EXHIBIT 10.8:
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April 7,
2003, by and between Flexxtech Corporation, a company organized under the laws
of state of Nevada, with its principal executive office at 00 Xxxxxxxxxx Xx.,
Xxxxx 000X, Xxxxxx, XX (the "Company"), and the undersigned investor (the
"Investor").
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement between the Investor and the Company (the "Subscription
Agreement"), the Company has agreed to issue and sell to the Investor
convertible debentures of the Company (the "Debentures"), which will be
convertible into shares of the common stock, $.001 par value per share (the
"Common Stock"), of the Company.
WHEREAS, to induce the Investor to execute and deliver the Subscription
Agreement and the Investment Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute
(collectively, the "1933 Act"), and applicable state securities laws, with
respect to the shares of Common Stock issuable pursuant to the Subscription
Agreement and Debenture.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained hereinafter and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Closing Date" means the date funds are received by the Company
pursuant to the Subscription Agreement.
b. "Holder" means the Investor.
c. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
d. "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
Registration Statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the Registration Statement would be detrimental to the business and affairs of
the Company, or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a Registration Statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the Registration Statement would be
materially misleading absent the inclusion of such information.
e. "Principal Market" means either The American Stock Exchange, Inc., The
New York Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq SmallCap
Market, the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board or the proposed BBX, whichever is the principal market on which
the Common Stock is listed.
f. "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing with the United States Securities and Exchange
Commission (the "SEC") one or more Registration Statements in compliance with
the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("Rule 415"), and
effectiveness of such Registration Statement(s).
g. "Registrable Securities" means the shares of Common Stock issued or
issuable (i) pursuant to the Subscription Agreement, (ii) any shares of capital
stock issued or issuable with respect to the such shares of Common Stock and
Warrants, if any, as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, which have not been
(x) included in a Registration Statement that has been declared effective by the
SEC, or (y) sold under circumstances meeting all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the 1933 Act.
h. "Registration Statement" means a registration statement of the Company
filed under the 1933 Act.
i. "Debenture" means the convertible debenture issued by the Company to
the Investor.
j. Face Amount means $40,000 to be invested by Dutchess Private Equities
Fund, LP
All capitalized terms used in this Agreement and not otherwise
defined herein shall have the same meaning ascribed to them as in the
Subscription Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare,
and, as soon as practicable file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form
SB-2 (or, if such form is unavailable for such a registration,
on such other form as is available for such a registration),
covering the resale of all of the Registrable Securities,
which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such
Registration Statement also covers such indeterminate number
of additional shares of Common Stock as may become issuable
upon stock splits, stock dividends or similar transactions.
The Company shall initially register for resale 1,100,000
shares of Common Stock which would be issuable on the date
preceding the filing of the Registration Statement based on
the closing bid price of the Company's Common Stock on such
date and the amount reasonably calculated that represents the
number of shares issuable pursuant to the terms of the
Offering. In the event the Company cannot register sufficient
shares of Common Stock, due to the remaining number of
authorized shares of Common Stock being insufficient, the
Company will use its best efforts to register the maximum
number of shares it can based on the remaining balance of
authorized shares and will use its best efforts to increase
the number of its authorized shares as soon as reasonably
practicable.
b. The Company shall use its best efforts to have the Registration
Statement filed with the SEC within thirty (30) calendar days after the Closing
Date. If the Registration Statement covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof is not filed within
thirty (30) calendar days following the Closing Date, then the Company shall pay
the Investor the sum of two percent (2%) of the of the Debentures outstanding as
liquidated damages, and not as a penalty, for each thirty (30) calendar day
period, pro rata, following the thirty (30) calendar day period until the
Registration Statement is filed compounded daily. In addition, for each sixty
(60) calendar period, the Conversion Price of the Debentures will decrease by
two percent (2%).
Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this Section shall not be payable to the extent any delay in the
filing of the Registration Statement occurs because of an act of, or a failure
to act or to act timely by the Investor. The damages set forth in this Section
shall continue until the obligation is fulfilled and shall be paid within three
(3) business days after each thirty (30) day period, or portion thereof, until
the Registration Statement is filed. Failure of the Company to make payment
within said three (3) business days shall be considered a default.
