EXHIBIT 4.21
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
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This Settlement Agreement and Mutual Release (the "Agreement") is
entered into as of March 14, 2001, by and between TELENETICS CORPORATION, a
California corporation ("Telenetics") and CALIFORNIA INTEGRATION COORDINATORS,
INC., a California corporation ("CIC"). This Agreement is entered into with
reference to the following facts:
RECITALS
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A. Telenetics is indebted to CIC in the aggregate amount of
approximately $94,343.00 (the "Indebtedness").
B. Telenetics has agreed to issue, and CIC has agreed to accept as
payment in full of the Indebtedness, in lieu of cash, 147,990 shares of common
stock of Telenetics.
C. In consideration of the mutual covenants, agreements and promises
set forth in this Agreement, and other good and valuable consideration, the
receipt of which is hereby acknowledged each party to this Agreement agrees as
follows:
AGREEMENT
1. The foregoing Recitals shall be part of this Agreement.
2. Telenetics shall issue to CIC, 147,990 shares of its common stock.
In calculating the number of shares of Telenetic's common stock to be issued to
CIC pursuant to this Agreement (the "Shares"), the value of the Shares shall be
$0.6375 per share.
3. CIC expressly agrees to the issuance of the Shares and hereby agrees
to accept the Shares as full payment and in complete satisfaction of the
Indebtedness.
4. Telenetics agrees that the Shares will be validly issued, fully paid
and nonassessable.
5. Telenetics warrants that it has authorized a sufficient number of
shares of common stock to provide for the issuance of the Shares.
6. CIC has had access to all information that it desires concerning
Telenetics, including all of its reports filed with the Securities and Exchange
Commission
7. CIC has no need for liquidity in this investment in the Shares and
has no reason to anticipate any change in its circumstances, financial or
otherwise, which may cause or require any sale or distribution by CIC of all or
any part of the Shares.
8. CIC represents that it has a preexisting business relationship with
Telenetics, and by reason of its business and financial experience and the
business and financial experience of its professional advisors who are
unaffiliated with, and who are not compensated by Telenetics or any affiliate or
selling agent of Telenetics, directly or indirectly, has the capacity to protect
its own interests in connection with the issuance of the Shares.
9. In evaluating the merits and risks of this investment, CIC has
relied on the advice of its tax advisor, investment advisor and/or legal
counsel.
10. CIC acknowledges that the Shares have not been registered (these
shares are to be registered under a Form S-3) or qualified under the Securities
Act of 1933, as amended (the "Act") or any state securities law. Accordingly,
the Shares may be sold or otherwise transferred or hypothecated only if they are
subsequently registered or qualified under the Act or applicable laws or if, in
the opinion of counsel, an exemption from registration or qualification
thereunder is available and the transaction will not jeopardize the availability
of the exemptions under applicable federal and state securities laws relied upon
by Telenetics in connection with the issuance of the Shares.
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11. CIC acknowledges that the securities were not offered by means of
any general solicitation or advertising.
12. CIC is acquiring the Shares solely for its own account, for
investment purposes only, and not with an intent to sell, or for resale in
connection with any distribution of all or any portion of the Shares within the
meaning of the Act except as permitted by law.
13. The principal executive offices of CIC are located in the State of
California.
14. CIC hereby agrees that it shall make no disposition of the Shares
unless and until it has provided Telenetics with reasonable written assurances,
in form and substance satisfactory to Telenetics, that (i) the proposed
disposition does not require registration or qualification of the Shares under
the Act or any state securities laws; or (ii) all appropriate action necessary
for compliance with the registration requirements of the Act or any state
securities laws or of any exemption from registration available under the Act
(including Rule 144) or any state securities laws has been taken.
15. CIC further understands and agrees that (i) the legend set forth in
Section 16 below will be placed on the certificate(s) evidencing the Shares and
on any certificate(s) issued to transferees; and (ii) the stock records of
Telenetics will be noted with such restrictions.
