M.H. MEYERSON & CO., INC.
FOUNDED 1960
BROKERS & DEALERS IN SECURITIES
UNDERWRITERS
NEWPORT OFFICE TOWER
525 WASHINGTON BLVD. - P. O. BOX 260 - JERSEY CITY, NJ 07303-0260
201.459.9500 - 800.888.8118 - FAX 201.459.9521 - www.mhmeyerson.com
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Mr. Michael A. Armani
Chairman & Chief Executive Officer
Telenetics Corporation
25111 Arctic Ocean
Lake Forest, CA 92630
Dear Mr. Armani:
This agreement (the "Agreement') is made as of January 3, 2000 between
Telenetics Corporation ("Telenetics"), and M.H. Meyerson & Co., Inc.
("Meyerson").
In consideration of the mutual covenants contained herein and intending
to be legally bound thereby, Telenetics and Meyerson hereby agree as follows:
1. Meyerson will perform investment banking services, on a
non-exclusive basis, for Telenetics on the terms set forth below for a period of
five years from the date hereof. Such services will be performed on a best
efforts basis and will include, without limitation, assistance to Telenetics in
mergers, acquisitions, and internal capital structuring and the placement of new
debt and equity issues of Telenetics all with the objective of accomplishing
Telenetics's business and financial goals. In each instance, Meyerson shall
endeavor, subject to market conditions, to assist Telenetics in identifying
corporate candidates for mergers and acquisitions and sources of private and
institutional funds; to provide planning, structuring, strategic and other
advisory services to Telenetics; and to assist in negotiations on behalf of
Telenetics. Meyerson will have the option to perform all financings to be done
by Telenetics for as long as this Agreement is in effect. In each instance,
Meyerson will render such services as to which Telenetics and Meyerson mutually
agree and Meyerson will exert its best efforts to accomplish the goals agreed to
by Meyerson and Telenetics.
2. In connection with the performance of this Agreement, Meyerson and
Telenetics shall comply with all applicable laws and regulations, including,
without limitation, those of the National Association of Securities Dealers,
Inc. and the Securities and Exchange Commission.
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3. In consideration of the services previously rendered and to be
rendered by Meyerson hereunder, Meyerson is hereby granted five-year Warrants to
purchase, at a price of $3.00 per share, a total of 200,000 shares of Common
Stock of Telenetics, with demand and piggyback registration rights as set forth
in paragraph 4 below. Such Warrants ("Meyerson Warrants") may be exercised at
any time from December 13, 1999 to and including December 13, 2004. In any
event, the Meyerson Warrants shall vest and become irrevocable as follows:
100,000 immediately upon the signing of this Agreement, and the remaining
100,000 Warrants six months after the signing of this Agreement. After one year
from the date of this Agreement, Meyerson shall have, at Meyerson's discretion,
both a cashless exercise option to exercise the Warrants and rights of
registration as described in paragraph 4 below. If the cashless exercise option
is exercised, it would be accomplished by surrendering the vested Warrants and
replacing them with the equivalent of shares that may be sold under Rule 144.
The amount of shares of common stock of Telenetics to be issued will be based on
the fair market value per share on the date of exercise and shall be valued at
the average of the daily closing price for the five consecutive trading days
immediately preceding the date of exercise. The presentation of a copy of this
Agreement by Meyerson, together with a request that part or all of the Warrant
be exercised and a direction that the appropriate number of shares be withheld
to pay the exercise price, shall be deemed to be the surrender of such number of
shares for purposes of exercising the cashless exercise option.
4. In addition to the exercise format described in paragraph 3 above,
an additional registration route may also be available to Meyerson, at their
sole discretion, which is as follows: during the period from December 13, 2000
to December 13, 2004 the holders of at least 51% of: (i) the Meyerson Warrants
not then exercised; and (ii) the shares previously issued upon exercise of any
of the Meyerson Warrants (hereinafter, collectively, the "Meyerson Equity") may
demand, on one occasion only, that Telenetics at Telenetics's expense, promptly
file a Registration Statement under the Securities Act of 1933, as amended
("Act"), to permit a public offering of the shares of Common Stock issued and
issuable pursuant to exercise of the Meyerson Warrants (the "Meyerson Shares").
Additionally, if Telenetics during the period from December 13, 2000 to December
November 13, 2004 files a Registration Statement covering the sale of any of
Telenetics's common stock, then Telenetics on each such occasion, at the request
of the holders of at least 51% of the shares and warrants constituting the
Meyerson Equity, shall include in any such Registration Statement, at
Telenetics's expense, the Meyerson Shares, provided that, if the sale of
securities by Telenetics is being made through an underwriter and the
underwriter objects to inclusion of the Meyerson Shares in the Registration
Statement, the Meyerson Shares shall not be so included in the Registration
Statement or in any registration statement filed within 90 days after the
effective date of the underwritten Registration Statement.
5. In the event that Telenetics fails to honor the exercise by Meyerson
of any vested warrants as set forth herein, by failing to deliver the
certificate(s) for the underlying shares of common stock to Meyerson within 10
days after such exercise then Meyerson may take legal action, without further
notice to Telenetics to obtain such underlying shares, and Telenetics agrees to
pay all damages, costs and expenses incurred by Meyerson, including reasonable
attorneys' fees. In addition to any other damages sustained by Meyerson as a
result of Telenetics's failure to honor such exercise, including any diminution
in the value of the underlying shares over time, Telenetics agrees that it will
pay Meyerson interest, at the average prime rate based on New York City banking
levels for the prior six months, on the market value of the underlying shares as
of the 10th day after the exercise, for the period beginning on the 10th day
after the exercise and ending on the day the certificates for the underlying
shares are received by Meyerson.
