EXHIBIT 10.7
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, (the, "Agreement"), dated as of the
date of acceptance set forth below, is entered into by and among FLEXXTECH
CORPORATION, a Nevada corporation, with headquarters located at 0000 X. Xxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (the "Company"), and each
entity named on the signature page hereto and permitted assigns (each, a
"Buyer") (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer under such
agreement and the Transaction Agreements (as defined below).
W I T N E S S E T H:
WHEREAS, the Company and the Buyers are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
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D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyers wish to purchase, upon the terms and subject to the
conditions of this Agreement, $240,000 of debentures of the Company (the
"Debentures"), which will be convertible into shares of Common Stock, par value
$.001 per share, of the Company (the "Common Stock"), upon the terms and subject
to the conditions of such Debentures, and subject to acceptance of this
Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
PURCHASE.
The undersigned Buyers hereby, severally and not jointly, agree to purchase
from the Company Debentures in the principal amount of $240,000, each such
Debenture having the terms and conditions and being in the form attached hereto
as Exhibit B.
Subject to the terms and conditions of this Agreement and the other
Transaction Agreements (as defined below), the Buyers will purchase the
Debentures at a closing (the "Closing") held on the Closing Date (as defined
below).
The purchase price to be paid by each Buyer shall equal the face amount of
the Debentures, as the case may be, being purchased on the Closing Date (as
defined below) by such Buyer as set forth on the signature page to this
Agreement, and shall be payable in United States Dollars.
CERTAIN DEFINITIONS. As used herein, each of the following terms has
the meaning set forth below, unless the context otherwise requires:
(i) "Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
(ii) "Certificates" means the relevant Debentures duly executed on behalf of
the Company and issued in the name of the respective Buyer.
(iii) "Closing Date" means the date of the Closing.
(iv) "Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Debentures.
(v) "Debentures" means all or any portion of the Debentures.
(vi) "Effective Date" means the effective date of the Registration Statement
covering the Registrable Securities (as those terms are defined in the
Registration Rights Agreement defined below) for the Debentures issued on the
Closing Date.
(vii) "Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
(viii) "Purchase Price" means the purchase price for the Debentures.
(ix) "Schedules" means the disclosure schedules attached hereto as Exhibit
"A".
(x) Securities" means the Debentures and the Common Stock issuable upon
conversion of the Debentures.
(xi) "Shares" means the shares of Common Stock representing any or all of
the Conversion Shares.
FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) Each Buyer shall pay the Purchase Price to be paid by such Buyer
for the relevant Debentures by delivering immediately available good funds in
United States Dollars to the Company at the Closing on the Closing Date, subject
to the payment of fees and expenses as provided in Section 12(a) and 12(b).
No later than the Closing Date, but in any event promptly following payment
by each Buyer to the Company of the Purchase Price to be paid by such
Buyer, the Company shall deliver the relevant Certificates to such Buyer.
METHOD OF PAYMENT. Payment to the Company of the Purchase Price shall be
made at the Closing by wire transfer of funds to:
Beneficiary Account Name:
NORTH TEXAS CIRCUIT BOARD CO., INC.
0000 X. Xxxxx Xxxxx Xxxx
Xxxxx Xxxxxxx, Xxxxx 00000
Beneficiary Account No.: 867713
ABA/Transit No: 000000000
Beneficiary Bank: Legacy Bank of Texas
With notice to: Xxxxx Xxxxx
2. BUYERS REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
Each Buyer, severally and not jointly, represents and warrants to, and
covenants and agrees with, the Company as follows:
A. Without limiting any Buyer's right to sell the Common Stock pursuant to
the Registration Statement, each Buyer is purchasing the Debentures and will be
acquiring the Shares for its own account for investment only and not with a view
towards the public sale or distribution thereof and not with a view to or
for sale in connection with any distribution thereof.
B. Each Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities.
C. All subsequent offers and sales of the Debentures and the Shares by each
Buyer shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration and will comply with applicable
states' securities laws.
D. Each Buyer understands that the Debentures are being offered and sold to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyers set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyers to acquire the Debentures.
E. Each Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Debentures and the offer of the
Shares which have been requested by the Buyer. Each Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and have
received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, each Buyer has also had the
opportunity to obtain and to review the Company's (1) Annual Report on Form
10-KSB for the fiscal year ended December 31, 2000, (2) Quarterly Report on Form
10-QSB for the fiscal quarter ended March 31, 2001 (the "Company's SEC
Documents") and (3) all other filings made by the Company under the Securities
Exchange Act of 1934 (the "Company's SEC Documents.").
F. Each Buyer understands that its investment in the Securities involves a
high degree of risk.
G. Each Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
H. Each Buyer is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization. This Agreement and the
Transaction Agreements have been duly and validly authorized, executed and
delivered on behalf of the Buyer and create a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
I. Such Buyer has not employed any broker or finder in connection with the
transactions contemplated by this Agreement.
J. The state in which any offer to purchase shares hereunder was made to or
accepted by such Buyer in the state shown as the Buyer's address on Schedule I
hereto.
K. Each Buyer was not formed for the purpose of investing solely in the
Securities which may be acquired hereunder.
L. Each Buyer is able to bear the complete loss of such Buyer's investment
in the Securities.
M. Each Buyer's execution, delivery and performance under this Agreement
will not breach the provisions of any agreement to which the Buyer is a party.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to
the Buyers that, except as disclosed in the Schedules:
N. CONCERNING THE DEBENTURES AND THE SHARES. There are no preemptive
rights of any stockholder of the Company to acquire the Debentures or the
Shares.
O. REPORTING COMPANY STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or condition (financial or otherwise) or results of operation of the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect"). The
Company has registered its Common Stock pursuant to Section 12 of the 1934 Act,
and the Common Stock is listed and traded on the OTC Bulletin Board Market of
the National Association of Securities Dealers, Inc. The Company has received
no notice, either oral or written, with respect to the continued eligibility of
the Common Stock for such listing, and the Company has maintained all
requirements for the continuation of such listing.
P. AUTHORIZED SHARES. The authorized capital stock of the Company consists
of 100,000,000 shares of Common Stock, par value $0.001 per share, of which
15,194,862 shares are issued and outstanding as of the date of this Agreement.
All issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the Shares. The Shares have been duly authorized and, when issued
upon conversion of, or as interest on, the Debentures will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. At all times, the Issuer
shall keep available Common Stock duly authorized for issuance against the
Debentures.
Q. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT. This
Agreement and the Registration Rights Agreement, between the Company and the
Buyers, substantially in the form of Exhibit C annexed hereto (the "Registration
Rights Agreement"), and the transactions contemplated thereby, have been duly
and validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company. Each of this Agreement, the Debentures and the
Registration Rights Agreement, when executed and delivered by the Company, are
and will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally.
R. NON-CONTRAVENTION. The execution and delivery of this Agreement, the
Debenture and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Debentures do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) to its actual knowledge, any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound, including any listing
agreement for the Common Stock, except as herein set forth, (iii) to its actual
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) the
Company's listing agreement for its Common Stock, except such conflict, breach
or default which would not have a Material Adverse Effect.
S. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyers as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained, or such authorizations, approvals and
consents, the failure of which to obtain would not have a Material Adverse
Effect.
T. SEC FILINGS. None of the Company's SEC Documents contained, at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading. The Company has since December 31, 2000 timely filed all requisite
forms, reports and exhibits thereto with the SEC.
U. ABSENCE OF CERTAIN CHANGES. Since December 31, 2000, there has been no
Material Adverse Effect, except as disclosed in the Company's SEC Documents.
Since December 31, 2000, except as provided in the Company's SEC Documents,
neither the Company nor any of its subsidiaries has (i) incurred or become
subject to any material liabilities (absolute or contingent) except liabilities
incurred in the ordinary course of business consistent with past practices; (ii)
discharged or satisfied any material lien or encumbrance or paid any material
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business consistent with past practices; (iii)
declared or made any payment or distribution of cash or other property to
stockholders with respect to its capital stock, or purchased or redeemed, or
made any agreements to purchase or redeem, any shares of its capital stock; (iv)
sold, assigned or transferred any other tangible assets, or canceled any debts
or claims, except in the ordinary course of business consistent with past
practices; (v) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of existing business; (vi) made any changes in employee
compensation, except in the ordinary course of business consistent with past
practices; or (vii) experienced any material problems with labor or management
in connection with the terms and conditions of their employment.
V. FULL DISCLOSURE. There is no fact actually known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Documents) that has not been disclosed in writing to the
Buyers that (i) would reasonably be expected to have a Material Adverse Effect,
(ii) would reasonably be expected to materially and adversely affect the ability
of the Company to perform its obligations pursuant to this Agreement or any of
the agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements"), or (iii) would reasonably be expected to materially
and adversely affect the value of the rights granted to the Buyers in the
Transaction Agreements.
W. ABSENCE OF LITIGATION. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its subsidiaries,
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company and its subsidiaries taken as a whole to
perform its obligations under, any of the Transaction Agreements.
X. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company or any of its subsidiaries is a party,
and no event which, with the giving of notice or the passage of time or both,
would become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.
Y. PRIOR ISSUES. Except as set forth in the Company's SEC Documents, during
the twelve (12) months preceding the date hereof, the Company has not issued any
convertible securities or any shares of Common Stock that was not disclosed in
the SEC Documents.
Z. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no liabilities or
obligations other than those disclosed in the Company's SEC Documents or those
incurred in the ordinary course of the Company's business since December 31,
1999, and which individually or in the aggregate, do not or would not have a
Material Adverse Effect. No event or circumstances has occurred or exists with
respect to the Company or its properties, business, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There
are no proposals currently under consideration or currently anticipated to be
under consideration by the Board of Directors or the executive officers of the
Company which proposal would (x) change the articles of incorporation or other
charter document or by-laws of the Company, each as currently in effect, with or
without shareholder approval, which change would reduce or otherwise adversely
affect the rights and powers of the shareholders of the Common Stock or (y)
materially or substantially change the business, assets or capital of the
Company, including its interests in subsidiaries.
AA. NO DEFAULT. Neither the Company nor any of its subsidiaries is in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any material indenture, mortgage, deed of
trust or other material instrument or agreement to which it is a party or by
which it or its property is bound.
BB. NO INTEGRATED OFFERING. Neither the Company nor any of its affiliates
nor any person acting on its or their behalf has, directly or indirectly, at any
time since December 31, 2000, made any offer or sales of any security or
solicited any offers to buy any security under circumstances that would
eliminate the availability of the exemption from registration under Rule 506 of
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
CC. DILUTION. The number of Shares issuable upon conversion of the
Debentures may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the market price of the
Common Stock declines prior to the conversion of the Debentures. The Company's
executive officers and directors have studied and fully understand the nature of
the securities being sold hereby and recognize that they have a potential
dilutive effect and further that the conversion of the Debenture and/or sale of
the Conversion Shares may have an adverse effect on the market price of the
Common Stock. The board of directors of the Company has concluded, in its
business judgment, that such issuance is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the Shares
upon conversion of the Debentures is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
DD. TRANSFER RESTRICTIONS. The Buyers acknowledge that (1) the Debentures
have not been and are not being registered under the provisions of the 1933 Act
and, except as provided in the Registration Rights Agreement, the Shares have
not been and are not being registered under the 1933 Act, and may not be
transferred unless (A) subsequently registered thereunder or (B) the Buyers
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; (3) the Buyers may not sell or transfer the Debentures unless the
amount sold or transferred exceeds twenty percent (20%) of the Debentures; and
(4) neither the Company nor any other person is under any obligation to register
the Securities (other than pursuant to the Registration Rights Agreement) under
the 1933 Act or to comply with the terms and conditions of any exemption
thereunder.
EE. RESTRICTIVE LEGEND. The Buyers acknowledge and agree that the
Debentures, and, until such time as the Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement and sold in
accordance with an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
FF. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter into
the Registration Rights Agreement on or before the Closing Date.
GG. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyers required
under any United States laws and regulations applicable to the Company, or by
any domestic securities exchange or trading market, and to promptly provide a
copy thereof to the Buyers after written request.
HH. REPORTING STATUS. So long as the any of the Buyers beneficially own any
of the Securities, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. Except as otherwise set forth in this Agreement and
the Transaction Agreements, the Company will take all reasonable action under
its control to obtain and to continue the listing and trading of its Common
Stock (including, without limitation, all Registrable Securities) on the OTC
Bulletin Board Market of the National Association of Securities Dealers, Inc.
and will comply in all material respects with the Company's reporting, filing
and other obligations under the by-laws or rules of the National Association of
Securities Dealers, Inc. ("NASD").
II. USE OF PROCEEDS. The Company shall have the proceeds from the sale of
the Debentures (excluding amounts paid by the Company for fees as set forth in
the Transaction Documents) in the net amount of $213,800, wired to its wholly
owned subsidiary North Texas Circuit Board Co., Inc. to purchase a Giga 8800
Automatic CNC Drilling Machine and any remaining funds shall be used for working
capital.
JJ. CERTAIN AGREEMENTS. (i) The Company covenants and agrees that it will
not, without the prior written consent of the Buyers, enter into any subsequent
or further offer or sale of Common Stock or securities convertible into Common
Stock (collectively, "New Common Stock") with any third party pursuant to a
transaction which in any manner permits the sale of the New Common Stock on any
date which is earlier than ninety (90) days from the last day of the calendar
month in which the Effective Date occurs. The limitations described in this
section shall not apply to (w) any underwritten offering of securities made
pursuant to a written underwriting agreement with a nationally- or
regionally-recognized investment bank, (x) any issuance of securities or
assumption of debt made in connection with a merger, acquisition of or purchase
of the assets of another entity where the purpose of such issuance is not to
raise equity capital, or (y) any issuance of warrants made to a bank or other
commercial lending institution in connection with a loan made to the Company by
such bank or institution.
KK. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield two hundred percent (200%) of the number of shares of Common
Stock issuable at conversion as may be required to satisfy the conversion rights
of the Buyers pursuant to the terms and conditions of the Debentures which have
been issued and not yet converted. If at any time, the Company does not have
available an amount of authorized and non-issued Shares necessary to satisfy
full Conversion of the then outstanding amount of the Debentures, the Company
shall call and hold a special meeting within 30 days of such occurrence, for the
sole purpose of increasing the number of shares authorized. Management of the
Company shall recommend to shareholders to vote in favor of increasing the
number of Common Stock authorized. Management shall also vote all of its shares
in favor of increasing the number of Common Stock authorized.
LL. REIMBURSEMENT. If (i) any Buyer, other than by reason of its gross
negligence, willful misconduct or breach of law or this Agreement, becomes
involved in any capacity in any action, proceeding or investigation brought by
any stockholder of the Company, in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Agreements, or
if such Buyer is impleaded in any such action, proceeding or investigation by
any Person, or (ii) any Buyer, other than by reason of its gross negligence,
willful misconduct or breach of law, becomes involved in any capacity in any
action, proceeding or investigation brought by the SEC against or involving the
Company or in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Agreements, or if such Buyer is
impleaded in any such action, proceeding or investigation by any Person, then in
any such case, the Company will reimburse such Buyer for its reasonable
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliates of the Buyers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Buyers and any such Affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Buyers and any such Affiliate and any such Person. Except as
otherwise set forth in the Transaction Agreements, the Company also agrees that
neither any Buyer nor any such Affiliate, partners, directors, agents, employees
or controlling persons shall have any liability to the Company or any person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Agreements except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of such Buyer or
from a breach of the representations, covenants and conditions contained herein
or from a breach of law.
5. TRANSFER AGENT INSTRUCTIONS.
MM. Promptly following the purchase by the Buyers of the Debentures in
accordance with Section 1(c) hereof, the Company will irrevocably instruct its
transfer agent to issue Common Stock from time to time upon conversion of the
Debentures in such amounts as specified from time to time by the Company to the
transfer agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act,
registered in the name of the respective Buyer or its permitted assigns and in
such denominations to be specified by such Buyer in connection with each
conversion of the Debentures. The Company warrants that if the Buyer is not in
breach of the representations and warranties contained in this Agreement, no
instruction other than such instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyers' obligations
and agreement to comply with all applicable securities laws upon resale of the
Securities. If any Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by such
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities and, in the case of the Converted Shares or the Warrant
Shares, as the case may be, promptly instruct the Company's transfer agent to
issue one or more certificates for Common Stock without legend in such name and
in such denominations as specified by the Buyer.
NN. (i) The Company will permit the Buyers to exercise their rights to
convert the Debentures by telecopying or delivering an executed and completed
Notice of Conversion to the Company and delivering, within five (5) business
days thereafter, the original Debentures being converted to the Company by
express courier.
The term "Conversion Date" means, with respect to any conversion elected by
the holder of the Debentures, the date specified in the Notice of Conversion,
provided the copy of the Notice of Conversion is given either via mail or
facsimile to or otherwise delivered to the Company in accordance with the
provisions hereof so that it is received by the Company on or before such
specified date.
The Company will transmit the certificates representing the Converted
Shares issuable upon conversion of any Debentures (together, unless otherwise
instructed by the Buyer, with Debentures not being so converted) to the Buyer at
the address specified in the Notice of Conversion (which may be the Buyer's
address for notices as contemplated by Section 11 hereof or a different address)
via express courier, by electronic transfer or otherwise, within five (5)
business days if the address for delivery is in the United States and within
seven (7) business days if the address for delivery is outside the United States
(such fifth business day or seventh business day, as the case may be, the
"Delivery Date") after (A) the business day on which the Company has received
both of the Notice of Conversion (by facsimile or other delivery) and the
original Debentures being converted (and if the same are not delivered to the
Company on the same date, the date of delivery of the second of such items) or
(B) the date an interest payment on the Debenture, which the Company has elected
to pay by the issuance of Common Stock, as contemplated by the Debentures, was
due.