The Company acknowledges that its failure to have the
Registration Statement filed within said thirty (30) calendar day period will
cause the Investor to suffer damages in an amount that will be difficult to
ascertain. Accordingly, the parties agree that it is appropriate to include in
this Agreement a provision for liquidated damages. The parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to quantify such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to register the Common Stock and deliver the Common
Stock pursuant to the terms of this Agreement, the Subscription Agreement and
the Debenture.
c. The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC within ninety (90) calendar days after
the Closing Date. If the Registration Statement covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
has not become effective within ninety (90) calendar days following the Closing
Date, then the Company shall pay the Investor the sum of two percent (2%) of the
amount of the Debentures outstanding as liquidated damages and not as a penalty
for each thirty (30) calendar day period, pro rata, following the ninety (90)
calendar day period until the Registration Statement is declared effective.
If the Registration Statement covering the Registrable Securities
required to be filed by the Company pursuant to Section 2(a) hereof has become
effective, but after the effective date the Investor's right to sell is
suspended, then the Company shall pay the Investor the sum of 2% of the purchase
price plus interest and penalties due to the Investor for the
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Registrable Securities pursuant to the Subscription Agreement for each thirty
(30) calendar day period, pro rata, following the suspension until such
suspension ceases.
Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this Section shall not be payable to the extent any delay in the
effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Investor. The damages set forth in this
Section shall continue until the obligation is fulfilled and shall be paid
within three (3) business days after each thirty (30) day period, or portion
thereof, until the Registration Statement is declared effective or such
suspension is released. Failure of the Company to make payment within said three
(3) business days shall be considered a default.
The Company acknowledges that its failure to have the
Registration Statement become effective within said ninety (90) calendar day
period or to permit the suspension of the effectiveness of the Registration
Statement, will cause the Investor to suffer damages in an amount that will be
difficult to ascertain. Accordingly, the parties agree that it is appropriate to
include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to quantify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement, the
Subscription Agreement and the Debenture.
d. The Company agrees not to include any other securities, in this
Registration Statement without Investor prior written consent, unless for the
Investor. Furthermore, the Company agrees that it will not file any other
Registration Statement, including those on Form S-8, for other securities (other
than those for existing option holders, strategic partners or in connection with
a merger or acquisition), until one hundred and eighty (180) calendar days after
the Registration Statement for the Registrable Securities is declared effective
unless it has written approval from the Investor. Failure to obtain written
approval from the Investor will cause the Investor to suffer damages that will
be difficult to ascertain. Accordingly, the parties agree that it is appropriate
to include a provision for liquidated damages and the Company agrees to pay, the
Investor the sum of two percent (2%) of the amount of the Debentures outstanding
as liquidated damages and not as a penalty for each thirty (30) calendar day
period, pro rata, until the unauthorized Registration Statement is withdrawn.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, with respect
thereto, the Company shall have the following obligations:
a. The Company shall use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective within
ninety (90) calendar days after the date and shall keep such Registration
Statement effective pursuant to Rule 415 until the earlier of (i) the date as of
which the Investor may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act or (ii) the
date on which (A) the Investor shall have sold all the Registrable Securities
and (B) the Investor has no right to convert the Shares it owns into Common
Stock under the Subscription Agreement respectively (the "Registration Period"),
which Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. The Company shall respond to all SEC comments
within seven (7) business days of receipt by the Company. If the Company fails
to respond within seven (7) business days of receipt of SEC comments, the
Company shall pay to the Investor a cash amount within three (3) business days
of the end of the month equal to 2% per month, on a pro rata basis, of the
amount paid to purchase the Debentures then outstanding, as liquidated damages
and not as a penalty; provided that the seven (7) business day period provided
herein shall be extended as may be required by delays caused by Holders' counsel
pursuant to paragraph 3g below, and, provided further, that such seven (7)
business day period shall be extended two (2) business days for responses to SEC
staff accounting comments. The Company shall cause the Registration Statement
relating to the Registrable Securities to become effective no later than three
(3) business days after notice from the SEC that the Registration Statement may
be declared effective. Failure to do so will result in the Debenture's
Conversion Price to be lessened one percent (1%) per day the Company does not
request acceleration from the SEC.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to
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Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the Investor thereof as set forth in such Registration Statement.
