EXHIBIT 10.6:
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Flexxtech Corporation
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This offering consists of up to $100,000 of the Company's Convertible
Debentures convertible into the
Company's Common Stock.
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SUBSCRIPTION AGREEMENT
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SUBSCRIPTION PROCEDURES
Convertible Debentures of Flexxtech Corporation. (the "Company") are
being offered (the "Debentures"). This offering is being made in accordance with
the exemptions from registration provided for under Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act") and Rule 506 of Regulation D
promulgated under the 1933 Act.
In order to purchase Debentures, each subscriber must complete and
execute a questionnaire (the "Questionnaire") and a subscription agreement (the
"Subscription Agreement"). In addition, the subscriber must make a payment to an
escrow fund, if available, for the amount being purchased or directly to the
Investor. All subscriptions are subject to acceptance by the Company, which
shall not occur until the Company has returned the signed Company Signature
Page.
The Questionnaire is designed to enable the Purchaser to demonstrate
the minimum legal requirements under federal and state securities laws to
purchase the Debentures. The Signature Page for the Questionnaire and the
Subscription Agreement contain representations relating to the subscription and
should be reviewed carefully by each subscriber.
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you must submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
Payment must be made by wire transfer to Dutchess Private Equities
Fund, LP (the "Investort") per the wire instructions that will be established.
In the event of a termination of the offering or the rejection of a
subscription, subscription funds will be returned by the Company without
interest or charges.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
SUBSCRIPTION AGREEMENT
To: Flexxtech Corporation.
This Subscription Agreement is made between Flexxtech Corporation., a
Nevada corporation, (the "Company"), and the undersigned prospective purchaser
("Purchaser") who is subscribing hereby for the Company's convertible debentures
(the "Debentures"). This subscription is submitted to you in accordance with and
subject to the terms and conditions described in this Subscription Agreement,
together with any Exhibits thereto, relating to an offering (the "Offering") of
up to $100,000 of Debentures. The Offering is limited to accredited investors
and is made in accordance with the exemptions from registration provided for
under Section 4(2) of the 1933 Act and Rule 506 of Regulation D promulgated
under the 1933 Act ("Regulation D").
1. SUBSCRIPTION.
(a) The Purchaser hereby irrevocably subscribes for and agrees to
purchase that amount of Debentures as stated on the signature page upon the
terms set forth in this Subscription Agreement. The Debentures shall pay a 6%
cumulative interest, compounded daily, payable in arrears at the time of each
conversion, in cash or in common stock of the Company, $.001 par value ("Common
Stock"), at the Company's option. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by dividing the
amount of the accrued and unpaid interest by the conversion price as of the time
of conversion under the terms of the Debenture. If the dividend is to be paid in
cash, the Company shall notify Investor on the Conversion Date and make such
payment on the next business day. The Debentures are subject to automatic
conversion at the end of five (5) years from the date of issuance at which time
all Debentures outstanding will be automatically converted based upon the terms
set forth in the Debenture. The closing shall be deemed to have occurred on the
date funds, less escrow fees, attorney fees and other amounts payable pursuant
to the Escrow Agreement, if applicable, are received by the Company (the
"Closing Date"). The initial closing shall be held not later than the next day
after execution of this Agreement, the Registration Rights Agreement and the
Investment Agreement.
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased, the Debentures so purchased will be forwarded by the
Company to the Purchaser or its broker, as listed on the signature page, and the
name of such Purchaser will be registered on the Debenture transfer books of the
Company as the record owner of such Debentures.
(c) As long as the Purchaser owns the Debenture, the Purchaser
shall have the right to change the terms for the balance of the Debenture it
then holds, to match the terms of any other offering of securities made by the
Company.
(d) The Purchaser retains the right to choose legal council for
preparation and filing of the registration statement for this Debenture.
2. REPRESENTATIONS AND WARRANTIES.
The Purchaser hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The Purchaser has been furnished with, and has
carefully read the applicable form of Registration Rights Agreement
annexed hereto as Exhibit B (the "Registration Rights Agreement"), and
the Debenture annexed hereto as Exhibit C and is familiar with and
understands the terms of the Offering. With respect to tax and other
economic considerations involved in his investment, the Purchaser is
not relying on the Company. The Purchaser has carefully considered and
has, to the extent the Purchaser believes such discussion necessary,
discussed with the Purchaser 's professional legal, tax, accounting and
financial advisors the suitability of an investment in the Company, by
purchasing the Debentures, for the Purchaser 's particular tax and
financial situation and has determined that the investment being made
by the Purchaser is a suitable investment for the Purchaser.
