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 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 Xxxxxx X. Xxxxxx, an
individual ("HOLDER"), pursuant to that certain Consulting 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 stock option to purchase
shares of the Company's common stock, no par value per share ("COMMON STOCK").
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING, the Company hereby
grants to Holder an option to purchase (this "OPTION") up to One Hundred Fifty
Thousand (150,000) shares (such shares as adjusted from time to time are
referred to herein individually, each as an "OPTION SHARE," and collectively, as
the "OPTION Shares") of Common Stock of the Company at the Exercise Price (as
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 Holder and (ii) the form of
Restricted Stock Letter attached hereto duly executed by Holder (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,
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.
(a) This Option shall vest and become exercisable according to the
following schedule: On the date hereof, Fifty Thousand (50,000) Option
Shares shall become vested and exercisable. On January 7, 2001, an
additional Fifty Thousand (50,000) Option Shares shall become vested
and exercisable. On January 7, 2002, the remaining Fifty Thousand
(50,000) Option Shares shall become vested and exercisable, at which
time all of the Option Shares shall be vested and exercisable.
(b) This Option (to the extent not earlier exercised) shall expire
on January 6, 2005 (such date being referred to herein as the
"EXPIRATION DATE"). If this Option is not surrendered to the Company
for exercise in accordance with SECTION 1(c) prior to the close of
business on the 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. 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 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, 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
price per share at which Option Shares shall be purchasable upon exercise of
this Option (the "EXERCISE PRICE") shall be $1.75.
3. ISSUANCE OF OPTION SHARE CERTIFICATES.
(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 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'), 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 Exercise Price and the number 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
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
same class as the Option Shares (the "OPTION SHARE CLASS OF SECURITIES") are
substituted or exchanged for, combined or changed into any cash, property or
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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 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
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 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, 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
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.
9. CERTAIN NOTICES TO HOLDER. Upon any adjustment to the number of
Option Shares issuable pursuant to exercise of this Option or to the Exercise
Price pursuant to SECTION 4, the Company, within fifteen (15) calendar days
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
part of the notice required to be mailed under the other provisions of this
SECTION 9. If:
(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;
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
Common Stock to be entitled to receive any such securities or assets 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 or (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. The failure to give the notice required by this
SECTION 9 or any defect therein shall not 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.
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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.
10. NONTRANSFERABILITY OF OPTION. Except by will, the laws of descent
and distribution or qualified domestic relations order, this Option is not
transferable by Holder.
11. NOTICES. Any notice or demand authorized by this Option to be given
or made 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 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. TERMINATION OF SERVICE.
(a) GENERAL. If Holder's services to the Company pursuant to the
Service Agreement are terminated ("SERVICE TERMINATION") for any other
reason than for Good Cause (as that term is defined in the Service
Agreement) or voluntary resignation by Holder, then Holder may at any
time within three months after the effective date of the Service
Termination exercise the Option to the extent that Holder was entitled
to exercise the Option at the date of Service Termination, provided
that in no event shall the Option be exercisable after the Expiration
Date. If Service Termination occurs for Good Cause or due to voluntary
resignation by Holder, the Option shall immediately terminate and be of
no further force or effect.
(b) DEATH OR DISABILITY OF HOLDER. In the event of the death or
Disability (as that term is defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended) of Holder within a period during
which the Option, or any part thereof, could have been exercised by
Holder, including three months after the effective date of Service
Termination for any other reason than for Good Cause or voluntary
resignation (the "OPTION PERIOD"), the Option shall lapse unless it is
exercised within the Option Period and in no event later than twelve
months after the date of the Holder's death or Disability by Holder or
Holder's legal representative or representatives in the case of a
Disability or, in the case of death, by the person or persons entitled
to do so under Holder's last will and testament or if Holder fails to
make a testamentary disposition of the Option or shall die intestate,
by the person or persons entitled to receive the Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of Holder only if the Option was
exercisable by Holder immediately prior to his death or Disability. In
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no event shall the Option be exercisable after the Expiration Date. The
Company shall have the right to require evidence satisfactory to it of
the rights of any person or persons seeking to exercise the Option
under this SECTION 13 to exercise the Option.
14. ACCELERATION OF VESTING. If the Company undertakes to (i) sell,
lease, exchange, convey or otherwise dispose of all or substantially all of its
property or business, or (ii) merge into or consolidate with any other entity
(other than a wholly-owned subsidiary of the Company), or effect any transaction
(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of, then
all of the Option Shares shall become automatically vested and exercisable
immediately prior to such event.
15. SUCCESSORS. All the representations, warranties, agreements,
covenants and 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.
16. GOVERNING LAW. This Option shall be deemed to be a contract made
under the 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.
17. BENEFITS OF THIS AGREEMENT. Nothing in this Option shall be
construed to 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 15.
18. INVALIDITY OF PROVISIONS. If any provision of this Option is or
becomes 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.
19. NO IMPAIRMENT. The Company will not, by amendment of its articles
of 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.
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20. SECTION HEADINGS. The section headings contained in this Option are
for 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: /S/ Xxxxxxx X. Armani
-------------------------------------
Xxxxxxx X. Armani, 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
Shares be issued and delivered as follows:
ISSUE TO: _____________________________________________________________
(Name)
_____________________________________________________________
(Address, including Zip Code)
_____________________________________________________________
(Social Security or Tax Identification Number)
DELIVER TO: _____________________________________________________________
(Name)
at __________________________________________________________
(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: __________ _____________________________________________
(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
---------
FORM OF RESTRICTED STOCK LETTER
THE UNDERSIGNED (hereinafter referred to as "PURCHASER") is exercising
the 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
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-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
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
and the Shares received on delivery of this Restricted Stock Letter shall be
subject to the restrictions set forth therein.
Executed ______________________
Purchaser: ________________________
Signature: ________________________
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