REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT
AGREEMENT
dated
as of June 16, 2005, between MERCATOR MOMENTUM FUND, L.P., MERCATOR MOMENTUM
FUND III, L.P, MONARCH POINTE FUND, LTD. (collectively, the "Funds")
and MERCATOR ADVISORY GROUP, LLC ("MAG") (the Funds and MAG are referred
to
individually as a "Holder" and collectively as the "Holders"),
and M-Wave, Inc. a Delaware corporation (the "Company").
WHEREAS,
each
Fund and MAG have acquired Warrants (together, the "Warrants")
from the Company, pursuant to which the Holders have the right to purchase
in
the aggregate up to 601,450 shares of the Common Stock through the exercise
of
the Warrants; and
WHEREAS,
the
Company desires to grant to the Holders the registration rights set forth
herein
with respect to the shares of Common Stock issuable upon exercise of the
Warrants.
NOW,
THEREFORE, the
parties hereto mutually agree as follows:
1. Registrable
Securities. As
used herein the terms "Registrable
Security"
means each of the shares of Common Stock issued upon exercise of the Warrants
(the "Warrant Shares"),
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date
of
determination that (a) it has been effectively registered under the Securities
Act of 1933, as amended (the "Securities
Act"), and disposed of pursuant thereto, or (b) registration under the
Securities Act is no longer required for the immediate public distribution
of
such security. The term "Registrable Securities"
means any and/or all of the securities falling within the foregoing definition
of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the
rights
granted pursuant to this Section 1.
2. Registration.
(a) The
Holders shall have the right to demand, on or after February 1, 2006, that
the
Company shall file a registration statement (the "Registration
Statement")
with the Securities and Exchange Commission (the "SEC")
in order to register the resale of the Registrable Securities under the
Securities Act. The Company shall file the Registration Statement with the
SEC
within thirty (30) days after receipt of written demand. Once effective,
the
Company shall maintain the effectiveness of the Registration Statement until
the
earlier of (i) the date that all of the Registrable Securities have been
sold,
or (ii) the date that the Company receives an opinion of counsel to the Company
that all of the Registrable Securities may be freely traded without registration
under the Securities Act, under Rule 144 promulgated under the Securities
Act or
otherwise.
(b)
The Company will
initially include in the Registration Statement as Registrable Securities
Six
Hundred One Thousand Four Hundred Fifty (601,450) shares of Common
Stock.
3. Covenants
of the Company with Respect to Registration.
The
Company covenants and agrees as follows:
(a) The
Company shall use best efforts to cause the Registration Statement to become
effective with the SEC as promptly as possible and in no event more than
90 days
after filing the Registration Statement with the SEC. If any stop order
shall
be issued by the SEC in connection therewith, the Company shall use best
efforts
to obtain promptly the removal of such order. Following the effective date
of
the Registration Statement, the Company shall, upon the request of any Holder,
forthwith supply such reasonable number of copies of the Registration Statement,
preliminary prospectus and prospectus meeting the requirements of the Securities
Act, and any other documents necessary or incidental to the public offering
of
the Registrable Securities, as shall be reasonably requested by the Holder
to
permit the Holder to make a public distribution of the Holder's Registrable
Securities. The obligations of the Company hereunder with respect to the
Holder's Registrable Securities are subject to the Holder's furnishing to
the
Company such appropriate information concerning the Holder, the Holder's
Registrable Securities and the terms of the Holder's offering of such
Registrable Securities as the Company may reasonably request in
writing.
(b) The
Company shall pay all costs, fees and expenses in connection with the
Registration Statement filed pursuant to Section 2 hereof including, without
limitation, the Company's legal and accounting fees, printing expenses, and
blue
sky fees and expenses; provided, however, that each Holder shall be solely
responsible for the fees of any counsel retained by the Holder in connection
with such registration and any transfer taxes or underwriting discounts,
commissions or fees applicable to the Registrable Securities sold by the
Holder
pursuant thereto.
(c) The
Company will take all actions which may be required to qualify or register
the
Registrable Securities included in the Registration Statement for the offer
and
sale under the securities or blue sky laws of such states as are reasonably
requested by each Holder of such securities, provided that the Company shall
not
be obligated to execute or file any general consent to service of process
or to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
(d) In
the event that the Company fails to (i) file the Registration Statement on
or
before thirty (30) days after receipt of written demand (or prior to such
written demand in the Company's
sole discretion), or (ii) cause the Registration Statement to be deemed
effective by the SEC prior to the later of 90 days after filing or May 1,
2006,
then the Company shall pay $1,600 for each day until such default is cured.
The
default payment shall be allocated among the Holders in accordance with
instructions received from the Holders. The agreement contained in this Section
3(d) applies solely to the Registration Statement, and not to any prior
registration statements filed or agreed to be filed by the Company, and such
payment shall in no way
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constitute
evidence of any actual or other damage to the Holders or any other party
with
respect to any such prior registration statements.
