EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August 14,
2001, by and among FLEXXTECH CORPORATION (the "Company"), a corporation formed
under the laws of the State of Nevada, with its principal office located at 5777
W. Century Boulevard, Suite 767, Los Angeles, California 94010 and the
undersigned investors (each, an "Investor" and collectively, the "Investors").
WHEREAS:
In connection with the Equity Line of Line of Credit Agreement (the "Line
of Credit Agreement"), dated as of August 14, 2001, by and among the parties
hereto, the Company has agreed, upon the terms and subject to the conditions of
the Line of Credit Agreement, to issue and sell to the Investors that number of
shares of the Company's common stock, par value $0.001 per share (the "Common
Stock"), which can be purchased pursuant to the terms of the Line of Credit
Agreement for an aggregate purchase price of up to $10,000,000. Capitalized
terms not defined herein shall have the meaning ascribed to them in the Line of
Credit Agreement.
To induce the Investors to execute and deliver 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 there
under, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
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 each of the undersigned Investors.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "REGISTER," "registered," and "registration" refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415 under the 1933
Act or any successor rule providing for offering securities on a continuous or
delayed basis ("RULE 415"), and the declaration or ordering of effectiveness of
such Registration Statement(s) by the SEC.
d. "REGISTRABLE SECURITIES" means the shares of Common Stock issuable to
Investors pursuant to the Line of Credit Agreement.
e. "REGISTRATION STATEMENT" means a registration statement under the
1933 Act which covers the Registrable Securities.
f. "SEC" means the United States Securities and Exchange Commission.
2. REGISTRATION.
-------------
a. Mandatory Registration. Within thirty (30) days after the date of
-----------------------
this Agreement, the Company shall prepare and file with the SEC a Registration
Statement on Form S-3 covering the resale of all of the Registrable Securities
whereby the number of shares registered shall be 28,571,428. If Form S-3 is
unavailable for such a registration, the Company shall use Form SB-2 or such
other form as is available for such a registration, subject to the provisions of
Section 2(b). The Company shall cause such Registration Statement to be
declared effective by the SEC prior to the first sale to Investors of the
Company's Common Stock pursuant to the Line of Credit Agreement.
b. Ineligibility for Form S-3. If Form S-3 is not available for the
-----------------------------
registration of Registrable Securities hereunder, within thirty (30) days after
the date of this Agreement the Company shall (i) register the sale of the
Registrable Securities on Form SB-2 or another appropriate form and (ii)
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available; provided, that the Company shall maintain the effectiveness
--------
of the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.
c. Sufficient Number of Shares Registered. If the number of shares
------------------------------------------
available under a Registration Statement filed pursuant to Section 2(a) is
insufficient to cover all of the Registrable Securities which Investors have
purchased pursuant to the Line of Credit Agreement, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover all of such
Registrable Securities which Investors have purchased pursuant to the Line of
Credit Agreement as soon as practicable, but in any event not later than fifteen
(15) days after the necessity therefore arises. The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the number of Registrable Securities issuable on an
Advance Notice Date is greater than the number of shares available for resale
under such Registration Statement.
d. Liquidated Damages. If either the conditions set forth in Sections 2(a)
-------------------
or 2(b) are not satisfied as required thereby, then within three (3) days after
the end of the time periods referenced in Sections 2(a) or 2(b) (the third such
date 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
0.5% 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(a) or 2(a), 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 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.
e. No Other Securities. The Company agrees not to include any other
---------------------
securities, other than those for the current Regulation D offering, in this
Registration Statement without Investors' prior written consent. Furthermore,
the Company agrees that it will not file any other Registration Statement for
other securities (other than those for the current Regulation D offering), until
ninety (90) days after the Registration Statement for the Registrable Securities
is declared effective.
