AGREEMENT OF SETTLEMENT
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This Agreement of Settlement (the "Agreement") is entered into this 8th
day of March, 2001, by and among Xxxxxxx and Company Securities, Inc.
("Xxxxxxx") and Telenetics Corporation ("Telenetics").
W I T N E S S T H:
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WHEREAS, Xxxxxxx has asserted certain claims against Telenetics which
are set forth in a Statement of Claim (hereinafter the "Claim") styled XXXXXXX
AND COMPANY SECURITIES, INC. V. TELENETICS CORPORATION, Case No. 13 113 00904 00
filed before the American Arbitration Association; and
WHEREAS, the parties have concluded that it is in their individual and
mutual best interests to resolve this matter amicably and end all controversy
between them;
NOW, THEREFORE, in consideration of the covenants, payments, and
agreements set forth in this Agreement, Xxxxxxx and Telenetics intending to be
legally bound thereby, and hereby warranting that they each have the capacity
and authority to execute this Agreement, it is agreed by and among the
undersigned parties, that all of the claims asserted by Xxxxxxx are hereby
settled and compromised on the following terms and conditions, to wit:
1. COMPROMISE. Telenetics shall issue Xxxxxxx, in the names and amounts
designated by Xxxxxxx on Exhibit A annexed hereto, two hundred thousand shares
(200,000) of Telenetics Corporation common stock (the "Settlement Shares") in
full settlement of the above matter, subject to adjustment as described in
Paragraph 2 herein below. The Settlement Shares represent payment in full,
subject to adjustment as described in Paragraph 2 herein below, and will be
included in a Registration Statement on Form S-3 to be filed by Telenetics with
the Securities and Exchange Commission ("SEC") no later than March 20, 2001.
Upon declaration of effectiveness of the Registration Statement, Telenetics has
covenanted and agreed that the Settlement Shares shall not be encumbered or
subject to any "lock-up" and that the Settlement Shares shall be "Free Trading."
2. ADJUSTMENT TO COMPENSATION. In the event that the closing "bid"
price for Telenetics common stock is less than $1.00 on the date that the
aforementioned Registration Statement is declared effective, Telenetics hereby
further covenants and agrees to issue Xxxxxxx a cash payment in funds, within
two (2) business days, in an amount representing the difference between the cash
value of the Settlement Shares (such figure to be calculated by multiplying the
closing "bid" price for Telenetics on the date that aforementioned Registration
Statement is declared effective and 200,000) and two hundred thousand dollars
($200,000) (E.G. If the closing "bid" price is $0.75, then Telenetics shall
issue Xxxxxxx a check in the amount of $50,000).
3. RELEASES. The parties shall execute general mutual releases in favor
of each other in the form annexed hereto as Exhibit B.
4. REGISTRATION STATEMENT ON FORM S-3. In consideration for executing
this Agreement of Settlement, Telenetics has covenanted and agreed to include
the Settlement Shares in a Registration Statement on Form S-3. Telenetics has
further covenanted and agreed that said Registration Statement shall be filed
with the SEC no later than March 20, 2001 and shall be declared effective by the
SEC no later than June 15, 2001.
5. CONFESSION OF JUDGMENT. Simultaneously with the execution of this
Agreement, Telenetics shall execute a Confession of Judgment in favor of Xxxxxxx
in the amount of two hundred fifty thousand dollars ($250,000.00). The parties
expressly acknowledge and agree that Xxxxxxx shall be entitled to file the
Confession of Judgment and execute upon it if any of the following conditions
are not satisfied by Telenetics:
a. Failure of Telenetics to file the Registration Statement on
Form S-3, which includes the Settlement Shares, with the SEC, by the
end of business on March 20, 2001; or
b. Failure to achieve declaration of effectiveness by of the
Registration Statement on Form S-3, which includes the Settlement
Shares, by the SEC by the end of business on June 15, 2001.
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c. Failure to pay any of the monies owed under Paragraph 2
herein above.
In the event that the foregoing conditions are not satisfied,
Telenetics hereby expressly waives any right to contest Xxxxxxx'x right to file
the Confession of Judgment and execute same.
6. ESCROW. The originally executed Confession of Judgment and the
Releases shall be held in escrow by Xxxxxxx'x attorney, Xxxxxxx X. Xxxxxxx, Esq.
of Sichenzia, Ross & Xxxxxxxx LLP pending Telenetics compliance with all of the
provisions of this Agreement. Upon compliance with this Agreement, Xx. Xxxxxxx
will forward the originally executed copy of Xxxxxxx'x Release in favor of
Telenetics and the originally executed Confession of Judgment to Telenetics or
its counsel. In the event that Telenetics violates either of the conditions set
forth in Paragraph 5, Xxxxxxx shall have the right to immediately file the
Confession of Judgment and execute on same without further notice. In that
instance, Xxxxxxx will not be required to return the Confession of Judgment to
Telenetics.
7. CONFIDENTIALITY. The parties agree to keep the terms of this
Agreement and the matters raised in this arbitration as confidential. The
parties shall not disclose the terms of this Agreement or the matters raised in
this arbitration unless compelled by court order, subpoena, or request by a
self-regulatory organization of which Respondents are a member.
8. BINDING AGREEMENT. The terms of this Agreement are binding upon and
inure to the benefit of each of the parties hereto, their successors, assigns,
dependents, officers, directors and all other related persons, affiliates or
associates.
9. HEADINGS. The captions of the paragraphs and sections of this
Agreement are provided solely for convenience, and are not intended to, and in
fact, shall not affect the substance or meaning of this Agreement.
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10. REPRESENTATION. Each of the parties hereto represents that each has
read and fully understands each of the provisions as contained herein, and has
been afforded the opportunity to review same with their attorney of choice; and
further that each of the parties hereto represents that each and every one of
the provisions contained in this Agreement is fair and not unconscionable to
either party.
IN WITNESS WHEREOF, the parties have read and executed this Agreement
as of the date and year first above written.
TELENETICS CORPORATION XXXXXXX AND COMPANY
SECURITIES, INC.
Name: /S/ Xxxxxx Xxxxxxx, Esq. Name: /S/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx, Esq. Xxxxxx Xxxxxxx
Title: Chief Accounting and Legal Officer Title: President
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EXHIBIT A
NAME NUMBER OF SHARES
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Xxxxxxx and Company Securities, Inc. 150,000
Xxxxx Xxxxxxxxxx 40,000
Xxxxxx Xxxxxxxxx 10,000
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