EXHIBIT 10.4
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR TELENETICS CORPORATION SHALL HAVE RECEIVED
AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
AMENDED AND RESTATED WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
TELENETICS CORPORATION
Expires February 28, 2007
No.: W-___ Number of Shares: _______
Date of Issuance: March 1, 2003
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, Telenetics Corporation, a California corporation (together with
its successors and assigns, the "ISSUER"), hereby certifies that
________________________ or its registered assigns is entitled to subscribe for
and purchase, during the period specified in this Warrant, up to
_________________ (_______) shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Common Stock of the Issuer, at an exercise price per share equal to the Warrant
Price then in effect, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. Capitalized terms used in this Warrant and not
otherwise defined herein shall have the respective meanings specified in SECTION
9 hereof.
1. TERM.
The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., eastern time, on February 28, 2007 (such period being
the "TERM").
2. METHOD OF EXERCISE PAYMENT; ISSUANCE OF NEW WARRANT; TRANSFER AND
EXCHANGE.
(a) TIME OF EXERCISE. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
(b) METHOD OF EXERCISE. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, together
with the payment to the Issuer of an amount of consideration therefor equal to
the Warrant Price in effect on the date of such exercise multiplied by the
number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election (i) by certified or official
bank check or by wire transfer to an account designated by the Issuer, (ii) by
"CASHLESS EXERCISE" by surrender to the Issuer for cancellation of a portion of
this Warrant representing that number of unissued shares of Warrant Stock which
is equal to the quotient obtained by dividing (A) the product obtained by
multiplying the Warrant Price by the number of shares of Warrant Stock being
purchased upon such exercise by (B) the Per Share Market Value as of the date of
such exercise, or (iii) by a combination of the foregoing methods of payment
selected by the Holder of this Warrant. In any case where the consideration
payable upon such exercise is being paid in whole or in part pursuant to the
provisions of clause (ii) of this subsection (b), such exercise shall be
accompanied by written notice from the Holder of this Warrant specifying the
manner of payment thereof and containing a calculation showing the number of
shares of Warrant Stock with respect to which rights are being surrendered
thereunder and the net number of shares to be issued after giving effect to such
surrender.
(c) ISSUANCE OF STOCK CERTIFICATES. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise (if the deliveries required
to be made by the Holder pursuant to SECTION 2(B) are received by the Issuer
prior to 6:00 p.m. pacific time on the exercise date) and delivered to the
Holder hereof within a reasonable time, not exceeding three (3) Trading Days
after such exercise, and the Holder hereof shall be deemed for all purposes to
be the Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) TRANSFERABILITY OF WARRANT. Subject to SECTION 2(E) and subject to
the provisions of the Purchase Agreement, this Warrant may be transferred by a
Holder without the consent of the Issuer. If transferred pursuant to this
paragraph and subject to the provisions of subsection (e) of this SECTION 2,
this Warrant may be transferred on the books of the Issuer by the Holder hereof
in person or by duly authorized attorney, upon surrender of this Warrant at the
principal office of the Issuer, properly endorsed (by the Holder executing an
assignment in the form attached hereto) and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. This
Warrant is exchangeable at the principal office of the Issuer for Warrants for
the purchase of the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange. All
Warrants issued on transfers or exchanges shall be dated the Original Issue Date
and shall be identical with this Warrant except as to the number of shares of
Warrant Stock issuable pursuant hereto.
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(e) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR TELENETICS
CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant or the shares of Warrant Stock to be purchased
upon exercise hereof shall terminate (A) when such securities shall
have been resold pursuant to an effective registration statement under
the Securities Act, (B) upon the Issuer's receipt of an opinion of
counsel, in form and substance reasonably satisfactory to the Issuer,
addressed to the Issuer to the effect that such restrictions are no
longer required to ensure compliance with the Securities Act and state
securities laws, or (C) upon the Issuer's receipt of other evidence
reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are
not required. Whenever such restrictions shall cease and terminate as
to any such securities, the Holder thereof shall be entitled to receive
from the Issuer (or its transfer agent and registrar), without expense
(other than applicable transfer taxes, if any), new Warrants (or, in
the case of shares of Warrant Stock, new stock certificates) of like
tenor not bearing the applicable legend required by paragraph (ii)
above relating to the Securities Act and state securities laws.