(b) The Purchaser acknowledges that all documents,
records, and books pertaining to this investment which the Purchaser
has requested have been made available for inspection or the Purchaser
has had access thereto.
(c) The Purchaser has had a reasonable opportunity to ask
questions of and receive answers from a person or persons acting on
behalf of the Company concerning
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the Offering and if such opportunity was taken, all such questions have
been answered to the full satisfaction of the Purchaser.
(d) The Purchaser will not sell, or otherwise dispose of
the Debentures or the Common Stock issued upon conversion of the
Debentures without registration under the 1933 Act or applicable state
securities laws or compliance with an exemption therefrom. The
Debentures have not been registered under the 1933 Act or under the
securities laws of any state. Resales of the Common Stock underlying
the Debentures or issued in payment of accrued interest on the
Debentures are to be registered by the Company pursuant to the terms of
the Registration Rights Agreement attached hereto as Exhibit B and
incorporated herein and made a part hereof.
(e) The Purchaser recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire
amount of such investment. Further, the Purchaser has carefully read
and considered the schedule entitled Litigation matters attached hereto
as Schedule 3(h).
(f) The Purchaser acknowledges that each certificate
representing the Debentures (and the shares of Common Stock issued upon
conversion of the Debentures, unless registered) or in payment of
dividends on the Debentures shall be stamped or otherwise imprinted
with a legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144
UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO
THE DISPOSITION OF SECURITIES), OR (iii) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
If Purchaser sends a Notice of Conversion (See Exhibit A
attached hereto), and provided a registration statement under the
Securities Act of 1933 is in effect as to the sale, then in such event
the Company shall have its transfer agent send Purchaser the
appropriate number of shares of Common Stock without restrictive
legends and not subject to stop transfer instructions.
(g) The Purchaser acknowledges and agrees that it shall
not be entitled to seek any remedies with respect to the Offering from
any party other than the Company.
(h) If this Subscription Agreement is executed and
delivered on behalf of a corporation: (i) such corporation has the full
legal right and power and all authority and approval required (a) to
execute and deliver, or authorize execution and delivery of, this
Subscription Agreement and all other instruments (including, without
limitation, the Registration Rights Agreement) executed and delivered
by or on behalf of such corporation in connection with the purchase of
the Debentures and (b) to purchase and hold the Debentures; and (ii)
the signature of the party signing on behalf of such corporation is
binding upon such corporation.
(i) The Purchaser is not subscribing for the Debentures
as a result of, or pursuant to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar
or meeting.
(j) The Purchaser is purchasing the Debentures for its
own account for investment, and not with a view toward the resale or
distribution thereof, except pursuant to sales registered or exempted
from registration under the 0000 Xxx. The Purchaser has not offered or
sold any portion of the Debentures being acquired nor does the
Purchaser have any present intention of dividing the Debentures with
others or of selling, distributing or otherwise disposing of any
portion of the Debentures either currently or after the passage of a
fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstance in violation
of the 1933 Act provided, however, that by making the representations
herein, Purchaser does not agree to hold any of the Debentures for any
minimum or other specific term and reserves the right to dispose of the
Debentures at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Purchaser is neither an
underwriter of, nor a dealer in, the Debentures or the Common Stock
issuable upon conversion thereof or upon the payment of dividends
thereon and is not participating in the distribution or resale of the
Debentures or the Common Stock issuable upon conversion or exercise
thereof. Except as provided in the Registration Rights Agreement, the
Company has no obligation to register the Common Stock underlying
Debentures and the Common Stock that may be issued in lieu of cash
dividends.
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(k) The Purchaser or the Purchaser's representatives, as
the case may be, has such knowledge and experience in financial, tax
and business matters so as to enable the Purchaser to utilize the
information made available to the Purchaser in connection with the
Offering to evaluate the merits and risks of an investment in the
Debentures and to make an informed investment decision with respect
thereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, the Company
represents and warrants to the Purchaser that:
a. Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Subscription Agreement means any
entity in which the Company, directly or indirectly, owns capital stock or holds
an equity or similar interest) (a complete list of which is set forth in
Schedule 3(a)) are corporations duly organized and validly existing in good
standing under the laws of the respective jurisdictions of their incorporation,
and have the requisite corporate power and authorization to own their properties
and to carry on their business as now being conducted. Each of the Company and
its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Subscription
Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, properties, assets, operations, results of operations, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined in Section 3(b)below).
