Exhibit 10.3
EXHIBIT A
TO SECURITIES PURCHASE AGREEMENT
COMMON STOCK REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
_____________, 2002, by and among MINDARROW SYSTEMS, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and the
undersigned (the "INVESTORS").
WHEREAS:
A. The Company and the Investors have entered into a Securities Purchase
Agreement dated ____________________, 2002 (the "SECURITIES PURCHASE
AGREEMENT"); capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement. In connection with the Securities Purchase Agreement, the Company has
agreed, upon the terms and subject to the conditions contained therein, to issue
and sell to the Investors shares of the Company's common stock, $0.001 par value
(the "COMMON STOCK") and to issue to the Lead Investor the Warrants (as that
term is defined in the Securities Purchase Agreement). The shares of Common
Stock issued on the Closing Date under the Securities Purchase Agreement are
referred to herein as the "SHARES."
B. Previously, the Lead Investor has received a Warrant to purchase
1,500,000 shares of Common Stock of the Company ("EXCLUSIVITY WARRANTS").
C. To induce the Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors, intending to be legally bound, hereby agree as follows:
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1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall
have the following meanings:
"INVESTORS" means the investors under this Agreement and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 8 hereof.
"LEAD INVESTOR" means East-West Capital Associates, Inc.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
"REGISTRABLE SECURITIES" means: (i) the Shares, (ii) the Common
Stock issuable or issued pursuant to the Exclusivity Warrant, (iii) the Common
Stock issuable or issued pursuant to the Warrants, and (iv) any shares of
capital stock issued or issuable, from time to time (with any adjustments), as a
distribution on or in exchange for or otherwise with respect to any of the
foregoing; provided, however, that the treatment as Registrable Securities shall
terminate if and when such securities can be resold under Rule 144(k) under the
Securities Act and provided further however, that any shares of capital stock
issued or issuable, from time to time (with any adjustments), in exchange for or
otherwise with respect to any Shares shall not be considered Registrable
Securities to the extent such shares of capital stock are covered by another,
current and effective registration statement permitting the resale without
restriction of such shares.
"REGISTRATION STATEMENT" means one or more registration
statements of the Company under the Securities Act registering all of the
Registrable Securities, including the Initial Registration Statement, any
Uncovered Shares Amendments and Uncovered Shares Registration Statements (each,
as defined below).
2. REGISTRATION.
2.1 Mandatory Registration. The Company shall file with the SEC,
on or before ninety (90) calendar days after the Demand has been made by the
Board of Directors and approved by the Shareholders, as set forth in Section
5.14 or the Securities Purchase Agreement, or if no such Demand is made then 30
days after the expiration of the right to make the Demand (the "FILING
DEADLINE") a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of all of the Registrable Securities) covering the resale of all
of the Registrable Securities (the "INITIAL REGISTRATION STATEMENT"). The
Registrable Securities included in the Initial Registration Statement shall be
registered on behalf of the Investors as set forth in Section 10.11 hereof. The
Initial Registration
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Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to the Investors and
their counsel. If for any reason (including, but not limited to, a determination
by the staff of the SEC that all or any portion of the Registrable Securities
cannot be included in the Initial Registration Statement (an "SEC
DETERMINATION")) the Initial Registration Statement declared effective by the
SEC does not include all of the Registrable Securities (any such shares that are
not included being the "UNCOVERED SHARES"), the Company shall prepare and file
with the SEC, as soon as practicable, but in any event prior to the tenth (10th)
Business Day after becoming aware of the existence of any Uncovered Shares (such
date referred to herein as the "UNCOVERED SHARE FILING DEADLINE"), either (a) an
amendment (the "UNCOVERED SHARES AMENDMENT") to the Initial Registration
Statement effecting a registration of the Uncovered Shares or (b) a registration
statement which registers the Uncovered Shares (the "UNCOVERED SHARES
REGISTRATION STATEMENT"). The Uncovered Shares Amendment or the Uncovered Shares
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to the
Investors and their counsel. The Company shall use its commercially reasonable
efforts to cause each of the Initial Registration Statement and the Uncovered
Shares Amendment or the Uncovered Shares Registration Statement to become
effective as soon as practicable after the filing thereof.
