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EXHIBIT D
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
August 23, 2000 between Constellation 3D, Inc., a Florida corporation with
offices at 230 Park Avenue, New York, New York (the "Company") and each of the
entities listed under "Investors" on the signature page hereto (each an
"Investor" and collectively the "Investors"), each with offices at the address
listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Common Stock Investment Agreement,
dated the date hereof, among the Company and the Investors (the "Purchase
Agreement"), the Company has agreed to sell and issue to the Investors, and the
Investors have agreed to purchase from the Company, inter alia, an aggregate of
492,459 shares (the "Initial Shares") of the Company's common stock, $.001 par
value ("Common Stock"), and certain warrants, all as more fully specified and
subject to the terms and conditions set forth in the Purchase Agreement;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to issue the Initial Warrants, Optional Warrants and Adjustment Warrants
described therein (collectively, the "Warrants") exercisable for shares of
Common Stock ("Warrant Shares", "Optional Warrant Shares" and "Adjustment
Shares", respectively); and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to provide the Investors with certain registration rights with respect to
the Initial Shares, Warrant Shares, Optional Warrant Shares, Adjustment Shares,
Anti-Dilution Shares, and MDP Shares (as defined herein), as well as certain
other rights and remedies as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement and/or
the Warrants. As used in this Agreement, the following terms shall have the
following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such
terms in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Effectiveness Deadline" has the meaning specified in Section 2(a).
"Fair Market Value" shall have the meaning ascribed to such term in the
Warrants.
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"Holder" and "Holders" shall mean the Investor or the Investors,
respectively, and any transferee of Registrable Securities and/or Warrants which
have not been sold to the public to whom the registration rights conferred by
this Agreement have been transferred in compliance with this Agreement.
"Interfering Events" shall have the meaning set forth in Section 2(b).
"Monthly Delay Payment" shall have the meaning specified in Section
2(b)(i)(C).
"Premium Redemption Price" shall mean the following:
(a) as to the Initial Shares, Optional Warrant Shares and Warrant
Shares, the greater of (i) 120% of the Share Purchase Price (with respect to the
Initial Shares and the Optional Warrant Shares) or 120% of the exercise price of
the Initial Warrants (with respect to the Warrant Shares) and (ii) the highest
Common Stock closing price on the Principal Market between and including date of
the event triggering the right of redemption and the trading day immediately
prior to the actual redemption of the Purchased Shares;
(b) as to the Adjustment Shares, Deficiency Shares and
Anti-Dilution Shares, 120% of the dollar amount which is the product of (i) the
number of shares to be redeemed, or the number of Deficiency Shares, as
applicable, and (ii) the Fair Market Value for shares of Common Stock in
existence at the time (x) of the closing of a redemption of shares, or a payment
for Deficiency Shares, as applicable, or (y) of the event triggering the right
to redemption or payment, whichever results in a greater Premium Redemption
Price.
(c) as to the Initial Warrants, Adjustment Warrants and Optional
Warrants, 120% of the dollar amount which is the product of (i) the number of
Warrant Shares, Adjustment Shares or Optional Warrant Shares to be issued to the
Holder upon exercise thereof multiplied by (ii) the Fair Market Value for Shares
of Common Stock in existence at the time (x) of the closing of the redemption or
(y) of the event triggering the right to redemption, whichever results in a
greater Premium Redemption Price.
"Purchased Shares" shall mean the Initial Shares, Warrant Shares and
Optional Warrant Shares.
"Purchased Shares Purchase Price" shall mean (i) with respect to the
Initial Shares and the Optional Warrant Shares, the Share Purchase Price, and
(ii) with respect to the Warrant Shares, the exercise price of the Initial
Warrants.
"Put Notice" shall have the meaning set forth in Section 2(b)(i)(B).
"Registrable Securities" shall mean: (i) the Initial Shares; (ii) the
Warrant Shares (without regard to Section 16 of the Initial Warrants); (iii) the
Adjustment Shares (without regard to Section 14 of the Adjustment Warrants);
(iv) the Optional Warrant Shares (without regard to Section 16 of the Optional
Warrants); (v) the Anti-Dilution Shares; (vi) the MDP Shares; (vii) securities
issued or issuable upon any stock split, stock dividend, recapitalization or
similar event with respect to the foregoing; and (v) any other security issued
as a dividend or other distribution with respect to, in exchange for or in
replacement of the securities referred to in the preceding clauses.