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Subscription Agreement, the Registration Rights Agreement and
the Investment Agreement, and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Subscription Agreement (collectively, the "TRANSACTION DOCUMENTS"), and to issue
the Debentures in accordance with the terms hereof and thereof, (ii) the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the reservation for issuance and the issuance of
the Debentures pursuant to this Subscription Agreement, have been duly and
validly authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors, or its
shareholders, (iii) the Transaction Documents have been duly and validly
executed and delivered by the Company, and (iv) the Transaction Documents
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 100,000,000 shares of Common Stock, of which as
of the date hereof, approximately 503,407 shares are issued and outstanding, 0
shares of Preferred Stock of which none are issued and outstanding and
approximately (as of April 7, 2003) shares of Common Stock are issuable upon the
exercise of options, warrants and conversion rights. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(c) which is attached hereto
and made a part hereof, (i) no shares of the Company's capital stock are subject
to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding shares of capital stock, options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement), (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Subscription
Agreement, (vii) the Company does not have any stock
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appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement and (viii) there is no dispute as to the class of any shares of the
Company's capital stock. The Company has furnished to the Purchaser, or the
Purchaser has had access through XXXXX to, true and correct copies of the
Company's Articles of Incorporation, as in effect on the date hereof (the
"ARTICLES OF INCORPORATION"), and the Company's By-laws, as in effect on the
date hereof (the "BY-LAWS `), and the terms of all securities convertible into
or exercisable for Common Stock and the material rights of the holders thereof
in respect thereto.
d. Issuance of Debentures. A sufficient number of Debentures
issuable pursuant to this Subscription Agreement, but not more than 19.99% of
the shares of Common Stock outstanding as of the date hereof (if the Company
becomes listed on Nasdaq or the American Stock Exchange), has been duly
authorized and reserved for issuance pursuant to this Subscription Agreement.
Upon issuance in accordance with this Subscription Agreement, the Debentures
will be validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof. In the event the Company
cannot register a sufficient number of shares of Common Stock, due to the
remaining number of authorized shares of Common Stock being insufficient, the
Company will use its best efforts to register the maximum number of shares it
can based on the remaining balance of authorized shares and will use its best
efforts to increase the number of its authorized shares as soon as reasonably
practicable.
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Articles of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree, including United States federal and state securities laws and
regulations and the rules and regulations of the principal securities exchange
or trading market on which the Common Stock is traded or listed (the "Principal
Market"), applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 3(e), neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, the Articles
of Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or their
organizational charter or by-laws, respectively, or any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its Subsidiaries,
except for possible conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not individually or in
the aggregate have a Material Adverse Effect. The business of the Company and
its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, statute, ordinance, rule, order or regulation of any
governmental authority or agency, regulatory or self-regulatory agency, or
court, except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Subscription Agreement and as
required under the 1933 Act, the Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or registration (except
the filing of a registration statement) with, any court, governmental authority
or agency, regulatory or self-regulatory agency or other third party in order
for it to execute, deliver or perform any of its obligations under, or
contemplated by, the Transaction Documents in accordance with the terms hereof
or thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof and are
in full force and effect as of the date hereof. Except as disclosed in Schedule
3(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the Principal Market as in
effect on the date hereof and on each of the Closing Dates and is not aware of
any facts which would reasonably lead to delisting of the Common Stock by the
Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since January 1, 2003,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
("SEC") pursuant to the reporting requirements of the Securities and Exchange
Act of 1934 ("1934 Act") (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC DOCUMENTS"). The Company has delivered to the Purchaser or its
representatives, or they have had access through XXXXX, to true and complete
copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC,
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contained any untrue statement of a material fact or omitted 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. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Purchaser which is
not included in the SEC Documents, including, without limitation, information
referred to in Section 3(d) of this Subscription Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstance under which they
are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g) or the SEC Documents filed at least five (5) days prior to the date hereof,
since December 31, 2002, there has been no change or development in the
business, properties, assets, operations, financial condition, results of
operations or prospects of the Company or its Subsidiaries which has had or
reasonably could have a Material Adverse Effect. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
h. Absence of Litigation. Except as set forth in the Company's
SEC filings, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive officers of
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
in which an adverse decision could have a Material Adverse Effect.