2.2 Additional Demand Registration. Notwithstanding the
foregoing, at such time as any of the Investors is considered a control person
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934 as amended (the "EXCHANGE ACT") the Lead
Investor shall have the right to demand one additional mandatory registration on
the same terms as set forth in Section 2.1, except that for such additional
mandatory registration, the "FILING DEADLINE" shall be 30 days after the demand
for registration by the Lead Investor and the term "ADDITIONAL REGISTRATION
STATEMENT" shall replace the term "Initial Registration Statement" and such
additional registration shall not be required to include any shares that are
then currently included in an effective registration statement, whether filed
under Section 2.1 or otherwise.
2.3 Underwritten Offering. The Investors may offer and sell the
Registrable Securities pursuant to a Registration Statement filed in accordance
with Section 2.1 or 2.2 in an underwritten offering. In any such underwritten
offering, the Lead Investor shall have the right to select one legal counsel to
represent the Investors and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. In the
event that any Investors elect not to participate in such underwritten offering,
the Registration Statement covering all of the Registrable Securities shall
contain appropriate plans of distribution reasonably satisfactory to the
Investors participating in such underwritten offering and the Investors electing
not to participate in such underwritten offering (including, without limitation,
the ability of nonparticipating Investors to sell from time to time and at any
time during the effectiveness of such Registration Statement).
2.4 Effectiveness of Registration. The Company shall use its
reasonable commercially reasonable efforts to cause each Registration Statement
required to be filed pursuant to Section 2.1 or 2.2 hereof to become effective
as soon as practicable, but, as to the Initial Registration Statement filed
pursuant to Section 2.1, in no event later than the one hundred eightieth
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(180th) calendar day after the Closing Date, and as to any Uncovered Shares
Amendment or Uncovered Shares Registration Statement, in no event later than the
ninetieth (90th) day after the Uncovered Share Filing Deadline, and as to the
Additional Registration Statement filed pursuant to Section 2.2, in no event
later than the one hundred eightieth (180th) calendar day after the demand for
registration.
2.5 Piggy Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities (other than on Form S-4 or Form S-8 or the then equivalents relating
to equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with stock
option or other employee benefit plans), the Company shall send to each Investor
who is entitled to registration rights under this Section 2.5 written notice of
such determination and, if within fifteen (15) days after the date of such
notice, such Investor shall so request in writing, the Company shall include in
such registration statement all or any part of the Registrable Securities, not
already covered by another current and effective registration statement
permitting the resale without restriction of such Registrable Securities, such
Investor requests to be registered, except that if in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the registration statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such registration statement only such limited
portion, if any of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not entitled to inclusion of such securities in such registration statement
or are not entitled to pro rata inclusion with the Registrable Securities; and
provided further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the registration statement other than holders of securities
entitled to inclusion of their securities in such registration statement by
reason of demand registration rights (except to the extent any existing
agreements otherwise provide). No right to registration of Registrable
Securities under this Section 2.5 shall be construed to limit any registration
required under Section 2.1 or 2.2 hereof. If an offering in connection with
which an Investor is entitled to registration under this Section 2.5 is an
underwritten offering, then each Investor whose Registrable Securities are
included in such registration statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
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2.6 Eligibility for Form S-3. The Company represents and warrants
that it is eligible to register the resale of Registrable Securities on a
registration statement on Form S-3 under the Securities Act, and that the
Company is not aware of any facts or circumstances (including without limitation
any required approvals or waivers or any circumstances that may delay or prevent
the obtaining of accountant's consents) that would prohibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Registrable Securities.
2.7 Suspension Period. The Company may, at any time, suspend the
effectiveness of the Registration Statement, as appropriate (a "SUSPENSION
PERIOD"), by giving notice to each holder of Registrable Securities to be
included in the Registration Statement, if the Board of Directors shall have
determined that the Company may be required to disclose any material corporate
development which disclosure may have a Material Adverse Effect on the Company.
