REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of October
31, 2000, by and among Telenetics Corporation a California corporation, with its
principal office located at 00000 Xxxxxx Xxxxx, Xxxx Xxxxxx, Xxxxxxxxxx 00000
(the "COMPANY"), May Xxxxx Group, Inc., with its principal office at Xxx Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX ("MAY XXXXX"), Xxxx X. Xxxxxx, an
individual ("XXXXXX"), Xxxxxx Xxxxxxx, an individual ("XXXXXXX"), Xxxxxx
Xxxxxxx, an individual ("XXXXXXX"), Hunter Singer, an individual ("SINGER"), and
Xxxxxx Xxxxxxxx LLP, a limited liability partnership ("XXXXXX XXXXXXXX"). May
Xxxxx, Xxxxxx, Donahue, Farrell, Singer and Xxxxxx Xxxxxxxx are collectively
referred to herein as the "HOLDERS" and individually as a "HOLDER").
WHEREAS:
A. In connection with the Placement Agent Agreement among the Company,
May Xxxxx and Xxxxxx Xxxxxxxx, of even date herewith (the "PLACEMENT AGENT
AGREEMENT"), the Company has agreed to issue to the Holders warrants to purchase
an aggregate of Five Hundred Fifteen Thousand (515,000) shares of the Company's
common stock, no par value (the "COMMON STOCK"), at a fixed exercise price for a
term of five (5) years from the date of issuance of such warrants (individually,
a "WARRANT" and collectively, the "WARRANTS"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Placement Agent Agreement.
B. To induce the Placement Agent to enter into and to execute and
deliver the Placement Agent Agreement, the Company has agreed to provide the
Holders with certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations there under, or any similar successor
statute (collectively, the "1933 ACT"), and applicable state securities laws,
with respect to the shares of Common Stock issuable upon exercise of the
Warrants (the "WARRANT SHARES").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holders hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "WARRANT HOLDER" means a Holder and any transferee or
assignee thereof to whom a Holder assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
1
b. "PERSON" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the shares of Common Stock
issuable to Warrant Holders upon conversion of the Warrants issues pursuant to
the Placement Agent Agreement.
e. "REGISTRATION STATEMENT" means a registration statement
under the 1933 Act which covers the Registrable Securities.
2. REGISTRATION.
a. Subject to the terms and conditions of this Agreement, the
Company shall prepare and, within sixty (60) calendar days following the date of
receipt of final proceeds from the sale of the Company's Series A Convertible
Preferred Stock pursuant to the Securities Purchase Agreement dated October ___,
2000 (the "Filing Deadline"), file with the SEC a registration statement on Form
S-1 or SB-2 (or, if the Company is then eligible, on Form S-3) under the 1933
Act (the "Initial Registration Statement") for the registration of a maximum of
500,000 shares of Common Stock to be issued upon conversion of the Warrants
issued pursuant to the Placement Agent Agreement dated October ___, 2000, to be
declared effective and the Company shall cause the Registration Statement to
remain effective until all of the Registrable Securities have been sold (the
"REGISTRATION PERIOD"). Prior to the filing of the Initial Registration
Statement with the SEC, the Company shall furnish a copy of the Initial
Registration Statement to the Warrant Holders, May Xxxxx and Xxxxxx Xxxxxxxx,
LLP for their review and comment together with a selling shareholder
questionnaire in form prepared by the Company. The Warrant Holders, May Xxxxx
and Xxxxxx Xxxxxxxx, LLP shall furnish comments on the Initial Registration
Statement and an executed selling shareholder questionnaire to the Company
within twenty four (24) hours of the receipt thereof from the Company.
b. EFFECTIVENESS OF THE INITIAL REGISTRATION STATEMENT. The
Company shall use its commercially reasonable efforts (i) to have the Initial
Registration Statement declared effective by the SEC by no later than one
hundred and twenty (120) days after the date hereof (the "Scheduled Effective
Deadline") and (ii) to insure that the Initial Registration Statement and any
subsequent Registration Statement remains in effect throughout the Registration
Period, subject to the terms and conditions of this Agreement.
2
c. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) is insufficient to cover all of the Registrable Securities which
are issuable to the Warrant Holders upon conversion of the Warrants issued
pursuant to the Placement Agent Agreement, the Company shall amend the
Registration Statement, or use its commercially reasonable efforts to file a new
Registration Statement (on the short form available therefore, if applicable),
or both, so as to cover all of such Registrable Securities issuable to the
Warrant Holders upon conversion of the Warrants issued pursuant to the Placement
Agency Agreement as soon as practicable, but in any event not later than fifteen
(15) business days after the necessity therefore arises. The Company shall use
it best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issuable upon conversion of the Warrants is greater than the number of shares
available for resale under such Registration Statement.