OO. From and after the date on which the Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the failure
to issue unrestricted, freely tradable Shares to the Buyers upon Conversion
shall be considered an Event of Default, which if not cured after ten (10) days
prior written notice, shall entitle the Buyers to accelerate full repayment of
the Debentures then outstanding. The Company acknowledges that the failure to
honor a Notice of Conversion shall cause definable financial hardship on the
Buyers.
PP. The Company will authorize its transfer agent to give information to a
Buyer or such Buyer's representative relating to the transfer of the Company's
shares of Common Stock to the Buyer, upon the reasonable request of the Buyer or
any such representative. The Company will provide such Buyer with a copy
of the authorization so given to the transfer agent.
Each Buyer shall be entitled to exercise its conversion privilege with
respect to the Debentures notwithstanding the commencement of any case under 11
U.S.C. 101 et seq.(the "Bankruptcy Code"). In the event the Company is a
--------
debtor under the Bankruptcy Code, the Company hereby waives, to the fullest
extent permitted, any rights to relief it may have under 11 U.S.C. 362 in
respect of such Buyer's conversion privilege. The Company hereby waives, to the
fullest extent permitted, any rights to relief it may have under 11 U.S.C.
362 in respect of the conversion of the Debentures. The Company agrees, without
cost or expense to such Buyer, to take or to consent to any and all action
necessary to effectuate relief under 11 U.S.C. 362.
6. CLOSING DATE.
A. The Closing Date shall occur on the date that the Company receives the
net proceeds of this offering.
B. The Closing of the purchase and issuance of Debentures shall occur on the
Closing Date at the offices of Xxxxxx X. XxXxxxx, Esq., 00 Xxxxxx Xxxxxx,
Xxx Xxxxxx, XX 00000 and shall take place no later than 3:00 P.M., New York
time, on such day or such other time as is mutually agreed upon by the Company
and the Buyers.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Each Buyer understands that the Company's obligation to sell the Debentures
to the Buyer pursuant to this Agreement on the Closing Date is conditioned upon:
C. The execution and delivery of this Agreement by those Buyers who are
purchasing, in the aggregate, at least $240,000.00 in principal amount of
Debentures;
D. Delivery by the Buyers to the Company of good funds as payment in full of
an amount equal to the Purchase Price for the Debentures in accordance with
this Agreement;
E. The accuracy on the Closing Date of the representations and warranties of
the Buyers contained in this Agreement, each as if made on such date, and
the performance by the Buyers on or before such date of all covenants and
agreements of the Buyers required to be performed on or before such date; and
F. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
8. CONDITIONS TO THE BUYERS' OBLIGATION TO PURCHASE.
The Company understands that the Buyers' obligation to purchase the
Debentures on the Closing Date is conditioned upon:
G. The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company;
H. Delivery by the Company to the Escrow Agent of the Certificates in
accordance with this Agreement;
I. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
J. On or before the Closing Date, the Buyers shall have received an opinion
of counsel for the Company, dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to the Buyers, substantially to the effect set
forth in EXHIBIT D annexed hereto and a copy of the Board Resolution authorizing
this offering which will be attached as EXHIBIT E;
K. On or before the Closing Date the Buyers shall have received a copy of
the Purchase Order for one (1) Giga 8800 Automatic CNC Drilling Machine which
will be attached hereto as EXHIBIT F;
L. On or before the Closing Date the Buyers shall have received a copy of a
lock-up agreement signed by Xxxx X. Xxxxxxxx and Xxxxxxx Xxxxxxxx in favor of
the Company and Buyers, whereby Xxxx X. Xxxxxxxx and Xxxxxxx Xxxxxxxx agree not
to sell any shares of the Company's common stock during a specified lock-up
period, which lock-up agreement is attached hereto as EXHIBIT G;
M. On or before the Closing Date, the Buyers shall have received a copy of a
Security Agreement signed by the Company in favor of the Buyers, a copy of which
shall be attached hereto as EXHIBIT H;
N. On or before the Closing Date, the Buyers shall have received a copy of a
UCC-1 Financing Statement signed by the Company in favor of the Buyers, a copy
of which shall be attached hereto as EXHIBIT I;
O. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and
P. From and after the date hereof to and including the Closing Date, the
trading of the Common Stock shall not have been suspended by the SEC or the NASD
and trading in securities generally on the New York Stock Exchange or The
NASDAQ/National Market System shall not have been suspended or limited, nor
shall minimum prices been established for securities traded on The
NASDAQ/National Market System, nor shall there be any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyers
makes it impracticable or inadvisable to purchase the Debentures.
9. GOVERNING LAW: MISCELLANEOUS.
Q. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Buyers for
any reasonable legal fees and disbursements incurred by the Buyers in
enforcement of or protection of any of its rights under any of the Transaction
Agreements.
R. 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.
S. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
T. All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
U. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
V. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
W. The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
X. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
Y. This Agreement may be amended only by the written consent of a majority
in interest of the holders of the Debentures and an instrument in writing signed
by the Company.
Z. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
10. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(c) the third business day after mailing by next-day express courier, with
delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: FLEXXTECH CORPORATION
0000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
ATTN: Xxxx Xxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxx, Xxxxxxxx & Xxxxxx LLP
0000 XxXxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000-0000
ATTN: Xxxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYERS: At the address set forth on the signature page of this Agreement.
with copies to:
Xxxxxx X. XxXxxxx, Esq.
00 Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyers' representations and warranties herein shall survive for a period of
twelve (12) months after the execution and delivery of this Agreement and shall
inure to the benefit of the Buyers and the Company and their respective
successors and assigns.
12. FEES; EXPENSES.
AA. In respect of the debt financing being made by the Buyers to the Company
which is being recommended and advised by Dutchess Advisors, Ltd. as a
consultant, the Company shall pay Dutchess Advisors, Ltd. the sum of 8% of the
principal amount of the Debentures purchased by the Buyers under this Agreement.
The cash fee shall be deducted from the proceeds of the sale of the Debentures.
BB. At the Closing, the Company shall pay Xxxxxx X. XxXxxxx, Esq. the sum of
$3,000 for legal fees and expenses incurred in the transaction consummated
hereunder, and the Company shall pay the law firm of Xxxx, Xxxxxxxx & Xxxxxx,
LLP the sum of $3,000 for legal fees and expenses incurred in the transaction
consummated hereunder which fees may be deducted from the proceeds of the sale
of the Debentures.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyers and
the Company as of the date set forth below.
Date: as of October _____, 2001
COMPANY:
FLEXXTECH CORPORATION
By:
Title:
BUYERS:
Name of Buyer: Name of Buyer:
By: By:
(Signature of Authorized Person) (Signature of Authorized Person)
Printed Name and Title Printed Name and Title
Address: Address:
Telephone: Telephone:
Facsimile: Facsimile:
Jurisdiction of Incorporation: Jurisdiction of Incorporation:
Principal Amount of Debentures Principal Amount of Debentures
to be Purchased: to be Purchased:
Name of Buyer: Name of Buyer:
By: By:
(Signature of Authorized Person) (Signature of Authorized Person)
Printed Name and Title Printed Name and Title
Address: Address:
Telephone: Telephone:
Facsimile: Facsimile:
Jurisdiction of Incorporation: Jurisdiction of Incorporation:
Principal Amount of Debentures Principal Amount of Debentures
to be Purchased: to be Purchased:
Name of Buyer: Name of Buyer:
By: By:
(Signature of Authorized Person) (Signature of Authorized Person)
Printed Name and Title Printed Name and Title
Address: Address:
Telephone: Telephone:
Facsimile: Facsimile:
Jurisdiction of Incorporation: Jurisdiction of Incorporation:
Principal Amount of Debentures Principal Amount of Debentures
to be Purchased: to be Purchased:
Name of Buyer: Name of Buyer:
By: By:
(Signature of Authorized Person) (Signature of Authorized Person)
Printed Name and Title Printed Name and Title
Address: Address:
Telephone: Telephone:
Facsimile: Facsimile:
Jurisdiction of Incorporation: Jurisdiction of Incorporation:
Principal Amount of Debentures Principal Amount of Debentures
to be Purchased: to be Purchased:
Name of Buyer:
By:
(Signature of Authorized Person)
Printed Name and Title
Address:
Telephone:
Facsimile:
Jurisdiction of Incorporation:
Principal Amount of Debentures
to be Purchased:
Name of Buyer:
By:
(Signature of Authorized Person)
Printed Name and Title
Address:
Telephone:
Facsimile:
Jurisdiction of Incorporation:
Principal Amount of Debentures
to be Purchased:
Schedule I SCHEDULE OF BUYERS
Exhibit A DISCLOSURE SCHEDULES
Exhibit B FORM OF DEBENTURE
Exhibit C REGISTRATION RIGHTS AGREEMENT
Exhibit D OPINION OF COUNSEL
Exhibit E BOARD RESOLUTION
Exhibit F PURCHASE ORDER
Exhibit G LOCK-UP AGREEMENT
Exhibit H SECURITY AGREEMENT
Exhibit I UCC-1 FINANCING STATEMENT
SCHEDULE I-LIST OF BUYERS
NAME AMOUNT
---- ------
Dutchess Private Equities Fund, L.P. $60,000
000 Xxxx Xxxxx Xxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Xxxxx Xxxxxx $180,000
c/o Dutchess Private Equities Fund, L.P.
