THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("1933 ACT"), OR ANY STATE SECURITIES LAWS AND SHALL NOT
BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED, WHETHER OR
NOT FOR CONSIDERATION, BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF
A FAVORABLE OPINION OF ITS COUNSEL OR THE SUBMISSION TO THE COMPANY OF SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER
CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933
ACT AND APPLICABLE STATE SECURITIES LAWS.
TELENETICS CORPORATION
Common Stock Purchase Warrant
to
Purchase ________ Shares
of
Common Stock
This Common Stock Purchase Warrant is issued to:
(name)
--------------------------------
(address)
--------------------------------
--------------------------------
by TELENETICS CORPORATION, a California corporation (hereinafter called the
"Company", which term shall include its successors and assigns).
FOR VALUE RECEIVED and subject to the terms and conditions hereinafter
set out, the registered holder of this Warrant as set forth on the books and
records of the Company (the "Holder") is entitled upon surrender of this Warrant
to purchase from the Company _______ ___________________________ (______) fully
paid and nonassessable shares of Common Stock, no par value per share (the
"Common Stock"), at the Exercise Price (as defined below) per share.
This Warrant shall expire at the close of business on June 30, 2005
(the "Expiration Date").
1. (a) The right to purchase shares of Common Stock represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company at 25111 Arctic Ocean, Lake Forest, California 92630 (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), and
upon payment to the Company, by cash or by certified check or bank draft, of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be deemed to be issued to the Holder as the record
owner of such shares of Common Stock as of the close of business on the date on
which this Warrant shall have been surrendered and payment shall have been made
<PAGE>
for such shares of Common Stock as aforesaid. Certificates for the shares of
Common Stock so purchased (together with a cash adjustment in lieu of any
fraction of a share) shall be delivered to the Holder within a reasonable time,
not exceeding five (5) business days, after the rights represented by this
Warrant shall have been so exercised, and, unless this Warrant has expired, a
new Warrant representing the number of shares of Common Stock, if any, with
respect to which this Warrant shall not then have been exercised, in all other
respects identical with this Warrant, shall also be issued and delivered to the
Holder within such time, or, at the request of the Holder, appropriate notation
may be made on this Warrant and the same returned to the Holder.
(b) This Warrant may be exercised to acquire, from and after
the date hereof, the number of shares of Common Stock set forth on the first
page hereof (subject to adjustments described in this Warrant); provided,
however, the right hereunder to purchase such shares of Common Stock shall
expire at the close of business on the Expiration Date.
2. This Warrant is being issued by the Company pursuant to the terms of
a Settlement Agreement and Release dated as of June 30, 2000 (the "Settlement").
3. The Company covenants and agrees that all Common Stock upon issuance
against payment in full of the Exercise Price by the Holder pursuant to this
Warrant will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof (except to the extent
resulting from the Holder's own circumstances, actions or omissions); and,
without limiting the generality of the foregoing, the Company covenants and
agrees that it will take from time to time all such action as may be requisite
to assure that the par value per share of the Common Stock is at all times equal
to or less than the then effective Exercise Price. The Company further covenants
and agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will have at all times authorized, and
reserved for the purpose of issue or transfer upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant, and will
procure at its sole expense upon each such reservation of shares the listing
thereof (subject to issuance or notice of issuance) on all stock exchanges on
which the Common Stock is then listed or inter-dealer trading systems on which
the Common Stock is then traded. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
national securities exchange upon which the Common Stock may be listed or
inter-dealer trading system on which the Common Stock is then traded. The
Company will not take any action which would result in any adjustment in the
number of shares of Common Stock purchasable hereunder if the total number of
shares of Common Stock issuable pursuant to the terms of this Warrant after such
action upon full exercise of this Warrant and, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and other rights to purchase shares of Common Stock then
outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Restated and Amended Articles of Incorporation, as
then amended.
