TELENETICS CORPORATION
DEBENTURE PURCHASE AGREEMENT
----------------------------
This DEBENTURE PURCHASE AGREEMENT ("Agreement") made as of
this 2nd day of January 2001 between TELENETICS CORPORATION, a California
corporation, with its principal offices at 25111 Arctic Ocean, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company") and the undersigned ("Subscriber").
W I T N E S S E T H :
---------------------
WHEREAS, the Company desires to sell to the Subscriber and its
affiliates, in a private placement, $2,115,000 in principal amount of 7.0%
convertible subordinated debentures due January 2, 2003 (the "Debentures"), the
Debentures being convertible into shares of common stock, no par value per share
(the "Common Stock"), of the Company at $.67 per share, subject to adjustment;
and
WHEREAS, Subscriber desires to acquire the Debentures by the
payment of cash by wire transfer to the account of the Company by the Subscriber
(the "Purchase Price").
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto do hereby agree
as follows:
1. SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY
SUBSCRIBER.
1.1 Subject to the terms and conditions hereinafter
set forth, tSubscriber hereby subscribes for and agrees to purchase from the
Company the Debentures, in denominations of $1,000 or multiples thereof, subject
to the Company's right to sell to the Subscriber such Debentures in lesser
denominations as it may, in its sole and absolute discretion, deem necessary or
desirable. The Purchase Price is payable, at or prior to the closing of this
Agreement (the "Closing"), by wire transfer pursuant to written instruction to
be provided by the Company.
1.2 The Subscriber recognizes that the purchase of
the Debentures involves a high degree of risk in that (i) neither the Debentures
nor the shares of Common Stock issuable upon conversion of the Debentures (the
"Conversion Shares") have been registered under the Securities Act of 1933, as
amended ("1933 Act"), and the Company has no obligation to register the
Debentures or the Conversion Shares, except as set forth in Section 3 below;
(ii) an investment in the Debentures is highly speculative and only investors
who can afford the loss of their entire investment should consider investing in
the Company and the Debentures; (iii) the Subscriber may not be able to
liquidate the Subscriber's investment; (iv) the Debentures are unsecured debt
obligations of the Company and are subordinated to all other secured
indebtedness of the Company; and (v) the Subscriber could sustain the loss of
Subscriber's entire investment.
1.3 The Subscriber represents as follows:
(a) The Subscriber represents that the
Subscriber is an Accredited Investor (as defined in Rule 501 of Regulation D
promulgated under the ▇▇▇▇ ▇▇▇) as indicated by the Subscriber's responses to
the Confidential Investor Questionnaire and that the Subscriber is able to bear
the economic risk of an investment in the Debentures.
(b) The Subscriber acknowledges that the
Subscriber has significant prior investment experience, including investment in
non-listed and non-registered securities. The Subscriber recognizes the highly
speculative nature of this investment. The Subscriber acknowledges that the
Subscriber has carefully read the Company's Form 10-KSB for the fiscal year
ended December 31, 1999, the Company's Annual Report for the fiscal year ended
December 31, 1999, the Company's Form 10-QSB for the fiscal quarter ended March
31, 2000, as amended by the Company's Form 10-QSB/A dated July 25, 2000, the
Company's Form 10-QSB for the fiscal quarter ended June 30, 2000, the Company's
Form 10-QSB for the fiscal quarter ended September 30, 2000, the Company's Form
8-K dated January 21, 2000, the Company's Form 8-K/A dated March 22, 2000, the
Company's Form 8-K dated September 27, 2000, and the Company's Preliminary Proxy
Statement, dated December 15, 2000, filed in connection with the Company's 2001
Annual Meeting to be held on January 26, 2001.