000 Xxxx Xxxxx Xxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
EXHIBIT A-DISCLOSURE SCHEDULES
SCHEDULE 3(B)
-------------
Reporting Company Status
------------------------
The Company is not qualified as a foreign corporation to do business in
California.
------
SCHEDULE 3(G)
-------------
SEC Filings
-----------
a) The Balance Sheets contained in the 10-KSB and 10-QSB for the periods
ending December 31, 2000 and March 31, 2001, respectively, state that the
Company's authorized Common Stock is 25,000,000 shares, however on December 29,
2000, the Company amended its Articles of Incorporation to reflect the amount of
authorized common stock as 100,000,000. Additionally, the 10-KSB appears to
refer erroneously to Xxxxxx Xxxxxx as a Director.
b) The Company's 10-KSB for the period ending December 31, 2000 was filed
late.
c) The Company's 10-QSB for the period ending March 31, 2001 was filed late.
SCHEDULE 3(H)
-------------
Absence of Certain Changes
--------------------------
On July 1, 2001, Flexxtech Holdings sold one hundred percent (100%) of the
stock of Xxxxxxx, Inc. and XxxXX.xxx, Inc. to Xxxxxxx.xxx, Inc. in exchange for,
in the aggregate, 250,000 shares of Common Stock of the Company.
SCHEDULE 3(J)
-------------
Litigation
----------
Default Judgment entered by Triad Ad Valorem Group against North Texas
Circuit Board Co., Inc. on July 18, 2001, in the County Court at Law No. 3,
Dallas County, Texas, in the amount of $5,665.01 in actual damages, $736.45 in
pre-judgment interest, attorneys' fees, post-judgment interest and costs of
court.
Xxxxxxxxxxx Circuits is claiming that it has obtained a judgment against
North Texas Circuit Board Co., Inc. by and through its attorneys. As of yet,
the opposing counsel has failed to provide North Texas Circuit Board Co., Inc.
with a copy of the petition, evidence of service of process or evidence of any
judgment.
Neltec of Arizona threatened to bring suit against North Texas Circuit
Board Co., Inc. for alleged nonpayment of contractual debt. The matter has
settled and, as of the Closing Date, North Texas Circuit Board Co., Inc. only
has one (1) payment of $4,683.28 remaining to be paid to Neltec of Arizona.
Xxxxxx Xxxxxxx a/k/a Xxx Xxxxxxx, Xxxxx Dorizetti and Luminary Ventures
brought suit against Flexxtech Corporation on April 26, 2001 for alleged breach
of contract. Such matter is currently in settlement negotiations.
Multilayer Technology International, Inc. v. North Texas Circuit Board Co.,
Inc.; Cause No. CC-01-02724-B; Xxxxxx Xxxxx xx Xxx Xx. 0, Xxxxxx Xxxxxx, Xxxxx.
Affiliated Distributors, Inc. v. North Texas Circuit Board Co., Inc.; Cause
No. CC-01-02259-E; County Court at Law No. 5, Dallas County, Texas. Settlement
terms call for payment, in the aggregate, of $11,700.00 with interest.
SCHEDULE 3(K)
-------------
Events of Default
-----------------
None.
SCHEDULE 3(L)
-------------
Prior Issues
------------
Since April 1, 2001, the Company has issued 6,761,794 shares of Common
Stock. Please see attached shareholder list for details of issuance.
An additional 2,000,000 shares of Common Stock were issued to VLK Capital
Corp. on August 13, 2001. Additionally, the Company continues to raise equity
capital at $1.00 per share on an open Reg D 506.
EXHIBIT B
FORM OF DEBENTURE
-----------------
EXHIBIT C
FORM OF DEBENTURE REGISTRATION RIGHTS AGREEMENT
-----------------------------------------------
EXHIBIT D
FORM OF OPINION OF XXXX, XXXXXXXX & XXXXXX LLP
----------------------------------------------
EXHIBIT B
Exhibit B
to the Securities
Purchase Agreement
------------------
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD,
PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.
NO. ____________ $_______________
ISSUANCE DATE OCTOBER 23, 2001
FLEXXTECH CORPORATION
CONVERTIBLE DEBENTURE DUE OCTOBER 23, 2003
FOR VALUE RECEIVED, FLEXXTECH CORPORATION, a corporation organized and existing
under the laws of the State of Nevada (the "Company"), hereby promises to pay to
___________________, a __________________, having its address at
______________________ or its assigns (the "Holder"), the principal sum of
________ and 00/100 Dollars ($____________) on October 23, 2003 (the "Maturity
Date") and to pay simple interest on the principal sum outstanding from time to
time in arrears (i) upon conversion as provided herein or (ii) on the Maturity
Date, at the rate of 6% per annum. Interest shall commence to accrue on this
Debenture on the first such business day to occur after the date hereof and
shall continue on a daily basis until payment in full of the principal sum has
been made or duly provided for or until the full outstanding amount of this
Debenture has been converted in accordance with the provisions hereof. Interest
shall be payable in cash or stock, at the Company's option. This Debenture and
the interest thereon shall be secured by a UCC Financing Statement and a
Security Agreement in favor of the Holder for the amount of the Debenture being
purchased herein.
This Debenture is the Debenture referred to in the Securities Purchase
Agreement (the "Securities Purchase Agreement") dated October of 2001, between
the Company and the Holder, is subject to the provisions of the Securities
Purchase Agreement and further is subject to the following additional
provisions:
1. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act and other applicable state and foreign
securities laws. In the event of any proposed transfer of this Debenture, the
Company may require, prior to issuance of a new Debenture in the name of such
other person, that it receive reasonable transfer documentation including legal
opinions that the issuance of the Debenture in such other name does not and will
not cause a violation of the Securities Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
2. A. The Holder is entitled to, at any time or from time to time,
convert the Conversion Amount into shares of Common Stock of the Company, par
value $.001 per share ("Common Stock"), at a conversion price for each share of
Common Stock (the "Conversion Price") equal to the lower of (x) 120% of the
closing bid price per share (as reported by Bloomberg, LP) on the Closing Date,
and (y) 80% of the lowest closing bid price per share (as reported by Bloomberg,
LP) of the Company's Common Stock for the five (5) Trading Days immediately
preceding the date of conversion. The Conversion Price will be adjusted as
provided in Section 6.
B. For purposes of this Debenture, the following terms have the meanings
indicated below:
(i) "Conversion Amount" shall mean the sum of (A) all or any portion of the
outstanding principal amount of this Debenture, as designated by the Holder upon
exercise of its right of conversion and (B) all interest that has accrued
on the portion of the principal amount that has been designated for payment
pursuant to (A).
(ii) "Market Price of the Common Stock" means (x) the closing bid price of
the Common Stock for the period indicated in the relevant provision hereof
(unless a different relevant period is specified in the relevant provision), as
reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market or (y) if the Common Stock is listed on a stock
exchange, the closing price on such exchange, as reported in The Wall Street
Journal.
(iii) "Trading Day" shall mean any day on which the New York Stock Exchange
is open for business.
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, Pacific Stock Transfer Co. located at
0000 Xxxxx Xxxxx, Xxxxx X, Xxx Xxxxx, Xxxxxx 00000, accompanied by or
preceded by facsimile or other delivery to the Company of the form of conversion
notice attached hereto as Exhibit A, executed by the Holder of the Debenture
evidencing such Holder's intention to convert this Debenture or a specified
portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. No fractional shares of Common Stock or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. The date on which
notice of conversion is given (the "Conversion Date") shall be deemed to be the
date on which the Company receives by fax or by mail the conversion notice
("Notice of Conversion"), substantially in the form annexed hereto as Exhibit A,
duly executed, to the Company; providedthat the Holder shall deliver to the
--------
Company's transfer agent or the Company the original Debentures being converted
within seven (7) business days thereafter (and if not so delivered within such
time, the Conversion Date shall be the date on which the later of the Notice of
Conversion and the original Debentures being converted is received by the
Company). Facsimile delivery of the Notice of Conversion shall be accepted by
the Company at facsimile number (000) 000-0000 ATTN: Corporate Secretary. Except
as otherwise provided, certificates representing Common Stock upon conversion
will be delivered within seven (7) business days from the date of delivery of
the Notice of Conversion.
D. Within seven (7) business days after the Conversion Date, the
Company shall deliver to Holder a certificate for the number of shares of Common
Stock issuable upon the conversion. In the event the Company does not make
delivery of the Common Stock, as instructed by Holder, within seven (7) business
days after the Conversion Date, then in such event the Company shall pay to
Holder one percent (1%) in cash, of the dollar value of the Debentures being
converted per each day after the seventh (7th) business day following the
Conversion Date that the Common Stock is not delivered to the Holder. The
Company shall make any payments incurred under this subsection in immediately
available funds within seven (7) business days from the date the Common Stock is
fully delivered. Nothing herein shall limit a Holder's right to pursue actual
damages or cancel the conversion for the Company's failure to issue and deliver
Common Stock to the Holder within seven (7) business days after the Conversion
Date.
