EXHIBIT 10.3
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October 27,
2006, between Mems USA, Inc., a Nevada corporation (the "Company"), and GCA
Strategic Investment Fund Limited (the "Fund").
1. INTRODUCTION.
1.1 SECURITIES PURCHASE AGREEMENT. The Company and the Fund have
today executed that certain Securities Purchase Agreement (the "Securities
Purchase Agreement"), pursuant to which the Company has agreed, among other
things, to issue (the "Offering") up to an aggregate of Three Million Five
Hundred Thirty Thousand Dollars ($3,530,000) (U.S.) principal amount of
Convertible Notes of the Company (the "Notes") to the Fund or its successors,
assigns or transferees (collectively, the "Holders"). The Notes are convertible
into an indeterminable number of shares (the "Note Conversion Shares") of the
Company's common stock par value, $0.001 per share (the "Common Stock") pursuant
to the terms of the Notes. In addition, pursuant to the terms of the Securities
Purchase Agreement and the transactions contemplated thereby, the Company has
agreed to issue to the Fund Common Stock Purchase Warrants exercisable for
1,000,000 shares of the Company's Common Stock and to Global Capital Advisors,
LLC ("GCA") Common Stock Purchase Warrants exercisable for 500,000 shares of the
Company's Common Stock (the "Warrant Shares"). The number of Note Conversion
Shares and Warrant Shares is subject to adjustment upon the occurrence of stock
splits, recapitalizations and similar events occurring after the date hereof.
1.2 DEFINITION OF SECURITIES. The Note Conversion Shares and the
Warrant Shares are herein referred to as the "Securities."
1.3 NATIONAL MARKET REPRESENTATION. The Company represents and
warrants that the Company's Common Stock is currently eligible for trading on
the Over-the-Counter Bulletin Board ("OTCBB") operated and maintained by the
National Association of Securities Dealers ("NASD") under the symbol "MEMS."
Certain capitalized terms used in this Agreement are defined in Section 3
hereof; references to sections shall be to sections of this Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 MANDATORY REGISTRATION.
(A) REGISTRATION OF REGISTRABLE SECURITIES. The Company
shall prepare and file on or before the 60th day following the date hereof (the
"Filing Date") a registration statement (the "Registration Statement") to
register no less than 10,000,000 shares of Common Stock covering the resale of
the Registrable Securities. The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the Commission on the earlier
of (i) 90 days following the date hereof, (ii) ten (10) days following the
receipt of a "No Review" or similar letter from the Commission or (iii) the
first business day following the day the Commission determines the Registration
Statement eligible to be declared effective (the "Required Effectiveness Date").
Nothing contained herein shall be deemed to limit the number of Registrable
Securities to be registered by the Company hereunder. As a result, should the
Registration Statement not relate to the maximum number of Registrable
Securities acquired by (or potentially acquirable by) the Holders thereof upon
conversion of the Notes, or exercise of the Common Stock Purchase Warrants
described in Section 1 above, the Company shall be required to promptly file a
separate registration statement (utilizing Rule 462 promulgated under the
Securities Act, where applicable) relating to such Registrable Securities which
then remain unregistered. The provisions of this Agreement shall relate to any
such Registration Statement and any such separate registration statement as if
it were an amendment to the Registration Statement.
(B) REGISTRATION STATEMENT FORM. Registrations under this
Section 2.1 shall be on Form X-0, XX0 or such other appropriate successor
registration form of the Commission as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified by the Fund; provided, however, such intended method of
deposition shall not include an underwritten offering of the Registrable
Securities.
(C) EXPENSES. The Company will pay all Registration Expenses
in connection with any registration required by this Section 2.1.
