THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT") OR ANY STATE SECURITIES
LAWS AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY THE HOLDER
EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION OF ITS
COUNSEL OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY
BE SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER CASE, TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933 ACT
AND APPLICABLE STATE SECURITIES LAWS.
TELENETICS CORPORATION
Common Stock Purchase Warrant
to
Purchase 11,029 Shares
of
Common Stock
This Common Stock Purchase Warrant is issued to:
XX. XXXXXXX XXXXXXX
c/o Taglich Brothers, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
by TELENETICS CORPORATION, a California corporation (hereinafter called the
"Company," which term shall include its successors and assigns).
FOR VALUE RECEIVED and subject to the terms and conditions hereinafter
set out, the registered holder of this Warrant as set forth on the books and
records of the Company (the "Holder") is entitled upon surrender of this Warrant
to purchase from the Company eleven thousand twenty-nine (11,029) fully paid and
nonassessable shares of Common Stock, no par value (the "Common Stock"), at the
Exercise Price (as defined below) per share.
This Warrant shall expire at the close of business on January 23, 2006.
1. (a) The right to purchase shares of Common Stock represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company at 00000 Xxxxxx Xxxxx, Xxxx Xxxxxx, Xxxxxxxxxx 00000 (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), and
upon payment to the Company, by cash or by certified check or bank draft, of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be deemed to be issued to the Holder as the record
owner of such shares of Common Stock as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares
of Common Stock as aforesaid. Certificates for the shares of Common Stock so
purchased (together with a cash adjustment in lieu of any fraction of a share)
shall be delivered to the Holder within a reasonable time, not exceeding ten
(10) business days, after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant representing
the number of shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised, in all other respects identical with this
Warrant, shall also be issued and delivered to the Holder within such time, or,
at the request of the Holder, appropriate notation may be made on this Warrant
and the same returned to the Holder.
(b) This Warrant may be exercised , subject to Section 4 hereof,
to acquire, from and after the date hereof, the number of shares of Common Stock
set forth on the first page hereof; provided, however, the right hereunder to
purchase such shares of Common Stock shall expire at the close of business on
January 23, 2006.
2. This Warrant is being issued by the Company to Taglich Brothers,
Inc. ("Taglich Brothers"), or its designee, pursuant to a letter agreement
between the Company and Taglich Brothers, dated as of January 23, 2001 (the
"Letter Agreement"), whereby the Company agreed to issue a five (5) year
warrant, exercisable at the Exercise Price per share to Taglich Brothers or its
designee, to purchase 11,029 shares of Common Stock as compensation for using
its best efforts to privately place $75,000 in principal amount of 6.5%
convertible junior subordinated debentures of the Company due April 23, 2003.
The designee shall have the right after issuance of this Warrant to divide up
this Warrant with other employees at Taglich Brothers.
3. The Company covenants and agrees that all Common Stock upon issuance
against payment in full of the Exercise Price by the Holder pursuant to this
Warrant will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will have at all times authorized,
and reserved for the purpose of issue or transfer upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant, and will
procure at its sole expense upon each such reservation of shares the listing
thereof (subject to issuance or notice of issuance) on all stock exchanges on
which the Common Stock is then listed or inter-dealer trading systems on which
the Common Stock is then traded, provided, however, that the Company currently
does not have sufficient authorized and unissued shares of Common Stock which
are not otherwise reserved for issuance, to reserve for issuance upon exercise
of the Warrant. The Company will take all such action as may be necessary to
assure that such shares of Common Stock may be so issued without violation of
any applicable law or regulation, or of any requirements of any national
securities exchange upon which the Common Stock may be listed or inter-dealer
trading system on which the Common Stock is then traded. The Company will not
take any action which would result in any adjustment in the number of shares of
Common Stock purchasable hereunder if the total number of shares of Common Stock
issuable pursuant to the terms of this Warrant after such action upon full
exercise of this Warrant and, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options and other rights to purchase shares of Common Stock then outstanding,
would exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation, as then amended.