The Company acknowledges that its failure to deliver the Common Stock
within seven (7) business days after the Conversion Date will cause the Holder
to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Debenture 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 deliver the Common Stock pursuant to the terms
of this Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this subsection is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this subsection shall not
apply but instead the provisions of subsection 2.G shall apply.
E. It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the Conversion Date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
F. Nothing contained in this Debenture shall be deemed to establish or
require the payment of interest to the Holder at a rate in excess of the maximum
rate permitted by governing law. In the event that the rate of interest
required to be paid exceeds the maximum rate permitted by governing law, the
rate of interest required to be paid thereunder shall be automatically reduced
to the maximum rate permitted under the governing law and such excess shall be
returned with reasonable promptness by the Holder to the Company.
G. The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Debentures by all Holders of
the entire amount of Debentures then outstanding. If, at any time Holder submits
a Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are available, and the Notice of
Conversion as to any Debentures requested to be converted but not converted (the
"Unconverted Debentures"), may be deemed null and void upon written notice sent
by the Holder to the Company. The Company shall provide notice of such
Conversion Default ("Notice of Conversion Default") to all existing Holders of
outstanding Debentures, by facsimile, within three (3) business day of such
default (with the original delivered by overnight or two day courier), and the
Holder shall give notice to the Company by facsimile within five business days
of receipt of the original Notice of Conversion Default (with the original
delivered by overnight or two day courier) of its election to either nullify or
confirm the Notice of Conversion.
The Company agrees to pay to all Holders of outstanding Debentures payments
for a Conversion Default ("Conversion Default Payments") in the amount of
(N/365) x (.24) x the initial issuance price of the outstanding and/or tendered
but not converted Debentures held by each Holder where N = the number of days
from the Conversion Default Date to the date (the "Authorization Date") that the
Company authorizes a sufficient number of shares of Common Stock to effect
conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, upon written notice sent by the Holder to the
Company, which Conversion Default shall be payable as follows: (i) in the event
Holder elects to take such payment in cash, cash payments shall be made to such
Holder of outstanding Debentures by the fifth day of the following calendar
month, or (ii) in the event Holder elects to take such payment in stock, the
Holder may convert such payment amount into Common Stock at the conversion
rate set forth in section 3.2(d) at anytime after the 5th day of the calendar
month following the month in which the Authorization Notice was received, until
the expiration of the mandatory two (2) year conversion period.
The Company acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of the Debentures will cause the Holder 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 deliver the Common
Stock pursuant to the terms of this Debenture. Nothing herein shall limit the
Holder's right to pursue actual damages for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock.
H. If, by the seventh (7th) business day after the Conversion Date of
any portion of the Debentures to be converted (the "Delivery Date"), the
transfer agent fails for any reason to deliver the Common Stock upon conversion
by the Holder and after such Delivery Date, the Holder purchases, in an open
market transaction or otherwise, shares of Common Stock (the "Covering Shares")
solely in order to make delivery in satisfaction of a sale of Common Stock by
the Holder (the "Sold Shares"), which delivery such Holder anticipated to make
using the Common Stock issuable upon conversion (a "Buy-In"), the Company shall
pay to the Holder, in addition to any other amounts due to Holder pursuant to
this Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as
defined below). The "Buy In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by the Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Holder in
immediately available funds within five (5) business days of written demand by
the Holder. By way of illustration and not in limitation of the foregoing, if
the Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which the Company will be required to pay to the Holder will
be $1,000.
I. Limitation on Issuance of Shares. If the Company's Common Stock becomes
listed on the Nasdaq SmallCap Market after the issuance of the Debentures, the
Company may be limited in the number of shares of Common Stock it may issue by
virtue of (X) the number of authorized shares or (Y) the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, including, but not necessarily limited to, NASDAQ Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable (collectively, the
"Cap Regulations"). Without limiting the other provisions thereof, the
Debentures shall provide that (i) the Company will take all steps reasonably
necessary to be in a position to issue shares of Common Stock on conversion of
the Debentures without violating the Cap Regulations and (ii) if, despite taking
such steps, the Company still cannot issue such shares of Common Stock without
violating the Cap Regulations, the holder of a Debenture which cannot be
converted as result of the Cap Regulations (each such Debenture, an "Unconverted
Debenture") shall have the right to elect either of the following remedies:
(x) if permitted by the Cap Regulations, require the Company to issue
shares of Common Stock in accordance with such holder's Notice of Conversion at
a conversion purchase price equal to the average of the closing bid price per
share of Common Stock for any five (5) consecutive trading days (subject to
certain equitable adjustments for certain events occurring during such period)
during the sixty (60) trading days immediately preceding the Conversion Date; or
(y) require the Company to redeem each Unconverted Debenture for an amount
(the "Redemption Amount"), payable in cash, equal to the sum of (i) one hundred
thirty-three percent (133%) of the principal of an Unconverted Debenture, plus
(ii) any accrued but unpaid interest thereon through and including the date (the
"Redemption Date") on which the Redemption Amount is paid to the holder.
A holder of an Unconverted Debenture may elect one of the above remedies
with respect to a portion of such Unconverted Debenture and the other remedy
with respect to other portions of the Unconverted Debenture. The Debentures
shall contain provisions substantially consistent with the above terms, with
such additional provisions as may be consented to by the Holder. The provisions
of this section are not intended to limit the scope of the provisions otherwise
included in the Debentures.
J. Limitation on Amount of Conversion and Ownership. Notwithstanding
anything to the contrary in this Debenture, in no event shall the Holder be
entitled to convert that amount of Debenture, and in no event shall the Company
permit that amount of conversion, into that number of shares, which when added
to the sum of the number of shares of Common Stock beneficially owned, (as such
term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange
Act of 1934, as may be amended, (the "1934 Act")), by the Holder, would exceed
4.99% of the number of shares of Common Stock outstanding on the Conversion
Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. In the
event that the number of shares of Common Stock outstanding as determined in
accordance with Section 13(d) of the 1934 Act is different on any Conversion
Date than it was on the Closing Date, then the number of shares of Common Stock
outstanding on such Conversion Date shall govern for purposes of determining
whether the Holder would be acquiring beneficial ownership of more than 4.99% of
the number of shares of Common Stock outstanding on such Conversion Date.
K. Prior to conversion of all the Debentures, if at anytime the conversion
of all the Debentures 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 or have shareholder action with written consent of the proper number of
shareholders within thirty (30) days of such event, or such greater period of
time if statutorily required or reasonably necessary as regards standard
brokerage house and/or SEC requirements and/or procedures, for the purpose of
authorizing additional shares of Common Stock to facilitate the conversions.
In such an event management of the Company shall recommend to all shareholders
to vote their shares in favor of increasing the authorized number of shares of
Common Stock. Management of the Company shall vote all of its shares of Common
Stock in favor of increasing the number of shares of authorized Common Stock.
Company represents and warrants that under no circumstances will it deny or
prevent Holder's right to convert the Debentures as permitted under the terms of
the Securities Purchase Agreement or the Registration Rights Agreement. Nothing
in this Section shall limit the obligation of the Company to make the payments
set forth in Section 2.G. In the event the Company's shareholder's meeting does
not result in the necessary authorization, the Company shall redeem the
outstanding Debentures for an amount equal to (x) the sum of the principal of
the outstanding Debentures plus accrued interest thereon multiplied by (y) 133%.
3. Unless demand has otherwise been made in writing for payment in cash by
the Holder, any Debentures not previously received for conversion as of the
Maturity Date shall be deemed to have been surrendered for conversion, without
further action of any kind by the Company or any of its agents, employees or
representatives, as of the Maturity Date at the Conversion Price applicable on
the Maturity Date ("Mandatory Conversion").
4. No provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to Convert this Debenture into
Common Stock, at the time, place, and rate herein prescribed. This
Debenture is a direct obligation of the Company.
5. If the Company (a) merges or consolidates with another corporation or
after business entity and the Company is not the surviving entity or (b) sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee will agree that this Debenture may thereafter
be converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any (i) proposed
merger or consolidation where the Company is not the surviving entity or (ii)
sale or transfer of all or substantially all of the assets of the Company (in
either such case, a "Sale"), the Holder shall have the right to convert by
delivering a Notice of Conversion to the Company within fifteen (15) days of
receipt of notice of such Sale from the Company.