In the event the number of shares of Common Stock available under a Registration
Statement filed pursuant to this Agreement is at any time insufficient to cover
all of the Registrable Securities, the Company shall amend such Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within thirty
(30) calendar days after the necessity therefor arises (based on the then
Purchase Price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely), assuming the Company has sufficient
authorized shares at that time, and if it does not, within thirty (30) calendar
days after such shares are authorized. The Company shall use it best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof.
Prior to conversion of all the Shares, if at any time the conversion of
all the Shares outstanding would result in an insufficient number of authorized
shares of Common Stock being available to cover all the conversions, then in
such event, the Company will move to call and hold a shareholder's meeting
within thirty (30) calendar days of such event for the sole purpose of
authorizing additional shares of Common Stock to facilitate the conversions. In
such an event the Company shall recommend to all shareholders and management of
the Company to vote their shares in favor of increasing the authorized number of
shares of Common Stock. The Company represents and warrants that under no
circumstances will it deny or prevent Purchaser's right to convert the Shares as
permitted under the terms of this Subscription Agreement or this Registration
Rights Agreement. The investor retains the right to request additional shares
upon the determination the company may not be able to facilitate conversions in
the future.
c The Company shall furnish to the Investor whose Registrable Securities
are included in any Registration Statement and its legal counsel without charge
(i) promptly after the same is prepared and filed with the SEC at least one copy
of such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, the prospectus included in such Registration Statement (including
each preliminary prospectus) and, with regards to such Registration
Statement(s), any correspondence by or on behalf of the Company to the SEC or
the staff of the SEC and any correspondence from the SEC or the staff of the SEC
to the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as the Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as the
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by a Registration Statement under the
applicable securities or "blue sky" laws of such states of the United States as
specified by the Holder, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Holder who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Holder in writing of the happening of any event as a
result of which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, ("Registration Default") and use all diligent efforts to promptly
prepare a supplement or amendment to such Registration Statement and take any
other necessary steps to cure the Registration Default, (which, if such
Registration Statement is on Form S-3, may
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consist of a document to be filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be
incorporated by reference in the prospectus) to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to each
Holder (or such other number of copies as such Holder may reasonably request).
Failure to cure the Registration Default within five (5) business days shall
result in the Company paying liquidated damages of 2.0% of the price paid to
purchase the Shares then held by the Holders for each thirty (30) calendar day
period or portion thereof, beginning on the date of suspension. The Company
shall also promptly notify each Holder in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Holder by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate, (iv) in the event the Registration Statement is no longer
effective or, (v) the Registration Statement is stale for a period of more than
five (5) Trading Days as a result of the Company's failure to timely file its
financials.
The Company acknowledges that its failure to cure the Registration
Default within ten (10) business days will cause the Investor to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty.
It is the intention of the parties that interest payable under any of
the terms of this Agreement shall not exceed the maximum amount permitted under
any applicable law. If a law, which applies to this Agreement which sets the
maximum interest amount, is finally interpreted so that the interest in
connection with this Agreement exceeds the permitted limits, then: (1) any such
interest shall be reduced by the amount necessary to reduce the interest to the
permitted limit; and (2) any sums already collected (if any) from the Company
which exceed the permitted limits will be refunded to the Company. The Investor
may choose to make this refund by reducing the amount that the Company owes
under this Agreement or by making a direct payment to the Company. If a refund
reduces the amount that the Company owes the Investor, the reduction will be
treated as a partial payment. In case any provision of this Agreement is held by
a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Agreement will
not in any way be affected or impaired thereby.
f. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Holder who holds Registrable Securities being sold of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall permit each Holder and a single firm of counsel,
designated as selling shareholders' counsel by the Holders who hold a majority
of the Registrable Securities being sold, to review and comment upon a
Registration Statement and all amendments and supplements thereto at least seven
(7) business days prior to their filing with the SEC, and not file any document
in a form to which such counsel reasonably objects. The Company shall not submit
to the SEC a request for acceleration of the effectiveness of a Registration
Statement or file with the SEC a Registration Statement or any amendment or
supplement thereto without the prior approval of such counsel, which approval
shall not be unreasonably withheld.
h. At the request of any Holder, the Company shall cause to be furnished
to such Holder, on the date of the effectiveness of a Registration Statement, an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in the form of Exhibit D attached to the
Subscription Agreement.
i. The Company shall make available for inspection by (i) any Holder and
(ii) one firm of attorneys and one firm of accountants or other agents retained
by the Holders (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to a Holder) or use of any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the
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disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required under the 1933
Act, (b) the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement of which the Inspector has knowledge. Each Holder agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
k. The Company shall use its best efforts to secure designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding sentence, it shall use its
best efforts to cause all the Registrable Securities covered by any Registration
Statement to be listed on each other national securities exchange and automated
quotation system, if any, on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or system. If,
despite the Company's best efforts, the Company is unsuccessful in satisfying
the two preceding sentences, it will use its best efforts to secure the
inclusion for quotation with Pink Sheets, LLC. The Company shall pay all fees
and expenses in connection with satisfying its obligation under this Section
3(k).
l. The Company shall cooperate with the Investor to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Holders may reasonably request and registered in such
names of the Persons who shall acquire such Registrable Securities from the
Holders, as the Holders may request.
m. The Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first Registration Statement
filed pursuant hereto.
n. If requested by the Holders holding a majority of the Registrable
Securities, the Company shall (i) as soon as reasonably practical incorporate in
a prospectus supplement or post-effective amendment such information as such
Holders reasonably determine should be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by such Holders.
o. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
p. The Company shall make generally available to its security holders as
soon as reasonably practical, but not later than ninety (90) calendar days after
the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 0000 Xxx) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of any Registration Statement.
q. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
r. Within one (1) business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall
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cause legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities, with copies to the Investor, confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A. Failure to do so will result in the discount on
the convertible increasing by one percentage point per day not filed.
s. At or prior to the date of the first Conversion Notice (as that term is
defined in the Subscription Agreement) and at such other times as the Holders
may reasonably request, the Company shall cause to be delivered, letters from
the Company's independent certified public accountants (i) addressed to the
Holders that such accountants are independent public accountants within the
meaning of the 1933 Act and the applicable published rules and regulations
thereunder, and (ii) in customary form and covering such financial and
accounting matters as are customarily covered by letters of independent
certified public accountants delivered to underwriters in connection with public
offerings.
t. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Holders of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE HOLDERS.
a. At least five (5) calendar days prior to the first
anticipated filing date of a Registration Statement the
Company shall notify each Holder in writing of the information
the Company requires from each such Holder if such Holder
elects to have any of such Holder's Registrable Securities
included in such Registration Statement. It shall be a
condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Holder
that such Holder shall furnish in writing to the Company such
information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the
Registrable Securities held by it as shall reasonably be
required to effect the registration of such Registrable
Securities and shall execute such documents in connection with
such registration as the Company may reasonably request. Each
Holder covenants and agrees that, in connection with any
resale of Registrable Securities by it pursuant to a
Registration Statement, it shall comply with the "Plan of
Distribution" section of the current prospectus relating to
such Registration Statement.
b. Each Holder, by such Holder's acceptance of the
Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in
writing of such Holder's election to exclude all of such
Holder's Registrable Securities from such Registration
Statement.
c. Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind
described in Section 3(f) or the first sentence of 3(e), such
Holder will immediately discontinue disposition of Registrable
Securities pursuant to any Registration Statement(s) covering
such Registrable Securities until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated
by Section 3(f) or the first sentence of 3(e).