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4. The Holder shall have no right to exercise its rights as provided
for herein until the Company has authorized and reserved for issuance a
sufficient number of shares of Common Stock to cover the total amount of shares
of Common Stock issuable pursuant to the terms of this Warrant.
5. The Company hereby covenants to use its best efforts to gain
shareholder approval to increase the number of authorized shares of Common Stock
from 25,000,000 shares to 50,000,000 shares at its upcoming special meeting of
shareholders, scheduled for January 26, 2001 and which shall occur no later than
July 2, 2001. If the Company is unable to obtain its shareholders' approval of
the foregoing proposal by July 2, 2001, the Company shall pay to the Holder in
cash an amount equal to the product of (i) the positive difference, if any,
between the closing price of the Common Stock on the date the Holder sends
written notice to the Company that it intends to exercise the Warrant and the
Exercise Price on such date, and (ii) the number of shares of Common Stock as to
which the Holder intends to purchase under the Warrant as evidenced in such
written notice.
6. The initial exercise price is $0.81 per share of Common Stock (the
"Initial Exercise Price").
The Initial Exercise Price shall be adjusted as provided for below in this
Section 6 (the Initial Exercise Price, and the Initial Exercise Price as
thereafter then adjusted, shall be referred to as the "Exercise Price") and the
Exercise Price from time to time shall be further adjusted as provided for below
in this Section 6. Upon each adjustment of the Exercise Price, the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, at the Exercise
Price resulting from such adjustment, the number of shares of Common Stock
obtained by (i) multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Common Stock purchasable hereunder
immediately prior to such adjustment, and (ii) dividing the product thereof by
the Exercise Price resulting from such adjustment. The Exercise Price shall be
adjusted as follows:
(i) In the case of any amendment to the Articles of
Incorporation of the Company to change the rights, privileges,
restrictions or conditions in respect to the Common Stock or
division of the Common Stock, this Warrant shall be adjusted
so as to provide that upon exercise thereof, the Holder shall
receive, in lieu of each Common Stock theretofore issuable
upon such exercise, the kind and amount of shares, other
securities, money and property receivable upon such, change or
division by the Holder issuable upon such exercise had the
exercise occurred immediately prior to such designation,
change or division. This Warrant shall be deemed thereafter to
provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this
Section 6. The provisions of this Subsection 6(i) shall apply
in the same manner to successive reclassifications, changes,
consolidations and mergers.
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(ii) If the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of
shares of Common Stock, or declare a dividend or make any
other distribution upon the Common Stock payable in shares of
Common Stock, the Exercise Price in effect immediately prior
to such subdivision or dividend or other distribution shall be
proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Exercise Price
in effect immediately prior to such combination shall be
proportionately increased.
(iii) In case the Company shall issue or otherwise
sell or distribute shares of Common Stock for a consideration
per share in cash or property equal to, or the Company shall
issue options or warrants to purchase Common Stock (other than
options granted pursuant to the Company's stock option plans
for which shares have been reserved for issuance on the date
of the hereof) that are exercisable at, or the Company shall
issue or otherwise sell or distribute rights to subscribe for
or securities convertible into or exchangeable for Common
Stock at, a price per share less than the then effective
Exercise Price (hereinafter, the "Lower Price"), the Exercise
Price then in effect shall automatically be adjusted to equal
120% of the Lower Price. (The per share price of any
consideration that is other than cash shall be as reasonably
determined by the Board of Directors of the Company including
a majority of the Directors who are not officers or employees
of the Company or any of its Subsidiaries, whose determination
shall be described in a resolution of the Board of Directors.)
Notwithstanding the foregoing, in no event shall the Exercise
Price ever be increased as a result of this Subsection 6(iii).
There will be no adjustment in the event that the Company pays
a dividend in cash to its holders of Common Stock; provided,
however, the Company will give the holder of this Warrant
written notice at least thirty (30) days prior to the record
date for the cash dividend, that the Company intends to
declare a cash dividend.