3. RELATED OBLIGATIONS.
a. The Company shall keep the Registration Statement effective
during the term of the Warrant pursuant to Rule 415 at all times until the end
of the Registration Period, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period and, during such
period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company's filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), the Company shall incorporate such report by
reference into the Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC on the same day on which the 1934 Act
report is filed which created the requirement for the Company to amend or
supplement the Registration Statement.
3
c. The Company shall furnish to each Warrant Holder whose
Registrable Securities are included in any Registration Statement, without
charge, (i) at least one copy of such Registration Statement as declared
effective by the SEC and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) ten (10) copies of the final
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Warrant Holder may
reasonably request) and (iii) such other documents as such Warrant Holder may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Warrant Holder.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Warrant Holder reasonably requests (unless an exemption from
qualification or registration is available), (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its Articles of Incorporation or By-laws, (x)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify each Warrant
Holder who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such
event or development, the Company shall notify each Warrant Holder in writing of
the happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to each Warrant Holder. The Company shall also promptly notify each
Warrant Holder in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Warrant Holder by facsimile on the same
day of such effectiveness), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus information, and
(iii) of the Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate.
4
f. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction within the United States of
America and, if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to notify each
Warrant Holder who holds Registrable Securities being sold pursuant to the
Registration Statement of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
g. At the reasonable request of any Warrant Holder, the
Company shall furnish to such Warrant Holder, on the date of the effectiveness
of the Registration Statement and thereafter from time to time on such dates as
a Warrant Holder may reasonably request (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Warrant Holders.
h. The Company shall make available for inspection by (i) any
Warrant Holder and (ii) one firm of accountants or other agents retained by the
Warrant Holders (collectively, the "INSPECTORS") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company,
as permitted under applicable law (collectively, the "RECORDS"), as shall be
reasonably deemed necessary by each Inspector, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree, and each
Warrant Holder hereby agrees, to hold in strict confidence and shall not make
any disclosure (except to a Warrant Holder) or use any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this Agreement or any other agreement
of which the Inspector and the Warrant Holder has knowledge. Each Warrant Holder
agrees that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
i. The Company shall hold in confidence and not make any
disclosure of information concerning a Warrant Holder provided to the Company
unless (i) disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
5
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Warrant Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Warrant Holder and allow such Warrant Holder, at the
Warrant Holder's expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
j. The Company shall use its best efforts either to cause all
the Registrable Securities covered by a Registration Statement (i) to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
(ii) to secure the inclusion for quotation on the National Association of
Securities Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(j).
k. After a Registration Statement registering the Registrable
Securities is declared effective by the SEC, and for so long as such
Registration Statement shall remain effective, the Company shall cooperate with
the Warrant Holders who hold Registrable Securities being offered pursuant to
such Registration Statement and, to the extent applicable, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Warrant Holders may reasonably request
and registered in such names as the Warrant Holders may request.
l. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
m. The Company shall furnish to the holders of Registrable
Securities copies of its annual reports on Form 10-K within ninety (90) days
after the end of the Company's fiscal year, and copies of its quarterly reports
on Form 10-Q within forty-five (45) days after the end of each fiscal quarter.
n. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
o. Within two (2) business days after a Registration Statement
which covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Warrant
Holders whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as EXHIBIT A.
6
p. The Company shall take such other reasonable actions
necessary, as requested by the Warrant Holders, to facilitate disposition by the
Warrant Holders of Registrable Securities pursuant to a Registration Statement.
4. OBLIGATIONS OF THE WARRANT HOLDERS.
Each Warrant Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(f) or the first sentence of 3(e), such Warrant Holder will immediately
discontinue disposition of any Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until such
Warrant Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(e) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended certificates for shares of
Common Stock to a transferee of a Warrant Holder in accordance with the terms of
the Placement Agent Agreement in connection with any sale of Registrable
Securities with respect to which a Warrant Holder has entered into a contract
for sale prior to the Warrant Holder's receipt of a notice from the Company of
the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Warrant Holder has not yet settled.
5. EXPENSES OF REGISTRATION.
All expenses incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualification fees, printers, legal
and accounting fees shall be paid by the Company.
6. INDEMNIFICATION.
With respect to Registrable Securities which are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Warrant Holder, the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Warrant Holder within the meaning of the 1933
Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several
(collectively, "CLAIMS") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
7
not an indemnified party is or may be a party thereto ("INDEMNIFIED DAMAGES"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation there under relating to the
offer or sale of the Registrable Securities pursuant to a Registration Statement
(the matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). The Company shall reimburse the Warrant Holders and each such
controlling person promptly as such expenses are incurred and are due and
payable, for any legal fees or disbursements or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (x) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (y) shall not be available to the extent such Claim is based
on a failure of the Warrant Holders to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(e); and (z) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Warrant
Holders pursuant to Section 9.
