EXHIBIT 2
NON-QUALIFIED STOCK OPTION
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE TRANSFERRED OR OTHERWISE
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DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
January 7, 2000
TELENETICS CORPORATION
WHEREAS, in connection with the services to be rendered to Telenetics
Corporation, a California corporation (the "Company"), by Xxxxxxxx & Xxxxxx,
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Inc., a Texas corporation ("Holder"), pursuant to that certain Consulting
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Agreement of even date herewith by and between the Company and Holder (the
"Service Agreement"), the Company desires to grant to Holder a non-qualified
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stock option to purchase shares of the Company's common stock, no par value per
share ("Common Stock").
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NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING, the Company hereby
grants to Holder an option to purchase (this "Option") up to Six Hundred
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Thousand (600,000) shares (such shares as adjusted from time to time are
referred to herein individually, each as an "Option Share," and collectively, as
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the "Option Shares") of Common Stock of the Company at the Exercise Price (as
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defined below). This Option may be exercised in accordance with the terms of
this Option by surrendering this Option, with (i) the form of Election to
Purchase set forth hereon duly executed by Xxxxxx and (ii) the form of
Restricted Stock Letter attached hereto duly executed by Xxxxxx (unless the sale
of the Option Shares is registered under the Securities Act), at the Company's
principal executive office ("Office"), and by paying in full the Exercise Price,
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plus transfer taxes, if any, in United States currency by cash, check or money
order payable to the order of the Company.
1. Duration, Vesting and Exercise of Option.
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(a) This Option shall vest and become exercisable in full on the
date hereof.
(b) This Option (to the extent not earlier exercised) shall expire on
January 6, 2005 (such date being referred to herein as the "Expiration
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Date"). If this Option is not surrendered to the Company for exercise in
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accordance with Section 1(c) prior to the close of business on the
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Expiration Date it shall be void.
(c) This Option may be exercised, to the extent not previously
exercised, in whole or in part, prior to the Expiration Date at the per
Option Share Exercise Price determined in accordance with Sections 2 and 4.
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In order to exercise such right, Holder shall surrender this Option to the
Company at the Office with the form of Election to Purchase and the
Restricted Stock Letter (unless the sale of the Option Shares is registered
under the Securities Act) attached hereto duly completed and signed, and
shall
tender payment in full of the Exercise Price to the Company for the
Company's account, together with such taxes as are specified in Section 8,
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for each Option Share with respect to which this Option is being exercised.
If this Option is exercised as to less than all of the Option Shares
purchasable, one or more new option(s) shall be issued to Holder for the
remaining number of Option Shares evidenced by this Option.
2. Exercise Price. Subject to adjustment pursuant to Section 4, the
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price per share at which Option Shares shall be purchasable upon exercise of
this Option (the "Exercise Price") shall be $1.75.
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3. Issuance of Option Share Certificates.
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(a) Upon surrender of this Option, delivery of an Election to Purchase
and delivery of a Restricted Stock Letter (if the sale of the Option Shares
is not registered under the Securities Act) in the forms attached hereto
and payment of the Exercise Price and transfer taxes, the Company shall
issue and deliver certificates representing shares of Common Stock
("Certificates") in the manner set forth in the Election to Purchase
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delivered by Holder to the Company.
(b) If the shares of Common Stock deliverable upon exercise of this
Option are not registered under the Securities Act, the Certificates shall
bear a legend in substantially the following form:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 'ACT'),
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AND MAY NOT BE RESOLD, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION UNDER
SAID ACT IS NOT REQUIRED."
4. Adjustment of Exercise Price and Number of Option Shares Purchasable. The
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Exercise Price and the number and kind of Option Shares purchasable upon the
exercise of this Option are subject to adjustment from time to time upon the
occurrence of the events specified in this Section 4. If, by reason of any
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merger, consolidation, combination, liquidation, reorganization,
recapitalization, stock dividend, stock split, split-off, spin-off, combination
of shares, exchange of shares, or other similar changes in the capital structure
of the Company (each, a "Reorganization"), the outstanding securities of the
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same class as the Option Shares (the "Option Share Class of Securities") are
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substituted or exchanged for, combined or changed into any cash, property or
other securities or into a greater or lesser number of shares, the number and/or
kind of shares and/or interests subject to this Option and the Exercise Price
shall be appropriately adjusted to prevent dilution or enlargement of the rights
of Holder so that, thereafter, this Option shall be exercisable for the
securities, cash and/or other property that would have been received in respect
of the Option Shares if this Option had been exercised in
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full immediately prior to such event. Such adjustments shall be made
successively whenever any event described in the foregoing sentence occurs.
5. Fractional Option Shares. The Company shall not be required to issue
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fractions of Option Shares upon exercise of this Option or to distribute
certificates that evidence fractional Option Shares. All fractions of Option
Shares to which Holder would otherwise be entitled shall be aggregated and in
lieu of such remaining fractional Option Share, there shall be paid to Holder at
the time this Option is exercised as herein provided an amount in cash equal to
the stated fraction of the fair market value of an Option Share as determined in
good faith by the Board of Directors of the Company.
