EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made by and
between TELENETICS CORPORATION, a California corporation (the "COMPANY"), and
the undersigned (the "HOLDER") effective as of the date this Agreement is
accepted by the Company.
This Agreement is being entered into pursuant to the Common Stock
Purchase Agreement dated as of the date hereof between the Company and the
Holder (the "PURCHASE AGREEMENT") or pursuant to a Warrant to Purchase Shares of
Common Stock dated as of the date hereof issued by the Company in favor of the
Holder pursuant to the placement agent arrangement described in the Memorandum
("WARRANT"), as the case may be.
The Company and the Holder hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement or the Warrant, as
the case may be. As used in this Agreement, the following terms shall have the
following meanings:
"ADVICE" shall have meaning set forth in SECTION 3(M).
"AFFILIATE" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "CONTROL," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"BOARD" shall have meaning set forth in SECTION 3(N).
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of California generally are authorized or required by law or other
government actions to close.
"CLOSING DATE" means the date of the closing under the
Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, no par value
per share.
"EFFECTIVENESS DATE" means with respect to the Registration
Statement the earlier of (x) June 30, 2005 and (y) the date that is no later
than five (5) business days after the date on which the Commission informs the
Company that the Company may request the acceleration of the effectiveness of
the Registration Statement and the Company makes such request.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
SECTION 2.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FILING DATE" means April 30, 2005.
"HOLDER" or "HOLDERS" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
SECTION 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in
SECTION 5(c).
"LOSSES" shall have the meaning set forth in SECTION 5(A).
"MEMORANDUM" means the Company's Confidential Private
Placement Memorandum dated December 15, 2004 with respect to the offer and sale
of up to 15,285,714 shares of Common Stock.
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means (i) the Shares and (ii) any
securities issued or issuable with respect to such Shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"REGISTRATION STATEMENT" means the registration statements and
any additional registration statements contemplated by SECTION 2 and SECTION
7(C), including (in each case) the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference in
such registration statement.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
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"RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933.
"SHARES" means the shares of Common Stock issued or issuable
to the Holder pursuant to the terms of the Purchase Agreement or a Warrant, and
all other shares of Common Stock issued or issuable to all other Holders
pursuant to the terms of the Memorandum.
2. MANDATORY REGISTRATION.
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission a Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form). The
Company shall use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the Effectiveness Date, and to keep
such Registration Statement continuously effective under the Securities Act
until such date as is the earlier of (x) three years after the Closing Date, (y)
the date when all Registrable Securities covered by such Registration Statement
have been sold or (z) the date on which the Registrable Securities may be sold
without any restriction pursuant to Rule 144 as determined by the counsel to the
Company pursuant to a written opinion letter, addressed to the Company's
transfer agent to such effect (the "EFFECTIVENESS PERIOD").
(b) If the Registration Statement is not filed with the
Commission on or prior to the Filing Date, then as relief for the damages to any
holder by reason of any such delay, then within five (5) days after each thirty
(30)-day period, or any part thereof, that elapses beyond the Filing Date and
before the Registration Statement is filed with the Commission, the Company will
(x) pay a cash liquidated damages payment to each Holder who purchased Shares
pursuant to the Purchase Agreement, which payment shall be in an amount equal to
three percent (3%) of the purchase price paid by the Holder for the Shares and
(y) as liquidated damages, reduce the exercise price of each Warrant by an
amount equal to three percent (3%) of the initial exercise price of such
Warrant.
(c) If the Registration Statement is not declared effective by
the Commission on or before the Effectiveness Date, then within five (5) days
after each thirty (30)-day period, or any part thereof, that elapses beyond the
Effectiveness Date and before the Registration Statement is declared effective
by the Commission, the Company will (x) pay a cash liquidated damages payment to
each Holder who purchased Shares pursuant to the Purchase Agreement, which
payment shall be in an amount equal to two percent (2%) of the purchase price
paid by the Holder for the Shares and (y) as liquidated damages, reduce the
exercise price of each Warrant by an amount equal to two percent (2%) of the
initial exercise price of such Warrant.