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(f) CONTINUING RIGHTS OF HOLDER. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
3. STOCK FULLY PAID; RESERVATION AND LISTING OF SHARES; COVENANTS.
(a) STOCK FULLY PAID. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) RESERVATION. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(c) COVENANTS. The Issuer shall not by any action including, without
limitation, amending the Articles of Incorporation or the by-laws of the Issuer,
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder hereof against dilution (to the extent specifically
provided herein) or impairment. Without limiting the generality of the
foregoing, the Issuer will (i) not permit the par value, if any, of its Common
Stock to exceed the then effective Warrant Price, (ii) take all such action as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iii) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be reasonably necessary to enable the Issuer
to perform its obligations under this Warrant.
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(d) LOSS, THEFT, DESTRUCTION OF WARRANTS. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(e) REGISTRATION RIGHTS. The Warrant Stock of the Issuer is entitled to
the benefits and subject to the terms of the Registration Rights Agreement dated
as of the date hereof between the Issuer and the Holder.
4. ADJUSTMENT OF WARRANT PRICE AND WARRANT SHARE NUMBER.
The Warrant Price shall be adjusted as set forth in this SECTION 4.
Upon each adjustment to the Warrant Price, the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, at the Warrant Price
resulting from such adjustment, the number of shares of Common Stock obtained by
(i) multiplying the Warrant 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 Warrant Price
resulting from such adjustment. The Issuer shall give the Holder notice of any
event described below which requires an adjustment pursuant to this SECTION 4 in
accordance with SECTION 5.
(a) The Warrant Price shall be further adjusted as follows:
(i) In the case of any amendment to the Issuer's Articles of
Incorporation to change the designation of the Common Stock or the
rights, privileges, restrictions or conditions with 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 share of Common Stock theretofore issuable
upon such exercise, the kind and amount of shares, other securities,
money and property receivable upon such designation, 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 that shall be as
nearly equivalent as may be practicable to the adjustments provided for
in this SECTION 4. The provisions of this SUBSECTION 4(a)(i) shall
apply in the same manner to successive reclassifications, changes,
consolidations and mergers.
(ii) If the Issuer 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 Warrant 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 Warrant Price in effect
immediately prior to such combination shall be proportionately
increased.
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(iii) If any capital reorganization or reclassification of the
capital stock of the Issuer, or any consolidation or merger of the
Issuer with or into another corporation or other entity, or the sale of
all or substantially all of the Issuer'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 stock, 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 4), lawful and adequate
provisions shall be made whereby the Holder shall thereafter have the
right to receive upon the exercise hereof 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 4 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 provisions hereof (including, without limitation, provisions for
adjustments of the Warrant 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 practicable, in relation to any shares
of stock, securities, other evidence of equity ownership or assets
thereafter deliverable upon the exercise hereof. 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, is greater or
lesser than the number of shares of Common Stock outstanding
immediately prior to such merger or consolidation, then the Warrant
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.
(iv) In case the Issuer shall, at any time prior to exercise
of this Warrant, consolidate or merge with any other corporation or
other entity (where the Issuer is not the surviving entity) or transfer
all or substantially all of its assets to any other corporation or
other entity, then the Issuer 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 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.
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(v) 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 Issuer shall make a cash payment therefor equal
in amount to the product of the applicable fraction multiplied by the
Warrant Price then in effect.
(b) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this SECTION 4:
(i) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this SECTION 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common
Stock, as provided for in SECTION 4(a)(ii)) up to, but not beyond the
date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent
(1%) of the shares of Common Stock for which this Warrant is
exercisable immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount
(except as aforesaid) which is postponed shall be carried forward and
made as soon as such adjustment, together with other adjustments
required by this SECTION 4 and not previously made, would result in a
minimum adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(ii) FRACTIONAL INTERESTS. In computing adjustments under this
SECTION 4, fractional interests in Common Stock shall be taken into
account to the nearest one one-hundredth (1/100th) of a share.
