EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of July 31, 2002, between Distinctive Devices, Inc.,
a New York corporation, having an address at Xxx Xxxxxx Xxxxx, Xxxxx 000, Xxxx
Xxx, XX 00000 (the "Company"), and Xxxxxxxx X. Xxxxx, having an address c/o
Distinctive Devices, Inc., Xxx Xxxxxx Xxxxx, Xxxxx 000, Xxxx Xxx, XX 00000 (the
"Purchaser").
BACKGROUND
The Company has designated 250,000 shares of its Preferred Stock, $1.00
par value, as Series D Convertible Preferred Stock, (the "Series D Preferred
Stock"). The Purchaser desires to purchase 173,333 shares (the "Purchased
Shares") of the authorized Series D Preferred Stock from the Company, and the
Company desires to sell the Purchased Shares to the Purchaser, on the terms and
conditions set forth below.
NOW, THEREFORE, the parties hereto for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged hereby, agree as
follows:
1. Sale of Series D Preferred Stock; Purchase Price.
1.1 Sale. Subject to the terms and conditions set forth
herein, the Purchaser hereby purchases 173,333 shares of Series D Preferred
Stock from the Company constituting the Purchased Shares, and the Company hereby
sells the Purchased Shares to the Purchaser for the aggregate purchase price of
$650,000 (the "Purchase Price"). Pursuant to 912(c)(1) of the New York
Business Corporation Law, the Board of Directors of the Company approves of the
purchase of the Purchased Shares by the Purchaser.
1.2 Closing. The closing (the "Closing") of the transaction
contemplated hereby is taking place simultaneously with the execution and
delivery of this Agreement. At the Closing, the parties are making the
following deliveries to each other:
(a) The Company is delivering to the Purchaser a
certificate registered in the name of the Purchaser representing all of the
Purchased Shares, receipt of which is acknowledged by the Purchaser; and
(b) The Purchaser is delivering the Purchase Price to the
Company by check or wire transfer to an account designated by the Company,
receipt of which is acknowledged by the Company.
2. Representations, Warranties and Covenants of the Company. The
Company represents and warrants to the Purchaser that:
2.1 Organization; Qualification The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. 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 Corporate Power. The Company has all requisite corporate
power to enter into this Agreement, to sell the Purchased Shares and to carry
out and perform its obligations under the terms of this Agreement. All
corporate action on the part of the Company necessary for the authorization,
execution, delivery and performance by the Company of this Agreement and for the
authorization, issuance and delivery of the Purchased Shares issuable upon
payment therefor has been taken. This Agreement constitutes a valid and binding
agreement of the Company enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and general
principles of equity.
2.3 No Restrictive Agreements The issuance and delivery of the
Purchased Shares to the Purchaser is not subject to any preemptive
rights."Upon the delivery of the Purchased Shares, the Purchaser will acquire
the beneficial and legal, valid and indefeasible title to the Purchased Shares,
free and clear of all pledges, liens, charges, claims or options of any kind,
except for restrictions on transfer under the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities laws."
2.4 Capitalization The Company's authorized capital stock
consists of 20,000,000 shares of Common Stock, $.05 par value (the "Common
Stock"), of which 19,134,824 shares are issued and outstanding, and 1,000,000
shares of Preferred Stock, 60,000 shares of which have been designated as Series
C Preferred Stock, of which 10,000 shares are issued and outstanding, and
250,000 shares of which have been designated as Series D, none of which is
outstanding. All of the issued and outstanding shares of Common Stock and
Series C Preferred Stock are validly issued, fully paid and non-assessable. The
Purchased Shares being issued to the Purchaser pursuant to this Agreement upon
issuance will be validly issued, fully paid and non-assessable shares of Series
D Preferred Stock. The shares of Common Stock underlying the conversion rights
of the Purchased Shares upon conversion in accordance with the terms of the
Series D Preferred Stock and after a recapitalization (the "Recapitalization")
of the Common Stock increasing the number of authorized shares and reducing the
par value to $.001 per share, upon issuance will be validly issued, fully paid
and non-assessable shares of Common Stock.
2.5 SEC Reports. The Company is subject to filing reports
with the Securities and Exchange Commission pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
information in the Company's annual report on Form 10-KSB for the fiscal year
ended December 31, 2001 and Form 10-QSB for the fiscal quarter ended March 31,
2002 is in all material respects complete and correct.
2.6 Stockholders Meeting. The Company shall use its best
efforts to promptly call and hold a Special Meeting of Shareholder in accordance
with the New York Business Corporation Law and the Exchange Act, at which
Meeting the shareholders will vote upon the Recapitalization as described in
Section 2.4, a proposed reverse stock split of the Common Stock, a proposed
corporate migration to the State of Delaware, and such other matters as the
Company's Board of Directors may propose.
3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company that:
3.1 Knowledge. As a member of the Board of Directors of the
Company, the Purchaser is aware of the current business, prospects and financial
condition of the Company and the market for its Common Stock, has reviewed the
reports recently filed by the Company under the Exchange Act, and has had the
opportunity to discuss the Company's prospects with its management. In
addition, the Purchaser understands the restrictions on resale or other transfer
of the Series D Shares (and any underlying shares of Common Stock) as they have
not been registered under the Securities Act.