(d) If the Company is unable to keep the Registration
Statement continuously effective under the Securities Act throughout the
Effectiveness Period as required pursuant to SECTION 2(A) above, then except
with regard to (x) grace periods of thirty (30) days during which a
post-effective amendment is required to be filed to include in such Registration
Statement material information previously not included in such Registration
Statement, or to correct a material misstatement set forth in such Registration
Statement, in each case due to facts or circumstances arising subsequent to the
effectiveness of such Registration Statement or any post-effective amendment, or
to otherwise provide information necessary to comply with Section 10(a)(3) of
the Securities Act regarding the age of financial statements included therein,
provided that the Company is using its best efforts to prepare and file such
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post-effective amendment as soon as practicable and the Company is using its
best efforts to have such post-effective amendment declared effective by the
Commission) and (y) grace periods of ten (10) trading days for the preparation
and filing with the Commission of any prospectus supplement, the Company shall
within five (5) days after each thirty-(30) day period, or portion thereof,
elapsed after the termination of the grace period and prior to the date that the
post-effective amendment is declared effective or the prospectus supplement is
filed with the Commission, (i) pay a cash liquidated damages amount to each
Holder who purchased Shares pursuant to the Purchase Agreement, which payment
shall be in an amount equal to two percent (2%) of the purchase price paid by
the Holder for the Shares then held by the Holder, and (ii) reduce the exercise
price of each Warrant by an amount equal to two percent (2%) of the initial
exercise price of such Warrant.
(e) Notwithstanding anything to the contrary contained herein,
the maximum aggregate cash liquidated damages payment and/or the maximum
aggregate liquidated damages Warrant exercise price reduction for each Holder
shall be thirty-six percent (36%).
3. REGISTRATION PROCEDURES.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form) in accordance with the method
or methods of distribution thereof as specified by the Holders, and use its best
efforts to cause the Registration Statement to become effective and remain
effective as provided herein; PROVIDED, HOWEVER, that not less than three (3)
Business Days prior to the filing of the Registration Statement or any related
Prospectus or any amendment or supplement thereto (including any document that
would be incorporated therein by reference), the Company shall (i) furnish to
the Holders copies of all such documents proposed to be filed, which documents
(other than those incorporated by reference) will be subject to the review of
such Holders, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in writing within two (2) Business Days of
their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
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(c) Notify the Holders of Registrable Securities to be sold as
promptly as possible (and, in the case of (i)(A) below, not less than three (3)
days prior to such filing) and (if requested by any such Person) confirm such
notice in writing no later than one (1) Business Day following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of
the Registrable Securities, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Company reasonably agrees should be included therein and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(f) Make available to each Holder, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto as such Persons may reasonably request; and
the Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto, during periods in which such Prospectus and each amendment
or supplement thereto are effective, by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
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(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any material tax in any such jurisdiction where it is not
then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall, if
required under the terms of this Agreement, be free of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any Holder may request within the applicable time
periods prescribed for the issuance of shares upon exercise of a Warrant.
(j) Upon the occurrence of any event contemplated by SECTION
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an 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 the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the OTC Bulletin Board,
Nasdaq SmallCap Market, Nasdaq National Market, American Stock Exchange and any
other securities exchange, quotation system or market, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) If the Registration Statement refers to any Holder by name
or otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
SECTION 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
SECTION 3(c), (ii) it and its officers, directors or Affiliates, if any, will
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comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement and (iii) it will furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
The Company will use its best efforts to ensure that the use
of the Prospectus may be resumed as promptly as practicable. The Company agrees
and acknowledges that any periods during which the Holder is required to
discontinue the disposition of the Registrable Securities are subject to the
provisions of SECTION 2(d) above.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in SECTION 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by SECTION 3(j), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "BOARD") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed 20
consecutive days, provided that the Company may not postpone or suspend its
obligation under this SECTION 3(N) for more than 45 days in the aggregate during
any 12-month period; provided, however, that no such postponement or suspension
shall be permitted for consecutive 20-day periods, arising out of the same set
of facts, circumstances or transactions.
