up, share combination, exchange of shares, recapitalization, merger, consolidation, disposition of all or substantially all of its property, reorganization, liquidation or other similar changes or transactions, of or by the Company, the Board of Directors of the Company shall make (or shall undertake to have the Board of Directors of any corporation which merges with, or acquires the stock or assets of, the Company make) such adjustment of the number and class of shares then covered by the Option, or of the Exercise Price, or both. To the extent practicable, the Company shall give the Optionee prior written notice of 2 any such event, provided that the failure by the Company to give such notice shall not subject the Company to any liability herein. After an event which results in an adjustment in the Option, the Company shall give written notice to the Optionee specifying the adjusted number or type of Option Shares or other security and/or the Exercise Price, together with a calculation of the adjustment. The determination of the adjustment by the Company shall be final and binding on the Optionee. 6. Reservation of Shares. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock or such other class of stock then subject to the Option as shall be sufficient to satisfy the requirements of this Agreement. 7. Methods of Exercise of Option. 7.1 Exercise Notice. Subject to the terms and conditions of this Agreement, the Option shall be exercisable by notice (the "Exercise Notice"), together with delivery of this Agreement and payment to the Company by a certified check or wire transfer payable to the order of the Company in the full amount of the purchase price for the Purchased Shares. Each Exercise Notice shall: (i) state the election to exercise the Option and the number of Option Shares (such number being the "Purchased Shares") in respect of which it is being exercised; (ii) If at the time of exercise the Purchased Shares are not covered by an effective registration statement filed under the Securities Act of 1933, as amended (the "Securities Act"), contain a representation and agreement as to investment intent with respect to the Purchased Shares, and an 3 acknowledgement as to restrictions on resale or transfer of such Shares by reason of the Securities Act of 1933; (iii) be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Option; and (iv) be sent to the company in accordance with Section 10 hereof. 7.2 Stock Certificate. Upon receipt of the documents to be provided for in Section 7.1 hereof in proper form, the Company shall deliver to the person or person exercising the Option certificates for the Purchased Shares. In the event the Purchased Shares are not then covered by an effective Securities Act registration statement, each certificate shall be subject to stop transfer instructions and bear the following legend. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT IF 1933, AS AMENDED. THEY MAY NOT PUBLICLY BE OFFERED FOR SALE, SOLD OR DELIVERED AFTER SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SUCH ACT EXCEPT AS AUTHORIZED UNDER SAID ACT, AND UNLESS HEREAFTER REGISTERED WILL NOT BE TRANSFERRED UPON THE RECORDS OF THE CORPORATION IN THE ABSENCE OF AN OPINION OF COUNSEL TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. 7.3 Partial Exercise. If the Option is being exercised for less than the full number of Option Shares, the company shall deliver to the Optionee a new Stock Option Agreement for the remaining number of Option Shares. 4 8. Rights of Holder. 8.1 As Stockholder. The Optionee shall not have any rights to voting, dividends or any other rights of a stockholder with respect to any Option Shares until the certificates for such Option Shares shall have been issued to him as evidenced by the appropriate entry on the stock record books of the Company upon purchase of such Option Shares upon exercise of the Option. 8.2 As Employee. Nothing in this Agreement shall constitute an employment agreement or arrangement between the Optionee and the Company nor shall give the Optionee any rights as an employee. 9. Registration. At any time after the Vesting Date the Optionee may request the Company to file a registration statement on Form S-8 (or successor form) under the Securities Act coverning the Option Shares. Assuming the Company is eligible to file a Form S-8 (or successor form) for the Option Shares, it shall use its best efforts to file and cause such registration statement to become effective and thereafter maintain the effectiveness thereof for at least the earliest of (i) one year after the Expiration Date, (ii) the termination of this Agreement, assuming no Option Shares have been purchased hereunder or (iii) the date when all the Purchased Shares may be sold in accordance with Rule 144 under the Securities Act. The Company shall bear all costs related to such registration statement. This shall be the only right of the Optionee to include his Option Shares in a Securities Act registration statement. The Company may include in such registration statement shares of Common Stock on behalf of other holders of Company options and warrants. 5 10. Notices. Any notice relating to this Agreement shall be in writing and delivered in person, by certified mail, hand, express courier or fax as follows to the following address: If to the Company: Distinctive Devices, Inc. One Bridge Plaza, Suite 100 Fort Lee, New Jersey 07024 Attn: President If to the Optionee: ----------------- ----------------- ----------------- or to such other address as either party hereto may hereafter duly give to the other. 11. Miscellaneous. 11.1 Benefits of Agreement. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, assigns, heirs and administrators. 11.2 Governing Law. This Agreement shall be construed by and governed in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. 11.3 Severability. In the event that any one or more provisions of this Agreement shall be deemed to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not affect the legality, validity and enforceability of the remaining legal, valid and enforceable provisions hereof, which shall be construed as if such illegal, invalid or unenforceable provision or provisions had not been inserted. 6 11.4 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto as to the subject matter herein, and cannot be amended, modified or terminated except by a writing executed by the parties hereto. 11.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute a single instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above. ------------------------------------ DISTINCTIVE DEVICES, INC. By:_________________________________ EX-99 7 exh99_1.txt EX. 99.1 - PRESS RELEASE PRESS RELEASE, DATED April 22, 2004 EXHIBIT 99.1 Press Release DISTINCTIVE DEVICES SECURES $4 MILLION FUNDING FOR WORKING CAPITAL AND GALAXIS A WHOLLY OWNED SUBSIDIARY HAS BACK ORDERS EXCEEDING $20 MILLION Thursday April 22, 7:00 am ET FORT LEE, N.J.--(BUSINESS WIRE)--April 22, 2004--Distinctive Devices, Inc. (OTCBB-DDVS) announced today that it has secured a $4 million unsecured loan on favorable terms from an unrelated private lender. Loan proceeds will be utilized for working capital by our recently acquired wholly owned subsidiary, galaxis technology ag of Lubeck, Germany, to execute the order back logs for delivery of Set-Top-Boxes (STB) ordered by its customers. The loan also will be used for opening L/C's to contract manufacturers which manufacture the STB based on proprietary specifications of galaxis approved by their customers. Galaxis currently has a back orders exceeding $20 million and has several major contracts in the negotiations some of which are expected to close shortly. This financing provides working capital to execute orders which could make the operations break-even or profitable for the current quarter. This funding provides the necessary liquidity to achieve our revenue and operational goals and provides the necessary validation to our acquisition of galaxis in the growing digital TV technologies all over the world. It also endorses an opportunity to enhance our long term objective for growth and value for our shareholders said Sanjay Mody, President and CEO of Distinctive Devices, Inc. Galaxis is a leading developer of interactive digital TV technologies and a manufacturer of TV set-top-boxes which it markets in Europe, Middle-East and India. About Distinctive Devices, Inc.: Distinctive Devices is engaged in digital TV technologies and telecom access product development and manufacturing through its wholly owned subsidiaries in Germany and India. For further information please visit our website at www.ddev.net This press release contains forward-looking statements, which involve numerous risks and uncertainties. Actual results, performance or achievements could differ materially from those anticipated in such forward looking statements as a result of certain factors, including those set forth in the Company's filings with the Securities and Exchange Commission. - --------------- Contact: Distinctive Devices, Inc. Sanjay Mody, 201-363-9922 sanmody@ddev.net or Earl Anderson, 561-416-9804 earl@ddev.net -----END PRIVACY-ENHANCED MESSAGE-----