(iv) If any capital reorganization or
reclassification of the capital stock of the Company, or any
consolidation or merger of the Company with another
corporation or entity, or the sale of all or substantially all
of the Company's assets to another corporation or other entity
shall be effected in such a way that holders of shares of
Common Stock shall be entitled to receive stocks, securities,
other evidence of equity ownership or assets with respect to
or in exchange for shares of Common Stock, then, as a
condition of such reorganization, reclassification,
consolidation, merger or sale (except as otherwise provided
below in this Section 6), lawful and adequate provisions shall
be made whereby the Holder shall thereafter have the right to
receive upon the basis and upon the terms and conditions
specified herein, such shares of stock, securities, other
evidence of equity ownership or assets as may be issued or
payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of
shares of Common Stock immediately theretofore purchasable and
receivable upon the exercise of this Warrant under this
Section 6 had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such
case appropriate provisions shall be made with respect to the
rights and interests of the Holder to the end that the
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provisions hereof (including, without limitation, provisions
for adjustments of the Exercise Price and of the number of
shares of Common Stock receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities, other evidence
of equity ownership or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason
of such consolidation or merger, of the Exercise Price to the
value for the Common Stock reflected by the terms of such
consolidation or merger if the value so reflected is less than
the Exercise Price in effect immediately prior to such
consolidation or merger). Subject to the terms of this
Warrant, in the event of a merger or consolidation of the
Company with or into another corporation or other entity as a
result of which the number of shares of common stock of the
surviving corporation or other entity issuable to holders of
Common Stock of the Company, is greater or lesser than the
number of shares of Common Stock of the Company outstanding
immediately prior to such merger or consolidation, then the
Exercise Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding
shares of Common Stock of the Company. The Company shall not
effect any such consolidation, merger or sale, unless, prior
to the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed or delivered to the
Holder, the obligation to deliver to the Holder such shares of
stock, securities, other evidence of equity ownership or
assets as, in accordance with the foregoing provisions, the
Holder may be entitled to receive or otherwise acquire. If a
purchase, tender or exchange offer is made to and accepted by
the holders of more than fifty (50%) percent of the
outstanding shares of Common Stock of the Company, the Company
shall not effect any consolidation, merger or sale with the
Person having made such offer or with any Affiliate of such
Person, unless prior to the consummation of such
consolidation, merger or sale the Holder of this Warrant shall
have been given a reasonable opportunity to then elect to
receive upon the exercise of this Warrant the amount of stock,
securities, other evidence of equity ownership or assets then
issuable with respect to the number of shares of Common Stock
of the Corporation in accordance with such offer.
(v) In case the Company shall, at any time prior to
exercise of this Warrant, consolidate or merge with any other
corporation or other entity (where the Company is not the
surviving entity) or transfer all or substantially all of its
assets to any other corporation or other entity, then the
Company shall, as a condition precedent to such transaction,
cause effective provision to be made so that the Holder of
this Warrant upon the exercise of this Warrant after the
effective date of such transaction shall be entitled to
receive the kind and amount of shares, evidences of
indebtedness and/or other securities or property receivable on
such transaction by a holder of the number of shares of Common
Stock as to which this Warrant was exercisable immediately
prior to such transaction (without giving effect to any
restriction upon such exercise); and, in any such case,
appropriate provision shall be made with respect to the rights
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and interest of the Holder of this Warrant to the end that the
provisions of this Warrant shall thereafter be applicable (as
nearly as may be practicable) with respect to any shares,
evidences of indebtedness or other securities or assets
thereafter deliverable upon exercise of this Warrant. Upon the
occurrence of any event described in this Section 6(v), the
holder of this Warrant shall have the right to (i) exercise
this Warrant immediately prior to such event at an Exercise
Price equal to lesser of (1) the then Exercise Price or (2)
the price per share of Common Stock paid in such event, or
(ii) retain ownership of this Warrant, in which event,
appropriate provisions shall be made so that the Warrant shall
be exercisable at the Holder's option into shares of stock,
securities or other equity ownership of the surviving or
acquiring entity.