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The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "blue sky"
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due diligence" examination of the Company and review of the Registration
Statement and related documents, and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company)."Registration Statement" shall have the meaning set forth in Section
2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities" means the Registrable Securities and the Warrants.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all reasonable
fees and disbursements of counsel for Holders not included within "Registration
Expenses" and if the Holders engage a third party as an underwriter for the
purpose of distributing Registrable Securities on an underwritten basis, the
fees and expenses of such underwriting and any additional expenses of an
accountant incurred in order to obtain a "Comfort Letter."
"Trading Day" shall mean (x) if the Common Stock is listed on the New
York Stock Exchange or the American Stock Exchange, a day on which there is
trading on such stock exchange, or (y) if the Common Stock is not listed on
either of such stock exchanges but sale prices of the Common Stock are reported
on an automated quotation system, a day on which trading is reported on the
principal automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.
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2. Registration Requirements. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "blue sky" or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) reasonably
requested by the Holder and in all U.S. jurisdictions. Such best efforts by the
Company shall include the following:
(a) The Company shall, as expeditiously as reasonably possible
after the Closing Date:
(i) But in any event within 30 days thereafter, prepare and
file a registration statement with the Commission on Form S-1 or
Form S-3, as applicable, under the Securities Act (or in the event
that the Company is ineligible to use either such form, such other
form as the Company is eligible to use under the Securities Act)
covering the Registrable Securities (such registration statement,
including any amendments or supplements thereto and prospectuses
contained therein, is referred to herein as the "Registration
Statement"), which Registration Statement, to the extent allowable
under the Securities Act and the rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement
also covers such number of additional shares of Common Stock as
may become issuable to prevent dilution resulting from stock
splits, stock dividends or similar events. The number of shares of
Common Stock initially included in such Registration Statement
shall be no less than 2,142,197 shares. Thereafter, the Company
shall use its best efforts to cause such Registration Statement to
be declared effective as soon as reasonably practicable, and in
any event prior to the earlier of (i) 120 calendar days following
the Closing Date or (ii) 5 Trading Days after SEC clearance to
request acceleration (the "Effectiveness Deadline"). The Company
shall provide Holders and their legal counsel reasonable
opportunity to review any such Registration Statement or amendment
or supplement thereto prior to filing. Without limiting the
foregoing, the Company will promptly respond to all SEC comments,
inquiries and requests, and shall request acceleration of
effectiveness at the earliest possible date. If the Company is not
initially eligible to use Form S-3, it will, at the request of a
majority-in-interest of the holders of Registrable Securities,
amend its Form S-1 to a Form S-3 at such time that it becomes
eligible to do so.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used
in connection with such Registration Statement, or prepare and
file such additional registration statements, as may be necessary
to comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration
Statement in accordance with the intended methods of disposition
by the seller thereof as set forth in the Registration Statement
and notify the Holders of the filing and effectiveness of such
Registration Statement and any amendments or supplements.
(iii) After the registration, furnish to each Holder such
numbers of copies of a current prospectus conforming with the
requirements of the Act, copies of the Registration Statement, any
amendment or supplement thereto and any documents incorporated by
reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
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(iv) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other
securities or "blue sky" laws of all U.S. jurisdictions (except in
any such jurisdiction where the registration and qualification of
the securities covered by such Registration Statement is exempt
under the laws and regulations of such jurisdiction); provided
that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) Notify each Holder immediately of the happening of any
event (but not the substance or details of any such event unless
specifically requested by a Holder) as a result of which the
prospectus (including any supplements thereto or thereof and any
information incorporated or deemed to be incorporated by reference
therein) included in such Registration Statement, as then in
effect, includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances then existing, and, pursuant to Section 2(f), use
its best efforts to promptly update and/or correct such
prospectus.
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any
stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose.
The Company shall use its best efforts to prevent the issuance of
any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible time.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by the Holders of a majority of the Registrable
Securities included in the Registration Statement, to review the
Registration Statement and all amendments and supplements thereto
within a reasonable period of time prior to each filing, and shall
not file any document in a form to which such counsel reasonably
objects.