16. Each certificate representing the Shares shall have conspicuously
printed on it the following legends:
"THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF THE VARIOUS STATES, AND HAVE BEEN
ISSUED AND SOLD PURSUANT TO AN EXEMPTION FROM THE ACT, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED BY THE HOLDER THEREOF AT ANY
TIME EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED
UNDER THE ACT COVERING THESE SHARES, OR (2) UPON DELIVERY TO THE
CORPORATION OF ANY OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION
THAT THESE SHARES MAY BE TRANSFERRED WITHOUT REGISTRATION."
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17. Registration Rights.
(a) On or before March 20, 2001, Telenetics shall, at its sole
cost and expense, file a registration statement on the appropriate form
under the Act with the Securities and Exchange Commission covering all
of the Shares. Telenetics will use its best efforts to have such
registration statement declared effective as soon as possible after
filing, and to keep such registration statement current and effective
until December 20, 2001 or until such earlier date as all of the Shares
registered pursuant to such registration statement shall have been
sold.
(b) If Telenetics effects any registration under the Act of
the Shares pursuant to Section 17(a) above, Telenetics shall indemnify,
to the extent permitted by law, and hold harmless CIC, any underwriter,
any officer, director, affiliate, shareholder, employee or agent of CIC
or underwriter, and each other person, if any, who controls CIC or
underwriter within the meaning of Section 15 of the Act, against any
losses, claims, damages, liabilities, judgment, fines, penalties, costs
and expenses, joint or several, or actions in respect thereof
(collectively, the "Claims"), to which each such indemnified party
becomes subject, under the Act or otherwise, insofar as such Claims
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or prospectus or any amendment or supplement thereto or any document
filed under a state securities or blue sky law (collectively, the
"Registration Documents") or insofar as such Claims arise out of or are
based upon the omission or alleged omission to state in any
Registration Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading, and will
reimburse any such indemnified party for any legal or other expenses
reasonably incurred by such indemnified party in investigating or
defending any such Claim; provided that Telenetics shall not be liable
in any such case to a particular indemnified party to the extent such
Claim is based upon an untrue statement or alleged untrue statement of
a material fact or omission or alleged omission of a material fact made
in any Registration Document in reliance upon and in conformity with
information furnished to Telenetics by or on behalf of such indemnified
party specifically for use in the preparation of such Registration
Document.
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(c) In connection with any registration statement in which CIC
is participating, CIC shall indemnify, to the extent permitted by law,
and hold harmless Telenetics, each of its directors, each of its
officers who have signed the registration statement, each other person,
if any, who controls Telenetics within the meaning of Section 15 of the
Act, each other seller with securities registered pursuant to the same
registration statement under which the Shares are registered, and each
underwriter, any officer, director, affiliate, shareholder, employee or
agent of any such other seller or underwriter and each other person, if
any, who controls such other seller or underwriter within the meaning
of Section 15 of the Act, against any Claims to which each such
indemnified party may become subject under the Act or otherwise,
insofar as such Claims (or actions in respect thereof) are based upon
any untrue statement or alleged untrue statement of any material fact
contained in any Registration Document, or insofar as any Claims are
based upon the omission or alleged omission to state in any
Registration Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading, and will
reimburse any such indemnified party for any legal or other expenses
reasonably incurred by such indemnified party in investigating or
defending any such Claim; provided, however, that such indemnification
or reimbursement shall be payable only if, and to the extent that, any
such Claim arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Registration Document in reliance upon and in conformity with
information furnished to Telenetics by CIC specifically for use in the
preparation thereof.