Each holder of Registrable Securities agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of a Suspension
Period, such holder shall forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or prospectus until such
holder (i) is advised in writing by the Company that the use of the applicable
prospectus may be resumed, (ii) has received copies of a supplemental or amended
prospectus, if applicable, and (iii) has received copies of any additional or
supplemental filings which are incorporated or deemed to be incorporated by
reference in such prospectus. The Suspension Period shall be no more than 90
days at a time and shall be limited to no more than 180 days per year.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable
Securities, the Company shall have the following obligations:
3.1 The Company shall prepare and file with the SEC, on or before
the Filing Deadline or the Uncovered Share Filing Deadline, as applicable, the
applicable Registration Statement required by Section 2.1 or 2.2 and shall use
its commercially reasonable efforts to cause such Registration Statement to
become effective as soon as practicable after such filing. The Company shall
keep such Registration Statement effective pursuant to Rule 415 at all times
until the date on which all of the Registrable Securities may (in the reasonable
opinion of both counsel to the Company and counsel to the Lead Investor) be
immediately sold to the public without registration or restriction pursuant to
Rule 144(k) under the Securities Act (the "REGISTRATION PERIOD"). If the Initial
Registration Statement is not filed on Form S-3, the Company shall, as soon as
it is eligible to do so, file a post-effective amendment on Form S-3 to the
Initial Registration Statement to the extent permitted by the SEC or, if not so
permitted, file a new Registration Statement on Form S-3 to permit sales of the
Registrable Securities pursuant to Rule 429 under the Securities Act; and the
Company shall use its commercially reasonable efforts to cause such
post-effective amendment or Registration Statement to become effective as soon
as possible. Each Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein and all documents
incorporated by reference therein) filed pursuant to this Agreement (i) shall
comply in all material respects with the requirements of the Securities Act and
the rules and regulations of the SEC promulgated thereunder and (ii) shall not
contain any untrue statement of a material fact or omit
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to state a material fact required to be stated therein, or necessary to make the
statements therein not misleading. The financial statements of the Company
included in the Registration Statement or incorporated by reference therein will
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC applicable with
respect thereto. Such financial statements shall be prepared in accordance with
U.S. 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 not include footnotes or may be condensed or
summary statements) and shall fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to immaterial year-end adjustments).
3.2 The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in the Registration Statement.
3.3 The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto. In the case of the Registration Statement referred to in Section 2.1 or
2.2, the Company shall furnish to each Investor (i) a copy of any request to
accelerate the effectiveness of any Registration Statement or amendment thereto,
(ii) on the date of effectiveness of the Registration Statement or any amendment
thereto, a notice stating that the Registration Statement or amendment has been
declared effective, and (iii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
3.4 The Company shall use its commercially reasonable efforts to
(i) register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as each Investor who holds Registrable Securities being
offered reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions;
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provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3.4, or (b) file a general consent to service of process in any such
jurisdiction.
3.5 In the event the Lead Investor selects underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
3.6 As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor by telephone or facsimile of the
happening of any event, of which the Company has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and use its commercially reasonable efforts promptly to prepare
a supplement or amendment to the Registration Statement to correct such untrue
statement or omission and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request.
3.7 The Company shall use its commercially reasonable efforts to
prevent the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable date (including in each
case by amending or supplementing such Registration Statement) and to notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance of such
order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request).
3.8 At the request of the Investors whose Registrable Securities
are included in a Registration Statement, the Company shall furnish, on the date
of effectiveness of the Registration Statement (i) an opinion, dated as of such
date, from counsel, reasonably acceptable to Lead Investor, representing the
Company addressed to the Investors and in form, scope and substance as is
customarily given in an underwritten public offering, including that the
Registration Statement and related prospectus comply as to form in all material
respects with the requirements of the Securities Act and the applicable rules
and regulations thereunder, and (ii) a letter, dated as of such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the Investors and the
underwriters, if any.
3.9 The Company shall make available for inspection by (i) the
Lead Investor, (ii) any underwriter participating in any disposition pursuant to
a Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Lead Investor, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "INSPECTORS") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company
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(collectively, the "RECORDS"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence.
3.10 The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this agreement, or (v) such Investor consents to the
form and content of any such disclosure. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
3.11 The Company shall use its commercially reasonable efforts to
promptly either (i) secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on The Nasdaq Small Cap Market,
or (ii) cause all the Registrable Securities covered by the Registration
Statement to be listed on the NYSE or the AMEX or another national securities
exchange and on each additional national securities exchange on which securities
of the same class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under the rules of
such exchange.
3.12 The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
3.13 The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
Business Days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel in a form customary for such transactions.
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3.14 At the request of the Lead Investor, the Company shall
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with the Registration Statement each as approved by the Company,
which approval shall not be unreasonably withheld or delayed, as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
3.15 The Company shall comply with applicable federal and state
securities laws and regulations related to a Registration Statement and offering
and sale of securities.