b. In connection with a Registration Statement, each Warrant
Holders agrees to severally and not jointly indemnify, hold harmless and defend,
to the same extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers, employees, agents and
representatives of the Company, each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (each an "INDEMNIFIED
PARTY"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or is based upon any Violation, in
8
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Warrant Holders expressly for use in connection with such
Registration Statement or any post effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered; and, subject to Section 6(d), such Warrant Holders will reimburse the
Indemnified Party for any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Warrant Holders, which consent shall
not be unreasonably withheld; provided, further, however, that the Warrant
Holders shall be liable under this Section 6(b) for only that amount of a Claim
or Indemnified Damages as does not exceed the net proceeds to such Warrant
Holders as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Warrant
Holders pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected and such new prospectus was delivered to each Warrant
Holders prior to such Warrant Holders' use of the prospectus to which the Claim
relates.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party, if
and only if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In the case of an Indemnified Person, legal counsel referred to in
the immediately preceding sentence shall be selected by the Warrant Holders
holding a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
9
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Warrant Holders the
benefits of Rule 144 promulgated under the 1933 Act or any similar rule or
regulation of the SEC that may at any time permit the Warrant Holders to sell
securities of the Company to the public without registration ("RULE 144") the
Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
10
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents as required by the applicable provisions of Rule 144; and
c. furnish to each Warrant Holder so long as such Warrant
Holder owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Warrant Holders to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Warrant Holders to any transferee of all or any portion of
Registrable Securities if: (i) the Warrant Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such written
agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) at or before the
time the Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; and (iv) such transfer shall
have been made in accordance with the applicable requirements of the Placement
Agent Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Warrant Holders who then hold at least two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Warrant Holders and the Company. No such amendment
shall be effective to the extent that it applies to fewer than all of the
holders of the Registrable Securities. No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision
of any of this Agreement unless the same consideration also is offered to all of
the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
11
b. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party); (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested, or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company:
TELENETICS CORPORATION
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention:
with Copy to:
Xxxxx & Xxxxxx
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000)000-0000
Facsimile: (000)000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to a Warrant Holder, to its address and facsimile number on the Schedule of
Warrant Holders attached hereto, with copies to such Warrant Holder's
representatives as set forth on the Schedule of Warrant Holders or to such other
address and/or facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each other party
five days prior to the effectiveness of such change. Written confirmation of
receipt (A) given by the recipient of such notice, consent, facsimile waiver or
other communication, (B) provided by a courier or overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
12
d. The corporate laws of the State of California shall govern
all issues concerning the relative rights of the Company and the Warrant Holders
as its stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the Placement Agent Agreement and the
escrow agreement with First Union National Bank (the "Escrow Agreement")
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Placement Agent Agreement and the Escrow Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
13
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the
Warrant Holders pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Warrant Holders holding a majority of the
Registrable Securities.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
(Remainder of page intentionally blank)
14
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Name: Xxxxx X. Xxxxxx
Title: President
MAY XXXXX GROUP, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Director
/S/ Xxxx X. Xxxxxx
------------------------
Xxxx X. Xxxxxx
/S/ Xxxxxx Xxxxxxx
------------------------
Xxxxxx Xxxxxxx
/S/ Xxxxxx Xxxxxxx
------------------------
Xxxxxx Xxxxxxx
/S/ Hunter Singer
------------------------
Hunter Singer
XXXXXX XXXXXXXX LLP
By: /s/ Xxxxx Xxxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxxx
--------------------------------
Title: Counsel to May Xxxxx Group
-------------------------------
15
SCHEDULE OF WARRANT HOLDERS
WARRANT HOLDER ADDRESS WARRANT HOLDER'S REPRESENTATIVES' ADDRESS
WARRANT HOLDER NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
----------------------------------------------------------------------------------------------------------------------
The May Xxxxx Group, Inc.
Xxxx X. Xxxxxx One World Trade Center One World Trade Center
Xxxxxx Xxxxxxx 00xx Xxxxx 00xx Xxxxx
Xxxxxx Xxxxxxx Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Hunter Singer Facsimile : (000) 000-0000 Facsimile : (000) 000-0000
Xxxxxx Xxxxxxxx LLP 0000 Xxxxxxxxxx Xxxxxx, Xxxxx #0 0000 Xxxxxxxxxx Xxxxxx, Xxxxx #0
Xxxxx, Xxx Xxxxxx 00000 Union, New Jersey 07083
16
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:
-------------------------------
Re: TELENETICS CORPORATION
Ladies and Gentlemen:
We are counsel to Telenetics Corporation, a California corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Placement Agency Agreement (the "PLACEMENT AGENT AGREEMENT") entered into by and
among the Company and the Warrant Holders named therein (collectively, the
"WARRANT HOLDERS") pursuant to which the Company issued to the Warrant Holders
shares of its Common Stock, no par value (the "COMMON STOCK") upon conversion of
the Warrants. Pursuant to the Placement Agent Agreement, the Company also has
entered into a Registration Rights Agreement with the Warrant Holders (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ____, the Company filed a Registration
Statement on Form ________ (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Warrant Holders as a selling
stockholder there under.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
---------------------------------
cc: [LIST NAMES OF WARRANT HOLDERS]
17
