Exhibit 10.26
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "PLEDGE AGREEMENT") is made and
entered into as of March 21, 2002, by and between XXXXXXX X. ARMANI, an
individual ("PLEDGOR"), and TELENETICS CORPORATION, a California corporation
("PLEDGEE").
IN CONSIDERATION of the mutual covenants herein contained and for other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by each of the parties hereto, the parties do hereby agree as
follows:
1. SECURED OBLIGATIONS.
-------------------
The security interest granted by this Pledge Agreement secures prompt
and complete payment and performance of all indebtedness, obligations and
liabilities of Pledgor to Pledgee (the "SECURED OBLIGATIONS") arising out of (i)
that certain Secured Promissory Note of even date herewith made by Pledgor in
favor of Pledgee in the original principal amount of $139,000 (the "NOTE"), and
(ii) this Pledge Agreement.
2. PLEDGE AND COLLATERAL.
---------------------
Pledgor does hereby pledge and grant to Pledgee a security interest in
the following collateral ("Collateral") to secure the Secured Obligations:
(a) The Pledgor will initially pledge Seven Hundred Thousand (700,000)
shares of common stock of Pledgee which is part of Certificate No. ______.
However, the obligation of the Pledgor is only to pledge enough shares of common
stock of Pledgee as Collateral to satisfy the Note at any given time. To
accomplish this, the parties will, on a quarterly basis or at other times based
on mutual consent, recalculate the amount of shares of common stock of Pledgee
necessary to satisfy the Note based on the average of the closing prices of a
share of Pledgee's common stock, as traded on the NASD OTC Electronic Bulletin
Board (or other NASD service), for the five (5) trading days ending on the last
trading day of the applicable period, by taking the amount then due under the
Note divided by such average closing price; the resulting amount of shares shall
be the Collateral until a recalculation is made at the end of the following
period. After a calculation is made as provided above, (i) any shares of
Pledgee's common stock then constituting Collateral in excess of those required
to secure the Pledgor's obligations under the Note shall be automatically
released by Pledgee as Collateral, and (ii) any shares of Pledgee's common stock
held by Pledgor and not then constituting Collateral that are required, together
with the Collateral, to secure Pledgor's obligations under the Note shall
automatically become Collateral hereunder. The shares of common stock from time
to time constituting Collateral shall be referred to hereinafter as (the
"SHARES").
(b) All "Proceeds" of the foregoing, as such term is defined in the
California Commercial Code ("Code").
3. Warranties.
-----------
Pledgor hereby represents and warrants that:
(a) Pledgor has full power and authority to enter into this Pledge
Agreement, the Note and all related documents and agreement.
(b) Pledgor has the unrestricted right to vote, pledge and grant the
security interest in or otherwise transfer the Collateral, free of any liens,
claims, encumbrances or other security interests.
(c) Except as provided under this Pledge Agreement, Pledgor will not
create, permit or suffer to exist, and will defend the Collateral against and
take such other action as is necessary to remove, any lien, security interest or
encumbrance on any of the Collateral and will defend the right, title and
interest of Pledgee in and to any of Pledgor's right, title and interest in and
to the Collateral against the claims and demands of all other persons. Pledgor
will not, without the prior written consent of Pledgee, sell, assign, exchange,
grant a security interest in, transfer, encumber or otherwise dispute of, any of
the Collateral, or attempt or contract to do so.
(d) Pledgor has made his own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, but not
limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and Pledgor
agrees that Pledgee shall not have any responsibility or liability under this
Pledge Agreement for informing Pledgor of any such changes or potential changes
or for taking any action or omitting to take any action with respect thereto.
4. FINANCING STATEMENTS.
--------------------
Pledgor hereby authorizes Pledgee to file one or more financing
statements, continuation statements or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the security
interest with or without the signature of Pledgor, naming Pledgor as debtor and
Pledgee as secured party. Upon request by Pledgee, Pledgor shall join with
Pledgee in executing one or more such financing statements or other documents.
5. RISK OF LOSS.
-------------
Pledgor shall have all risk of loss of the Collateral, notwithstanding
possession or control of the Collateral or any part thereof by Pledgee.
