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EXECUTION COPY
HALIFAX FUND, L.P.
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, New Jersey 07040
September 19, 2000
Constellation 3D, Inc.
230 Park Avenue, Suite 453
New York, New York 10169
Re: Additional Investment
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Ladies and Gentlemen:
On August 23, 2000, Halifax Fund, L.P. (the "Investor")
invested $5,000,000 in Constellation 3D, Inc. (the "Company") pursuant to the
terms of a Common Stock Investment Agreement (the "Purchase Agreement"). This
investment is referred to herein as the "Initial Investment." In consideration
for the Initial Investment, the Investor received from the Company (i) 492,459
shares of the Company's common stock, $.001 par value ("Initial Shares"), (ii)
five (5) year warrants to purchase 196,984 shares of common stock at an initial
exercise price of $14.6656 per share (the "Initial Warrants"), (iii) adjustment
warrants to purchase a number of shares of common stock calculated pursuant to a
formula set forth therein (the "Adjustment Warrants") and (iv) one year warrants
to purchase 246,229 shares of Common Stock at an initial exercise price of
$10.15313 and additional Adjustment Warrants pertaining to such shares of Common
Stock (the "Optional Warrants" and together with the Initial Warrants and the
Adjustment Warrants, the "Warrants"), all on the terms and conditions described
in the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Purchase Agreement.
The Investor and the Company now wish to amend and supplement
the Transaction Documents to provide for an additional $5,000,000 investment in
the Company by the Investor on the same terms and conditions as set forth in the
Transaction Documents for the Initial Investment, except as such terms and
conditions are amended as provided herein, and therefore agree as follows:
1. Additional Investment. Concurrently with the execution and
delivery of this Agreement, the Investor shall make an additional investment in
the Company of $5,000,000 (the "Additional Investment") on the same terms and
conditions as the Initial Investment. In consideration of such additional
investment, the Company shall issue to the Investor 492,459 shares ("New
Shares") of the Company's common stock, $.001 par value ("Common Stock"). The
New Shares shall be deemed "Initial Shares" under the Purchase Agreement, and
except as specifically set forth herein, the terms of the Purchase Agreement
shall apply mutatis mutandis to the Additional Investment with the "Closing
Date" being the date of this Agreement. Upon the Company's receipt of the
Additional Investment, the amendments to the Transaction Documents set forth
herein shall automatically become effective.
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2. Amendments to the Transaction Documents.
(a) Amendment to Initial Warrant. The Initial Warrant is
hereby amended to be exercisable for a total of 393,968 Warrant Shares.
(b) Amendment to Optional Warrant. The Optional Warrant is
hereby amended to be exercisable for a total of 492,458 units consisting of (i)
one Optional Warrant Share and (ii) an Adjustment Warrant per unit.
(c) Amendment to Registration Rights Agreement. The
Registration Rights Agreement is hereby amended as follows:
(1) The defined term "Initial Shares" is amended to
include the New Shares, in addition to (and not in substitution of) the 492,459
shares of the Company's Common Stock purchased by the Investor in connection
with the Initial Investment.
(2) The Company hereby agrees that for purposes of the
Registration Rights Agreement, the New Shares and the shares of Common Stock
issuable upon exercise of the Warrants, as the Warrants have been amended
pursuant to this Agreement, shall be deemed "Registrable Securities" under the
Registration Rights Agreement.
(d) Amendment to Adjustment Warrant. The Adjustment Warrant
is hereby amended as follows:
(1) The definition of "Adjustment Period" contained in
Section 3(a) shall be replaced in its entirety by the following:
"Subject to Section 3(e), "Adjustment Period" means the period
starting 15 Trading Days after the day on which a registration
statement covering the Initial Shares is first declared
effective by the SEC and ending on and including the 100th
consecutive Trading Day thereafter. For the avoidance of
doubt, the Adjustment Period with respect to an Adjustment
Warrant issued in connection with the exercise of an Optional
Warrant shall be the same period in time as the Adjustment
Period with respect to the Adjustment Warrants issued in
connection with the sale of the Initial Shares, even if the
Adjustment Period has ended prior to the exercise of such
Optional Warrant."
(2) The definition of "Average Price" contained in
Section 3(a) shall be replaced in its entirety by the following:
"Average Price" means, with respect to a particular day during
the Adjustment Period, the average of the 30 lowest daily
trades for a share of Common Stock from the commencement of
the Adjustment Period up to and including the date on which
such calculation is made.
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(3) Section 3(c) shall be replaced in its entirety by
the following:
"Adjustment Share Calculations. Subject to Sections 3(e) and
(f), the number of Adjustment Shares (if any) issuable in
respect of the Adjustment Period shall be calculated
immediately following the close of trading of the Principal
Market on the final Trading Day of the Adjustment Period,
using the following formula:
# of Adjustment Shares = ($11,500,000 / Average Price) - # of
Initial Shares
The number of Initial Shares used in the above calculation
shall be appropriately adjusted for any stock split, reverse
stock split, stock dividend, recapitalization, etc. Promptly
after performing the calculations pursuant to Section 3(c),
the Company shall deliver its written calculations to the
Investor by facsimile.
If this Adjustment Warrant was issued to the Investor pursuant
to the exercise of an Optional Warrant, the term "Initial
Shares" as used in this Adjustment Warrant shall be deemed to
mean the Optional Warrant Shares received upon such exercise
of such Optional Warrant."