3.2 Authority. The Purchaser has the power and authority to
enter into this Agreement and to purchase the Series D Preferred Stock, and the
purchase is consistent with his investment objectives.
4. Preemptive Rights.
4.1 Right. If at any time and from time to time, for a period
of eighteen (18) months from the date of this Agreement, the Board of Directors
authorizes the Company to sell (the "Sale"), solely for cash, shares of Common
Stock (the "Shares"), or shares of Preferred Stock or other securities (the
"Derivative Securities") that are exercisable for, convertible into or
exchangeable for shares of Common Stock in a private placement transaction
pursuant to the exemption from registration under Regulation D of the Securities
Act, the Company shall send a written notice to the Purchaser of such
authorization (the "Notice of Preemptive Rights") offering the Purchaser the
right to participate in such Sale. For purposes of this Section, a "Sale" shall
not include (a) an issuance of Shares directly or underlying options or other
rights granted to employees, officers, consultants or directors under an
agreement or an employee benefit plan or otherwise as incentive or compensation,
(b) an issuance of Shares either directly or underlying Derivative Securities in
whole or in part in consideration for services, (c) the issuance as part of an
acquisition transaction, (d) an issuance to a party who the Board of Directors
determines would be a strategically important shareholder, or (e) upon the
exercise of any Derivative Securities which were outstanding on the date of this
Agreement. Any Shares not purchased by the Purchaser pursuant to this Section 4
may be sold, issued or granted within ninety (90) days after deliver of the
Notice of Preemptive Rights, at the same price and terms as offered for sale to
the Purchaser hereunder.
4.2 Notice of Preemptive Right. The Notice of Preemptive
Rights shall specify the total aggregate number of Shares to be issued, the
price and other terms of the proposed Sale, the amount of Shares or Derivative
Securities to which the Purchaser is entitled to purchase and the period during
which the Purchaser may elect to participate in the purchase. The Notice of
Preemptive Rights shall be sent to the Purchaser at least ten (10) days prior to
the anticipated closing date of the Sale. If the Purchaser desires to
participate in the Sale, the Purchaser shall notify the Company by sending a
notice of acceptance which must be received by the Company within the time
period specified in the applicable Notice of Preemptive Rights.
4.3 Effectiveness. The purpose of the preemptive right in
this Section 4 is to accommodate the Purchaser's desire to have the opportunity
to maintain his beneficial percentage interest (on a fully diluted basis) in the
Company's Common Stock upon certain issuances by the Company. If (i) the
Purchaser fails to purchase at least fifty percent (50%) of the Shares or
Derivative Securities offered in the Notice of Preemptive Rights in any Sale
which closes, or (ii) the Purchaser sells or otherwise disposes of fifty percent
(50%) of the securities beneficially owned by him upon the closing of the
Purchase herein, the Purchaser's rights under this Section 4 shall terminate
with respect to any subsequent Sale.
5. Miscellaneous.
5.1 Survival. All representations and warranties and other
agreements made by the Company and the Purchaser in this Agreement shall survive
the Closing for a period of one (1) year.
5.2 Additional Action. Each of the Purchaser and the Company
shall, upon the request of the other, from time to time, execute and deliver
promptly to the other party all instruments and documents of further assurances
or otherwise and will do any and all such acts and things as may be reasonably
required to carry out the obligations of such party hereunder and to consummate
the transactions contemplated hereby.
5.3 Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective estates,
heirs, executors, successors and assigns.
5.4 Governing Law. This Agreement shall in all respects be
governed by the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
5.5 Entire Agreement. This Agreement constitutes the entire
arrangement between the parties with respect to the subject matter herein and
cannot be changed, modified, discharged or terminated except by a writing signed
by the party against whom enforcement of any change, modification, discharge or
termination is sought.
5.6 Waiver. No waiver shall be deemed to be made by any party
of any of his rights hereunder unless the same shall be in writing, and each
waiver, if any, shall be a waiver only with respect to the specific instance
involved and shall in no way impair the rights of the waiving party of the
obligations of the other party in any other respect at any other time.
5.7 Notices. Any notice, demand or other communication to be
given hereunder by either party to the other shall be in writing and shall be
mailed by certified mail, return receipt requested, sent by recognized overnight
courier or delivered against receipt to the party to whom it is to be given to
the address of such party set forth in the preamble to this Agreement (or to
such other address as the party shall have furnished in accordance with the
provisions of this Section 5.7).
5.8 Captions. The captions used in this Agreement are for
convenience only and shall not be deemed as, or construed as, a part of this
Agreement.
5.9 Counterparts, Facsimile Execution. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument. Facsimile
execution and delivery of this Agreement is legal, valid and binding execution
and delivery for all purposes.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the date first above written.
DISTINCTIVE DEVICES, INC.
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By: Xxxxxx X. Xxxx
Title: President
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XXXXXXXX X. XXXXX