(D) EFFECTIVE REGISTRATION STATEMENT. A registration
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective within
the time period specified herein, provided that a registration which does not
become effective after the Company filed a registration statement with respect
thereto solely by reason of the refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel in
the form of a letter signed by such counsel and provided to the Company relating
to a disclosure matter unrelated to such holder) shall be deemed to have been
effected by the Company unless the Holders of the Registrable Securities shall
have elected to pay all Registration Expenses in connection with such
registration, (ii) if, after it has become effective, such registration becomes
subject to any stop order, injunction or other order or extraordinary
requirement of the Commission or other governmental agency or court for any
reason or (iii) if, after it has become effective, such registration ceases to
be effective for more than an aggregate of twenty (20) days.
(E) PLAN OF DISTRIBUTION. The Company hereby agrees that the
Registration Statement shall include a plan of distribution section reasonably
acceptable to the Fund; provided, however, such plan of distribution section
shall be modified by the Company so as to not provide for the disposition of the
Registrable Securities on the basis of an underwritten offering.
2.2 INCIDENTAL REGISTRATION.
(A) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at any time
after the date hereof but before the second (2nd) anniversary of the date hereof
[NOTE: RULE 144K IS AVAILABLE AFTER 2 YEARS], the Company proposes to register
any of its securities under the Securities Act (other than by a registration in
connection with an acquisition in a manner which would not permit registration
of Registrable Securities for sale to the public, on Form S-8, or any successor
form thereto, on Form S-4, or any successor form thereto and other than pursuant
to Section 2.1), on an underwritten basis (either best-efforts or
firm-commitment), then, the Company will each such time give prompt written
notice to all Holders of Registrable Securities of its intention to do so and of
such Holders' rights under this Section 2.2. Upon the written request of any
such holder made within twenty (20) days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method of disposition thereof), the Company
will, subject to the terms of this Agreement, use its commercially reasonable
best efforts to effect the registration under the Securities Act of the
Registrable Securities, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of such Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which the Company
proposes to register, provided that if, at any time after written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason either not to register or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to each holder and, thereupon, (i) in the case of a
determination not to register, shall be relieved of this obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith), and
(ii) in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities, for the same period as the delay
in registering such other securities. No registration effected under this
Section 2.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 2.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 2.1. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.2. The right
provided the Holders of the Registrable Securities pursuant to this Section
shall be exercisable at their sole discretion and will in no way limit any of
the Company's obligations to pay the Note according to their terms.
(B) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter of the underwritten offering contemplated by this Section 2.2 shall
inform the Company and Holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering, then the Company will include in such registration, to the extent of
the number which the Company is so advised can be sold in such offering, (i)
first securities proposed by the Company to be sold for its own account, and
(ii) second Registrable Securities and securities of other selling security
Holders requested to be included in such registration pro rata on the basis of
the number of shares of such securities so proposed to be sold and so requested
to be included; provided, however, the Holders of Registrable Securities shall
have priority to all shares sought to be included by officers and directors of
the Company as well as Holders of ten percent (10%) or more of the Company's
Common Stock.