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printing and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
- To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Holder who holds such Registrable
Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls, any Holder within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, attorneys'
fees,
7
amounts paid in settlement or expenses, joint or several (collectively,
"Claims"), incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Holders and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus were timely made available by the Company pursuant to Section 3(c);
(ii) shall not be available to the extent such Claim is based on (a) a failure
of the Holder to deliver or to cause to be delivered the prospectus made
available by the Company or (b) the Indemnified Person's use of an incorrect
prospectus despite being promptly advised in advance by the Company in writing
not to use such incorrect prospectus; and (iii) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holders pursuant to the
Registration Statement.
- In connection with any Registration Statement in which a Holder is
participating, each such Holder agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Holder
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c), such Holder will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and the agreement with respect to contribution contained in Section
7 shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Holder, which consent
shall not be unreasonably withheld; provided, further, however, that the Holder
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the resale of the Registrable Securities by the Holders pursuant to the
Registration Statement. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus were corrected on a timely basis in the
prospectus, as then amended or supplemented.
- Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any
8
governmental action or proceeding) involving a Claim, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such counsel shall be selected by Holders holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates, if the Holders are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully appraised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim. Following indemnification
as provided for hereunder, the indemnifying party shall be surrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
- The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
- The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Holders the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Holders to sell securities of the Company to
the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
9
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and
the 1934 Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall
limit the Company's obligations under Section 4(c) of the
Subscription Agreement) and the filing of such reports and
other documents is required for the applicable provisions of
Rule 144; and
c. furnish to the Investor, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Investor to sell such securities pursuant to Rule 144 without
registration.
9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Holders who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Holder and the Company. No such amendment shall be effective to the
extent that it applies to less than all of the Holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a Holder of Registrable Securities whenever
such Person owns of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
b. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Xxxx Xxxxxxx, President
Flexxtech Corporation
00 Xxxxxxxxxx Xx., Xxxxx 000X,
Xxxxxx, XX
Telephone:
Facsimile:
If to the Investor:
At the address listed in the Questionnaire.
Each party shall provide five (5) business days prior notice to the
other party of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. All disputes arising under this agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws. The parties to this agreement
will submit all disputes arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA"). The arbitrator shall be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an
10
attorney admitted to practice law in the Commonwealth of Massachusetts. No party
to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
e. This Agreement and the Transaction Documents (as defined in the
Subscription Agreement) constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein.
f. This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, all of
which taken together shall constitute one instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile signature
of a party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
i. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. All consents and other determinations to be made by the Holders
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Holders holding a majority of the Registrable Securities.
k. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written.
FLEXXTECH CORPORATION
By: ____________________________________
Name: Xxxx Xxxxxxx
Title: President
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: ________________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: A Managing Member
11
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Date: __________
[TRANSFER AGENT]
Re: Flexxtech Corporation
Ladies and Gentlemen:
We are counsel to Flexxtech Corporation, a Nevada corporation (the
"Company"), and have represented the Company in connection with that certain
Subscription Agreement (the "Subscription Agreement") entered into by and among
the Company and _________________________ (the "Investor") pursuant to which the
Company has agreed to issue to the Investor shares of the Company's common
stock, $.001 par value per share (the "Common Stock") on the terms and
conditions set forth in the Subscription Agreement. Pursuant to the Subscription
Agreement, the Company also has entered into a Registration Rights Agreement
with the Investor (the "Registration Rights Agreement") pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock issued or issuable under the Subscription Agreement under the Securities
Act of 1933, as amended (the "1933 Act"). In connection with the Company's
obligations under the Registration Rights Agreement, on ____________ ___, 2003,
the Company filed a Registration Statement on Form S- ___ (File No.
333-________) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities which names the
Investor as a selling shareholder thereunder.
In connection with the foregoing, we advise you that [a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective] [the Registration Statement has
become effective] under the 1933 Act at [enter the time of effectiveness] on
[enter the date of effectiveness] and to the best of our knowledge, after
telephonic inquiry of a member of the SEC's staff, no stop order suspending its
effectiveness has been issued and no proceedings for that purpose are pending
before, or threatened by, the SEC and the Registrable Securities are available
for resale under the 1933 Act pursuant to the Registration Statement.
Very truly yours,
[Company Counsel]
By: ____________________
cc: [Investor]
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