6. If, at any time while any portion of this Debenture remains outstanding,
the Company effectuates a stock split or reverse stock split of its Common Stock
or issues a dividend on its Common Stock consisting of shares of Common
Stock or otherwise recapitalizes its Common Stock, the Conversion Price shall be
equitably adjusted to reflect such action. By way of illustration, and not in
limitation, of the foregoing (i) if the Company effectuates a 2:1 split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such split, the Conversion Price
shall be deemed to be one-half of what it had been calculated to be immediately
prior to such split; (ii) if the Company effectuates a 1:10 reverse split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such reverse split, the Conversion
Price shall be deemed to be the amount of such Conversion Price calculated
immediately prior to the record date multiplied by 10; and (iii) if the Company
declares a stock dividend of one share of Common Stock for every 10 shares
outstanding, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such dividend, the Conversion Price
shall be deemed to be the amount of such Conversion Price calculated immediately
prior to such record date multiplied by a fraction, of which the numerator is
the number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
7. All payments contemplated hereby to be made "in cash" shall be made by
wire transfer of immediately available funds in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts. All payments of cash and each delivery of shares
of Common Stock issuable to the Holder as contemplated hereby shall be made to
the Holder to an account designated by the Holder to the Company and if the
Holder has not designated any such accounts at the address last appearing on the
Debenture Register of the Company as designated in writing by the Holder
from time to time; except that the Holder may designate, by notice to the
Company, a different delivery address for any one or more specific payments or
deliveries.
8. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except in compliance with the terms of the
Securities Purchase Agreement and the Registration Rights Agreement and under
circumstances which will not result in a violation of the Securities Act or any
applicable state Blue Sky or foreign laws or similar laws relating to the sale
of securities.
9. This Debenture shall be governed by and construed in accordance with the
laws of the State of New York. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non coveniens, to the bringing of any such proceeding
in such jurisdictions. To the extent determined by such court, the Company
shall reimburse the Holder for any reasonable legal fees and disbursements
incurred by the Holder in enforcement of or protection of any of its rights
under this Debenture or the Securities Purchase Agreement.
10. The following shall constitute an "Event of Default":
a. The Company fails in the payment of principal or interest on this
Debenture as required hereunder and the same shall continue for a period of
three (3) days; or
b. Any of the representations or warranties made by the Company herein, in
the Securities Purchase Agreement, the Registration Rights Agreement, dated
October of 2001 between the Company and the Investors therein (the "Registration
Rights Agreement"), or in any certificate or financial or other written
statements heretofore or hereafter furnished by the Company in connection with
the execution and delivery of this Debenture or the Securities Purchase
Agreement shall be false or misleading in any material respect at the time made;
or
c. The Company fails to issue shares of Common Stock to the Holder or to
cause its Transfer Agent to issue shares of Common Stock upon exercise by the
Holder of the conversion rights of the Holder in accordance with the terms of
this Debenture, fails to transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon conversion of
this Debenture and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove any
restrictive legend or to cause its Transfer Agent to transfer any certificate or
any shares of Common Stock issued to the Holder upon conversion of this
Debenture as and when required by this Debenture, the Agreement or the
Registration Rights Agreement and such legend removal is otherwise lawful, and
any such failure shall continue uncured for five (5) business days after written
notice from the Holder of such failure; or
d. The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation of the
Debenture and, except the case of Section 5, such failure shall continue uncured
for a period of thirty (30) days after written notice from the holder of such
failure. The Company shall fail to perform or observe, in any material respect,
any covenant, term, provision, condition, agreement or obligation of the Company
under the Securities Purchase Agreement or the Registration Rights Agreement and
such failure shall continue uncured for a period of thirty (30) days after
written notice from the Holder of such failure; or
e. The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a substantial
part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for the Company or
for a substantial part of its property or business without its consent and shall
not be discharged within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company and shall
not be dismissed within sixty (60) days thereafter; or
h. Any final money judgment, writ or warrant of attachment, or similar
process, not subject to appeal, in excess of One-Hundred Thousand ($100,000)
Dollars in the aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of sixty (60) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty (60) days after such
institution or the Company shall by any action or answer approve of, consent to,
or acquiesce in any such proceedings or admit the material allegations of, or
default in answering a petition filed in any such proceeding; or
j. The Company shall have its Common Stock suspended or delisted from an
exchange for a period in excess of five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by a majority in interest of
the Holders of the Debentures (which waiver shall not be deemed to be a waiver
of any subsequent default) at the option of a majority in interest of the
Holders and in the discretion of a majority in interest of the Holders, the
Holder may at its option and discretion declare this Debenture, together with
all accrued and unpaid interest herein, to be immediately due and payable,
without presentment, demand, protest or notice of any kinds, all of which are
hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and a majority in interest of the
Holders may immediately enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
11. The Company agrees to have its wholly owned subsidiary, North
Texas Circuit Board Co., Inc. execute a Security Agreement and UCC Financing
Statement in favor of Holder for the amount of this Debenture. The Company
agrees that the collateral for this loan shall be a Giga 8800 Automatic CNC
Drilling Machine. The Company agrees it will use its best efforts to redeem 110%
of the unconverted principal amount of this Debenture, plus accrued but unpaid
interest, through a purchase leaseback financing on the Pluritec GIGA 8800 CNC
Drilling Machine it is purchase with proceeds of the Debentures. An additional
one percent (1%) per month, accrued monthly on the principal amount shall be
paid by the Company to the Holder in the event the Company does not redeem
within thirty (30) calendar days from the date of issuance of this Debenture.
The Holder shall have the right to decline redemption, in Holder's absolute
discretion, but in such event those liquidated damages of one percent (1%) per
month applicable to the redemption shall not be payable, however, all other
accrued but unpaid liquidated damages shall be payable. However, the Holder
shall waive such right only if (a) the price of the Common Stock is less than
200% (two hundred percent) of the Closing Bid Price ("Qualifying Price") and (b)
the registration statement has been declared effective by the SEC prior to
December 31, 2001 ("Forced Redemption Condition"). After December 31, 2001 the
Forced Redemption Condition shall be deemed expired and terminated, and the
ability to decline redemption becomes the Holder's sole and exclusive right. If
at anytime during the Forced Redemption Condition period, the price of the
Common Stock fluctuates above or below the Qualifying Price, the Company may
force redemption on the balance of the unconverted Debentures, during such times
the price of the Common Stock is below the Qualifying Price. The Company
acknowledges that its failure to redeem the unconverted principal amount of this
Debenture, plus accrued but unpaid interest, within thirty (30) calendar days
after the Issuance Date of this Debenture will cause the Holder to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Debenture 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 deliver the Common Stock pursuant to the terms of this Debenture.
12. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
13. This Debenture may be amended only by the written consent of the parties
hereto.
14. No waivers or consents in regard to any provision of this Debenture may
be given other than by an instrument in writing signed by the Holder.
[Balance of this page intentionally left blank.]
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by
an officer thereunto duly authorized.
Dated: October ___, 2001
FLEXXTECH CORPORATION
By:_______________________________________
__________________________________________
(Print Name)
__________________________________________
(Title)
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of
the principal
amount of the above Debenture No. ___ into Shares of Common Stock of FLEXXTECH
CORPORATION (the "Company") according to the conditions hereof, as of the date
written below.
Conversion Date*
Applicable Conversion Price
Signature
[Name]
Address:
_____________________________________________________________________
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
EXHIBIT C
To the Securities
Purchase Agreement
------------------
REGISTRATION RIGHTS AGREEMENT
(CONVERTIBLE DEBENTURES)
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 16, 2001 (this
"Agreement"), is made by and between FLEXXTECH CORPORATION, a Nevada
corporation, with headquarters located at 0000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxx Xxxxxxx, XX 00000 (the "Company"), and each entity named on the signature
page hereto as "Investors" (each, an "Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of August 14, 2001, between the Buyers listed
therein and the Company (the "Securities Purchase Agreement"; terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Investors one or more debentures of the Company, in the aggregate principal
amount of $240,000.00 (the "Debentures"); and
WHEREAS, the Debentures are convertible into shares of Common Stock (the
"Conversion Shares"; which term, for purposes of this Agreement, shall include,
without limitation, shares of Common Stock of the Company issuable in lieu of
accrued interest on conversion as contemplated by the Debentures) upon the terms
and subject to the conditions contained in the Debentures.
WHEREAS, to induce the Investors to execute and deliver the Securities Purchase
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 "Securities
Act"), with respect to the Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Investor" means an Investor who agrees to become bound by the
provisions of this Agreement.
(b) "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.
(c) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
(d) "Registrable Securities" means the Conversion Shares.
(e) "Registration Statement" means a registration statement of the Company
under the Securities Act.
(f) "SEC" means the United States Securities and Exchange Commission.
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to them in the Securities Purchase Agreement.
2. REGISTRATION.
(A) Mandatory Registration.
(i) The Company shall prepare and file with the SEC, as soon as possible
after the Closing Date and no later than thirty (30) days following the Closing
Date (the "Required Filing Date"), either a Registration Statement or an
amendment to an existing Registration Statement, in either event registering for
resale by the Investors a sufficient number of shares of Common Stock for
the Investors to sell the Registrable Securities (or such lesser number as may
be required by the SEC, but in no event less than three hundred percent (300%)
of that number of shares of the Company's Common Stock into which the relevant
Debentures and all interest thereon through their respective Maturity Dates
would be convertible at the time of filing of such Registration Statement
(assuming for such purposes that all such Debentures had been eligible to be
converted, and had been converted, into Conversion Shares in accordance with
their terms, whether or not such accrual of interest, eligibility or conversion
had in fact occurred as of such date) . The Registration Statement (W) shall
include the Registrable Securities and (X) shall also state that, in accordance
with Rule 416 and 457 under the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Debentures to prevent dilution resulting from stock
splits or stock dividends. The Company will use its reasonable best efforts to
cause such Registration Statement to be declared effective on a date no later
than ninety (90) days after the Closing Date (the "Required Effective Date").