2.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2.1 and, as applicable, 2.2, the Company
shall, as expeditiously as possible:
(a) prepare and file with the Commission the Registration
Statement or amendments thereto, to effect such registration (including such
audited financial statements as may be required by the Securities Act or the
rules and regulations promulgated thereunder) and thereafter use its
commercially reasonable best efforts to cause such registration statement to be
declared effective by the Commission, as soon as practicable, but in any event
no later than the Required Effectiveness Date (with respect to a registration
pursuant to Section 2.1); provided, however, that before filing such
registration statement or any amendments thereto, the Company will furnish to
the counsel selected by the Holders of Registrable Securities which are to be
included in such registration, copies of all such documents proposed to be
filed;
(b) with respect to any registration statement pursuant to
Section 2.1, prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
until the earlier to occur of five (5) years after the date of this Agreement
(subject to the right of the Company to suspend the effectiveness thereof for
not more than 10 consecutive days or an aggregate of 30 days in such five (5)
years period) or such time as all of the securities which are the subject of
such registration statement cease to be Registrable Securities (such period, in
each case, the "Registration Maintenance Period");
(c) furnish to each of the sellers of Registrable Securities
covered by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller; PROVIDED, HOWEVER, if any such
documents are available on the SEC website or another website, the Company shall
not be required to provide copies of such documents;
(d) use its commercially reasonable best efforts to register
or qualify all Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky laws as any
seller thereof shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (d) be obligated to be so qualified or to consent to general service
of process in any such jurisdiction;
(e) use its commercially reasonable best efforts to cause
all Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(f) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller, and the underwriters, if any, of:
(1) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such registration includes
an underwritten public offering, an opinion dated the date of the closing under
the underwriting agreement), reasonably satisfactory in form and substance to
such seller, and
(2) a "comfort" letter (or, in the case of any Person
which does not satisfy the conditions for receipt of a "comfort" letter
specified in Statement on Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter of like kind
dated the date of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's financial
statement included in such registration statement, covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in accountants' letters delivered to the underwriters in underwritten
public offerings of securities (with, in the case of an "agreed upon procedures"
letter, such modifications or deletions as may be required under Statement on
Auditing Standards No. 35) and, in the case of the accountants' letter, such
other financial matters, as such seller (or the underwriters, if any) may
reasonably request;
(g) notify the Sellers' Representative and its counsel
promptly and confirm such advice in writing promptly after the Company has
knowledge thereof:
(1) when the Registration Statement, the prospectus or
any prospectus supplement related thereto or post-effective amendment to the
Registration Statement has been filed, and, with respect to the Registration
Statement or any post-effective amendment thereto, when the same has become
effective;
(2) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus or for additional
information;
(3) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings by any Person for that purpose; and
(4) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any Registrable
Securities for sale under the securities or blue sky laws of any jurisdiction or
the initiation or threat of any proceeding for such purpose;
(h) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such seller promptly
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, except if such documents are
available on the SEC or another website, such prospectus shall not include an
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 not misleading in
the light of the circumstances then existing;
(i) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(j) otherwise use its commercially reasonable best efforts
to comply with all applicable rules and regulations of the Commission, and make
available to its security Holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(k) enter into such agreements and take such other actions
as the Sellers' Representative shall reasonably request in writing (at the
expense of the requesting or benefiting seller) in order to expedite or
facilitate the disposition of such Registrable Securities; and
(l) use its commercially reasonable best efforts to list all
Registrable Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing. The failure to provide such
information shall toll any Default Fee until such information is provided.
The Company will not file any registration statement pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such documents incorporated by reference and proposed to be filed after the
initial filing of the Registration Statement) to which the Sellers'
Representative shall reasonably object, provided that the Company may file such
documents in a form required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase Agreement.
The Fund agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (h) of this Section
2.3, the Fund will forthwith discontinue the Fund's disposition of Registrable
Securities pursuant to the Registration Statement relating to such Registrable
Securities until such Fund's receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (h) of this Section 2.3 and, if
so directed by the Company, will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in the Fund's
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.
2.4 UNDERWRITTEN OFFERINGS.
(A) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 2.2 and subject to the
provisions of Section 2.2(a), use its commercially reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to be
offered and sold by such holder among the securities to be distributed by such
underwriters.
(B) HOLDBACK AGREEMENTS. Subject to such other reasonable
requirements as may be imposed by the underwriter as a condition of inclusion of
holder's Registrable Securities in the registration statement, each holder
agrees by acquisition of Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of,
except as part of such underwritten registration, any equity securities of the
Company, during such reasonable period of time requested by the underwriter;
provided however, such period shall not exceed the 150 day period commencing 30
days prior to the commencement of such underwritten offering and ending 120 days
following the completion of such underwritten offering.