3.16 From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the Company
to include any of their securities in any Registration Statement under Section
2.1 or 2.2 hereof or any amendment or supplement thereto under Section 3.2
hereof without the consent of the Lead Investor.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
4.1 It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least fifteen
(15) Business Days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of any
information the Company requires from each such Investor.
4.2 In the event the Lead Investor determines to engage the
services of an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the underwriter(s) of such offering and the Company and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless such Investor has notified
the Company in writing of such Investor's election not to participate in such
underwritten distribution.
4.3 No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below. Notwithstanding anything in this
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Section 4.3 to the contrary, this Section 4.3 is not intended to limit an
Investor's rights under Section 2.1, 2.2 or 3.2 hereof.
5. EXPENSES OF REGISTRATION.
All expenses incurred by the Company in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3 above
(excluding underwriting discounts and commissions), including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees and the fees and disbursements of counsel for the Company and
the reasonable and documented fees and disbursements for one counsel for the
Lead Investor, shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees and
agents of such Investor, any underwriter and each person who controls any
Investor or underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, if any (each, an "INDEMNIFIED PERSON"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "VIOLATIONS"). Subject to the restrictions
set forth in Section 6.3 with respect to the number of legal counsel, the
Company shall reimburse the Investors and each other Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6.1: (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any
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such amendment thereof or supplement thereto; (ii) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without an
unconditional release of the Company and all of its controlling persons,
employees and agents, or without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) with respect to any
prospectus, shall not inure to the benefit of any Indemnified Person if the
untrue statement or omission of material fact contained in such prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3.3 hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
8.
6.2 In connection with any Registration Statement in which an
Investor is participating and to the extent permitted by law, each such Investor
agrees severally and not jointly to indemnify, hold harmless and defend, the
Company, each of its directors, each of its officers who signs the Registration
Statement, its employees, agents, any underwriter, and each person, if any, who
controls the Company or any such underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, and any other Investor
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such Investor within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to the restrictions set forth in Section 6.3, such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6.2 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without an
unconditional release of such Investor and all of its controlling persons,
employees and agents, or without the prior written consent of such Investor,
which consent shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Agreement (including this Section
6.2 and Section 7) for only that amount as does not exceed the net proceeds
actually received by such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 8. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6.2 with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact by the Investor contained in the preliminary prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented, and the
Indemnified Party failed to utilize such corrected prospectus.
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6.3 Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that such indemnifying
party shall not be entitled to assume such defense and an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
reasonable fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and the indemnifying party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are in conflict with those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for all
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by the Lead Investor, if the Investors are entitled to
indemnification hereunder, or by the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
6.4 The obligations of the Company and the Investors under these
Sections 6 and 7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement, and otherwise.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any other person who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
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8. ASSIGNMENT OF REGISTRATION RIGHTS.
(a) The rights of the Investors hereunder, including the right to have
the Company register Registrable Securities pursuant to this Agreement, shall be
assignable by each Investor to any transferee of all or any portion of the
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (a) the name and address of such transferee or assignee
and (b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Securities Purchase
Agreement; provided, however, that during such time that the Registrable
Securities held by an Investor are covered by an effective Registration
Statement, the rights of such Investor hereunder shall be assignable by the
Investor only to a transferee of all or any portion of the Registrable
Securities in a transaction that is not eligible to be covered by the
Registration Statement.
(b) Notwithstanding anything to the contrary contained in this Agreement
or the Securities Purchase Agreement, the Shares may be pledged, and all rights
of the Investors under this Agreement or any other agreement or document related
to the transaction contemplated hereby may be assigned, without further consent
of the Company, to a bona fide pledgee in connection with an Investor's margin
or brokerage accounts, provided, however, that any further assignment of the
rights under this Agreement by the pledgee shall be subject to the terms of
Section 8(a) to the same extent applicable to the Investor.
9. AMENDMENT OF REGISTRATION RIGHTS.
All consents, approvals and other determinations to be made by
the Lead Investor pursuant to this Agreement and all waivers and amendments to
or of any provisions in this Agreement prior to the Closing Date to be binding
upon all Investors shall be made by the Lead Investor and except as otherwise
expressly provided herein, all consents, approvals and other determinations
(other than amendments to the terms and provisions of this Agreement) to be made
by the Investors pursuant to this Agreement and all waivers and amendments to or
of any provisions in this Agreement after the Closing Date shall be made by the
Lead Investor.