i. Acknowledgment Regarding the Purchase of Debentures. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length investor with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that the Purchaser is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby and
any advice given by the Purchaser or any of its respective representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Purchaser's purchase
of the Debentures. The Company further represents to the Purchaser that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.
j. Intentionally omitted.
k. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. No executive officer (as defined in Rule 501(f) of the
0000 Xxx) has notified the Company that such officer intends to leave the
Company's employ or otherwise terminate such officer's employment with the
Company.
l. Intellectual Property Rights. All patents, patent
applications, trademark registrations and applications for trademark
registration held by the Company are owned free and clear of all mortgages,
liens, charges or encumbrances whatsoever. No licenses have been granted with
respect to these items and the Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, and, except as set forth on Schedule 3(l), there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its Subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
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m. Environmental Laws. The Company and its Subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
n. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(n) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company or any of
its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
o. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
p. Regulatory Permits. The Company and its Subsidiaries have in
full force and effect all certificates, approvals, authorizations and permits
from the appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
q. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
r. No Materially Adverse Contracts, Etc. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
s. Tax Status. The Company's consolidated 2002 federal income tax
return, the Company and each of its Subsidiaries has made or filed all United
States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. Except for unpaid federal withholding taxes, there are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
7
t. Certain Transactions. Except as set forth on Schedule 3(t) and
in the SEC Documents filed at least ten days prior to the date hereof and except
for arm's length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed on Schedule 3(c), none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
u. Dilutive Effect. The Company understands and acknowledges that
the number of shares of Common Stock issuable upon purchases pursuant to this
Subscription Agreement will increase in certain circumstances including, but not
necessarily limited to, the circumstance wherein the trading price of the Common
Stock declines following the effective date of the registration statement
covering the Common Stock underlying the Debentures (the "Effective Date"). The
Company's executive officers and directors have studied and fully understand the
nature of the transactions contemplated by this Subscription Agreement and
recognize that they have a potential dilutive effect. The board of directors of
the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that, subject to such limitations as are expressly set forth in the
Transaction Documents, its obligation to issue shares of Common Stock upon
purchases pursuant to this Subscription Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
v. Additional Financings. The Company shall not, directly nor
indirectly, without the prior written consent of Dutchess Private Equities Fund,
L.P., offer, sell, grant any option to purchase, or otherwise dispose of (or
announce any offer, sale, grant or any option to purchase or other disposition)
any of its Common Stock or securities convertible into Common Stock, or file any
registration statement, including those on Form S-8 for any securities (a
"SUBSEQUENT FINANCING") for a period of 180 days after the Effective Date.
4. COVENANTS OF THE COMPANY
a. Best Efforts. The Company shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in this
Subscription Agreement.
b. Blue Sky. The Company shall, at its sole cost and expense,
make all filings and reports relating to the offer and sale of the Debentures
and the Common Stock underlying the Debentures as required under the applicable
securities or "Blue Sky" laws of such states of the United States as specified
by the Purchaser.
c. Reporting Status. Until the earlier of (i) the date that the
Purchaser may sell all of the Common Stock underlying the shares acquired
pursuant to this Subscription Agreement without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date
on which the Purchaser shall have sold all the Common Stock underlying the
Debentures, the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as a
reporting company under the 1934 Act.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Debentures exclusively for auditing, legal and other expenses
associated in connection with the Company's current 10K filing due March 31,
2003. The Company represents that the proceeds shall be sufficient to cover all
costs required to file its 10K with the SEC. Once those obligations have been
satisfied, any remaining balance may be used for general corporate purposes.
e. Financial Information. The Company agrees to make available to
the Purchaser via XXXXX or other electronic means the following: (i) within five
(5) business days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current
Reports on Form 8-K and any Registration Statements or amendments filed pursuant
to the 1933 Act; (ii) on the same day as the release thereof, facsimile copies
of all press releases issued by the Company or any of its Subsidiaries, (iii)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders and (iv) within two (2) calendar
days of filing or delivery thereof, copies of all documents filed with, and all
correspondence sent to, the Principal Market, any securities exchange or market,
or the National Association of Securities Dealers, Inc.