(4) Section 3(d) shall be replaced in its entirety by
the following:
"Exercise of Adjustment Warrant. Exercise of the rights
represented by this Adjustment Warrant may be made at any time
or times, in whole or in part, after the 30th Trading Day of
the Adjustment Period and prior to 5:00 p.m. New York City
time on the Termination Date, by the surrender on any business
day of this Adjustment Warrant and a Notice of Exercise in the
form annexed hereto duly completed and executed, at the
principal office of the Company (or such other office or
agency of the Company as it may designate by notice in writing
to the registered holder hereof at the address of such holder
appearing on the books of the Company); whereupon the holder
of this Adjustment Warrant shall be entitled to receive a
certificate for the number of Adjustment Shares for which this
Adjustment Warrant has been so exercised. Certificates for
Adjustment Shares shall be delivered to the holder hereof
within three (3) Trading Days after the date on which this
Adjustment Warrant shall have been exercised as aforesaid
(such event being a "Fill-Up Closing"). An exercise of this
Adjustment Warrant shall be deemed for all purposes a
"cashless" exercise."
(5) The following section shall be added as Section
3(k):
"(k) If the number of Adjustment Shares would be but for this
Section 3(k) greater than 348,415 (as appropriately adjusted
for stock splits, reverse stock splits, stock dividends,
recapitalizations and the like) and the Company has delivered
a written notice to the Investor on any date after the date
hereof until 5:00 p.m. New York City time on the Option Day
(as defined below) that it has elected the terms of this
Section 3(k) to be effective upon such an event (such notice
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to be irrevocable once delivered) (an "Option Notice"), the
number of Adjustment Shares shall be reduced to 348,415 (as
appropriately adjusted for stock splits, reverse stock splits,
stock dividends, recapitalizations and the like) and the
Company shall pay to the Investor, in cash, within 15 Trading
Days after the termination of the Adjustment Period, an amount
equal to the Excess Adjustment Amount (as defined below). In
the event an Option Notice has not been so delivered to the
Investor in a timely manner, the terms of this Section 3(k)
shall not be of any force or effect and the number of
Adjustment Shares shall be as calculated in accordance with
Section 3(c) above.
For purposes hereof, the "Option Day" shall be the earlier of
(i) the Trading Day immediately following the first Trading
Day during the Adjustment Period on which the Common Stock
trades below $6.50 on the Principal Market at any time during
such day, and (ii) the Trading Day immediately following the
first Trading Day during the Adjustment Period on which the
Average Price, as calculated as of the close of business on
such day, is below $8.625 (each as appropriately adjusted for
stock splits, reverse stock splits, stock dividends,
recapitalizations, and the like).
For purposes hereof, "Excess Adjustment Amount" shall mean:
$11,500,000 - (1,333,333 x Average Price)"
(e) All other terms and conditions of the Purchase
Agreement, Initial Warrant, Optional Warrant, Adjustment Warrant and
Registration Rights Agreement shall remain in full force and effect.
3. Payment of Legal Fees. Concurrently with the execution of
this Agreement, the Company shall pay to Kleinberg, Kaplan, Wolff & Cohen, P.C.
("KKWC") in immediately available funds, all reasonable legal fees and expenses
incurred by the Investor in connection with the transactions contemplated by
this Agreement. In lieu thereof, the Investor may pay such amounts due to KKWC,
with the amount of such payment being credited towards the payment of the
Additional Investment.
4. Legal Opinion and Officer's Certificate. Concurrently with
the execution of this Agreement, the Company shall deliver to the Investor (i)
an opinion of counsel to the Company in the form attached to the Purchase
Agreement as Exhibit 4.2(e), and (ii) a certificate in form and substance
satisfactory to the Investor and the Investor's counsel, executed by an officer
of the Company, certifying as to satisfaction of applicable closing conditions,
incumbency of signing officers, and the true, correct and complete nature of the
Certificate of Incorporation, By-laws, good standing and authorizing resolutions
of the Company.
5. Representation and Warranties of the Company. Except as
described on Schedule A hereto, the Company hereby restates and reaffirms to the
Investor, as of the date hereof, each of the Company's representations and
warranties set forth in the Purchase Agreement with, for the purposes of making
these representations and warranties, the New Shares being deemed Initial Shares
thereunder and the Warrants being amended as set forth in this Agreement.
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6. Representation and Warranties of the Undersigned. The
Investor hereby restates and reaffirms to the Company, as of the date hereof,
each of the Investor's representations and warranties set forth in the Purchase
Agreement with, for the purposes of making these representations and warranties,
the New Shares being deemed Initial Shares thereunder and the Warrants being
amended as set forth in this Agreement.
7. Miscellaneous.
(a) In case of any conflict between the terms of this
Agreement and the terms of the Warrants or any other document governing the
Initial Investment, the terms of this Agreement shall govern.
(b) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS TO BE
EXECUTED AND PERFORMED EXCLUSIVELY IN NEW YORK. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH
NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED
HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW. 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 IN THAT
JURISDICTION OR THE VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS
AGREEMENT IN ANY OTHER JURISDICTION. EACH PARTY HEREBY WAIVES ALL RIGHTS TO
TRIAL BY JURY.
(c) This Agreement may be executed in two or more identical
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; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
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(d) Each party covenants and agrees to promptly execute and
deliver all such agreements, instruments and documents and to promptly take all
such further actions as the other party may reasonably request from time to time
to carry out the intent and purposes of this Agreement and to consummate the
transactions contemplated hereby, including, but not limited to, issuing amended
and restated Warrants to the Investor incorporating the amendments set forth in
this Agreement.
(e) This Agreement may only be amended or modified pursuant
to a written agreement executed by both the Investor and the Company.
Please indicate your acceptance and agreement of the terms
contained herein by countersigning this Agreement and returning a signed copy to
the Investor.
Sincerely,
HALIFAX FUND, L.P.
By: /s/ Steven W. Weiner
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Name: Steven W. Weiner
Title: Managing Director
AGREED TO AND ACCEPTED:
CONSTELLATION 3D, INC.
By: /s/ Eugene Levich
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Name:
Title:
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