Exhibit 4.2
VOID AFTER 5:00 P.M., EASTERN TIME,
ON DECEMBER 9, 2007
DISTINCTIVE DEVICES, INC.
COMMON STOCK PURCHASE WARRANT
-----------------------------
No. 02-1 2,766,666 Shares
DISTINCTIVE DEVICES, INC., a Delaware corporation (the "Company"), hereby
certifies that COMBINE INTERNATIONAL, INC. (the "Initial Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company, 2,766,666
shares (the "Shares") of fully paid and non-assessable Common Stock of the
Company, par value $.001 per share, at a purchase price of Fifteen Cents ($0.15)
per Share, subject to adjustment from time to time pursuant to Section 3 hereof
(the "Exercise Price"). The term "Common Stock" means, unless the context
otherwise requires, the Company's Common Stock, par value $.001 per share, or
other securities or property at the time deliverable upon the exercise of this
Warrant.
This Warrant has been issued as additional consideration for the Unsecured
Demand Promissory Note (the "Note") in aggregate principal amount of up to
$415,000 by the Company.
1. Exercise.
1.1 Timing of Exercise. This Warrant shall be exercisable in whole or in
part from time to time commencing as of June 10, 2003 and expiring at 5:00 P.M.,
New York time, on December 9, 2007 (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
shall be exercised by the Initial Holder or any person permitted by Section 6.1
herein (collectively, "the Holder"), by surrendering this Warrant, 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 checks) of the Exercise
Price.
1.3 Partial Exercise. This Warrant may be exercised for less than the full
number of shares of Common Stock at the time called for hereby, in which case
the number of shares receivable upon the exercise of this Warrant as a whole,
and the sum payable upon the exercise of this Warrant 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 Warrant or Warrants of like
tenor calling for the number of shares of Common Stock as to which rights have
not been exercised, such Warrant or Warrants to be issued in the name of the
Holder.
2. Delivery of Stock Certificates Upon Exercise. As soon as practicable
after the exercise of this Warrant, 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
this Warrant is 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 Share, of Common Stock or the Exercise
Price per Share, or both, which may be purchased under this Warrant.
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 and the surviving entity is a publicly traded company or the
transaction consideration consists in whole or in part of securities of a
publicly traded company, the Company agrees that a condition of such transaction
will be that the Company or such 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 of stock or other securities or property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which this Warrant might have been exercised immediately prior
to such consolidation, merger, sale or transfer, subject to adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 3, provided that the consideration to the stockholders of
the Company on such transactions consists in whole or in part of securities of
the other corporation. 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 and the surviving entity is neither a publicly traded company nor a
subsidiary of a publicly traded company, 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 thirty (30) days
before the anticipated closing date of the transaction) written notice of such
record date. 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 this Warrant.
Upon the closing of the transaction referenced in the foregoing notice, this
Warrant 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
2
expiration of this Warrant) to exercise this Warrant 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 this Warrant might
have been converted 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 is adjusted, the
Company shall promptly mail to the Holder of this Warrant 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 in accordance with this
Warrant and shall be final and binding upon the Holder absent manifest error.
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. Upon the
delivery of shares issued upon the due exercise of this Warrant, the issuing
company shall deliver to the Holder an opinion of counsel setting forth that the
issued shares are 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 this Warrant, such
number of its duly authorized shares of Common Stock as from time to time shall
be issuable upon the exercise of this Warrant.
5. Fractional Shares. The Company shall not issue fractions of shares of
Common Stock upon exercise of this Warrant 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 this Warrant, 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 only to (i) any other Holder of a Warrant in
this Series, (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, officer, 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 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.
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 this Warrant may not be registered under the Securities Act of
1933, as amended (the "Securities Act"), at the time issued;
3
(b) agrees that, upon the exercise of this Warrant, 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 or any other appropriate exemption from registration thereunder,
and, in connection with such exemption, that any certificates representing
shares of Common Stock issued pursuant to this Warrant 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 form or relating to any violation of the Securities Act and
applicable state securities or "blue sky" laws arising from any misstatement or
omission by Holder in any of its representations and warranties in connection
with the exercise of this Warrant or the issuance, sale or transfer of shares of
Common Stock or other securities acquired under this Warrant.
6.3 Maintenance of Reporting Requirements. The Company shall use its best
efforts to be in compliance with its reporting requirements, if any, under the
Securities Exchange Act of 1934, as amended. The Company shall maintain such
compliance until the earliest of (i) the date that the Holder ceases to be the
beneficial owner of any shares acquired upon exercise of this Warrant, (ii) the
date that the Holder would have the ability to dispose of all of the shares
acquired hereunder pursuant to the provisions of Rule 144(k) under the
Securities Act, or any similar rule as may be enacted by the Securities and
Exchange Commission or (iii) the termination of this Warrant without it having
been exercised, .