6. Reservation and Issuance of Option Shares. The Company represents and
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warrants that (a) there have been reserved, and the Company shall at all times
keep reserved, out of its authorized Common Stock a number of shares of Common
Stock sufficient to provide for the exercise of the rights of purchase
represented by this Option, and (b) there are no restrictions in the Company's
articles of incorporation or bylaws that prevent the Company from issuing shares
of its Common Stock for the purpose of enabling it to satisfy any obligation to
issue Option Shares upon exercise of this Option in accordance with its terms.
The Company covenants and agrees that it will not amend its articles of
incorporation or bylaws in any manner, or take any other action, that could
adversely affect the Company's ability to issue Option Shares upon exercise of
this Option.
The Company further represents and warrants that all shares of its Common
Stock issued upon exercise of this Option will, upon issuance in accordance with
the terms of this Option, (a) be legally issued and free from all taxes, liens,
charges, encumbrances and security interests created by the Company with respect
to the issuance thereof and (b) be duly and validly issued, fully paid and
nonassessable Common Stock as to which no holder shall have any liability other
than Holder's payment of the Exercise Price.
7. Mutilated or Missing Option Certificates. If this Option is mutilated,
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lost, stolen or destroyed, the Company shall issue and deliver, in exchange and
substitution for and upon cancellation of the mutilated Option, or in lieu of
and substitution for the lost, stolen or destroyed Option, a new option in
substantially the same form as this Option and representing an option to
purchase an equivalent number of Option Shares, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of this
Option and an indemnity or bond, if requested, satisfactory to the Company.
Holder shall also comply with such other reasonable regulations and pay such
other reasonable charges as the Company may prescribe.
8. Payment of Taxes. The Company will pay all documentary stamp taxes
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attributable to the issuance of Option Shares issuable upon the exercise of this
Option; provided, however, that the Company shall not be required to pay any tax
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or taxes that may be payable in respect of any transfer involved in the issuance
of any options or any Option Share certificates in a name other than that of
Holder, and the Company shall not be required to issue or deliver such Option
Share certificates unless and until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
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9. Certain Notices to Holder. Upon any adjustment to the number of Option
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Shares issuable pursuant to exercise of this Option or to the Exercise Price
pursuant to Section 4, the Company, within fifteen (15) calendar days
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thereafter, shall cause to be given to Holder, at his address appearing on the
Company's records, written notice of such adjustments in accordance with this
Section 9. Where appropriate such notice may be given in advance and included as
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part of the notice required to be mailed under the other provisions of this
Section 9. If:
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(a) The Company authorizes the issuance or distribution of securities
or assets to holders of its shares of Common Stock or makes any
distribution (other than cash dividends) to the holders of its shares of
Common Stock;
(b) The Company becomes a party to any consolidation or merger for
which approval of any shareholder of the Company is required, conveys or
transfers all or substantially all of its properties, assets, or business,
shall engage in any reorganization or recapitalization or makes any tender
or exchange offer for shares of its Common Stock;
(c) The Company becomes subject to voluntary or involuntary
dissolution, liquidation or winding up; or
(d) The Company proposes to take any other action that would require
an adjustment of the Exercise Price pursuant to Section 4;
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then the Company shall cause to be given to Holder at his address appearing on
the Company's records, at least fifteen (15) calendar days prior to the
applicable record date hereinafter specified, a written notice in accordance
with this Section 9 stating (i) the date as of which the holders of record of
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Common Stock to be entitled to receive any such securities or assets or
distribution are to be determined, (ii) the initial expiration date set forth in
any tender or exchange offer made by the Company for shares of its Common Stock,
(iii) the date on which any such consolidation or merger, conveyance, transfer,
reorganization or recapitalization, dissolution, liquidation or winding up is
expected to become effective or consummated, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to exchange
such Common Stock for securities or other property that may be deliverable upon
such consolidation or merger, conveyance, transfer, reorganization or
recapitalization, dissolution, liquidation or winding up, or (iv) the date on
which any other action that would require an adjustment of the Exercise Price
pursuant to Section 4 is expected to become effective or be consummated and any
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relevant record date for holders of Common Stock related thereto. The failure to
give the notice required by this Section 9 or any defect therein shall not
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affect the legality or validity of any distribution, right, option,
consolidation, conveyance, transfer, reorganization, dissolution, liquidation or
winding up or the vote upon any action.
Nothing contained in this Option shall be construed as conferring upon
Holder the right to vote or to consent or to receive notice as a shareholder in
respect of any rights or other matter whatsoever as a shareholder of the
Company, or any other rights or liabilities as a shareholder of the Company.
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10. Nontransferability of Option. This Option is not transferable by Holder
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voluntarily, involuntarily or by operation of law, except that this Option may
be transferred in whole or in part by Holder to Xxxxxxx X. Xxxxxxxx and/or Xxxxx
X. Xxxxxx, and if such transfer occurs, this Option may be further transferred
by Xx. Xxxxxxxx or Xx. Xxxxxx only by will, the laws of descent and distribution
or a qualified domestic relations order.