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6. If Telenetics should, at any time, or from time to time hereafter,
effect a stock split, a reverse stock split, a business combination, a
recapitalization or merger, the terms of the Meyerson Warrants shall be
proportionately adjusted to prevent the dilution or enlargement of the rights of
the Meyerson interest.
7. The obligation of Telenetics to register the Meyerson Shares,
including the shares issuable upon exercise of the Meyerson Warrants, pursuant
to the demand or the piggyback registration rights set forth in paragraph 6
above, shall be without regard to whether the Meyerson Warrants have been or
will be exercised.
8. Telenetics agrees that, for a period of three (3) years from the
date of this Agreement, Telenetics will not utilize the registration exemption
set forth in Regulation S under the Act, nor issue any security with a downward
ratchet dilution program without the consent of Meyerson, which consent will not
be unreasonably withheld.
9. This Agreement constitutes the entire Warrant Agreement between the
parties and when a copy hereof is presented to Telenetics's transfer agent,
together with a request that all or part of the Meyerson Warrant be exercised
and a certified check in the proper amount or a direction, pursuant to the
cashless exercise option, that shares be withheld to pay for the exercise, the
certificates for the appropriate number of shares of Common Stock shall be
promptly issued.
10. Upon the execution of this Agreement, Telenetics shall include in
its next annual report and filings the highlights and terms of this investment
banking Agreement.
11. Meyerson shall be entitled to additional compensation, to be
negotiated between Meyerson and Telenetics arising out of any transactions that
are proposed or executed by Meyerson and consummated by Telenetics or are
executed by Meyerson at Telenetics's request, during the term of this Agreement
to the extent that such compensation is normal and ordinary for such
transactions. In addition, Meyerson shall be reimbursed by Telenetics for any
reasonable out-of-pocket expenses that Meyerson may incur in connection with
rendering any service to or on behalf of Telenetics that is approved, in
writing, in advance by Telenetics's Chief Executive Officer.
12. Telenetics agrees to indemnify and hold Meyerson and its directors,
officers and employees harmless from and against any and all losses, claims,
damages, liabilities, costs or expenses arising out of any action or cause of
action brought against Meyerson in connection with its rendering services under
this Agreement except for any losses, claims, damages, liabilities, costs or
expenses resulting from any violation by Meyerson of applicable laws and
regulations including, without limitation, those of the National Association of
Securities Dealers, Inc. and the Securities and Exchange Commission or any state
securities commission or from any act of Meyerson involving willful misconduct
and except that Telenetics shall not be liable for any amount paid in settlement
of any claim that is settled without its prior written consent.
13. Meyerson agrees to indemnify and hold Telenetics and its directors,
officers and employees harmless from and against any and all losses, claims,
damages, liabilities, costs or expenses resulting from any violation by Meyerson
of applicable laws and regulations including, without limitation, those of the
National Association of Securities Dealers, Inc., the Securities and Exchange
Commission or any state securities commission or from any act of Meyerson
involving willful misconduct.
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14. Within 90 days of the date of this Agreement, a representative of
Meyerson will visit the corporate headquarters of Telenetics. Telenetics will
submit to Meyerson a current business plan setting forth how Telenetics plans to
proceed over the next two (2) years.
15. Nothing contained in this Agreement shall be construed to
constitute Meyerson as a partner, employee, or agent of Telenetics; nor shall
either party have any authority to bind the other in any respect, it being
intended that Meyerson is, and shall remain an independent contractor.
16. This Agreement may not be assigned by either party hereto, except
that Meyerson may assign any or all of its Warrants to its employees, and shall
be interpreted in accordance with the laws of the State of New Jersey applicable
to agreements negotiated, entered into, and performed wholly within the State of
New Jersey, and shall be binding upon the successors of the parties. Either
party may terminate this Agreement at any time, however, legally vested Warrants
will remain with Meyerson.
17. If any paragraph, sentence, clause or phrase of this Agreement is
for any reason declared to be illegal, invalid, unconstitutional, void or
unenforceable, all other paragraphs, sentences, clauses or phrases hereof not so
held shall be and remain in full force and effect.
18. None of the terms of this Agreement shall be deemed to be waived or
modified except by an express agreement in writing signed by the party against
whom enforcement of such waiver or modification is sought. The failure of either
party at any time to require performance by the other party of any provision
hereof shall, in no way, affect the full right to require such performance at
any time thereafter. Nor shall the waiver by either party of a breach of any
provision hereof be taken or held to be a waiver of any succeeding breach of
such provision or as a waiver of the provision itself.
19. Any dispute, claim or controversy arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in Jersey
City, New Jersey, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The parties hereto agree that they will abide
by and perform any award rendered by the arbitrator(s) and that judgment upon
any such award may be entered in any Court, state or federal, having
jurisdiction over the party against whom the judgment is being entered. Any
arbitration demand, summons, complaint, other process, notice of motion, or
other application to an arbitration panel, Court or Judge, and any arbitration
award or judgment may be served upon any party hereto by registered or certified
mail, or by personal service, provided a reasonable time for appearance or
answer is allowed.
20. For purposes of compliance with laws pertaining to potential inside
information being distributed unauthorized to anyone, all communications
regarding Telenetics; confidential information should only be directed to Martin
H. Meyerson, Chairman, Michael Silvestri, President, or Joseph Messina, Vice
President, Compliance. If information is being faxed, our confidential
compliance fax number is (201) 459-9534 for communication use.
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In Witness Whereof, the parties hereto have executed this Agreement as
of the day and year set forth above.
M.H. Meyerson & Co., Inc. Telenetics Corporation
By: /S/ Michael Silvestri By: /S/ Michael A. Armani
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Michael Silvestri Michael A. Armani
President Chairman & Chief Executive Officer
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