6. RIGHTS AND POWERS.
-----------------
Pledgee may, without obligation to do so, exercise at any time and from
time to time one of more of the following rights and powers with respect to any
or all of the Collateral:
(a) Perform such acts as are necessary to preserve and protect the
Collateral and the rights, powers and remedies granted with respect to such
Collateral by this Pledge Agreement.
-2-
(b) Transfer record ownership of the Collateral to Pledgee or its
nominee and receive, endorse and give receipt for, or collect by legal
proceedings or otherwise, dividends or other distributions made or paid with
respect to the Collateral, provided and only if there exists at the time an
outstanding Event of Default (as defined in SECTION 9 of this Pledge Agreement).
Reasonable expenses incurred in the exercise of such rights and powers
shall be paid promptly by Pledgor.
So long as there exists no Event of Default, Pledgor may exercise all
shareholder voting rights and be entitled to receive any cash distribution with
respect to the Collateral; provided, however, that no vote shall be cast, or
consent, waiver or ratification given, or any action taken, that would
materially impair the value of the Collateral or be inconsistent with or violate
any provision of this Pledge Agreement, the Note or any other agreement or
document related to any of the foregoing. Accordingly, until such time as an
Event of Default occurs, all shareholder materials that Pledgee receives with
respect to the Collateral shall be delivered to Pledgor at the address indicated
below.
7. PAYMENT OF TAXES AND OTHER CHARGES.
----------------------------------
Pledgor shall pay, prior to the delinquency date, all taxes, liens,
assessments and other charges against the Collateral, if any, and in the event
of Pledgor's failure to do so, Pledgee may at its election pay any or all of
such taxes and charges without contesting the validity or legality thereof. If
Pledgee pays any such taxes or charges, Pledgor shall immediately reimburse
Pledgee for such payment.
8. TRANSFER OF COLLATERAL.
----------------------
In connection with the transfer or assignment of the Note (whether by
negotiation, discount or otherwise), Pledgee may transfer all or any part of its
interest in the Collateral, and the transferee shall thereupon succeed to all
the rights, powers, remedies and obligations of Pledgee hereunder with respect
to the Collateral so transferred. Upon such transfer, Pledgee shall be fully
discharged from all liability and responsibility for the transferred Collateral.
9. EVENTS OF DEFAULT.
-----------------
The occurrence of one or more of the following events shall constitute
an "Event of Default" under this Pledge Agreement:
(a) failure of Pledgor to pay when due under the Note principal or
accrued interest;
(b) the occurrence of any event of default specified in the Note;
(c) the failure of Pledgor to perform or observe any of the Secured
Obligations or any other obligation or covenant under the Note, under this
Pledge Agreement or under any related agreement; or
(d) the breach of any warranty of Pledgor contained in this Pledge
Agreement.
-3-
Upon the occurrence of any such Event of Default, Pledgee may, at its
election, declare the Secured Obligations immediately due and payable and may
exercise any or all of the rights and remedies with respect to the Collateral
granted to a secured party under the provisions of the Code (as now or hereafter
in effect), including without limitation, the power to dispose of the Collateral
by public or private sale or to accept the Collateral in full payment of the
Note and/or any or all other Secured Obligations. Any proceeds realized from the
disposition of the Collateral pursuant to the power of sale hereby granted to
Pledgee shall first be applied to the payment of expenses incurred by Pledgee in
connection with the disposition, and the balance shall be applied to the payment
of the Secured Obligations in such order of application as Pledgee shall deem
appropriate. Any surplus proceeds shall be paid over to Pledgor, and the Secured
Obligations shall not be discharged to the extent of any deficiency.
10. WAIVER.
------
The rights, powers and remedies granted to Pledgee pursuant to the
provisions of this Pledge Agreement shall be in addition to all rights, powers
and remedies granted to Pledgee under any statute or rule of law. Any
forbearance, failure or delay by Pledgee in exercising any right, power or
remedy under this Pledge Agreement shall not be deemed to be a waiver of such
right, power or remedy. Any single or partial exercise of any right, power or
remedy under this Pledge Agreement shall not preclude the further exercise
thereof, and every right, power and remedy of Pledgee under this Pledge
Agreement shall continue in full force and effect until such right, power or
remedy is specifically waived by an instrument executed by Pledgee. Pledgor
waives any and all claims or defenses assertable against Pledgee and assignees
thereof, except defenses that cannot be waived under the Code.
