Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
(Warrant Shares & Restricted Shares)
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 14, 2001 (this
"Agreement"), is made by and between FLEXXTECH CORPORATION a Nevada
corporation, with headquarters located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Company"), and the persons respectively named
on Schedule A annexed hereto (the "Holders").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of August 14, 2001, between the Buyers
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 to the Holders or their
designee(s) warrants (the "MD Warrants") to purchase 300,000 shares of the
Company's Common Stock, par value $.001 per share (the "Common Stock"); and
WHEREAS, pursuant to the Equity Line of Credit Agreement (the "Line of
Credit Agreement"), dated as of August 14, 2001, between the Company and the
investors named therein, the Company has agreed to deliver to the Holders
certain shares of Common Stock (the "MD Restricted Shares"); and
WHEREAS, pursuant to the Securities Purchase Agreement and the Line of
Credit 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 MD Restricted Shares and the shares of
Common Stock that underlie the MD Warrants (the "Registrable Securities");
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
Holders hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Holders" means the Holders and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds MD Warrants or Registrable
Securities.
(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 Restricted Shares and the shares
of Common Stock that underlie the Warrants.
(e) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(f) "SEC" means the United States Securities and Exchange Commission.
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 Holders a sufficient number of shares of Common
Stock for the Holders to sell the Registrable Securities (or such lesser
number as may be required by the SEC, but in no event less than one hundred
fifty percent (150%) of the aggregate number of shares (A) into which the
relevant Warrants would be convertible at the time of filing of such
Registration Statement (assuming for such purposes that all such Warrants had
been eligible to be converted, and had been converted, into Registrable
Securities 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 Warrants to
prevent dilution resulting from stock splits or stock dividends. The Company
will use its reasonable efforts to cause such Registration Statement to be
declared effective on a date (a "Required Effective Date") no later than
ninety (90) days after the Closing 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 Holders, 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 efforts to cause the amended Registration Statement or
the Additional Registration Statement, as the case may be, to be declared
effective on a date (a "Required Effective Date") which is no later than
ninety (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 payments to the Holders in such amounts and at such times as shall
be determined pursuant to this Section 2(b).
(ii) 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 Holders in such amounts
and at such times as shall be determined pursuant to this Section 2(b).
(iii) If either the conditions set forth in Sections 2(b)(i) or
2(b)(ii) are not satisfied as required thereby, then within three (3) days
after the end of the time periods referenced in Sections 2(b)(i) or 2(b)(ii)
(the third such date being referred to as the "Set Date"), as the case may be,
the Company shall immediately pay to the Holders without demand therefore a
cash amount equal to 2% per month of aggregate market value (computed at the
market price then prevailing) of the Registrable Securities and, until such
time as the actions required by Sections 2(b)(i) or 2(b)(ii), as the case may
be, shall have been taken, the same amount shall accrue and become payable to
the Investors within three days on the same day as the Set Date of each
subsequent month until such Sections shall have been complied with. In light
of the difficulty of ascertaining the amount of damage that the Holders 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.
(iv) The parties acknowledge that the damages which may be
incurred by the Holders if the Registration Statement is not filed by the
Required Filing Date or if the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended, 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.
(v) 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 Holders or their 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 Effective Date occurs, (ii) the date when the Holders may sell all
Registrable Securities under Rule 144, or (iii) the date the Holders no longer
hold 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 Holders 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 Holder, such Holders' legal counsel identified to the
Company (which, until further written notice, shall be deemed to be
McGuireWoods LLP, ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, ATTN:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.; (the "Holders' 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
Holders); 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 Holders 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 Holders shall have the opportunity to comment thereon;
(e) Furnish to each Holder and such Holder'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 Holder may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by
such Holder;
(f) As promptly as practicable after becoming aware thereof, notify
each Holder 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 Holder as such
Holder may reasonably request;
(g) As promptly as practicable after becoming aware thereof, notify
each Holder 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;
(h) 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 Holders in writing of the existence of a Potential Material
Event, the Holders 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 Holder 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 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;
(i) 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 best efforts to arrange for at least two market makers to register
with the National Association of Securities Dealers, Inc. ("NASD") as such
with respect to such Registrable Securities;
(j) 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;
(k) Cooperate with the Holders 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
Holders 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 Holders whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and
opinion of such counsel;
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Holders of the Registrable Securities pursuant
to the Registration Statement; and
(m) 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 Holders. In connection with the registration of
the Registrable Securities, the Holders 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 Holder that such Holder 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) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Holder of the
information the Company requires from each such Holder (the "Requested
Information") if such Holder elects to have any of such Holder'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 a Holder (a "Non-Responsive Holder"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Holder;
(b) Each Holder, by such Holder's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Holder has notified the Company in writing of
such Holder's election to exclude all of such Holder's Registrable Securities
from the Registration Statement; and
(c) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Holder will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Holder'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 Holder 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 Holder'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 Holders) incurred in connection
with registrations, filings or qualifications pursuant to Section 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 Holders (as a
group and not individually) not exceeding $10,000 for the Registration
Statement covering the Registrable Securities applicable to the Warrants
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 Holders 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 Holders
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 Holders 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 Holder who holds such Registrable Securities, the directors,
managers and members, if any, of such Holder, the officers, if any, of such
Holder, and each person, if any, who controls any Holder 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
Holders, 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 Holders 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
Holder 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 Holder, 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 and shall survive
the transfer of the Registrable Securities by the Holders pursuant to Section
9.
(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, 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
Holders 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
Holders to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) 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;
(c) furnish to each Holder so long as such Holder 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 Holders 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. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Holders to any transferee of the Registrable
Securities (or all or any portion of any unconverted Debenture) only if: (a)
the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i)
the name and address of such transferee or assignee and (ii) the securities
with respect to which such registration rights are being transferred or
assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, and (d) at or
before the time the Company received the written notice contemplated by clause
(b) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein. In the event
of any delay in filing or effectiveness of the Registration Statement as a
result of such assignment, the Company shall not be liable for any damages
arising from such delay, or the payments set forth in Section 2(c) hereof
arising from such delay.
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 Holders 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 Holder and the
Company.
11. Miscellaneous.
(a) 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.
(b) Notices required or permitted to be given hereunder shall be given
in the manner contemplated by the Securities Purchase Agreement, at the
following addresses or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b):
COMPANY: FLEXXTECH CORPORATION
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
HOLDERS: Notice to all Holders in care of:
May ▇▇▇▇▇ Group, Inc.
c/o National Securities
28th Floor
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ Singer
with a copy to:
McGuireWoods, LLP
Nine ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) 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 Holders for any reasonable legal fees and disbursements incurred
by the Holders in enforcement of or protection of any of its rights under this
Agreement.
(e) 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.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns
of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) 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.
(j) 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 Holders, 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.
(k) 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.
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: President
HOLDERS:
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