(viii) Use its best efforts to list the Registrable
Securities covered by such Registration Statement with all
securities exchange(s) and/or markets on which the Common Stock is
then listed and/or quoted and prepare and file any required
filings with the National Association of Securities Dealers, Inc.
or any exchange or market where the Common Stock is then traded.
(ix) If applicable, take all steps necessary to enable
Holders to avail themselves of the prospectus delivery mechanism
set forth in Rule 153 (or successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events that may
arise that the Investors consider will interfere with the full enjoyment of
their rights under the Purchase Agreement and this Agreement (the "Interfering
Events"), and (II) certain remedies applicable in each of these events.
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Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an Interfering Event
occurs and provide that the Investors may require that the Company redeem
outstanding Securities at a specified price if certain Interfering Events are
not timely cured.
Paragraph (v) provides, inter alia, that if payments required as the
remedy in the case of certain of the Interfering Events are not paid when due,
the Company may be required by the Investors to redeem outstanding Securities at
a specified price.
The preceding paragraphs in this Section 2(b) are meant to serve only
as an introduction to this Section 2(b), are for convenience only, and are not
to be considered in applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of Registration Statement.
(A) In the event that the Registration Statement has not been
declared effective by the Effectiveness Deadline, then the Company
shall pay to each Holder a Monthly Delay Payment (as defined below)
for each 30 day period (or portion thereof) thereafter during which
the Registration Statement has not been declared effective, which
Monthly Delay Payments shall not in the aggregate exceed the maximum
percentage permitted by law.
(B) If the Registration Statement has not been declared
effective by 30 days following the Effectiveness Deadline, then each
Holder shall have the right but not the obligation to require the
Company to redeem the Warrants and/or Registrable Securities, in
whole or in part at the Premium Redemption Price. Each Holder shall
exercise such right by providing the Company with written notice
thereof (the "Put Notice"), which such Put Notice shall include the
type and amount of each security that the Holder seeks to redeem and
a date at least 5 business days from the date thereof on which the
Holder seeks the redemption to occur (the "Redemption Date").
(C) As used in this Agreement, a "Monthly Delay Payment" shall
be a payment in shares of Common Stock ("MDP Shares") computed as
equal to "X"% of the Purchased Shares Purchase Price of the Purchased
Shares held by a Holder for each 30 day period (or portion thereof)
that the specified condition in this Section 2(b) has not been
fulfilled or the specified deficiency has not been remedied,
(prorated in each case as appropriate) divided by the lesser of (i)
the Share Purchase Price, and (ii) the Fair Market Value of shares of
Common Stock at the time delivery of MDP Shares is demanded. For
purposes of this section, "X" shall mean "2" for the first 30 day
period (or portion thereof) referred to above, and "1.5" for each
subsequent 30 day period (or portion thereof) (the "Default Rate").
Payment of the Monthly Delay Payments and Premium Redemption Price
shall be due and payable from the Company to such Holder within 5
business days of demand therefor. Without limiting the foregoing, if
payment in immediately available funds of the Premium Redemption
Price is not made within such 5 business day period, the Holder may
revoke and withdraw in whole or in part its election to cause the
Company to make such mandatory purchase at any time prior to its
receipt of such cash, without prejudice to its ability to elect to
receive that particular or other Premium Redemption Price payments in
the future.
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(ii) No Listing; Premium Price Redemption for Delisting of Class
of Shares.
(A) In the event that the Company fails, refuses or is unable
to cause the Registrable Securities covered by the Registration
Statement to be listed and/or quoted, as the case may be, with the
Approved Market and each other securities exchange and market on
which the Common Stock is then traded at all times during the period
("Listing Period") commencing the earlier of the effective date of
the Registration Statement or the Effectiveness Deadline and
continuing thereafter for so long as any Warrants are outstanding,
then the Company shall make to each Holder a Monthly Delay Payment
for each 30 day period (or portion thereof) during the Listing Period
from and after such failure, refusal or inability to so list the
Registrable Securities until the Registrable Securities are so listed
and/or quoted.