10. MISCELLANEOUS.
10.1 Ownership. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
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10.2 Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five (5) days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
MindArrow Systems, Inc.
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Lead Investor:
East-West Capital Associates, Inc.
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to:
Buchalter, Nemer, Fields & Younger, P.C.
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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If to an Investor, at such address as such Investor shall
have provided in writing to the Company or such other address such Investor
furnishes by notice given in accordance with this Section 10.2.
Each party hereto may from time to time change its address or
facsimile number for notices under this Section 10.2 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number, in the
case of the Investors to the Company, and in the case of the Company to all of
the Investors.
10.3 Waiver. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
10.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware.
10.5 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
10.6 Successors and Assigns. Subject to the requirements of
Section 8 hereof, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
10.7 Headings. The headings in this Agreement are for convenience
of reference only and shall not form part of or effect the interpretation of
this Agreement.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed signature page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
10.9 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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10.10 Determinations. All consents, approvals and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by the Lead Investor.
10.11 Pro Rata Determinations. The initial number of Registrable
Securities included on any Registration Statement and each increase to the
number of Registrable Securities included thereon shall be registered on behalf
of each Investor pro rata based on the number of Registrable Securities held by
each Investor at the time of such establishment or increase, as the case may be.
In the event an Investor shall sell or otherwise transfer any of such holder's
Registrable Securities, each transferee shall be deemed to have registered on
its behalf a pro rata portion of the number of Registrable Securities included
on a Registration Statement for such transferor. For the avoidance of doubt, no
provision of this subsection shall operate to reduce the number of Registrable
Securities registered on behalf of any Investor pursuant to the first sentence
of this subsection.
10.12 Business Day. For purposes of this Agreement, the term
"BUSINESS DAY" means any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
10.13 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
10.14 Successor and Assigns. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by any other person.
10.15 Arbitration. Any dispute or claim arising hereunder shall
be settled by arbitration. Any party may commence arbitration by sending a
written notice of arbitration to the other party. The notice will state the
dispute with particularity. The arbitration hearing shall be commenced thirty
(30) days following the date of delivery of notice of arbitration by one party
to the other, by a single neutral arbitrator appointed by the American
Arbitration Association ("AAA"). The arbitration shall be conducted in Los
Angeles, California in accordance with the commercial arbitration rules
promulgated by AAA, and the Sellers, on the one hand, and the Purchaser, on the
other, shall retain the right to cross-examine the opposing party's witnesses,
either through legal counsel, expert witnesses or both. The decision of the
arbitrator shall be final, binding and conclusive on all parties (without any
right of appeal therefrom) and shall not be subject to judicial review. As part
of his decision, the arbitrator may allocate the cost of arbitration, including
fees of attorneys and experts, as he or she deems fair and equitable in light of
all relevant circumstances. Judgment on the award rendered by the arbitrator may
be entered in any court of competent jurisdiction.
10.16 WAIVER OF TRIAL BY JURY. TO THE MAXIMUM EXTENT THEY MAY
LEGALLY DO SO, THE PARTIES TO THIS AGREEMENT HEREBY EXPRESSLY WAIVE ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF
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ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR IN ANY
WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES
HERETO WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT
THEY MAY LEGALLY DO SO, THE PARTIES TO THIS AGREEMENT HEREBY AGREE THAT ANY SUCH
CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A
COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO
TRIAL BY JURY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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REGISTRATION RIGHTS AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned Investor and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
MINDARROW SYSTEMS, INC.
By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
Title: Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
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REGISTRATION RIGHTS AGREEMENT
INVESTORS SIGNATURE PAGE
EAST-WEST CAPITAL ASSOCIATES, INC.
By:
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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REGISTRATION RIGHTS AGREEMENT
INVESTORS SIGNATURE PAGE
EASTWEST VENTURE GROUP, LLC
By:
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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REGISTRATION RIGHTS AGREEMENT
INVESTORS SIGNATURE PAGE
▇▇▇ FINANCIAL HOLDINGS, LTD., L.L.P.
By:
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Authorized Signatory by Power
of Attorney
Address: Suite 810
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FIN --84-1043006
REGISTRATION RIGHTS AGREEMENT
INVESTORS SIGNATURE PAGE
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By:
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Authorized Signatory by Power
of Attorney
Address: ▇▇▇▇▇ ▇▇▇
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