Whenever the Exercise Price shall be adjusted pursuant to this
Section 6, the Company shall issue a certificate signed by its President or Vice
President and by its Chief Financial Officer, Assistant Treasurer, Secretary or
Assistant Secretary, setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors of the Company made any determination hereunder), and the
Exercise Price after giving effect to such adjustment, and shall cause copies of
such certificates to be mailed (by first-class mail, postage prepaid) to the
Holder of this Warrant.
No fractional shares of Common Stock shall be issued in
connection with any exercise of this Warrant, but in lieu of such fractional
shares, the Company shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Exercise Price then in
effect.
7. In the event the Company grants rights to all shareholders to
purchase Common Stock, the Holder shall have the same rights as if this Warrant
had been exercised immediately prior to such grant.
8. The Holder shall, with respect to the shares of Common Stock
issuable upon the exercise of this Warrant, have the registration rights and
"piggy back" registration rights set forth in the Letter Agreement. Such
registration rights and "piggy back" registration rights are incorporated herein
by this reference as if such provisions had been set forth herein in full.
9. This Warrant need not be changed because of any change in the
Exercise Price or in the number of shares of Common Stock purchased hereunder.
10. The terms defined in this paragraph, whenever used in this Warrant,
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified. The term "Common Stock" shall mean and include the
Company's Common Stock, no par value per share, authorized on the date of the
original issue of this Warrant and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets of the
character referred to in paragraph 4 hereof, the stock, securities or assets
provided for in such paragraph. The term "Company" shall also include any
successor corporation to Telenetics Corporation by merger, consolidation or
otherwise. The term "outstanding" when used with reference to Common Stock shall
mean at any date as of which the number of shares thereof is to be determined,
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all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company. The term "1933 Act" shall mean the Securities Act of
1933, as amended, or any similar Federal statute, and the rules and regulations
of the Securities and Exchange Commission (the "SEC") or any other Federal
agency then administering such securities act, thereunder, all as the same shall
be in effect at the time. The term "Affiliate" shall have the meaning ascribed
to it in the rules and regulations of the SEC under the 1933 Act.
11. This Warrant is exchangeable, upon the surrender hereby by the
Holder at the office or agency of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares of Common Stock as shall be designated by the Holder at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any such new
Warrants and, in the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity, reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender or cancellation of this Warrant or such
new Warrants, the Company will issue to the Holder a new Warrant of like tenor,
in lieu of this Warrant or such new Warrants, representing the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
12. The Company agrees to use its best efforts to file timely all
reports required to be filed by it pursuant to Sections 13 or 15 of the
Securities Exchange Act of 1934, as amended, and to provide such information as
will permit the Holder to sell this Warrant or any shares of Common Stock
acquired upon exercise of this Warrant in accordance with Rule 144 under the
1933 Act.
13. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. This Warrant shall not entitle the Holder to any
voting rights or any rights as a stockholder of the Company. The rights and
obligations of the Company, of the Holder, and of any holder of shares of Common
Stock issuable hereunder, shall survive the exercise of this Warrant.
14. This Warrant sets forth the entire agreement of the Company and the
Holder of the Common Stock issuable upon the exercise of this Warrant with
respect to the rights of the Holder and the Common Stock issuable upon the
exercise of this Warrant, notwithstanding the knowledge of such Holder of any
other agreement or the provisions of any agreement, whether or not known to the
Holder and the Company represents that there are no agreements inconsistent with
the terms hereof or which purport in any way to bind the Holder of this Warrant
or the Common Stock.
15. The validity, interpretation and performance of this Warrant and
each of its terms and provisions shall be governed by the laws of the State of
New York.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and dated as of January 23, 2001.
TELENETICS CORPORATION
By: /S/ Xxxxx X. Xxxxxx
----------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President and Chief Executive Officer
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