(c) The Subscriber hereby acknowledges that
the Private Placement has not been reviewed by the United States Securities and
Exchange Commission ("SEC") or by a state securities regulator because it is
intended to be a nonpublic offering pursuant to Sections 4(2) and 4(6) of the
1933 Act and Rule 506 of Regulation D promulgated thereunder. The Subscriber
represents that the Debentures are being purchased for the Subscriber's own
account, for investment purposes only and not for distribution or resale to
others. The Subscriber agrees that the Subscriber will not sell or otherwise
transfer the Debentures unless they are registered under the 1933 Act or unless
an exemption from such registration is available.
(d) The Subscriber understands that the
Debentures have not been registered under the 1933 Act by reason of a claimed
exemption under the provisions of the 1933 Act which depends, in part, upon the
Subscriber's investment intention. In this connection, the Subscriber
understands that it is the position of the SEC that the statutory basis for such
exemption would not be present if the Subscriber's representation merely meant
that the Subscriber's present intention was to hold the Debentures for a short
period, such as the capital gains period of tax statutes, for a deferred sale,
for a market rise, or for any other fixed period. The Subscriber realizes that,
in the view of the SEC, a purchase now with an intent to resell after a
pre-determined amount of time would represent a purchase with an intent
inconsistent with the Subscriber's representation to the Company, and the SEC
might regard such a sale or disposition as a deferred sale to which such
exemptions are not available.
-2-
(e) The Subscriber understands that Rule 144
(the "Rule") promulgated by the SEC under the 1933 Act requires, among other
conditions, a one year holding period prior to the resale (in limited amounts
and subject to certain other restrictions) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the 1933 Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended, or
its dissemination to the public of any current financial or other information
concerning the Company, as is required by the Rule as one of the conditions of
its availability. The Subscriber understands and hereby acknowledges that the
Company is the only entity that can register the Debentures and the Conversion
Shares under the 1933 Act and that the Company is under no obligation to
register the Debentures or the Conversion Shares under the 1933 Act, with the
exception of certain registration obligations set forth in Section 3 below. The
Subscriber acknowledges that the Company may, if it desires, permit the transfer
of the Debentures out of the Subscriber's name only when the Subscriber's
request for transfer is accompanied by an opinion of counsel reasonably
satisfactory to the Company that neither the sale nor the proposed transfer
results in a violation of the 1933 Act or any applicable state "blue sky" laws.
(f) The Subscriber consents to the placement
of a legend on any certificate or other document evidencing the Debentures
stating that they have not been registered under the 1933 Act and under
applicable state securities laws and setting forth or referring to the
restrictions on transferability and sale thereof.
(g) The Subscriber understands that the
Company will review this Agreement and the Confidential Investor Questionnaire.
(h) The Subscriber hereby represents that
the address of Subscriber furnished by the Subscriber at the end of this
Agreement is the Subscriber's principal residence, if the Subscriber is an
individual, or its principal business address, if the Subscriber is a
corporation or other entity.
(i) The Subscriber has had a reasonable
opportunity to ask questions of and receive answers from the Company concerning
the Company and the Private Placement, and all such questions, if any, have been
answered to the full satisfaction of the Subscriber; and the Company shall
provide Subscriber with the opportunity to ask additional questions of and
receive answers (all of which information shall be limited to information in the
public realm) from the Company concerning the Company during the period which
the Subscriber owns the Debentures.
(j) The Subscriber has such knowledge and
expertise in financial and business matters that the Subscriber is capable of
evaluating the merits and risks involved in an investment in the Debentures.
-3-
(k) The Subscriber has full power and
authority to execute and deliver this Agreement and to perform the obligations
of the undersigned hereunder; and this Agreement is a legally binding obligation
of the undersigned enforceable in accordance with its terms.
(l) Except as set forth in this Agreement,
the Debentures and the public documents of the Company (including, but not
limited to, the Company's latest Form 10-KSB, Annual Report and Forms 10-QSB;
collectively, the "Public Documents"), no representations or warranties have
been made to the Subscriber by the Company, Taglich Brothers, Inc. (the
"Placement Agent") or any of their respective agents, employees or affiliates
and in entering into this transaction, the Subscriber is not relying on any
information, other than that contained in the Public Documents and the results
of an independent investigation by the Subscriber.