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(d) Any person entitled to indemnification under Section 17(b)
or 17(c) above shall notify promptly the indemnifying party in writing
of the commencement of any Claim if a claim for indemnification in
respect thereof is to be made against an indemnifying party under this
Section 17(d), but the omission of such notice shall not relieve the
indemnifying party from any liability which it may have to any
indemnified party otherwise than under Section 17(b) or 17(c) above,
except to the extent that such failure shall materially adversely
affect any indemnifying party or its rights hereunder. In case any
action is brought against the indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in, and, to the extent that it
chooses, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party; and, after notice from the
indemnifying party to the indemnified party that it so chooses, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that (i) if the indemnifying party
fails to take reasonable steps necessary to defend diligently the Claim
within twenty (20) days after receiving notice from the indemnified
party that the indemnified party believes it has failed to do so; (ii)
if the indemnified party who is a defendant in any action or proceeding
which is also brought against the indemnifying party reasonably shall
have concluded that there are legal defenses available to the
indemnified party which are not available to the indemnifying party; or
(iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional
conduct, the indemnified party shall have the right to assume or
continue its own defense as set forth above (but with no more than one
firm of counsel for all indemnified parties, except to the extent any
indemnified party or parties reasonably shall have concluded that there
are legal defenses available to such party or parties which are not
available to the other indemnified parties or to the extent
representation of all indemnified parties by the same counsel is
otherwise inappropriate under applicable standards of professional
conduct) and the indemnifying party shall be liable for any reasonable
expenses therefor; provided, that no indemnifying party shall be
subject to any liability for any settlement of a Claim made without its
consent (which may not be unreasonably withheld, delayed or
conditioned). If the indemnifying party assumes the defense of any
Claim hereunder, such indemnifying party shall not enter into any
settlement without the consent of the indemnified party if such
settlement attributes liability to the indemnified party.
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(e) If for any reason the indemnity provided in Section 17(b)
or 17(c) above is unavailable, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of any
Claim in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other from the transactions contemplated by
this Agreement. If, however, the allocation provided in the immediately
preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the
indemnifying party and the indemnified party as well as any other
relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or 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. The amount paid or
payable in respect of any Claim shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim.
Notwithstanding the foregoing, no underwriter or controlling person
thereof, if any, shall be required to contribute, in respect of such
underwriter's participation as an underwriter in the offering, any
amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such underwriter has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligation of any
underwriters to contribute pursuant to this Section 17(e) shall be
several in proportion to their respective underwriting commitments and
not joint.
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(f) The provisions of Section 17(b) through 17(e) of this
Agreement shall be in addition to any other rights to indemnification
or contribution which any indemnified party may have pursuant to law or
contract and shall remain operative and in full force and effect
regardless of any investigation made or omitted by or on behalf of any
indemnified party and shall survive the transfer of the Shares by any
such party.
18. Except for any obligations imposed by this Agreement, Telenetics
and CIC, and, as applicable, each of their respective agents, successors,
predecessors, parent companies, affiliated companies, related companies,
partners, officers, directors, shareholders, representatives, employees,
attorneys, insurance companies, assigns and heirs, and each of them, past and
present, hereby release and forever discharge each other party and each of their
respective agents, successors, predecessors, parent companies, affiliated
companies, related companies, partners, officers, directors, shareholders,
representatives, employees, attorneys, insurance companies, assigns and heirs,
and each of them, past and present, with respect to any and all claims, demands,
liabilities, obligations, debts, attorneys' fees, costs, accounts, actions, or
causes of action which any of the parties have or claim to have as of the date
of this Agreement, in law or equity, whether known or unknown, which pertain to
or which arise out of and/or which pertain to, or is in any connected with the
past relationships between the parties.
19. As a condition of this Agreement and in furtherance of the release
provisions set forth in this Agreement, the parties expressly waive any and all
rights and benefits conferred upon them by the provisions of section 1542 of the
Civil Code of the State of California with respect to any of the matters
described or set forth in this Agreement. Section 1542 of the Civil Code of the
State of California states:
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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
The parties acknowledge that except for matters expressly represented
or recited in this Agreement, the facts and law in relation to this matter and
the claims released by the terms of this Agreement may turn out to be different
from the facts or law as now known to each party and/or its agents and/or
representatives, including its counsel. Each party expressly assumes the risk of
the existence of different or presently unknown facts or law and agrees that
this Agreement shall in all respects be effective and binding as to each party
despite the possibility of the existence of different or new facts or law.