8
f. Reservation of Common Stock. Subject to the following
sentence, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Common Stock
underlying the Debentures. In the event that the Company determines that it does
not have a sufficient number of authorized shares of Common Stock to reserve and
keep available for issuance, the Company shall use its best efforts to increase
the number of authorized shares of Common Stock by seeking shareholder approval
for the authorization of such additional shares. If the investor feels that
there is not enough shares registered they have the right to have the company
issue more shares.
g. Listing. The Company shall promptly secure the listing of all
of the Common Stock underlying the Debentures upon the Principal Market and each
other national securities exchange and automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, such listing. The Company shall maintain the
Common Stock's authorization for quotation on the Principal Market, unless the
Purchaser and the Company agree otherwise, and the Company shall use its best
efforts to promptly make application for listing on the new Bulletin Board
Exchange not later than ninety (90) calendar days after the date the Company
receives its application in the mail. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market
(excluding suspensions of not more than one trading day resulting from business
announcements by the Company). The Company shall promptly provide to the
Purchaser copies of any notices it receives from the Principal Market regarding
the continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section.
h. Transactions With Affiliates. The Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
or permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, persons who were officers or directors at any
time during the previous two years, shareholders who beneficially own 5% or more
of the Common Stock, or affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "RELATED
PARTY"), except for (i) customary employment arrangements and benefit programs
on reasonable terms (including changes currently under discussion with the
Company's Board of Directors concerning the compensation, to be payable in
stock, of the Chairman of the Board), (ii) any agreement, transaction,
commitment or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, or (iii) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company.
For purposes hereof, any director who is also an officer of the Company or any
Subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment or arrangement. "AFFILIATE" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a 5% or more equity interest in
that person or entity, (ii) has 5% or more common ownership with that person or
entity, (iii) Controls that person or entity, or (iv) shares common control with
that person or entity. "CONTROL" or "CONTROLS" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
i. Intentionally deleted.
j. Corporate Existence. The Company shall use its best efforts to
preserve and continue the corporate existence of the Company.
k. Notice of Certain Events Affecting Registration. The Company
shall promptly notify Purchaser upon the occurrence of any of the following
events in respect of a registration statement or related prospectus covering the
Common Stock underlying the Debentures: (i) receipt of any request for
additional information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the registration statement for
amendments or supplements to the registration statement or related prospectus;
(ii) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any registration
statement or the initiation of any proceedings for that purpose; (iii) receipt
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Common Stock underlying the
Debentures for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any
statement made in such registration statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
registration statement, related prospectus or documents so that, in the case of
a registration statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to
9
be stated therein or necessary to make the statements therein not misleading,
and that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the registration
statement would be appropriate, and the Company shall promptly make available to
Purchaser any such supplement or amendment to the related prospectus.
l. Indemnification. In consideration of the Purchaser's execution
and delivery of the this Agreement and the Registration Rights Agreement and
acquiring the Debentures hereunder and in addition to all of the Company's other
obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless the Purchaser and all of their shareholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(ii) any breach of any covenant, agreement or obligation of the Company
contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (iii) any cause of action, suit or
claim brought or made against such Indemnitee by a third party and arising out
of or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (iv) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Debentures or (v) the status of the Purchaser as an investor in the
Company, except insofar as any such untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
written information furnished to the Company by the Purchaser which is
specifically intended by the Purchaser for use in the preparation of any such
Registration Statement, preliminary prospectus or prospectus. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. The indemnity provisions contained herein shall be in addition to any cause
of action or similar rights the Purchaser may have, and any liabilities to which
the Purchaser may be subject.
m. Reimbursement. If (i) Purchaser, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Purchaser is impleaded in any
such action, proceeding or investigation by any person, or (ii) Purchaser, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, 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 Documents, or if Purchaser is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Purchaser for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Purchaser is a named party, the Company will pay to
Purchaser the charges, as reasonably determined by Purchaser, for the time of
any officers or employees of Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearing, trials, and other
proceedings relating to the subject matter of this Subscription Agreement. The
reimbursement obligations of the Company under this section 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 Purchaser that are actually named
in such action, proceeding or investigation, and partners, directors, agents,
employees, attorneys, accountants, auditors and controlling persons (if any), as
the case may be, of Purchaser and any such affiliate, and shall be binding upon
and inure to the benefit of any successors of the Company, Purchaser and any
such affiliate and any such person.