11. Notices. Any notice or demand authorized by this Option to be given or made
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by Holder to or on the Company shall be sufficiently given or made if personally
delivered or sent by first class United States mail, by overnight courier
guaranteeing next-day delivery, or by facsimile confirmed by letter, addressed
(until another address is given in writing by the Company) to the Office.
Any notice pursuant to this Option to be given by the Company to Holder
shall be sufficiently given if personally delivered or sent by first class
United States mail, by overnight courier guaranteeing next-day delivery, or by
facsimile confirmed by letter, addressed (until another address is filed in
writing by Holder with the Company) to the address specified in the Company's
records.
12. Supplements and Amendments. The Company may from time to time supplement or
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amend this Option without the consent or concurrence of Holder in order to cure
any ambiguity, manifest error or other mistake in this Option.
13. Intentionally Omitted.
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14. Successors. All the representations, warranties, agreements, covenants and
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provisions of this Option by or for the benefit of the Company or Holder shall
bind and inure to the benefit of their respective permitted heirs, successors
and assigns hereunder.
15. Governing Law. This Option shall be deemed to be a contract made under the
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laws of the State of California and for all purposes shall be construed in
accordance with the internal laws of the State of California without regard to
conflicts of laws principles.
16. Benefits of This Agreement. Nothing in this Option shall be construed to
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give to any person or entity other than the Company and Holder any legal or
equitable right, remedy or claim under this Option, and this Option shall be for
the sole and exclusive benefit of the Company and Holder, except as otherwise
provided in Section 14.
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17. Invalidity of Provisions. If any provision of this Option is or becomes
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invalid, illegal or unenforceable in any respect, such provision shall be deemed
amended to the extent necessary to cause it to express the intent of the parties
to the maximum possible extent and be valid legal and enforceable. The
invalidity or deemed amendment of such provision shall not affect the validity,
legality or enforceability of any other provision hereof.
18. No Impairment. The Company will not, by amendment of its articles of
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incorporation or through any reorganization, recapitalization transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in the carrying out of all the provisions
of this Option and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of Holder against impairment.
19. Section Headings. The section headings contained in this Option are for
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convenience only and shall be without substantive meaning or content.
The Company has caused this Option to be duly executed as of the day and
year first above written.
TELENETICS CORPORATION
By:
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Xxxxxxx X. Xxxxxx, President
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TELENETICS CORPORATION
NON-QUALIFIED STOCK OPTION
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to purchase ____________ Option
Shares issuable upon the exercise of the Non-Qualified Stock Option dated
January 7, 2000 ("Option"), and requests that certificates for such Option
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Shares be issued and delivered as follows:
ISSUE TO:
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(Name)
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(Address, including Zip Code)
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(Social Security or Tax Identification Number)
DELIVER TO:
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(Name)
at
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(Address, including Zip Code)
If the number of Option Shares hereby exercised is less than all the Option
Shares represented by the Option, the undersigned requests that a new option
representing the number of Option Shares not exercised be issued and delivered
as set forth above or otherwise as the undersigned shall direct in writing.
In full payment of the purchase price of the Option Shares being issued
upon exercise of the Option and transfer taxes, if any, the undersigned hereby
tenders payment of $_____________ by cash, check or money order payable in
United States currency to the order of Telenetics Corporation.
Dated:
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(Signature)
(Signature must conform in all respects
to name of holder as specified on the
face of the Option.)
PLEASE INSERT SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER OF HOLDER
EXHIBIT A
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FORM OF RESTRICTED STOCK LETTER
THE UNDERSIGNED (hereinafter referred to as "Purchaser") is exercising the
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Non-Qualified Stock Option tendered with this Restricted Stock Letter, and in
connection with such exercise, makes the following representations and
warranties to Telenetics Corporation (the "Company") with the knowledge and
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intent that the Company shall be entitled to rely thereon in delivering shares
of the Company's Common Stock ("Shares") to Purchaser upon exercise of the Non-
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Qualified Stock Option:
1. Purchaser is acquiring the Shares for investment for Purchaser's own
account, and not with a view to or for sale in connection with any distribution
thereof. Purchaser understands that the Shares to be purchased have not been
registered pursuant to the Securities Act of 1933, as amended (the "Act"), and
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the offer and sale of the Shares is intended to be exempt from registration
under the Act, which exemption depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of Purchaser's representations
as expressed herein.
2. Purchaser is an "accredited investor" as defined in the rules and
regulations of the Act and Purchaser has such knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of Purchaser's investment in the Shares, and Purchaser is capable of
bearing the economic risks of such investment, including the risk of loss of
Purchaser's entire investment in the Shares.
3. Purchaser acknowledges that the Company has made available to
Purchaser or Purchaser's agents all documents and information relating to an
investment in the Shares requested by or on behalf of Purchaser.
4. All Shares issued on delivery of this Restricted Stock Letter shall
bear the legend set forth in Section 3 of the annexed Non-Qualified Stock Option
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and the Shares received on delivery of this Restricted Stock Letter shall be
subject to the restrictions set forth therein.
Executed
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Purchaser:
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Signature:
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