EXHIBIT 10.6
VOID AFTER 5:00 P.M., EASTERN TIME,
ON FEBRUARY 24, 2014
DISTINCTIVE DEVICES, INC.
WARRANT AGREEMENT
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No. W-04-G1 200,000 Shares
DISTINCTIVE DEVICES, INC., a Delaware corporation (the "Company"), hereby
certifies that ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Initial Holder"), is entitled, subject to
the terms set forth below, to exercise warrants (the "Warrants") to purchase
from the Company up to Two Hundred Thousand (200,000) shares (the "Shares") of
the Company's Common Stock at an exercise price of one dollar and sixty-five
cents ($1.65) 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 herein are being issued by the Company as consideration for
the services to be provided by the Initial Holder, pursuant to a Consulting
Agreement, dated February 25, 2004, between the Company and the Initial Holder.
1.1 Exercise.
1.1 Vesting. (a) General. The Warrants shall vest as to 66,666 Shares
(subject to Sections 3 and 5 hereof) on each of December 15, 2004 and December
15, 2005, and as to 66,667 Shares (subject to Sections 3 and 5 hereof) on
December 15, 2006.
(b) Change of Control. In the event of a change in control of the
Company, any Warrants that have not vested pursuant to Subsection (a) above
shall vest and shall be immediately exercisable. For purposes of this Agreement,
a "change in control" shall mean any of the following events: (a) the Company
receives a report on Schedule 13D filed with the Securities and Exchange
Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") disclosing that any person, group, corporation or
other entity is the beneficial owner, directly or indirectly, of twenty percent
(20%) or more of the outstanding Common Stock of the Company; (b) any person (as
such term is defined in Section 13(d) of the Exchange Act), group, corporation
or other entity other than the Company or any subsidiary, purchases shares
pursuant to a tender offer or exchange offer to acquire any Common Stock of the
Company for cash, securities or any other consideration, provided that after
consummation of the offer, the person, group, corporation or other entity in
question is the beneficial owner (as such term is defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of twenty percent (20%) or more of
the outstanding Common Stock of the Company (calculated as provided in paragraph
(d) of Rule 13d-3 under the Exchange Act in the case of rights to acquire common
stock); or (c) the stockholders of the Company approve (i) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
EXHIBIT 10.6
corporation or pursuant to which shares of Common Stock would be converted into
cash, securities or other property, or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company.
(c) Termination. In the event that the Consulting Agreement is
terminated either by reason of a material breach thereof by the Initial Holder
or by the Initial Holder, then all Warrants not vested at the date of such
termination shall be terminated. In the event that the Consulting Agreement is
terminated other than for the reasons specified in the preceding sentence, the
terms and conditions of this Warrant, including the vesting provisions, shall
remain in full force and effect.
1.2 Timing of Exercise. The Warrants shall be exercisable in whole or in
part, subject to vesting, at any time or from time to time after December 15,
2004 and expiring at 5:00 P.M., New York time, on February 24, 2014 (the
"Expiration Date"), subject to earlier termination as provided herein, and may
not be exercised thereafter.
1.3 Manner of Exercise. The purchase rights evidenced by this Agreement
shall be exercised by the Initial Holder or any person permitted by Section 6.1
herein (collectively, the "Holder"), by surrendering this Agreement, together
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 (by wire
transfer or by certified or official bank check) of the Exercise Price.
1.4 Partial Exercise. The Warrants may be exercised for less than the full
number of Shares at the time called for hereby, in which case the number of
shares of Common Stock receivable upon exercise as a whole, and the sum payable
upon the exercise of the Warrants as a whole, shall be proportionately reduced.
Upon any such partial exercise, the Company at its expense will forthwith issue
to the Holder a new Agreement or Agreements of like tenor calling for the number
of shares of Common Stock as to which the Warrants have not been exercised, such
Agreement or Agreements 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 five (5) 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 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 which may be purchased upon
exercise of the Warrants and to the Exercise Price per Share.
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EXHIBIT 10.6
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, and upon any such consolidation, merger, sale or
conveyance (i) the surviving entity is registered under the Exchange Act 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 he would have owned or have been entitled
to receive after the happening of such consolidation, merger, sale or conveyance
had these 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, and upon any such consolidation, merger, sale or
conveyance (i) the surviving entity is not registered under the Exchange Act 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 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 these Warrants. Upon the closing of the transaction
referenced in the foregoing notice, the Warrants 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 Date) 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 the Warrants is adjusted, the
Company shall promptly mail to the Holder a notice of adjustment, which notice
shall include a brief statement of the facts requiring the adjustment and the
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EXHIBIT 10.6
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
Warrants, such number of its duly authorized shares of Common Stock as from time
to time shall be issuable upon the exercise of these Warrants.
5. Fractional Shares. The Company shall not issue fractions of shares of
Common Stock upon exercise of the Warrants 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. Subject to the prior written consent of the Company, a
Holder, including the Initial Holder or any subsequent Holder, may transfer this
Warrant only to (i) any entity controlled by, controlling or under common
control of the Holder, or for which the Holder is acting as the representative,
(ii) to one or more shareholders, members, directors, officers or employees of
the Holder, if an entity, or (iii) 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 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 7.10 herein.
6.2 Securities Laws. The Holder of this Warrant, 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 (as defined in Section 7.1 herein) filed under the Securities Act,
such Shares shall be restricted on resale or other transfer, and he 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 pursuant to the Warrants would reflect an appropriate legend
regarding restrictions upon transferability; and
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EXHIBIT 10.6
(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.
(a) If at any time and from time to time after December 15, 2004 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; (iii) a registration of securities proposed
to be issued in exchange for other securities of the Company; or (iv) a
registration of securities proposed to be issued to generate proceeds to be used
to repay debt obligations 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 to register the Holder's Shares (the "Section 7.1 Notice"). The
rights described in this Section 7.1 are referred to as "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, in no event fewer than Fifty Thousand
(50,000), 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.