5. LIMITATION ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding anything to the contrary in this Agreement, in
no event shall the Purchaser be entitled to convert any of the Debentures to the
extent that, after such conversion, that number of shares of Common Stock, which
when added to the sum of the number of Debentures beneficially owned, (as such
term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange
Act of 1934 (the "1934 ACT")), by the Purchaser, would exceed 4.99% of the
number of shares of Common Stock outstanding on the Conversion Date (as that
term is defined in the Debenture), as determined in accordance with Rule
13d-1(j) of the 1934 Act. In
10
no event shall the Purchaser purchase shares of the Common Stock other than
pursuant to this Subscription Agreement and the Debenture until such date as the
Purchaser has fully converted the Debentures into Common Stock.
6. OPINION LETTER/BOARD RESOLUTION
Prior to or on the Closing Date the Company shall deliver to the
Investor an opinion letter signed by counsel for the Company in the form
attached hereto as Exhibit D. Also, prior to or on the Closing Date the Company
shall deliver to the Investor a signed Board Resolution authorizing this
Offering, which shall be attached hereto as Exhibit E.
7. DELIVERY INSTRUCTIONS; FEES
The Debentures being purchased hereunder shall be delivered to Dutchess
Private Equities Fund, L.P., on the Closing Date at which time funds (less
escrow fees, attorneys fees and those amount payable pursuant to the Term Sheet)
will be wired to the Company and the Debentures will be delivered to the
Purchaser, per the Purchaser's instructions.
8. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
a. This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement and delivering it to
Purchaser.
b. No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures or the Company.
c. The representations, warranties and agreements of the
undersigned and the Company contained herein shall be true and correct in all
material respects on and as of the date of the sale of the Debentures as if made
on and as of such date and shall survive the execution and delivery of this
Subscription Agreement and the purchase of the Debentures.
d. In making an investment decision, purchasers must rely on
their own examination of the company and the terms of the offering, including
the merits and risks involved. The shares have not been recommended by any
federal or state securities commission or regulatory authority. Furthermore, the
foregoing authorities have not confirmed the accuracy or determined the adequacy
of this document. Any representation to the contrary is a criminal offense.
e. The Offering is intended to be exempt from registration by
virtue of Section 4(2) of the 1933 Act and the provisions of Regulation D
thereunder, which is in part dependent upon the truth, completeness and accuracy
of the statements made by the undersigned herein and in the Questionnaire.
f. It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the 1933 Act and Regulation D,
any purchaser may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
g. The shares may not be resold except as permitted under the
securities act and applicable state securities laws, pursuant to registration or
exemption therefrom. Purchasers should be aware that they will be required to
bear the financial risks of this investment for an indefinite period of time.
9. DISPUTES SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS LAW
a. All disputes arising under this agreement shall be governed by
and interpreted in accordance with the laws of the Commonwealth of
Massachusetts, without regard to principles of conflict of laws. The parties to
this agreement will submit all disputes arising under this agreement to
arbitration in Boston, Massachusetts before a single arbitrator of the American
Arbitration Association ("AAA"). The arbitrator shall be selected by application
of the rules of the AAA, or by mutual agreement of the parties, except that such
arbitrator shall be an attorney admitted to practice law in the Commonwealth of
Massachusetts. No party to this agreement will challenge the jurisdiction or
venue provisions as provided in this section.
10. MISCELLANEOUS.
11
a. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Subscription Agreement
must be in writing and will be deemed to have been delivered (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided a
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Xxxx Xxxxxxx, President
Flexxtech Corporation
00 Xxxxxxxxxx Xx., Xxxxx 000X,
Xxxxxx, XX
Telephone:
Facsimile:
If to the Investor:
At the address listed in the Questionnaire.
Each party shall provide five (5) business days prior notice to the
other party of any change in address, phone number or facsimile number.
b. All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require.
c. Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
d. Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by facsimile transmission: (i) if to the Company, at it's
executive offices or (ii) if to the Purchaser, at the address for correspondence
set forth in the Questionnaire, or at such other address as may have been
specified by written notice given in accordance with this paragraph.
e. This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the Commonwealth of
Massachusetts, as such laws are applied by Massachusetts courts to agreements
entered into, and to be performed in, Massachusetts by and between residents of
Massachusetts, and shall be binding upon the undersigned, the undersigned's
heirs, estate and legal representatives and shall inure to the benefit of the
Company and its successors. If any provision of this Subscription Agreement is
invalid or unenforceable under any applicable statue or rule of law, then such
provisions shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
f. This Agreement shall not be assignable.
g. This Subscription Agreement, together with Exhibits A, B, C, D
and E attached hereto and made a part hereof, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties hereto.
h. This Subscription Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
Execution and delivery of this Subscription Agreement by exchange of facsimile
copies bearing the facsimile signature of a party shall constitute a valid and
binding execution and delivery of this Subscription Agreement by such party.