(m) The Subscriber agrees that Subscriber
will not sell or otherwise transfer the Debentures or the Conversion Shares
unless they are registered under the 1933 Act and applicable state "blue sky"
laws or unless an exemption from such registration is available. The Subscriber
represents that (i) the Subscriber has adequate means of providing for the
Subscriber's current needs and possible personal contingencies, (ii) the
Subscriber has no need for liquidity in this investment, (iii) the Subscriber is
able to bear the substantial economic risk of an investment in the Debentures
for an indefinite period, and (iv) at the present time the Subscriber could
afford a complete loss of such investment.
(n) It is understood that all documents,
records and books pertaining to this investment have been made available for the
inspection by the Subscriber's attorney and/or accountant and/or the
Subscriber's purchaser representative and the Subscriber, and that the books and
records of the Company will be available upon reasonable notice during business
hours at its principal place of business.
2. TERMS OF SUBSCRIPTION.
(a) The Offering of the Debentures is being made on a
"best efforts" basis.
3. REGISTRATION RIGHTS.
The Company covenants and agrees to register the
Conversion Shares and such additional shares or Common Stock that may be issued
pursuant to the anti-dilution rights granted in the Debentures on the terms and
conditions set forth in the Debentures.
4. MISCELLANEOUS.
4.1 All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) when delivered by hand, (b) one business day after the business day of
transmission if sent by facsimile (with receipt confirmed), provided that a copy
is mailed by certified mail, return receipt requested, or (c) two business days
after the business day of deposit with the carrier, if sent for next business
day delivery by Express Mail, Federal Express or other recognized express
delivery service (receipt requested), in each case addressed to the Company at
the address indicated on the first page of this Agreement marked "Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President", and to the Subscriber at the Subscriber's address
indicated on the last page of this Agreement (or to such other addresses, the
facsimile numbers as a party may designate as to itself by notice to the other
parties).
-4-
4.2 This Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged, and this
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by the party to be charged.
4.3 This Agreement shall be binding upon and inure to
the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter thereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
4.4 Notwithstanding the place where this Agreement
may be executed by any of the parties hereto, the parties expressly agree that
all the terms and provisions hereof shall be construed in accordance with and
governed by the laws of the State of New York. The parties hereby agree that any
dispute which may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in New York and they
hereby submit to the exclusive jurisdiction of the courts of the State of New
York and of the federal courts in New York with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they now
or hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Agreement or any acts or
omissions relating to the sale of the securities hereunder, and consent to the
service of process in any such action or legal proceeding by means of registered
or certified mail, return receipt requested, in case of the address set forth
below or such other address as the undersigned shall furnish in writing to the
other.
4.5 This Agreement may be executed in counterparts.
Upon the execution and delivery of this Agreement by the Subscriber, this
Agreement shall become a binding obligation of the Subscriber with respect to
the purchase of the Debentures as herein provided; subject, however, to the
right hereby reserved to the Company to enter into the same agreements with
other subscribers and to add and/or to delete other persons as subscribers.
4.6 The holding of any provision of this Agreement to
be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full force
and effect.
4.7 It is agreed that a waiver by either party of a
breach of any provision of this Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
4.8 The parties agree to execute and deliver all such
further documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Agreement.
-5-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
TO BE COMPLETED BY SUBSCRIBER
Dolphin Offshore Partners, L.P.
-------------------------------------
Print Name
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Partner
▇▇▇ ▇. ▇▇▇▇ ▇▇.
-------------------------------------
▇▇▇▇▇▇▇
▇▇ ▇▇ ▇▇▇▇▇
-------------------------------------
City State Zip Code
▇▇-▇▇▇▇▇▇▇
-------------------------------------
Social Security or Employer Identification
Number
$2,115,000.00
-------------------------------------
Purchase Price
SUBSCRIPTION ACCEPTED:
TELENETICS CORPORATION
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive
Officer
Date: January 2, 2001
-6-