4. REGISTRATION EXPENSES.
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in this SECTION 4, shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the OTC
Bulletin Board, Nasdaq SmallCap Market, Nasdaq National Market, American Stock
Exchange and each other securities exchange or market on which Registrable
Securities are required hereunder to be listed, (B) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and the NASD Regulation, Inc. and (C) in compliance with state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
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this Agreement, including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
the Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls the Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "LOSSES") (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review), as incurred, arising solely
out of based solely upon any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising solely out of or based solely upon any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that such untrue statements or omissions are based solely upon information
regarding the Holder or such other Indemnified Party furnished in writing to the
Company by the Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or the Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by the Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holder promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDER. The Holder shall indemnify and
hold harmless the Company, the directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review), as
incurred, arising solely out of or based solely upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus or form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
solely out of or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, to the extent, but only to the extent,
that such untrue statement or omission or alleged untrue statement or omission
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is contained in any information so furnished in writing by the Holder or other
Indemnified Party to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to the
Holder or the Holder's proposed method of distribution of Registrable Securities
and was reviewed and expressly approved in writing by the Holder expressly for
use in the Registration Statement, such Prospectus or such form of Prospectus.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
PROVIDED, HOWEVER, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel (which shall be reasonably
acceptable to the Indemnifying Party) that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld or delayed. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this SECTION 5) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; PROVIDED,
HOWEVER, that the Indemnifying Party may require such Indemnified Party to
undertake to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under SECTION
5(a) or SECTION 5(b) is unavailable to an Indemnified Party because of a failure
or refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
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statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in SECTION 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this SECTION 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. RULE 144.
Provided the Company is subject to the reporting requirements
of the Exchange Act, as long as the Holder owns Shares, the Company covenants to
use its best efforts to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish or make available to the Holders true and complete
copies of all such filings. As long as the Holder owns Shares, if the Company is
not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
Act, the Company will prepare and furnish to the Holder and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company further
covenants that it will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable such Person to
sell Shares without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions relating to such sale pursuant to Rule
144. Upon the request of the Holder, the Company shall deliver to the Holder a
written certification of a duly authorized officer as to whether it has complied
with such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by
the Holder, of any of their obligations under this Agreement, the Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and the Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
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(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of
its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holder in this Agreement or
otherwise conflicts with the provisions hereof.
(c) PIGGY-BACK REGISTRATIONS. If at any time when there is not
an effective Registration Statement covering the Registrable Securities, the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within ten (10) days after receipt of such notice, any
such holder shall so request in writing, (which request shall specify the
Registrable Securities intended to be disposed of by the Holders), the Company
will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holder, to
the extent requisite to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with SECTION 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this SECTION 7(c) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities the Holder requests to be registered; PROVIDED, HOWEVER, that the
Company shall not be required to register any Registrable Securities pursuant to
this SECTION 7(c) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities, would adversely affect the
offering contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement of fewer or
none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; PROVIDED, HOWEVER, that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
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affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(e) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., California
time, on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice later than 5:00 p.m., California time, on
any date and earlier than 11:59 p.m., California time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder at its address set forth in the Subscriber
Questionnaire completed in connection with the Purchase Agreement, or with
respect to the Company, addressed to:
Telenetics Corporation
▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to ▇▇▇▇▇ &
▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of the Holder and its successors and
permitted assigns. The Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the Holder.
Each Holder may assign its rights hereunder in the manner and to the Persons as
permitted under this Agreement and the Purchase Agreement.
(g) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Holder to any Affiliate of the Holder or any
other Holder or Affiliate of any other Holder of all or a portion of the
Registrable Securities if: (i) the Holder agrees in writing with the transferee
or assignee to assign such rights, and a copy of such 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) following such transfer or assignment the further
disposition of such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws, (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of
this Section, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. In addition, each Holder shall have the right to assign its rights
hereunder to any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld. The rights to assignment shall
apply to the Holders (and to subsequent) successors and assigns.
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(h) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to principles of conflicts of law thereof.
(j) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(l) HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement effective as of the date indicated below as the date the
Agreement is accepted by the Company.
COMPANY:
TELENETICS CORPORATION
By:
-----------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer
Date: December 23, 2004
HOLDER:
INDIVIDUALS ENTITIES
-------------------------------------- -----------------------------------
Print Name Print Name of Subscriber
-------------------------------------- -----------------------------------
Signature Authorized Signature
-------------------------------------- -----------------------------------
Signature (if Joint Tenants Print Name of Signatory and
or Tenants in Common) Capacity in which Signed
Date: December ___, 2004
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