(C) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No holder of
Registrable Securities may participate in any underwritten offering under
Section 2.2 unless such holder of Registrable Securities (i) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved, subject to the terms and conditions hereof, by the Holders of a
majority of Registrable Securities to be included in such underwritten offering
and (ii) completes and executes all questionnaires, indemnities, underwriting
agreements and other documents (other than powers of attorney) required under
the terms of such underwriting arrangements. Notwithstanding the foregoing, no
underwriting agreement (or other agreement in connection with such offering)
shall require any holder of Registrable Securities to make any representations
or warranties to or agreements with the Company or the underwriters other than
representations and warranties contained in a writing furnished by such holder
expressly for use in the related registration statement or representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants for Sellers' Representative, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of such Holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6 REGISTRATION DEFAULT FEE. Other than as a result of actions by the
Fund, if the Registration Statement contemplated in Section 2.1 is (x) not
declared effective by the Required Effectiveness Date or (y) such effectiveness
is not maintained for the Registration Maintenance Period, then the Company
shall pay to the Fund the Default Fee specified in Section 10.4 of the
Securities Purchase Agreement.
2.7 INDEMNIFICATION.
(A) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any Securities under the Securities Act, the Company will, and
hereby does agree to indemnify and hold harmless the holder of any Registrable
Securities covered by such registration statement, its directors and officers,
each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such holder or any
such underwriter within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which such holder or any
such director or officer or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that in no event shall the Company be
liable in any such case to the extent that any such loss, claim, damage,
liability, (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter stating that it is for use in the
preparation thereof and, provided further that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or an amendment or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or any such director, officer, underwriter
or controlling person and shall survive the transfer of such securities by such
holder.
(B) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to this Agreement, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such Registrable
Securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 2.7) the Company, each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(C) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in the
opinion of the indemnified party's counsel a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to xxx, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(D) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities (but only if and to the extent required pursuant to the terms of
Section 2.7(b)) with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(E) INDEMNIFICATION PAYMENTS. The indemnification required by this
Section 2.7 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
expense, loss, damage or liability is incurred.
(F) CONTRIBUTION. If the indemnification provided for in the
preceding subdivision of this Section 2.7 is unavailable to an indemnified party
in respect of any expense, loss, claim, damage or liability referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the holder or underwriter, as the case may be, on the other
from the distribution of the Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other in
connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
initial sale of the Registrable Securities by the Company to the purchasers bear
to the gain, if any, realized by all selling Holders participating in such
offering or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to information supplied by the
Company, by the holder or by the underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, provided that the foregoing contribution agreement shall
not inure to the benefit of any indemnified party if indemnification would be
unavailable to such indemnified party by reason of the provisions contained in
the first sentence of subdivision (a) of this Section 2.7, and in no event shall
the obligation of any indemnifying party to contribute under this subdivision
(f) exceed the amount that such indemnifying party would have been obligated to
pay by way of indemnification if the indemnification provided for under
subdivision (b) of this Section 2.7 had been available under the circumstances.
The Company and the Holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the Holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
Section 2.7, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
allege untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"AGREEMENT": As defined in Section 1.
"COMMISSION": The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"COMMON STOCK": As defined in Section 1.
"COMPANY": As defined in the introductory paragraph of this
Agreement.
"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"NOTE CONVERSION SHARES": As defined in Section 1.
"NOTES": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Notes.
"PERSON": A corporation, association, partnership, limited liability
company, trust, organization, business, individual, governmental or political
subdivision thereof or a governmental agency.
"REGISTRABLE SECURITIES": The Securities and any securities issued
or issuable with respect to such Securities by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. Once issued such securities
shall cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, (d) they shall have ceased to be outstanding, (e) on the expiration of
the applicable Registration Maintenance Period or (f) any and all legends
restricting transfer thereof have been removed in accordance with the provisions
of Rule 144(k) (or any successor provision) under the Securities Act.