(B) In the event that shares of Common Stock of the Company
are delisted or not quoted from the Approved Market at any time
following the Closing Date and remain delisted for 5 consecutive
business days, then at the option of each Holder and to the extent
such Holder so elects, the Company shall on 2 business days notice
either (1) make to such Holder a Monthly Delay Payment for each 30
day period (or portion thereof) that the shares are delisted or not
quoted or (2) redeem the Securities held by such Holder, in whole or
in part, at a redemption price equal to the Premium Redemption Price
(as defined above); provided, however, that such Holder may revoke
such request at any time prior to receipt of such Monthly Delay
Payments or Premium Redemption Price, as the case may be.
(iii) Blackout Periods. In the event any Holder is unable to sell
Registrable Securities under the Registration Statement for more than
(A) 10 consecutive Trading Days or (B) an aggregate of 30 Trading
Days in any 12 month period ("Suspension Grace Period"), including
without limitation by reason of a suspension of trading of the Common
Stock on the Approved Market, any suspension or stop order with
respect to the Registration Statement or the fact that an event has
occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in
effect includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, or the number of shares of Common Stock
covered by the Registration Statement is insufficient at such time to
make such sales (a "Blackout"), then the Company shall make to each
Holder a Monthly Delay Payment for each 30 day period (or portion
thereof) from and after the expiration of the Suspension Grace
Period. In lieu of receiving the Monthly Delay Payment as provided
above, a Holder shall have the right but not the obligation to elect
to have the Company redeem its Securities at a price equal to the
Premium Redemption Price.
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(iv) Redemption for Exercise Deficiency. In the event that the
Company does not have a sufficient number of shares of Common Stock
available to satisfy the Company's obligations to any Holder upon
receipt of a notice of exercise of a Warrant from an Investor, or is
otherwise unable or unwilling for any reason to issue Common Stock as
required by, and in accordance with the provisions of, the Warrants,
this Agreement or the Purchase Agreement (each, an "Exercise
Deficiency"), then at any time 5 days after the commencement of the
running of the first 30 day period following an Exercise Deficiency,
at the request of any Holder, the Company promptly shall purchase
from such Holder, on the terms set forth in Section 2(b)(i)(B) above,
the Warrants that are unexercisable and/or the shares of Common Stock
required to be issued that have not been issued, in each case as a
result of the Exercise Deficiency, at their Premium Redemption Price.
(v) Premium Redemption Price for Defaults.
(A) The Company acknowledges that any failure, refusal or
inability by the Company to perform the obligations described in the
foregoing paragraphs (i) through (iv) will cause the Holders to
suffer damages in an amount that will be difficult to ascertain,
including without limitation damages resulting from the loss of
liquidity in the Registrable Securities and the additional investment
risk in holding the Registrable Securities. Accordingly, the parties
agree, after consulting with counsel, that it is appropriate to
include in this Agreement the foregoing provisions for Monthly Delay
Payments and mandatory redemptions in order to compensate the Holders
for such damages. The parties acknowledge and agree that the Monthly
Delay Payments and mandatory redemptions set forth above represent
the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such payments and mandatory
redemptions are reasonable and will not constitute a penalty.
(B) In the event that the Company fails to make any Monthly
Delay Payment within 10 calendar days of demand therefor, each Holder
shall have the right to sell to the Company any or all of its
Securities at the Premium Redemption Price on the terms set forth in
Section 2(b)(i)(B) above.
(vi) Cumulative Remedies. Each Monthly Delay Payment triggered by
an Interfering Event provided for in the foregoing paragraphs (i)
through (v) shall be in addition to each other Monthly Delay Payment
triggered by another Interfering Event; provided, however, that in no
event shall the Company be obligated to make to any Holder Monthly
Delay Payments in an aggregate amount greater than the Default Rate
for any 30 day period (or portion thereof). Notwithstanding anything
in this Section 2 to the contrary, the Company shall only be
obligated to make Monthly Delay Payments to the Investor with respect
to a particular Interfering Event for a total of 3 full 30 day
periods; provided, that if the Company fails or has failed to make
payment in full to the Investor of a Premium Redemption Price on the
applicable Redemption Date (with regard to any Interfering Event),
then the limitations contained in this sentence shall cease to be of
any force and effect with regard to any current or future Interfering
Events. After the expiration of such 3 full 30 day periods, the
Investor shall be immediately entitled to sell the applicable
Securities to the Company at the Premium Redemption Price. The
Monthly Delay Payments and mandatory redemptions provided for above
are in addition to and not in lieu or limitation of any other rights
the Holders may have at law, in equity or under the terms of the
Transaction Documents including without limitation the right to
specific performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in connection
with the registration rights of the Holders hereunder.