(b) The Company shall be obligated to file and cause the
effectiveness of only two (2) Piggyback Registrations. The Shares set forth in
the Section 7.1 Notice are referred to for purposes of this Section 7, the
"Registrable Shares". The Holder shall not have the right to demand that the
Company file a Registration Statement under the Securities Act covering the
Holder's Shares.
7.2 Suspension in Filing.
(a) If the Company determines, in its good faith reasonable judgment,
that it should withdraw any Registration Statement previously filed pursuant to
Section 7.1 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
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EXHIBIT 10.6
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.
The Company's right to delay a request for registration or to withdraw a
Registration Statement pursuant to this Section 7.2 may not be exercised more
than once in any twelve (12) month period.
(b) If the Company determines to take any action pursuant to
Sub-section (a) above after a Registration Statement 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.
7.3 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 his Registrable Shares described in the Registration
Statement or six (6) months from the effective date of the Registration
Statement (or such later date as may be appropriate by reason of suspensions of
the effectiveness of the Registration Statement 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 permit, 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 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.
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EXHIBIT 10.6
(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 Holder; 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 Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iv) of
the happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Cause all Registrable Shares registered thereunder to be listed
on each securities exchange or quotation service on which similar securities
issued by the Company are then listed or quoted.
7.4 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.
7.5 Expenses of 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 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
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EXHIBIT 10.6
legal advisors to the Holder. Notwithstanding the foregoing, the Holder shall
pay all registration expenses that he is required to pay under applicable law.
7.6 Underwriting Requirements. In connection with any offering involving
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 7.1 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 to be sold other than by the Company that the underwriters determine
in their sole discretion is compatible with the success of the offering, then
the Company shall be required to include in the offering only that number of
such securities, including Registrable 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).
7.7 Delay of Registration. The Holder shall not have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 7.
7.8 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
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 7.8(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
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EXHIBIT 10.6
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 7.8(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 7.8(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 7.8(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
7.8 of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel selected by the
indemnifying party and approved by the indemnified party (whose approval 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
7.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 7.8
(d) If the indemnification provided for in this Section 7.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
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EXHIBIT 10.6
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
7.8 shall survive the completion of any offering of Registrable Shares in a
Registration Statement under this Section 7, and otherwise.
7.9 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:
(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 Exchange Act; and
(c) furnish to the Holder, so long as the Holder owns any Registrable
Shares, forthwith upon request (i) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (ii) such other information as may be reasonably requested in
availing the Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
7.10 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
his Registrable Shares 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
7.10, the rights of the 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.
10
EXHIBIT 10.6
7.11 Termination of Registration Rights. The right of the Holder to request
inclusion in any Piggyback Registration pursuant to Section 7.1 shall terminate
if all Shares held by the Holder may immediately be sold under Rule 144(k) after
the Warrants have been exercised in full.
7.12 Form S-8. In the event that the Holder's Shares are eligible to be
registered under the Securities Act under a registration statement on Form S-8
(or any successor form that provides for automatic effectiveness), the Company
shall prepare and file a Form S-8 registration statement on or before December
15, 2004 and shall thereafter use its best efforts to maintain the effectiveness
thereof until the Holder has sold or otherwise transferred all of his Shares.
Provided that the Company complies with its obligations under this Section 7.12,
the right of the Holder to request inclusion of his Shares in any Piggyback
Registration Statement to Section 7.1 shall terminate.
8. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrants 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 new Warrants 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 in accordance with Section 2 hereof. The rights of
the Holder are limited to those expressed in this Agreement and are not
enforceable against the Company except to the extent set forth herein. Prior to
due presentment for transfer of this Agreement, the Company may deem and treat
the Holder as the absolute owner of the Warrants 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. The Warrants (as well as any new warrants
issued pursuant to the provisions of this Section) are 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. Sending of Notices. All notices and other communications with respect
to this Agreement shall be in writing and sent by express mail or courier
service or by personal delivery, if to the Holder, to c/▇ ▇▇▇▇▇ Group, LLC, the
Hippodrome Building, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, and if to the Company, to One ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, or to such other address as either the Holder or the Company may
duly give to the other.
12. Headings. The headings in this Agreement are for purposes of reference
only and shall not limit or otherwise affect the meaning of the terms hereof.
11
EXHIBIT 10.6
13. Change, Waiver, Discharge or Termination. This Agreement sets forth
the entire agreement between the Company and the Holder with respect to the
matters herein. Neither this 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 Agreement 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: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
Dated: February 25, 2004 ▇▇▇▇▇▇ ▇▇▇▇,
Chief Executive Officer and President
12
EXHIBIT 10.6
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
(To be executed by a Holder desiring to exercise the right to purchase Shares
pursuant to a Warrant.)
The undersigned Holder of Warrants hereby:
(a) Irrevocably elects to exercise the Warrants 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 new
Warrants of like tenor for the remaining Shares purchasable pursuant to the
Agreement 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 Agreement.)
Address:______________________________
______________________________________
Stock Warrant No.: ##
13
EXHIBIT 10.6
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
Warrants 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 new Warrants 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 after the assignment contemplated herein, to issue
and deliver to the undersigned at the address stated below new Warrants
evidencing the right to purchase the number of Shares remaining after issuance
and delivery of the Warrants to the above-named assignee. Except for the number
of Shares purchasable, the new Warrants to be issued and delivered by the
Company are to contain the same terms and conditions as the undersigned's
Warrants. 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 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 Warrants 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 Agreement.)
Address:______________________________
______________________________________
Tax Identification No.:_______________
14