(iii) WHEN ADJUSTMENT NOT REQUIRED. If the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(c) FORM OF WARRANT AFTER ADJUSTMENTS. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
5. NOTICE OF ADJUSTMENTS.
Whenever the Warrant Price or Warrant Share Number shall be adjusted
pursuant to SECTION 4 hereof (for purposes of this SECTION 5, each an
"ADJUSTMENT"), the Issuer shall cause its Chief Financial Officer to prepare and
execute a certificate setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
7
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment.
6. FRACTIONAL SHARES.
No fractional shares of Warrant Stock will be issued in connection with
an exercise hereof, but in lieu of such fractional shares, the Issuer shall make
a cash payment therefor equal in amount to the product of the applicable
fraction multiplied by the Per Share Market Value then in effect.
7. OWNERSHIP CAP AND CERTAIN EXERCISE RESTRICTIONS.
(a) Notwithstanding anything to the contrary set forth in this Warrant,
at no time may a holder of this Warrant exercise this Warrant if the number of
shares of Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock beneficially owned by such
holder at such time, the number of shares of Common Stock which would result in
such holder beneficially owning more than 4.999% of all of the Common Stock
outstanding at such time; provided, however, that upon a holder of this Warrant
providing the Issuer with sixty (60) days notice (pursuant to SECTION 13 hereof)
(the "WAIVER NOTICE") that such holder would like to waive this SECTION 7(a)
with regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this SECTION 7(a) will be of no force or effect with regard to all or a
portion of the Warrant referenced in the Waiver Notice.
(b) The Holder may not exercise the Warrant hereunder to the extent
such exercise would result in the Holder beneficially owning (as determined in
accordance with SECTION 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon exercise of the Warrant held by the Holder after
application of this Section.
8. INTENTIONALLY OMITTED.
9. DEFINITIONS.
For the purposes of this Warrant, the following terms have the
following meanings:
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
"BOARD" shall mean the Board of Directors of the Issuer.
"CAPITAL STOCK" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
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"COMMON STOCK" means the Common Stock, no par value per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.
"GOVERNMENTAL AUTHORITY" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and whether
domestic or foreign.
"HOLDERS" mean the Persons who shall from time to time own any Warrant.
The term "HOLDER" means one of the Holders.
"INDEPENDENT APPRAISER" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
"ISSUER" means Telenetics Corporation, a California corporation, and
its successors.
"MAJORITY HOLDERS" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under the
Warrants at the time outstanding.
"NASDAQ" means The Nasdaq SmallCap Market or The Nasdaq National
Market.
"NOTES" means the secured promissory notes issued in connection with
the Purchase Agreement.
"ORIGINAL ISSUE DATE" means March 1, 2003.
"OTC BULLETIN BOARD" means the over-the-counter electronic bulletin
board.
"OTHER COMMON" means any other Capital Stock of the Issuer of any class
which shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
"PERSON" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing
price per share of the Common Stock on such date on the OTC Bulletin Board or
another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the closing price on
such exchange or quotation system on the date nearest preceding such date, or
(b) if the Common Stock is not then reported by the OTC Bulletin Board or the
Pink Sheets LLC (or similar organization or agency succeeding to its functions
9
of reporting prices), then the average of the "PINK SHEET" quotes for the
relevant conversion period, as determined in good faith by the holder, or (c) if
the Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Independent Appraiser selected in good faith by
the Majority Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to select an
additional Independent Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Independent Appraiser;
and provided, further that all determinations of the Per Share Market Value
shall be appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair market value
by an Independent Appraiser shall be based upon the fair market value of the
Issuer determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative of
value, and shall be final and binding on all parties. In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any
limitations on, voting rights.
"PURCHASE AGREEMENT" means the Amended and Restated Note and Warrant
Purchase Agreement dated as of March 1, 2003 among the Issuer and the investors
a party thereto.
"SECURITIES" means any debt or equity securities of the Issuer, whether
now or hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "SECURITY" means one of the Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
"SUBSIDIARY" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the Issuer or
by one or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
"TERM" has the meaning specified in SECTION 1 hereof.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
the OTC Bulletin Board, or (b) if the Common Stock is not listed on the OTC
Bulletin Board, a day on which the Common Stock is traded on Nasdaq or any
registered national stock exchange, or (c) if the Common Stock is not traded on
the OTC Bulletin Board, Nasdaq or any registered national stock exchange, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the Pink Sheets LLC (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event that the
Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof,
then Trading Day shall mean any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action to close.