11. APPLICABLE LAW.
---------------
This Pledge Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to choice of law
principles, and shall be binding upon the executors, administrators, heirs and
assigns of Pledgor. Pledgor may not assign its rights or obligations under this
Pledge Agreement or the Note without prior written consent of Pledgee. This
Pledge Agreement shall be fully enforceable by Pledgee's successors and assigns.
12. SEVERABILITY.
------------
If any provision of this Pledge Agreement is held to be invalid under
applicable law, then such provision shall be ineffective only to the extent of
such invalidity, and neither the remainder of such provision nor any other
provisions of this Pledge Agreement shall be affected thereby.
13. ATTORNEYS' FEES AND COSTS.
-------------------------
In any suit, action or proceeding (including arbitration) arising out
of or related to the Pledge Agreement or the transactions contemplated hereby,
including any appeals (an "ACTION"), the non-prevailing party shall pay to the
prevailing party a reasonable sum for ordinary and necessary attorneys',
paralegals', accountants' and experts' fees and costs incurred in connection
with prosecuting or defending such Action and/or enforcing any judgment, order,
ruling, or award (collectively, a "DECISION") granted therein, in addition to
any damages and costs which the prevailing party otherwise would be entitled.
-4-
Any Decision entered in such Action shall contain a specific provision providing
for the recovery of reasonable attorneys', paralegals', accountants' and
experts' fees and costs incurred in enforcing such Decision. For the purposes of
this SECTION 15 all attorneys', paralegals', accountants' and experts' fees and
costs shall include, but not be limited to, fees and costs incurred in the
following: (i) post-judgment motions and collection actions; (ii) contempt
proceedings; (iii) garnishment, levy, and debtor and third party examinations;
(iv) discovery; and (v) bankruptcy. Any action shall be brought in the state or
federal courts located in Orange County, California or, in the case of an
arbitration, brought before the American Arbitration Association located in
Orange County, California. Pledgor hereby agrees that service of any summons and
complaint or other process in any Action may be made by registered or certified
mail directed to Pledgor at Pledgor's address set forth in this Pledge
Agreement, Pledgor hereby waiving personal service thereof. Nothing in this
SECTION 15, however, shall affect the right of Pledgee to serve legal process in
any other manner permitted by law.
14. FURTHER ASSURANCES.
-------------------
Pledgor agrees that he will cooperate with Pledgee and will execute and
deliver, or cause to be executed and delivered, all such other instruments and
documents, and will take all such other action, including without limitation,
the filing of financing statements, as Pledgee may reasonably request from time
to time to carry out the provisions and purposes of this Pledge Agreement.
15. USURY REFORMATION
-----------------
The Note, this Pledge Agreement and all related agreements between
Pledgor and Pledgee are expressly limited so that in no contingency or event
whatsoever, whether by reason of advancement of the proceeds of the Note,
acceleration of maturity of the unpaid principal balance thereof, or otherwise,
shall the amount paid or agreed to be paid to Pledgee for the use, forbearance
or detention of the money evidenced by the Note exceed the highest lawful rate
permissible under applicable usury laws. If, from any circumstances whatsoever,
fulfillment of any provision of the Note or this Pledge Agreement or any other
agreement referred to herein or therein, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law that a court of competent jurisdiction may deem applicable,
then the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any circumstances Pledgee shall ever receive as interest
an amount that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the unpaid principal
balance due under the Note and not to the payment of interest. This provision
shall control every other provision of the Note and this Pledge Agreement.
16. COUNTERPARTS.
------------
This Pledge Agreement may be executed in multiple counterparts, each of
which shall be considered an original but all of which shall constitute one
agreement.
(Signature page follows)
-5-
IN WITNESS WHEREOF, this Pledge Agreement has been executed by Pledgor
and Pledgee effective as of the date first set forth above.
/s/ Xxxxxxx X. Armani
------------------------------------
Xxxxxxx X. Armani, an individual
Address:
18 Savcito
------------------------------------
Xxxxxxxx Xxxxx, XX 00000
PLEDGOR: ------------------------------------
TELENETICS CORPORATION,
a California corporation
By: /s/ Xxxxx X. Xxxxx
---------------------------------
PLEDGEE: Its: Chief Financial Officer/Secretary
-------------------------------
-6-