7. Registration Under the Securities Act of 1933.
7.1 Piggyback. If at any time prior to the Expiration Date the Company
proposes to register shares of its Common Stock under the Securities Act on any
form for the registration of its Common Stock under the Securities Act (the
"Registration Statement") for the account of stockholders (other than a
registration relating to (i) a registration of a stock option, 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 (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. Such
rights are referred to hereinafter as "Piggyback Registration Rights". Upon the
written request of the Holder to the Company made within ten (10) days after the
giving of any such notice (which request shall specify the number of Shares
intended to be disposed of by the Holder and the intended method of disposition
thereof) (such Shares being for purposes of this Section 7, the "Registered
Shares"), the Company will include in the Registration Statement the Registered
Shares which the Company has been so requested to register by the Holder,
provided that the Company's obligation shall continue after exercise of the
Warrants, but it need not include any Registered Shares in a Registration
Statement filed after the Expiration Date.
7.2 Company Termination. If, any time after giving written notice of its
intention to register any securities in a Piggyback Registration but prior to
the effective date of the related Registration Statement filed in connection
with such Piggyback Registration, the Company shall determine for any reason not
to register such securities, the Company will give written notice of such
4
determination to the Holder and thereupon shall be relieved of its obligation to
register any Shares in connection with such Piggyback Registration.
7.3 Holder Election. The Holder may elect in writing, not later than three
(3) business days prior to the effectiveness of the Piggyback Registration not
to have its Registered Shares so included in connection with the Registration
Statement.
7.4 Underwriting. If the securities covered by the Registration Statement
are to be underwritten, the Company shall not be required to include therein any
of Registered Shares unless the Holder accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it. If in the
opinion of the managing underwriter, the registration of all, or a part of, the
Registered Shares which the Holder has requested to be included in the
Registration Statement would adversely affect such public offering, then, (i)
the Company shall be required to include in the underwriting only the number of
Shares, if any, which the managing underwriter believes may be sold without
causing such adverse effect, and the number of the Registered Shares that may be
included in such registration shall be allocated among all selling stockholders,
requesting to participate in such registration in proportion (as nearly as
practicable) to the amount of shares of Common Stock owned by each selling
stockholder (including the Holder), or (ii) the Company may require the selling
stockholders (including the Holder) to delay any offering of their Securities
for a period of up to ninety (90) days.
7.5 Obligation. The Company is obligated to file only one Registration
Statement pursuant to this Section 7 which is declared effective under the
Securities Act; provided however, in the event any Registered Shares are
excluded from inclusion in a Registration Statement pursuant to Section 7.4,
such excluded Registered Shares may be included in a second Registration
Statement filed in accordance with this Section 7. The Piggyback Registration
Rights under this Section 7 are the only rights granted by the Company to the
Holder to include the Shares in a Registration Statement.
7.6 Selling Stockholders Agreement. As a condition to including the
Holder's Registered Shares in a Piggyback Registration, the Holder shall enter
into a Selling Stockholders Agreement with the Company containing such terms and
conditions, including mutual indemnification, as then are reasonable and
customary for such agreements.
8. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant 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 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 this Warrant. The rights of the Holder are limited to those
expressed in this Warrant and are not enforceable against the Company except to
the extent set forth herein. Prior to due presentment for transfer of this
Warrant, the Company may deem and treat the Holder as the absolute owner of this
5
Warrant 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 (as well as any new warrant 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. Sending of Notices. All notices and other communications with respect
to this Warrant 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 ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, or to such other address as either party hereto may duly
give to the other.
12. Headings. The headings in this Warrant 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 sets forth the
entire agreement between the Company and the Holder with respect to the matters
herein. Neither this Warrant 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. The Company shall not amend any other Warrant issued as
part of this Series to make terms thereunder more favorable to the Holder
thereof without offering the same amended terms to the Holder hereof.
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: December 10, 2002 ▇▇▇▇▇▇ ▇▇▇▇,
Chief Executive Officer, President
and Chief Financial Officer
Agreed to:
COMBINE INTERNATIONAL, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
BY:
----------------------------------
Name:
Title:
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 a Warrant 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 Warrant, that a new
Warrant of like tenor for the remaining Shares purchasable pursuant to the
Warrant be issued and delivered to the undersigned at the address stated below.
COMBINE INTERNATIONAL, INC.
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.)
Address:
------------------------------------------
------------------------------------------
Stock Warrant No.: ##
7
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 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 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 a new
Warrant evidencing the right to purchase the number of Shares remaining after
issuance and delivery of the Warrant to the above-named assignee. Except for the
number of Shares purchasable, the new Warrant to be issued and delivered by the
Company is to contain the same terms and conditions as the undersigned's
Warrant. 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. 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 and the rights thereunder on the books of the Company with
full power of substitution for these purposes.
COMBINE INTERNATIONAL, INC.
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.)
Address:
------------------------------------------
------------------------------------------
Stock Warrant No.: ##
8