(ii) If at any time (an "Increased Registered Shares Date"), the number of
shares of Common Stock represented by the Registrable Securities, issued or to
be issued as contemplated by the Transaction Agreements, exceeds the aggregate
number of shares of Common Stock then registered, the Company shall, within ten
(10) business days after receipt of a written notice from any Investor, either
(X) amend the relevant Registration Statement filed by the Company pursuant to
the preceding provisions of this Section 2, if such Registration Statement has
not been declared effective by the SEC at that time, to register one hundred ten
percent (110%) of such Registrable Shares, computed as contemplated by the
immediately preceding subparagraph (i), or (Y) if such Registration Statement
has been declared effective by the SEC at that time, file with the SEC an
additional Registration Statement (an "Additional Registration Statement") to
register one hundred ten percent (110%) of the shares of Common Stock
represented by the Registrable Shares, computed as contemplated by the
immediately preceding subparagraph (i), that exceed the aggregate number of
shares of Common Stock already registered. The Company will use its reasonable
best efforts to cause the amended Registration Statement or the Additional
Registration Statement, as the case may be, to be declared effective as promptly
as possible and in no event later than (90) days after the Increased Registered
Shares Date.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable Securities is not
filed with the SEC by the Required Filing Date, the Company will make
payment to the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities is
not declared effective by the SEC by the Required Effective Date, the Company
will make payment to the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(iii) If the Company does not respond to comments issued by the SEC within
five (5) business days of first receipt thereof by the Company or its counsel,
then the Company will make payments to the Investors in such amounts and at such
times as shall be determined pursuant to this Section 2(b).
(iv) If either the conditions set forth in Sections 2(b)(i), 2(b)(ii) or
2(b)(iii) are not satisfied as required thereby, then within three (3) days
after the end of the time periods referenced in Sections 2(b)(i), 2(b)(ii) or
2(b)(iii) (the third such day being referred to as the "Set Date"), as the case
may be, the Company shall immediately pay to the Investors without demand
therefore a cash amount equal to 2% per month of the outstanding principal
amount of the Debentures and, until such time as the actions required by
Sections 2(b)(i), 2(b)(ii) or 2(b)(iii), as the case may be, shall have been
taken, the same amount shall accrue and become payable to the Investors within
three (3) days on the same day as the Set Date of each subsequent month until
such Sections shall have been complied with (the "Periodic Amounts"). In light
of the difficulty of ascertaining the amount of damage that the Investors will
suffer as a result of the Company's failure to comply therewith, all amounts
payable under this Section shall be payable as liquidated damages, and not as a
penalty. The Company shall keep the registration statement effective throughout
the period during which the life of the Registrable Securities are issued
and outstanding.
(v) 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.
(vi) The parties acknowledge that the damages which may be incurred by
the Investors if the Registration Statement is not filed by the Required Filing
Date, declared effective by the SEC by the Required Effective Date or if the
Registration Statement has not been declared effective as promptly as possible
may be difficult to ascertain. The parties agree that the Periodic Amounts
represent a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of such damages, and shall be the exclusive
remedy.
(vii) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision 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 Investors or its counsel, or in the event
all of the Registrable Securities may be sold pursuant to Rule 144 or another
available exemption under the Act.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing Date a
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
efforts to cause such Registration Statement relating to Registrable Securities
to become effective as promptly as possible and keep the Registration Statement
effective at all times during the period (the "Registration Period") continuing
until the earliest of (i) the date that is five (5) years after the last day of
the calendar month following the month in which the Registration Statement is
declared effective, (ii) the date when the Investorss may sell all Registrable
Securities under Rule 144, or (iii) the date the Investorss no longer own any of
the Registrable Securities, 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;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement;
(c) The Company shall permit a single firm of counsel designated by the
Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects. If such counsel objects, the
Required Filing Date shall be extended by the number of days from the date the
Registration Statement was delivered to such counsel to the date such counsel no
longer objects;
(d) Notify each Investor, such Investor's legal counsel identified to the
Company (which, until further written notice, shall be deemed to be Xxxxxx X.
XxXxxxx, Esq. 00 Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxx, XX 00000; (the
"Investor's Counsel")), and any managing underwriters immediately (and, in the
case of (i)(A) below, not less than five (5) 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) whenever the SEC notifies the Company whether there will
be a "review" of Registration Statement; (C) whenever the Company receives (or
a representative of the Company receives on its behalf) any oral or written
comments from the SEC relating to a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC 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 SEC 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 or
warranties of the Company contained in any agreement (including any underwriting
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 to the best knowledge of the Company 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 light of the circumstances under which they
were made, not misleading. In addition, the Company shall furnish the Investors
with copies of all intended written responses to the comments contemplated in
clause (C) of this Section 3(d) not later than one (1) business day in advance
of the filing of such responses with the SEC so that the Investors shall have
the opportunity to comment thereon;
(e) Furnish to each Investor and such Investor's Counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration Statement, each
preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(g) As promptly as practicable after becoming aware thereof, notify each
Investor of the happening of any event of which the Company has actual
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits 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, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(h) As promptly as practicable after becoming aware thereof, notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the SEC of
a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(i) Notwithstanding the foregoing, if at any time or from time to time after
the date of effectiveness of the Registration Statement, the Company notifies
the Investors in writing of the existence of a Potential Material Event, the
Investors shall not offer or sell any Registrable Securities, or engage in any
other transaction involving or relating to the Registrable Securities, from the
time of the giving of notice with respect to a Potential Material Event until
such Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided, however,that the Company may not so
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suspend the right to such holders of Registrable Securities for more than two
twenty (20) business day periods in the aggregate during any 12-month period
("Suspension Period") with at least a ten (10) business day interval between
such periods, during the periods the Registration Statement is required to be in
effect;
(j) Use its reasonable efforts to secure and maintain the designation of
all the Registrable Securities covered by the Registration Statement on the
NASDAQ/National Market System or the "OTC Bulletin Board Market" of the National
Association of Securities Dealers Automated Quotations System ("NASDAQ") within
the meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the quotation of the Registrable
Securities on The NASDAQ National Market System; and further use its efforts to
arrange for at least two (2) market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities;
(k) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than three (3) business days after the
effective date of the Registration Statement;
(l) Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel;
(m) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement; and
(n) Not take, or omit to take, any actions that would preclude the filing or
effectiveness of the Registration Statement or require the withdrawal of
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) 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 Investor that such Investor shall furnish
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 be reasonably 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. At
least ten (10) business days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor, by such Investor'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 the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e) or 3(f),
above, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(d) Each holder of Registrable Securities that sells Registrable Securities
pursuant to a registration under this Agreement agrees that in connection with
registration as follows:
(i) Such seller shall cooperate as reasonably requested by the Company with
the Company in connection with the preparation of the registration statement,
and for as long as the Company is obligated to file and keep effective the
registration statement, shall provide to the Company, in writing, for use in the
registration statement, all such information regarding such seller and its plan
of distribution of the Registrable Securities as may reasonably be necessary to
enable the Company to prepare the registration statement and prospectus covering
the Registrable Securities, to maintain the currency and effectiveness thereof
and otherwise to comply with all applicable requirements of law in connection
therewith; and
(ii) During such time as such seller may be engaged in a distribution of the
Registrable Securities, such seller shall comply with Rules 10b-6 and 10b-7
promulgated under the Securities Exchange Act and pursuant thereto it shall,
among other things; (x) not engage in any stabilization activity in connection
with the securities of the Company in contravention of such rules; (y)
distribute the Registrable Securities under the registration statement solely in
the manner described in the registration statement; and (z) cease distribution
of such Registrable Securities pursuant to such registration statement upon
written notice from the Company that the prospectus covering the Registrable
Securites contains any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein not misleading.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Investors) incurred in connection
with registrations, filings or qualifications pursuant to Sections 2 and 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers, legal and accounting fees, the fees and disbursements of counsel
for the Company and a fee for a single counsel for the Investors (as a
group and not individually) not exceeding $10,000 for the Registration Statement
covering the Registrable Securities applicable to the Debentures issued on the
Closing Date shall be borne by the Company.
(b) Neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after the date
of this Agreement, entered into any agreement with respect to its securities
that is inconsistent with the rights granted to the Investors in this Agreement
or otherwise conflicts with the provisions hereof. Except as disclosed in the
Securities Purchase Agreement or the other documents entered into simultaneously
therewith, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person. Without limiting the generality of the
foregoing, without the written consent of the Investors holding a majority of
the Registrable Securities, the Company shall not grant to any person the right
to request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Investors set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement and the other
Transaction Agreements.