4.
Additional
Terms.
(a) The
Company shall indemnify and hold harmless the Holders and each underwriter,
within the meaning of the Securities Act, who may purchase from or sell for
any
Holder, any Registrable Securities, from and against any and all losses,
claims,
damages and liabilities caused by any untrue statement of a material fact
contained in the Registration Statement, any other registration statement
filed
by the Company under the Securities Act with respect to the registration
of the
Registrable Securities, any post-effective amendment to such registration
statements, or any prospectus included therein or caused by any omission
to
state therein a material fact required to be stated therein or necessary
to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission
based
upon information furnished or required to be furnished in writing to the
Company
by the Holders or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any Holder or underwriter
within
the meaning of the Securities Act and each officer, director, employee and
agent
of each Holder and underwriter; provided, however, that the indemnification
in
this Section 4(a) with respect to any prospectus shall not inure to the benefit
of any Holder or underwriter (or to the benefit of any person controlling
any
Holder or underwriter) on account of any such loss, claim, damage or liability
arising from the sale of Registrable Securities by the Holder or underwriter,
if
a copy of a subsequent prospectus correcting the untrue statement or omission
in
such earlier prospectus was provided to such Holder or underwriter by the
Company prior to the subject sale and the subsequent prospectus was not
delivered or sent by the Holder or underwriter to the purchaser prior to
such
sale and provided further, that the Company shall not be obligated to so
indemnify any Holder or any such underwriter or other person referred to
above
unless the Holder or underwriter or other person, as the case may be, shall
at
the same time indemnify the Company, its directors, each officer signing
the
Registration Statement and each person, if any, who controls the Company
within
the meaning of the Securities Act, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in the Registration Statement, any registration statement or any
prospectus required to be filed or furnished by reason of this Agreement
or
caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, insofar
as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission based upon information furnished in writing to the Company by
the
Holder or underwriter expressly for use therein.
(b) if
for any reason the indemnification provided for in the preceding section
is held
by a court of competent jurisdiction to be unavailable to an indemnified
party
with respect to any loss, claim, damage, liability or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in
such
proportion as is appropriate to reflect the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant equitable
considerations.
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(c) Neither
the filing of a Registration Statement by the Company pursuant to this Agreement
nor the making of any request for prospectuses by the Holder shall impose
upon
any Holder any obligation to sell the Holder's Registrable
Securities.
(d) Each
Holder, upon receipt of notice from the Company that an event has occurred
which
requires a Post-Effective Amendment to the Registration Statement or a
supplement to the prospectus included therein, shall promptly discontinue
the
sale of Registrable Securities until the Holder receives a copy of a
supplemented or amended prospectus from the Company, which the Company shall
provide as soon as practicable after such notice.
(e) If
the Company fails to keep the Registration Statement refen-ed to above
continuously effective during the requisite period, then the Company shall,
promptly upon the request of any Holder, use best efforts to update the
Registration Statement or file a new registration statement covering the
Registrable Securities remaining unsold, subject to the terms and provisions
hereof.
(f) Each
Holder agrees to provide the Company with any information or undertakings
reasonably requested by the Company in order for the Company to include any
appropriate information concerning the Holder in the Registration Statement
or
in order to promote compliance by the Company or the Holder with the Securities
Act.
(g) The
Company agrees that it shall cause each of its directors, officers and
shareholders owning ten percent (10%) or more of the Company's outstanding
Common Stock to refrain from selling any shares of the Company's Common Stock
until the Registration Statement has been declared effective.
(h) Each
Holder, on behalf of itself and its affiliates, hereby covenants and agrees
not
to, directly or indirectly, offer to "short sell", contract to "short sell"
or
otherwise "short sell" any securities of the Company, including, without
limitation, shares of Common Stock that will be received as a result of the
conversion of the Series A Stock or the exercise of the Warrants.
5. Governing
Law. The
Registrable Securities will be, if and when issued, delivered in California.
This Agreement shall be deemed to have been made and delivered in the State
of
California and shall be governed as to validity, interpretation, construction,
effect and in all other respects by the internal substantive laws of the
State
of California, without giving effect to the choice of law rules
thereof.
6. Amendment. This
Agreement may only be amended by a written instrument executed by the Company
and the Holders.
7. Entire
Agreement. This
Agreement constitutes the entire agreement of the parties hereto with respect
to
the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
8. Execution
in Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
document.
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9.
Notices. All
communications hereunder shall be in writing and shall be hand delivered,
mailed
by first-class mail, couriered by next-day air courier or by facsimile at
the
addresses set forth below.
|
If
to the Holders,
|
Mercator
Advisory Group, LLC
|
Mercator
Momentum Fund, L.P.