3. RELATED OBLIGATIONS.
---------------------
a. The Company shall keep the Registration Statement effective pursuant
to Rule 415 at all times until the date on which the Investors shall have sold
all the Registrable Securities covered by such Registration Statement (the
"REGISTRATION PERIOD"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company's filing a report on Form 10-KSB, Form 10-QSB or Form 8-K
or any analogous report under the Securities Exchange Act of 1934, as amended
(the "1934 ACT"), the Company shall have incorporated such report by reference
into the Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement the
Registration Statement.
c. The Company shall furnish to each Investor whose Registrable Securities
are included in any Registration Statement, without charge, (i) at least one
copy of such Registration Statement as declared effective by the SEC and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, all exhibits and each preliminary
prospectus, (ii) ten (10) copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents as such Investor may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use its best efforts to (i) register and qualify the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as any
Investor reasonably requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, that the Company shall not be required
in connection therewith or as a condition thereto to (w) make any change to its
articles of incorporation or by-laws, (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify each Investor who holds Registrable Securities
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event or
development, the Company shall notify each Investor in writing of the happening
of any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to each Investor. The
Company shall also promptly notify each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to each
Investor by facsimile on the same day of such effectiveness), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
f. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction within the United States of America and, if such an
order or suspension is issued, to obtain the withdrawal of such order or
suspension at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
g. At the reasonable request of any Investor, the Company shall furnish to
such Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may reasonably
request (i) a letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
Investors.
h. The Company shall make available for inspection by (i) any Investor and
(ii) one firm of accountants or other agents retained by the Investors
(collectively, the "INSPECTORS") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively, the
"RECORDS"), as shall be reasonably deemed necessary by each Inspector, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request; provided, that each Inspector shall agree,
and each Investor hereby agrees, to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector and the Investor has knowledge. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
i. The Company shall hold in confidence and not make any disclosure of
information concerning any or all of the Investors provided to the Company
unless (i) disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. Upon learning that disclosure of such information concerning any or
all of the Investors is sought in or by a court or governmental body of
competent jurisdiction or through other means, the Company will give prompt
written notice to the Investors and allow the Investors, at the Investors'
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
j. The Company shall use its best efforts either to cause all the
Registrable Securities covered by a Registration Statement (i) to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or The Nasdaq SmallCap
Market or, if, despite the Company's best efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in satisfying the preceding
clause (i) or (ii), to secure the inclusion for quotation on the National
Association of Securities Dealers, Inc. OTC Bulletin Board for such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(j).
k. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Investors may reasonably request and registered in
such names as the Investors may request.
l. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
m. The Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
n. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
o. Within two (2) business days after a Registration Statement which covers
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in substantially the form attached hereto as Exhibit A.
p. The Company shall take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of Registrable Securities pursuant
to a Registration Statement and will 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.
--------------------------------
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(f) or the first
sentence of 3(e), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to an Investor's purchaser in accordance
with the terms of the Line of Credit Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor's receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
---------------------------
- - All expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, 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,
shall be borne by the Company.
6. INDEMNIFICATION.
----------------
With respect to Registrable Securities which are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor, the directors,
officers, partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"CLAIMS") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("BLUE SKY FILING"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) any untrue statement or alleged untrue statement of
a material fact contained in any final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading; or (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). The Company shall
reimburse the Investors and each such controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or
disbursements 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): (x) shall not apply to a Claim by an Indemnified Person 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 such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company, if such prospectus was timely made available by the Company pursuant to
Section 3(c); and (z) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the resale of the Registrable
Securities by the Investors.
b. In connection with a Registration Statement, each Investor agrees
to, severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement and
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (each an "INDEMNIFIED PARTY"), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or
is based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(d), such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, that the Investor shall be liable under this
Section 6(b) for only that amount of a Claim or Indemnified Damages as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the resale of the Registrable
Securities by the Investors. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected and such new prospectus was delivered to each Investor
prior to such Investor's use of the prospectus to which the Claim relates.
c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, that an Indemnified Person
or Indemnified Party shall have the right to retain its own counsel with the
fees and expenses of not more than one counsel for such Indemnified Person or
Indemnified Party to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. In the case of an Indemnified
Person, legal counsel referred to in the immediately preceding sentence shall be
selected by the Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim relates.
The Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of
any action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
-------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party will 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, that: (i) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
-------------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any 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 will:
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 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Article VI of the Line of
Credit Agreement) and the filing of such reports and other documents is required
for the applicable provisions of Rule 144;
c. 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 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration; and
d. cause its counsel to render such opinions of law to the Company's
transfer agent as may be required to remove legends that restrict the resale of
the shares.
9. NO ASSIGNMENT.
---------------
The rights under this Agreement shall not be assignable.
10. AMENDMENT OF REGISTRATION RIGHTS.
------------------------------------
Provisions of this Agreement may be amended only with the written consent
of the Company and the Investors.
11. MISCELLANEOUS.
--------------
a. A Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
FLEXXTECH CORPORATION
5777 W. Century Boulevard
Suite 767
Los Angeles, CA 94010
Telephone: (310) 342-0794
Facsimile: (310) 342-0791
Attention: Greg Mardock, Chief Executive Officer
with a copy to:
Bell, Nunnally & Martin LLP
3232 McKinney Avenue
Suite 1400
Dallas, TX 75204-2429
Telephone: (214) 740-1400
Facsimile: (214) 740-1499
Attention: William E. Swart, Esq.
If to an Investor, to its address and facsimile number on the Schedule of
Investors attached hereto, with copies to McGuireWoods, LLP, 9 West 57th Street,
Suite 1620, New York, NY 10019, Attention: William A. Newman, Esq., and also to
such Investor's representatives as may be set forth on the Schedule of
Investors, or to such other address and/or facsimile number and/or to the
attention of such other person as the recipient party has specified by written
notice given to each other party five days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
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. The corporate laws of the State of Nevada shall govern all issues
concerning the relative rights of the Company and the Investors as its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. 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 in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the Line of Credit Agreement and the Escrow Agreement
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Line of Credit Agreement and the Escrow Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
g. This Agreement may be executed in multiple 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 facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
h. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
i. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities.
j. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
k. This Agreement is intended for the benefit of the parties hereto and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of day and year first above written.
FLEXXTECH CORPORATION
By: ________________________________
Name: Greg Mardock
Title: Chief Executive Officer
By: DRH Investment Company, LLC
By: ________________________________
Name: Alfred Hahnfeldt
Title: Managing Member
By:
By: ________________________________
Name:
Title:
SCHEDULE OF INVESTORS
INVESTOR ADDRESS INVESTOR'S REPRESENTATIVES' ADDRESS INVESTOR'S COUNSEL ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER AND FACSIMILE NUMBER
------------- -------------------- -------------------- ------------------------
DRH Investment 57 Post Road East, Suite 750, May Davis Group, Inc. McGuire Woods LLP
Company LLC Westport,CT 06880 c/o National Securities, 9 West 57th Street
203-899-1322 28th Floor Suite 1620
120 Broadway New York, NY 10019
New York, NY 10271 (212) 548-2150
May Davis Group, Inc. Joseph B. LaRocco
Dutchess Private 100 Mill Plain Rd. c/o National Securities, 49 Locust Avenue
Equities Fund, LP 3rd Floor 28th Floor Suite 107
Danbury, CT 06811 120 Broadway New Canaan, CT 06840
203-791-3839 New York, NY 10271 (203) 966-0363
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn:
Re: FLEXXTECH CORPORATION
----------------------
Ladies and Gentlemen:
We are counsel to Flexxtech Corporation, a Nevada corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Equity Line of Credit Agreement (the "LINE OF CREDIT AGREEMENT") entered into by
and among the Company and the investors named therein (collectively, the
"INVESTORS") pursuant to which the Company issued to the Investors shares of its
Common Stock, no par value (the "COMMON STOCK"). Pursuant to the Line of Credit
Agreement, the Company also has entered into a Registration Rights Agreement
with the Investors (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement) under the Securities Act of 1933,
as amended (the "1933 ACT"). In connection with the Company's obligations under
the Registration Rights Agreement, on ____________ ____, the Company filed a
Registration Statement on Form ________ (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Investors
as a selling stockholder there under.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
cc: [LIST NAMES OF INVESTORS]