6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors,
managers and members, if any, of such Investor, the officers, if any, of such
Investor, and each person, if any, who controls any Investor within the meaning
of the Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein 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 Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any 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) shall not (I) 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 or on behalf of 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 was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; (III) 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; or (IV) apply to any
violation or alleged violation by an Indemnified Person of the Securities Act,
the Exchange Act, any state securities laws or any rule or regulation under the
Securities Act, the Exchange Act, or any state securities laws. Each Investor
will indemnify the Company and its officers, directors and agents (each, an
"Indemnified Person" or "Indemnified Party") against any claims 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 or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), 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. In case
any such action is brought against any Indemnified Person or Indemnified Party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such Indemnified Person or Indemnified
Party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such Indemnified Person or Indemnified Party under this
Section 6 for any legal or other reasonable out-of-pocket expenses subsequently
incurred by such Indemnified Person or Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
Indemnified Person or Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Person or Indemnified Party. 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 such expense, loss, damage or liability is incurred and is due
and payable.
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,
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however, that (a) 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; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
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 EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(c) make and keep public information available, as those terms are
understood and defined in Rule 144;
(d) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act;
(e) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange 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
Investors to sell such securities pursuant to Rule 144 without registration; and
(d) cause its counsel to deliver to its transfer agent such opinions of
law as shall be required to remove restrictive legends on the shares to be sold.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. This Agreement shall not be
assignable.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision 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 Investors who hold a fifty (50%) percent
interest of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
(f) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities 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.
(g) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Securities Purchase Agreement, (i) if to the
Company or to the Investors, to their respective address contemplated by the
Securities Purchase Agreement, and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(h) 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.
(i) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non coveniens, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Buyer for
any reasonable legal fees and disbursements incurred by the Buyer in enforcement
of or protection of any of its rights under this Agreement.
(j) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(k) All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
(l) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning thereof.
(m) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(n) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
(o) This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
FLEXXTECH CORPORATION
By:
Name:
Title:
INVESTORS:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
By:
Name:
Title:
Name of Investor
EXHIBIT G
EXHIBIT G
LOCK-UP AGREEMENT
-----------------
This Lock-up Agreement (the "Agreement") is made AS OF October __, 2001, between
Flexxstech Corporation, a Nevada corporation ("Company"), Xxxxxxx Xxxxxxxx
("Shareholder") and Dutchess Private Equities Fund, L.P. and Xxxxx Xxxxxx
(Dutchess Private Equities Fund, L.P. and Xxxxx Xxxxxx being cumulatively
referred to as the "Investors").
W I T N E S S E T H:
WHEREAS, Shareholder currently owns __________ shares of the Common Stock
of Company (the "Shares");
WHEREAS Investors are considering purchasing $240,000 of secured
convertible debentures from the Company (the "Debentures"), pursuant to a
Securities Purchase Agreement and related documents entered into by the Company
and the Investors; and
WHEREAS, Company and Investors have requested that the Shareholder enter
into an Agreement whereby Shareholder agrees not to sell any of Shareholders
shares.
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
1. Shareholder covenants and agrees that's its right to offer, pledge, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any of the Shares in a private or public sale, shall be
suspended during the lock-up period ("Lock-up Period"). The Lock-up Period shall
be defined as the earlier of (a) the ninety (90) calendar day period following
the date the registration statement covering the Debentures is declared
effective ("Effective Date") or (b) the ninety (90) calendar day period
immediately following the one (1) year anniversary of the issuance of the
Debentures. Shareholder covenants and agrees that it shall not offer, pledge,
sell, contract to sell, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, any of the Shares in a private or public sale during
the Lock-up Period.
2. Shareholder agrees to the issuance of stop transfer instructions on the
Shares and Company agrees to instruct its transfer agent to place a stop
transfer order on the Shares during the Lock-up Period. Such stop transfer order
shall not be required during any period, other than the Lock-up Period.
3. The Company and Shareholder each agree that the Investors are third party
beneficiaries to this Agreement and are relying on the terms of this Agreement
in making their investment decision to purchase the Debentures.
4. Shareholder agrees that should it decide to offer or pledge to, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any of the Shares in a private or public sale during any
period, other than the Lock-up Period, that it shall grant to Dutchess Advisors,
Ltd. and May Xxxxx Group, Inc. a right of first refusal to accept such offer or
pledge.
5. This Agreement shall only be effective in the event the Investors
purchase the Debentures on or before October 26, 2001.
6. In the event of any breach of the terms of this Agreement by the
Shareholder or the Company, and Investors shale file a lawsuit to enforce their
rights under this Agreement, Investors shall be entitled to an award of any
costs, expenses, reasonable attorneys' fees incurred in protecting or enforcing
their rights under this Agreement. In the interest of a speedy resolution of
any lawsuit which may arise hereunder, the Company, Shareholder and Investors
waive a trial by jury in any action with respect to this Agreement and as to any
issues arising relating to this Agreement.
7. This Agreement constitutes the entire agreement between the parties
hereto as to the subject matter hereof and may not be altered or amended except
by written agreement signed by all the parties hereto. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.
8. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
9. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original. A facsimile transmission of this signed Agreement
shall be legal and binding on all parties hereto.
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DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By:_______________________________________
Name: Xxxxxxx X. Xxxxxxxx, a Managing Member
XXXXX XXXXXX
By:_______________________________________
Name: Xxxxx Xxxxxx
FLEXXTECH CORPORATION
By:_______________________________________
Name: Xxxx Xxxxxxx, its President
SHAREHOLDER
By:
Name: Xxxxxxx Xxxxxxxx
EXHIBIT G
LOCK-UP AGREEMENT
-----------------
This Lock-up Agreement (the "Agreement") is made AS OF October __, 2001, between
Flexxstech Corporation, a Nevada corporation ("Company"), Xxxx X. Xxxxxxxx
Xxxxxxxx ("Shareholder") and Dutchess Private Equities Fund, L.P. and Xxxxx
Xxxxxx (Dutchess Private Equities Fund, L.P. and Xxxxx Xxxxxx being cumulatively
referred to as the "Investors").
W I T N E S S E T H:
WHEREAS, Shareholder currently owns __________ shares of the Common Stock
of Company (the "Shares");
WHEREAS Investors are considering purchasing $240,000 of secured
convertible debentures from the Company (the "Debentures"), pursuant to a
Securities Purchase Agreement and related documents entered into by the Company
and the Investors; and
WHEREAS, Company and Investors have requested that the Shareholder enter
into an Agreement whereby Shareholder agrees not to sell any of Shareholders
shares.
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
1. Shareholder covenants and agrees that's its right to offer, pledge, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any of the Shares in a private or public sale, shall be
suspended during the lock-up period ("Lock-up Period"). The Lock-up Period shall
be defined as the earlier of (a) the ninety (90) calendar day period following
the date the registration statement covering the Debentures is declared
effective ("Effective Date") or (b) the ninety (90) calendar day period
immediately following the one (1) year anniversary of the issuance of the
Debentures. Shareholder covenants and agrees that it shall not offer, pledge,
sell, contract to sell, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, any of the Shares in a private or public sale during
the Lock-up Period.
2. Shareholder agrees to the issuance of stop transfer instructions on the
Shares and Company agrees to instruct its transfer agent to place a stop
transfer order on the Shares during the Lock-up Period. Such stop transfer order
shall not be required during any period, other than the Lock-up Period.
3. The Company and Shareholder each agree that the Investors are third party
beneficiaries to this Agreement and are relying on the terms of this Agreement
in making their investment decision to purchase the Debentures.
4. Shareholder agrees that should it decide to offer or pledge to, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any of the Shares in a private or public sale during any
period, other than the Lock-up Period, that it shall grant to Dutchess Advisors,
Ltd. and May Xxxxx Group, Inc. a right of first refusal to accept such offer or
pledge.
5. This Agreement shall only be effective in the event the Investors
purchase the Debentures on or before October 26, 2001.
6. In the event of any breach of the terms of this Agreement by the
Shareholder or the Company, and Investors shale file a lawsuit to enforce their
rights under this Agreement, Investors shall be entitled to an award of any
costs, expenses, reasonable attorneys' fees incurred in protecting or enforcing
their rights under this Agreement. In the interest of a speedy resolution of
any lawsuit which may arise hereunder, the Company, Shareholder and Investors
waive a trial by jury in any action with respect to this Agreement and as to any
issues arising relating to this Agreement.
7. This Agreement constitutes the entire agreement between the parties
hereto as to the subject matter hereof and may not be altered or amended except
by written agreement signed by all the parties hereto. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.
8. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
9. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original. A facsimile transmission of this signed Agreement
shall be legal and binding on all parties hereto.
[Balance of this page intentionally left blank.]
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By:_______________________________________
Name: Xxxxxxx X. Xxxxxxxx, a Managing Member
XXXXX XXXXXX
By:_______________________________________
Name: Xxxxx Xxxxxx
FLEXXTECH CORPORATION
By:_______________________________________
Name: Xxxx Xxxxxxx, its President
SHAREHOLDER
By:
Name: Xxxx X. Xxxxxxxx