"REGISTRATION EXPENSES": All expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration, filing and NASD fees, all stock exchange and OTC Bulletin
Board or other NASD or stock exchange listing fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, the reasonable fees and
disbursements of not more than one law firm (not to exceed $7,500) retained by
the holder or Holders of more than 50% of the Registrable Securities, premiums
and other costs of policies of insurance of the Company against liabilities
arising out of the public offering of the Registrable Securities being
registered and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"REGISTRATION MAINTENANCE PERIOD": As defined in Section 2.3.
"REQUIRED EFFECTIVENESS DATE": As defined in Section 2.1.
"SECURITIES": As defined in Section 1.2.
"SECURITIES ACT": The Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"SECURITIES PURCHASE AGREEMENT": As defined in Section 1.
"SELLERS' REPRESENTATIVE": Global Capital Advisors LLC or such
Person designated by Global Capital Advisors LLC as of the time of disposition
of the last of the Notes held by the Fund (or subsequent Sellers'
Representative).
"WARRANT SHARES": As defined in Section 1.
4. RULE 144. The Company shall timely file the reports required to be
filed by it under the Securities Act and the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will, upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent reasonably
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with the requirements of this Section 4.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
Holders of the sum of 51% or more of the shares of (i) Registrable Securities
issued at such time, plus (ii) Registrable Securities issuable upon exercise or
conversion of the Securities then constituting derivative securities (if such
Securities were not fully exchanged or converted in full as of the date such
consent if sought). Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
5, whether or not such Registrable Securities shall have been marked to indicate
such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or Holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by an holder or Holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. NOTICES. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person (a) in the case of a party
hereto other than the Company, addressed to such party in the manner set forth
in the Securities Purchase Agreement or at such other address as such party
shall have furnished to the Company in writing, or (b) in the case of any other
holder of Registrable Securities, at the address that such holder shall have
furnished to the Company in writing, or, until any such other holder so
furnishes to the Company an address, then to and at the address of the last
holder of such Registrable Securities who has furnished an address to the
Company, or (c) in the case of the Company, at the address set forth on the
signature page hereto, to the attention of its President, or at such other
address, or to the attention of such other officer, as the Company shall have
furnished to each holder of Registrable Securities at the time outstanding. Each
such notice, request or other communication shall be effective (i) if given by
mail, four (4) days after such communication is deposited in the United States
mails with first class postage prepaid, addressed as aforesaid or (ii) if given
by any other means (including, without limitation, by fax or air courier), when
delivered at the address specified above, provided that any such notice, request
or communication shall not be effective until received.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Each of the Holders of the Registrable Securities
agrees, by accepting any portion of the Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation,
appointment of the Sellers' Representative to act on behalf of such holder
pursuant to the terms hereof which such actions shall be made in the good faith
discretion of the Sellers' Representative and be binding on all persons for all
purposes.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NAVADA WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. COUNTERPARTS. This Agreement may be executed by facsimile and may be
signed simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supercedes all prior agreements and understandings
relating to such subject matter.
13. SEVERABILITY. If any provision of this Agreement, or the application
of such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
MEMS USA, INC.
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title: Chairman, CEO and President
Address: 0000 Xxxxxxx Xxxxxx Xxxx
Xxxxx 0-000
Xxxxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Tel.: (000) 000-0000
GCA STRATEGIC INVESTMENT FUND LIMITED
By: /s/ Xxxxx X. Xxxxxx
-------------------
Name: Xxxxx X. Xxxxxx
Title: Director
Address: c/o Prime Management Limited
Mechanics Xxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxx XX XX, Xxxxxxx
Fax: 000-000-0000
Tel.: 000-000-0000
GLOBAL CAPITAL ADVISORS, LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------
Name: Xxxxx X. Xxxxxx
Title: CEO and President
Address: 000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XXXX 00000
Fax: 340-719-
Tel.: 000-000-0000
REGISTRATION RIGHTS AGREEMENT
DATED AS OF
OCTOBER 27, 2006
BY AND BETWEEN
MEMS USA, INC.,
GCA STRATEGIC INVESTMENT FUND LIMITED
AND
GLOBAL CAPITAL ADVISORS, LLC