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(c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by investment bankers
reasonably satisfactory to the Company.
(d) The Company shall enter into such customary agreements for
secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities. In the event that
the offering in which the Registrable Securities are to be sold is deemed to be
an underwritten offering or an Investor selling Registrable Securities is deemed
to be an underwriter, the Company shall:
(i) make such representations and warranties to the Holders and
the underwriter or underwriters, if any, in form, substance and scope
as are customarily made by issuers to underwriters in secondary
offerings;
(ii) cause to be delivered, if requested, to the sellers of
Registrable Securities and the underwriter or underwriters, if any,
opinions of independent counsel to the Company, on and dated as of
the effective day (or in the case of an underwritten offering, dated
the date of delivery of any Registrable Securities sold pursuant
thereto) of the Registration Statement, and within 90 days following
the end of each fiscal year thereafter, which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to
the Holders and the underwriter(s), if any, and their counsel and
covering, without limitation, such matters as the due authorization
and issuance of the securities being registered and compliance with
securities laws by the Company in connection with the authorization,
issuance and registration thereof and other matters that are
customarily given to underwriters in underwritten offerings,
addressed to the Holders and each underwriter, if any.
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(iii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), and at the beginning of each
fiscal year following a year during which the Company's independent
certified public accountants shall have reviewed any of the Company's
books or records, a "comfort" letter from the Company's independent
certified public accountants addressed to the Holders and each
underwriter, if any, stating that such accountants are independent
public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder, and otherwise
in customary form and covering such financial and accounting matters
as are customarily covered by letters of the independent certified
public accountants delivered in connection with secondary offerings;
such accountants shall have undertaken in each such letter to update
the same during each such fiscal year in which such books or records
are being reviewed so that each such letter shall remain current,
correct and complete throughout such fiscal year; and each such
letter and update thereof, if any, shall be reasonably satisfactory
to the Holders.
(iv) if an underwriting agreement is entered into, the same shall
include customary indemnification and contribution provisions to and
from the underwriters and procedures for secondary underwritten
offerings;
(v) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or
the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(vi) deliver to the Holders on the effective day (or in the case
of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and at the beginning of each fiscal quarter thereafter, a
certificate in form and substance as shall be reasonably satisfactory
to the Holders, executed by an executive officer of the Company and
to the effect that all the representations and warranties of the
Company contained in the Purchase Agreement are still true and
correct except as disclosed in such certificate; the Company shall,
as to each such certificate delivered at the beginning of each fiscal
quarter, update or cause to be updated each such certificate during
such quarter so that it shall remain current, complete and correct
throughout such quarter; and such updates received by the Holders
during such quarter, if any, shall have been reasonably satisfactory
to the Holders.
(e) The Company shall make available for inspection by the
Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all financial and
other records customary for purposes of the Holders' due diligence examination
of the Company and review of any Registration Statement, all SEC Documents (as
defined in the Purchase Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree to keep such
information confidential.
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(f) The Company shall file a Registration Statement with respect
to any newly authorized and/or reserved shares within ten (10) business days of
any shareholders meeting authorizing or reserving same and shall use its best
efforts to cause such Registration Statement to become effective within
seventy-five (75) days of such shareholders meeting. If the Holders become
entitled, pursuant to an event described in clause (iii) of the definition of
Registrable Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration Statement, subsequent to
the date such Registration Statement is declared effective, and the Company is
unable under the securities laws to add such securities to the then effective
Registration Statement, the Company shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement with respect
to such newly Registrable Securities. The Company shall use its best efforts to
(i) cause any such additional Registration Statement, when filed, to become
effective under the Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5 below. All of the
registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for Monthly Delay Payments
contained herein.
3. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. Registration on Form S-3; Other Forms. The Company shall use its
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms, or in the event that the Company is ineligible to use
such form, such form as the Company is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until the later to occur of (i) sales are
permitted of all Registrable Securities without registration under Rule 144(k)
or (ii) such time as there are no longer any Warrants outstanding or issuable.
6. Indemnification.
(a) The Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors and partners, and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
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the like) incident to any such registration, qualification or compliance, or
based on 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, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors and partners, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly,
if Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder(s), against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading, and will reimburse the Company and such other Holder(s)
and their directors, officers and partners, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities. The indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this
Section 6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
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(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
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
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying each of such Indemnified Parties, shall contribute to the amount
paid or payable by each such Indemnified Party as a result of such losses,
claims, damages or liabilities as between the Company on the one hand and any
Holder on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of any Holder 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 or alleged omission to
state a material fact relates to information supplied by the Company or by such
Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. 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 paragraphs shall be deemed to include, subject to the limitations set
forth above, 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 section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any 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 alleged untrue statement or omission or alleged 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.
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8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall reasonably promptly
furnish to the Company such information regarding such Holder and the
distribution and/or sale proposed by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement. The
intended method or methods of disposition and/or sale (Plan of Distribution) of
such securities as so provided by such Investor shall be included without
alteration in the Registration Statement covering the Registrable Securities and
shall not be changed without written consent of such Holder, except that such
Holder may not require an intended method of disposition which violates
applicable securities law.
10. NASDAQ Limit on Stock Issuances. Section 3.14 of the Purchase
Agreement shall govern limits imposed by NASDAQ rules on the issuance of Common
Stock.
11. Replacement Certificates. The certificate(s) representing the
Registrable Securities held by the Investor (or then Holder) may be exchanged by
the Investor (or such Holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of
Registrable Securities, as reasonably requested by the Investor (or such Holder)
upon surrendering the same. No service charge will be made for such registration
or transfer or exchange.
12. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Registrable Securities or Warrants, and all other rights granted
to the Investors by the Company hereunder may be transferred or assigned to any
transferee or assignee of any Registrable Securities or Warrants; provided in
each case that the Company must be given written notice by the such Investor at
the time of or within a reasonable time after said transfer or assignment,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned; provided that the transferee or assignee of such rights agrees in
writing to be bound by the provisions of this Agreement.
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13. Miscellaneous.
(a) Remedies. The Company and the Investors acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.
(b) Jurisdiction. THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE INVESTORS CONSENTS
TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Constellation 3D, Inc.
230 Park Avenue
Suite 453
New York, New York 10169
Telephone: (212) 983-1107
Facsimile: (212) 983-1108
Attention: Eugene Levich, President
with copies to:
Blank Rome Comisky & McCauley, LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Telephone: (215) 569-5754
Facsimile: (215) 569-5628
Attention: Alan L. Zeiger, Esq.
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to the Investors:
To each Investor at the address and/or fax
number set forth on Schedule I of the
Purchase Agreement
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Telephone: (212) 986-6000
Facsimile: (212) 986-8866
Attention: Stephen M. Schultz, Esq.
Any party hereto may from time to time change its address for notices
by giving at least 10 days' written notice of such changed address to the other
parties hereto.
(d) Indemnity. Each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
(e) Waivers. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
(f) Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(g) Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of any Investor without
its express written approval, unless and until such disclosure is required by
law or applicable regulation, and then only to the extent of such requirement.
The Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Investor and any public announcement including the name of an Investor
to such Investor, prior to the publication of such announcements.
(h) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Warrants and the agreements and documents contemplated hereby and
thereby, contains the entire understanding and agreement of the parties, and may
not be modified or terminated except by a written agreement signed by both
parties.
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(i) Governing Law. THIS AGREEMENT AND THE VALIDITY AND PERFORMANCE
OF THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE.
(j) Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
(k) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY
JURY.
(l) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Signature page follows
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CONSTELLATION 3D, INC.
By: /s/ E. Levich
---------------------------------
Name: Eugene Levich
Title: President
HALIFAX FUND, L.P.
By: /s/ Steven W. Weiner
---------------------------------
Name: Steven Weiner
Title: Managing Director
The Palladin Group, L.P.
As Investment Advisor
Signature page to Registration Rights Agreement
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