EXHIBIT
B
to Subscription
Agreement
REGISTRATION RIGHTS
AGREEMENT
AGREEMENT dated as of December 29, 2006, between MERCATOR
MOMENTUM FUND, L.P., MERCATOR MOMENTUM FUND III, L.P, MONARCH
POINTE FUND, LTD. (collectively, the " Funds ") and M.A.G.
CAPITAL, 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 , pursuant to that certain Subscription
Agreement, dated as of December 29, 2006, among the Company and the
Holders (the " Subscription Agreement "), the Funds are
purchasing, in exchange for certain securities and the cancellation
of certain indebtedness, an aggregate of 5,000 shares of
Series B Convertible Preferred Stock (together, the "
Series B Stock ") from the Company, and have the right
to cause their Series B Stock to be converted into shares of
Common Stock (the " Common Stock "), of the Company,
pursuant to the conversion formula set forth in the Certificate of
Designations of Preferences and Rights of Series B Convertible
Preferred Stock of M-Wave, Inc. (the " Certificate of
Designations ");
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 the conversion of the Series B
Stock.
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 the conversion of the Series B Stock (the
" B Conversion 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 Company shall
file a registration statement (the " Registration Statement
") with the Securities and Exchange Commission (the "
Commission ") on or prior to the Filing Deadline (as defined
below), in order to register the resale of the Registrable
Securities under the Securities Act. 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. The term "Filing Deadline" means (i)
in the event that within 45 days after the Closing Date (as that
term is defined in the Subscription Agreement) the Company enters
into any agreement (a "Merger Agreement") to effect a merger,
reorganization, consolidation, recapitalization, sale of
substantial assets or similar transaction, the date that is 45 days
after the Company enters into such Merger Agreement, or (ii) in the
event that the Company does not enter into a Merger Agreement
within 45 days after the Closing Date, the date that is 60 days
after the Closing Date.
(b) The Company will
initially include in the Registration Statement as Registrable
Securities the number of shares of Common Stock into which the
Series B Stock is convertible at the date of the initial filing of
the Registration Statement.
(c) Depending on
whether the Registration Statement has previously become effective
with the Commission, the Company shall register additional shares
if and as required pursuant to the Subscription Agreement or the
Certificate of Designations either by amending the Registration
Statement to increase the number of shares that it covers or by
filing a new registration statement. Any such new registration
statement shall thereafter be deemed part of the Registration
Statement for the purposes of this Agreement.
3.
Covenants of the Company with Respect to
Registration .
The Company covenants and agrees as
follows:
(a) The Company shall
use its best efforts to cause the Registration Statement to become
effective with the Commission as promptly as possible and (i) in
the event that the Company enters into a Merger Agreement within 45
days after the Closing Date, not later than 150 days after the date
the Company enters into such Merger Agreement and (ii) in the event
that the Company does not enter into a Merger Agreement within 45
days after the Closing Date, within 60 days of the date the
Registration Statement is filed with the Commission. If any stop
order shall be issued by the Commission in connection therewith,
the Company shall use its 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 necessary 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
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