Mercator
Momentum Fund III, L.P.
Monarch
Pointe Fund, Ltd.
000
Xxxxx
Xxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxx, XX 00000 Attention: Xxxxx Xxxxxxxxx
|
With
a copy to
|
Xxxxxxxx
Xxxxxx Xxxxxxx & Hampton LLP
|
000
Xxxxx Xxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxxxxx, XX 00000-0000
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
Attention:
Xxxxx X. Xxxxx
|
If
to the Company,
|
M-Wave,
Inc.
|
000
Xxxxxxxxxx Xxxxx Xxxx
Xxxxxxx,
XxXxxxxx 00000
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
Attention:
Xxx Xxxxx
|
With
a copy to
|
Xxxxxxxx
& Xxxxxx, LLP Suite 3000
|
000
Xxxxx Xxxxxx Xxxxx
Xxxxxxx,
Xxxxxxxx 00000
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
Attention:
Xxxx X. Xxxxx
All
such notices and communications shall be deemed to have been duly given:
(i)
when delivered by hand, if personally delivered; (ii) five business days
after
being deposited in the mail, postage prepaid, if mailed certified mail, return
receipt requested; (iii) one business day after being timely delivered to
a
next-day air courier guaranteeing overnight delivery; (iv) the date of
transmission if sent via facsimile to the facsimile number as set forth in
this
Section or the signature page hereof prior to 4:00 p.m. on a business day,
or
(v) the business day following the date of transmission if sent via facsimile
at
a facsimile number set forth in this Section or on the signature page hereof
after 4:00 p.m. or on a date that is not a business day. Change of a party's
address or facsimile number may be designated hereunder by giving notice
to all
of the other parties hereto in accordance with this Section.
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10. Binding
Effect; Benefits. Any
Holder may assign its rights hereunder. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their respective
heirs,
legal representatives, successors and assigns. Nothing herein contained,
express
or implied, is intended to confer upon any person other than the parties
hereto
and their respective heirs, legal representatives and successors, any rights
or
remedies under or by reason of this Agreement.
11. Headings. The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of
any of
the terms or provisions of this Agreement.
12. Severability. Any
provision of this Agreement which is held by a court of competent jurisdiction
to be prohibited or unenforceable in any jurisdiction(s) shall be, as to
such
jurisdiction(s), ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
13. Jurisdiction. Each
of the parties irrevocably agrees that any and all suits or proceedings based
on
or arising under this Agreement may be brought only in and shall be resolved
in
the federal or state courts located in the City of Los Angeles, California
and
consents to the jurisdiction of such courts for such purpose. Each of the
parties irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding in any such court. Each of the parties
further agrees that service of process upon such party mailed by first class
mail to the address set forth in Section 9 shall be deemed in every respect
effective service of process upon such party in any such suit or proceeding.
Nothing herein shall affect the right of either party to serve process in
any
other manner permitted by law. Each of the parties agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive
and
may be enforced in other jurisdictions by suit on such judgment or in any
other
lawful manner.
14. Attorneys'
Fees and Disbursements. If
any action at law or in equity is necessary to enforce or interpret the terms
of
this Agreement, the prevailing party or parties shall be entitled to receive
from the other party or parties reasonable attorneys' fees and disbursements
in
addition to any other relief to which the prevailing party or parties may
be
entitled.
[The
balance of this page is intentionally left blank.]
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IN
WITNESS WHEREOF, this
Agreement has been executed and delivered by the parties hereto as of the
date
first above written.
M-Wave,
Inc.
By:
/s/
Xxx Xxxxx
Xxx
Xxxxx
|
Its:
|
CEO
|
HOLDERS:
MERCATOR
MOMENTUM FUND, L.P.
|
By:
|
M.A.G.
CAPITAL, LLC
|
|
Its:
|
General
Partner
|
|
By:
|
/s/
Xxxxx Xxxxxxxxx
|
| Name: |
Xxxxx
Xxxxxxxxx
|
|
Its:
|
Managing
Member
|
|
By:
|
M.A.G.
CAPITAL, LLC
|
|
Its:
|
General
Partner
|
|
By:
|
/s/
Xxxxx Xxxxxxxxx
|
| Name: |
Xxxxx
Xxxxxxxxx
|
|
Its:
|
Managing
Member
|
MONARCH
POINTE FUND
|
By:
|
/s/
Xxxxx Xxxxxxxxx
|
|
Its:
|
President
|
MERCATOR
MOMENTUM FUND III, L.P.
M.A.G.
CAPITAL, LLC
|
By:
|
/s/
Xxxxx Xxxxxxxxx
|
| Name: |
Xxxxx
Xxxxxxxxx
|
|
Its:
|
Managing
Member
|
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