20. Each of the parties represents and warrants that it has not heretofore
assigned, transferred or subrogated, or purported to assign, transfer or
subrogate, to any person or entity, any of the claims released in this
Agreement. Each of the parties agrees that it shall indemnify each of the other
parties, including with respect to any attorneys' fees and costs, and hold each
of the other parties harmless from and against any claims based on or arising
from any such assignment, transfer or subrogation, or any attempted assignment,
transfer or subrogation, of any of the claims released in this Agreement.
21. Each of the parties agrees to execute and deliver to each other
party all necessary documents and to take such additional action as may be
necessary or reasonably required to effectuate the terms, conditions,
provisions, and intent of this Agreement.
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22. Each party executing this Agreement and/or any other documents
related to the settlement between the parties represents and warrants that it
has been duly authorized to execute this Agreement and any such other related
documents.
23. Each of the parties acknowledges that it has carefully read this
Agreement and knows and understands the contents and effect of this Agreement,
and each of the parties further acknowledges that it is signing this Agreement
based on its own free act.
24. Each of the parties acknowledges that it has been advised to seek
legal counsel in connection with this matter and the provisions and execution of
this Agreement, and each of the parties acknowledges that it either has
consulted with its own legal counsel or has had a full opportunity to consult
with its own legal counsel in connection with the settlement between the
parties, the terms, conditions, and provisions of this Agreement, and the
execution of this Agreement.
25. This Agreement has been entered into in the State of California,
and all of the terms, conditions and provisions of this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California.
26. If any term, condition or provision of this Agreement is held to be
invalid, void or unenforceable, the remaining terms, conditions and provisions
of this Agreement nevertheless shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
27. This Agreement and all of its terms, conditions and provisions
shall be binding upon and shall inure to the benefit of each of the parties and
each of the parties' respective heirs, successors and assigns.
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28. The prevailing party in any proceeding to enforce the provisions of
this Agreement shall be entitled to recover all costs, including reasonable
attorney's fees, from the non-prevailing party.
29. This Agreement contains the entire agreement and understanding
concerning the settlement between the parties and replaces any prior
negotiations or agreements between the parties, whether written and/or oral.
30. Each of the parties agrees that no particular party or parties to
this Agreement shall be deemed to be the author of this Agreement or any
particular term, provision or condition of this Agreement. Each of the parties
further agrees that any ambiguities in this Agreement shall be resolved, and the
terms, provisions and conditions of this Agreement shall be construed and
interpreted, without regard to which party or parties may have suggested,
drafted, revised, or otherwise authored this Agreement or any of its particular
terms, provisions or conditions. Each of the parties further agrees that this
Agreement shall be construed and interpreted as if drafted jointly by all of the
parties.
31. Any disputes arising under this Agreement shall be resolved in
accordance with the laws of the State of California in either the County of
Orange or the County of Los Angeles, State of California.
32. This Agreement may not be changed, altered or modified except in a
writing signed by each of the parties and/or duly authorized representatives of
each of the parties.
33. This Agreement may be executed in counterparts, including facsimile
counterparts, and all such executed counterparts, including with facsimile
signatures, together shall constitute one original Agreement which shall be
binding on all of the parties to this Agreement notwithstanding that all of the
parties are not signatory to the original or the same counterparts.
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Dated: March 14, 2001 TELENETICS CORPORATION
By: /s/ Xxxxx Xxxxx
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Its: Chief Financial Officer
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Dated: March 14, 2001 CALIFORNIA INTEGRATION
COORDINATORS, INC.
By: /s/ X. Xxxxxxxxx
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Its: President
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