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"VOTING STOCK" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated) having
ordinary voting power for the election of a majority of the members of the Board
of Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.
"WARRANTS" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of SECTION 2(C), 2(D) OR 2(E) hereof or of any of such other
Warrants.
"WARRANT PRICE" means U.S. $.44064, as such price may be adjusted from
time to time as shall result from the adjustments specified in this Warrant,
including SECTION 4 hereof.
"WARRANT SHARE NUMBER" means at any time the aggregate number of shares
of Warrant Stock which may at such time be purchased upon exercise of this
Warrant, after giving effect to all prior adjustments and increases to such
number made or required to be made under the terms hereof.
"WARRANT STOCK" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.
10. OTHER NOTICES.
In case at any time:
(a) the Issuer shall make any distributions to the holders of Common
Stock; or
(b) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of Capital Stock
of any class; or
(c) there shall be any reclassification of the Capital Stock of the
Issuer; or
(d) there shall be any capital reorganization by the Issuer; or
(e) there shall be any (i) consolidation or merger involving the Issuer
or (ii) sale, transfer or other disposition of all or substantially all of the
Issuer's property, assets or business (except a merger or other reorganization
in which the Issuer shall be the surviving corporation and its shares of Capital
Stock shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
(f) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Issuer or any partial liquidation of the Issuer or
distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
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Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least ten (10)
days prior to the action in question and not less than ten (10) days prior to
the record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two (2) Trading Days written notice thereof describing the matters upon which
action is to be taken). The Holder shall have the right to send two (2)
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This Warrant
entitles the Holder to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Common Stock.
11. AMENDMENT AND WAIVER.
Any term, covenant, agreement or condition in this Warrant may be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by a written
instrument or written instruments executed by the Issuer and the Majority
Holders; provided, however, that no such amendment or waiver shall reduce the
Warrant Share Number, increase the Warrant Price, shorten the period during
which this Warrant may be exercised or modify any provision of this SECTION 11
without the consent of the Holder of this Warrant.
12. GOVERNING LAW.
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW.
13. NOTICES.
Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given
and effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii)
the Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice later than 5:00 p.m., eastern time, on any date and earlier than 11:59
p.m., eastern time, on such date, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service or (iv)
actual receipt by the party to whom such notice is required to be given. The
addresses for such communications shall be with respect to the Holder of this
Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at
its last known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:
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Telenetics Corporation
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: President
Attention: Chief Financial Officer
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with copies (which copies shall not constitute notice to the Company) to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.
14. WARRANT AGENT.
The Issuer may, by written notice to each Holder of this Warrant,
appoint an agent having an office in New York, New York for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of SECTION 2 hereof, exchanging this Warrant pursuant to
subsection (d) of SECTION 2 hereof or replacing this Warrant pursuant to
subsection (d) of SECTION 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
15. REMEDIES.
The Issuer stipulates that the remedies at law of the Holder of this
Warrant in the event of any default or threatened default by the Issuer in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
16. SUCCESSORS AND ASSIGNS.
This Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors and assigns of the Issuer, the Holder
hereof and (to the extent provided herein) the Holders of Warrant Stock issued
pursuant hereto, and shall be enforceable by any such Holder or Holder of
Warrant Stock.
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17. MODIFICATION AND SEVERABILITY.
If, in any action before any court or agency legally empowered to
enforce any provision contained herein, any provision hereof is found to be
unenforceable, then such provision shall be deemed modified to the extent
necessary to make it enforceable by such court or agency. If any such provision
is not enforceable as set forth in the preceding sentence, the unenforceability
of such provision shall not affect the other provisions of this Warrant, but
this Warrant shall be construed as if such unenforceable provision had never
been contained herein.
18. HEADINGS.
The headings of the Sections of this Warrant are for convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
TELENETICS CORPORATION
By: /S/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: President
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EXERCISE FORM
TELENETICS CORPORATION
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Telenetics
Corporation covered by the within Warrant.
Dated: _________________ Signature _____________________________
Address _______________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature _____________________________
Address _______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature _____________________________
Address _______________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
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