Such facsimile copies shall constitute enforceable original documents.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
FLEXXTECH CORPORATION.
12
QUESTIONNAIRE
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned's subscription to purchase the
Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned understands, however, that the Company may
present this Questionnaire to such parties as it deems appropriate if called
upon to establish that the proposed offer and sale of the Securities is exempt
from registration under the 1933 Act, as amended. Further, the undersigned
understands that the offering is required to be reported to the Securities and
Exchange Commission, NASDAQ and to various state securities and "blue sky"
regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY THE COMPANY,
THE UNDERSIGNED MUST COMPLETE FORM W-9.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.
[ ] 1. The undersigned: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific
purpose of acquiring the securities and (c) has its principal
place of business in ___________.
[ ] 2. The undersigned is a natural person whose individual
net worth* or joint net worth with his or her spouse exceeds
$1,000,000.
[ ] 3. The undersigned is a natural person who had an
individual income* in excess of $200,000 in each of the two
most recent years and who reasonably expects an individual
income in excess of $200,000 in the current year. Such income
is solely that of the undersigned and excludes the income of
the undersigned's spouse.
[ ] 4. The undersigned is a natural person who, together
with his or her spouse, has had a joint income* in excess of
$300,000 in each of of the two most recent years and who
reasonably expects a joint income in excess of $300,000 in the
current year.
* For purposes of this Questionnaire, the term "net worth" means the
excess of total assets over total liabilities. In determining "income", an
investor should add to his or her adjusted gross income any amounts attributable
to tax-exempt income received, losses claimed as a limited partner in any
limited partnership, deductions claimed for depletion, contributions to XXX or
Xxxxx retirement plan, alimony payments and any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross income.
5. The undersigned is:
[ ] (a) a bank as defined in Section 3(a)(2) of the
1933 Act; or
[ ] (b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the
1933 Act whether acting in its individual or
fiduciary capacity; or
[ ] (c) a broker or dealer registered pursuant to
Section 15 of the 1934 Act; or
[ ] (d) an insurance company as defined in Section
2(13) of the 1933 Act; or
[ ] (e) An investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of
the Investment Company Act of 1940; or
[ ] (f) a small business investment company licensed
by the U.S. Small Business Administration under
Section 301 (c) or (d) of the Small Business
Investment Act of 1958; or
[ ] 6. The undersigned is an entity in which all of the
equity owners are accredited investors.
II. INVESTOR INFORMATION.
13
(a) IF THE UNDERSIGNED IS AN INDIVIDUAL:
Name _________________________________________
Street Address __________________________________
City, State, Zip Code _____________________________
Phone ____________________ Fax _________________
Social Security Number ___________________________
Send Correspondence to:
______________________________________________
______________________________________________
______________________________________________
(b) IF THE UNDERSIGNED IS NOT AN INDIVIDUAL:
Name of Entity Dutchess Private Equities Fund, L.P.
Person's Name Xxxxxxx Xxxxxxxx Title_Managing Member
State of Organization Delaware
Principal Business Address 000 Xxxxxx Xx, Xxxxx Xxxxx
Xxxx, Xxxxx, Xxx Code Xxxxxx, XX 00000
Taxpayer Identification Number _____________________
Phone 000-000-0000 Fax 000-000-0000
Send Correspondence to:
______________________________________________
______________________________________________
______________________________________________
FLEXXTECH CORPORATION
SIGNATURE PAGE
Your signature on this Signature Page evidences your agreement to be
bound by the Questionnaire, Subscription Agreement and Registration Rights
Agreement.
1. The undersigned hereby represents that (a) the information
contained in the Questionnaire is complete and accurate and (b) the undersigned
will notify FLEXXTECH CORPORATION immediately if any material change in any of
the information occurs prior to the acceptance of the undersigned's subscription
and will promptly send FLEXXTECH CORPORATION written confirmation of such
change.
2. The undersigned signatory hereby certifies that he/she has
read and understands the Subscription Agreement and Questionnaire, and the
representations made by the undersigned in the Subscription Agreement and
Questionnaire are true and accurate.