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<PAGE>
4. The Initial Exercise Price is $5.00 per share of Common Stock
("Initial Exercise Price"). The Initial Exercise Price shall be adjusted as
provided for below in this Section 4 (the Initial Exercise Price, and the
Initial Exercise Price, as thereafter then adjusted, shall be referred to as the
"Exercise Price") and the Exercise Price from time to time shall be further
adjusted as provided for below in this Section 4. Upon each adjustment of the
Exercise Price, the Holder shall thereafter be entitled to receive upon exercise
of this Warrant, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by (i) multiplying the Exercise 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 Exercise Price resulting from such
adjustment. The Exercise Price shall be adjusted as follows:
(i) In the case of any amendment to the Company's Restated and
Amended Articles of Incorporation to change the designation of the
Common Stock or the rights, privileges, restrictions or conditions in
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 which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. The provisions of
this Subsection 4(i) shall apply in the same manner to successive
reclassifications, changes, consolidations and mergers.
(ii) If the Company 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 Exercise 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 Exercise Price in effect
immediately prior to such combination shall be proportionately
increased.
(iii) If any capital reorganization or reclassification of the
capital stock of the Company, or any consolidation or merger of the
Company with or into another corporation or other entity, or the sale
of all or substantially all of the Company'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
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<PAGE>
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 Exercise 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, in relation to any shares of stock,
securities, other evidence of equity ownership or assets thereafter
deliverable upon the exercise hereof (including an immediate
adjustment, by reason of such consolidation or merger, of the Exercise
Price to the value for the Common Stock reflected by the terms of such
consolidation or merger if the value so reflected is less than the
Exercise Price in effect immediately prior to such consolidation or
merger). 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 Exercise 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 Company shall, at any time prior to exercise
of this Warrant, consolidate or merge with any other corporation or
other entity (where the Company is not the surviving entity) or
transfer all or substantially all of its assets to any other
corporation or other entity, then the Company 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.
Whenever the Exercise Price shall be adjusted pursuant to this
Section 4, the Company shall issue a certificate signed by its President or Vice
President and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors of the Company made any determination hereunder), and the Exercise
Price after giving effect to such adjustment, and shall cause copies of such
certificates to be mailed (by first-class mail, postage prepaid) to the Holder
of this Warrant.
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 Company shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Exercise Price then in
effect.
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<PAGE>
5. The Holder shall, with respect to the shares of Common Stock
issuable upon the exercise of this Warrant, have the registration rights set
forth in the Settlement pursuant to which the Company is, among other things,
issuing this Warrant. Such registration rights are incorporated herein by this
reference as if such provisions had been set forth herein in full.
6. This Warrant need not be changed because of any change in the
Exercise Price or in the number of shares of Common Stock purchased hereunder.
7. The terms defined in this paragraph, whenever used in this Warrant,
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified. The term "Common Stock" shall mean and include the
Company's Common Stock, no par value per share, authorized on the date of the
original issue of this Warrant and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets of the
character referred to in Section 4 hereof, the stock, securities or assets
provided for in such paragraph. The term "Company" shall also include any
successor corporation to Telenetics Corporation by merger, consolidation or
otherwise. The term "outstanding" when used with reference to Common Stock shall
mean at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company. The term "1933 Act" shall mean the Securities Act of
1933, as amended, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission, or any other federal
agency then administering the 1933 Act, thereunder, all as the same shall be in
effect at the time.
8. This Warrant is exchangeable, upon the surrender hereby by the
Holder at the office or agency of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares of Common Stock as shall be designated by the Holder at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any such new
Warrants and, in the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity, reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender or cancellation of this Warrant or such
new Warrants, the Company will issue to the Holder a new Warrant of like tenor,
in lieu of this Warrant or such new Warrants, representing the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
9. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. This Warrant shall not entitle the Holder to any
voting rights or any rights as a shareholder of the Company. The rights and
obligations of the Company, of the Holder, and of any holder of shares of Common
Stock issuable hereunder, shall survive the exercise of this Warrant.
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<PAGE>
10. This Warrant sets forth the entire agreement of the Company and the
Holder of the Common Stock issuable upon the exercise of this Warrant with
respect to the rights of the Holder and the Common Stock issuable upon the
exercise of this Warrant.
11. The validity, interpretation and performance of this Warrant and
each of its terms and provisions shall be governed by the laws of the State of
California, without regard to choice of law principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal and dated as of June 30,
2000.
TELENETICS CORPORATION
By:
-------------------------------------
Name: Michael A. Armani
Title: President
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