_________________________________ ____________________________________
Amount of Debentures being purchased Date
By:____________________________
(Signature)
Name: _________________________
14
(Please Type or Print)
Title: _______________________
(Please Type or Print)
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted and agreed
to this ____ day of April, 2003.
FLEXXTECH CORPORATION
By__________________________________
Xxxx Xxxxxxx, CEO
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Owner in order to Convert Debenture)
The undersigned hereby irrevocably elects, as of ________________, to
convert $________________ of its convertible debenture (the "Debenture") into
Common Stock of FLEXXTECH CORPORATION (the "Company") according to the
conditions set forth in the Debenture issued by the Company.
Date of Conversion________________________________________________
Applicable Conversion Price________________________________________
Number of Debentures Issuable upon this Conversion_______________________
Name(Print) Dutchess Private Equities Fund, LP
Address 000 Xxxxxx Xx, 0xx Xxxxx
Phone 000-000-0000 Fax 000-000-0000
By:_______________________________________
EXHIBIT D
Purchasers of [Company] [Describe Securities] _______________, 2003
Re: FLEXXTECH CORPORATION
Ladies and Gentlemen:
As counsel to FLEXXTECH CORPORATION (the "Company"), we are familiar
with its Articles of Incorporation and Bylaws and with the corporate proceedings
taken by it in connection with the proposed issuance and sale of convertible
debentures (the "Securities") pursuant to the
15
related Subscription Agreement (including all Exhibits and Appendices thereto)
(collectively the "Agreements").
We have been furnished with copies, certified or otherwise identified
to our satisfaction, of the Agreements, and have examined such other documents,
agreements and records as we deemed necessary to render the opinions set forth
below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Nevada, and has
all requisite corporate power and authority to own its properties and conduct
its business.
2. The authorized capital stock of the Company consists of
_______ shares of Common Stock, ________ par value per share, ("Common Stock")
and ______________ Preferred Stock, par value $________ per share; [describe
classes if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended and the Company
has timely filed all the material required to be filed pursuant to Sections
13(a) or 15(d) of such Act for a period of at least twelve months preceding the
date hereof;
4. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to
enter into the Subscription Agreement and to sell and deliver the Securities and
the Common Stock to be issued upon the conversion of the Securities as described
in the Agreements; each of the Agreements has been duly and validly authorized
by all necessary corporate action by the Company to our knowledge, no approval
of any governmental or other body is required for the execution and delivery of
each of the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the
execution, delivery and performance of the Subscription Agreement and Securities
by the Company and the performance of its obligations thereunder do not and will
not constitute a breach or violation of any of the terms and provisions of, or
constitute a default under or conflict with or violate any provision of (i) the
Company's Certificate of Incorporation or By-Laws, (ii) any indenture, mortgage,
deed of trust, agreement or other instrument to which the Company is party or by
which it or any of its property is bound, (iii) any applicable statute or
regulation or as other, (iv) or any judgment, decree or order of any court or
governmental body having jurisdiction over the Company or any of its property.
7. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
8. The Company complies with the eligibility requirements for the
use of Form SB-2, under the Securities Act of 1933, as amended.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the Commonwealth of Massachusetts and does not include an interpretation or
statement concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Subscription Agreement and Securities may
16
be governed by the laws of other states, we have assumed that such laws are
identical in all respects to the laws of the Commonwealth of Massachusetts .
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Subscription Agreement and
Securities and may not be relied upon by any other person or entity or for any
other purpose without our prior consent.
Very truly yours,
By: _____________________
LIST OF EXHIBITS
----------------
EXHIBIT A Notice of Conversion
EXHIBIT B Registration Rights Agreement
EXHIBIT C Debenture
EXHIBIT D Opinion of Company's Counsel
EXHIBIT E Board Resolution
LIST OF SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(g) Material Changes
Schedule 3(h) Litigation
Schedule 3(l) Intellectual Property
Schedule 3(n) Liens
Schedule 3(t) Certain Transactions
SCHEDULE 3(a) SUBSIDIARIES
None.
SCHEDULE 3(c) CAPITALIZATION
SCHEDULE 3(e) CONFLICTS
\
SCHEDULE 3(g) MATERIAL CHANGES
None
17
SCHEDULE 3(h) LITIGATION
SCHEDULE 3(l) INTELLECTUAL PROPERTY
None
SCHEDULE 3(n) LIENS
SCHEDULE 3(t) CERTAIN TRANSACTIONS
18
