EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement ("Agreement") is entered into as of
October 19, 2001 between Constellation 3D, Inc., a Delaware corporation (the
"Company") and each of the entities listed under "Purchasers" on the signature
page hereto (each a "Purchaser" and collectively the "Purchasers").
W I T N E S S E T H:
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Whereas, pursuant to that certain Debenture Purchase Agreement by and
between the Company and the Purchasers, dated as of October 19, 2001 (the
"Purchase Agreement"), the Company has agreed to sell and issue to the
Purchasers, and the Purchasers have agreed to purchase from the Company,
following the Company's satisfaction of certain conditions set forth in the
Purchase Agreement (i) an aggregate of $3,000,000 principal amount of the
Company's 5% Convertible Debentures due October 1, 2006 (the "Debentures"),
which Debentures shall be convertible into shares (the "Common Shares") of the
Company's common stock, par value $.00001 per share (the "Common Stock"); and
(ii) warrants (the "Warrants") to purchase shares of Common Stock (the "Warrant
Shares"); and
Whereas, pursuant to the terms of, and in partial consideration for, the
Purchasers' agreement to enter into the Purchase Agreement, the Company has
agreed to provide the Purchasers with certain registration rights with respect
to the Common Shares and Warrant Shares.
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 Purchasers agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
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defined shall have the meaning ascribed thereto in the Purchase Agreement, the
Debentures and the Warrants. As used in this Agreement, the following terms
shall have the following respective meanings:
"Approved Markets" shall have the meaning set forth in the Purchase
Agreement
"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.
"Conversion Amount" shall have the meaning ascribed to such term in the
Debentures.
"Conversion Price" shall have the meaning ascribed to such term in the
Debentures.
"Conversion Price Adjustment" shall mean an adjustment to the Conversion
Price.
"Conversion Ratio" shall have the meaning ascribed to such term in the
Debentures.
"Delay Payment" shall mean a payment equal to 2% of the Conversion Amount
(as defined in the Debentures) of the Debentures held by the relevant Holder.
"Effectiveness Deadline" shall have the meaning set forth in Section 2(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exercise Price" shall have the meaning ascribed to such term in the
Warrants.
"Holder" and "Holders" shall mean the Purchaser or the Purchasers,
respectively, and any transferee of the Debentures, Warrants or Registrable
Securities 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).
"Market Price" shall have the meaning ascribed to such term in the
Debentures.
"Premium Redemption Price" shall mean the following:
(a) as to the Debentures, the greater of (i) 115% of the Conversion
Amount and (ii) the product of (A) the Conversion Ratio and (B) the greatest
Market Price during (I) the 5 Trading Days immediately preceding the event
giving rise to the redemption of the Debentures, and (II) the period commencing
with the 5 Trading Days immediately preceding the Holder's request for
redemption of such Debentures and ending on and including the date on which the
Premium Redemption Price with respect to such Debentures is actually paid to the
Holder;
(b) as to the Warrants, 115% of the positive difference (if any)
between (i) the aggregate Exercise Price for the Warrant Shares covered by the
Warrants (without reference to any exercise limitation contained in the
Warrants) and (ii) the number of underlying Warrant Shares multiplied by the
greatest Market Price during (A) the 5 Trading Days immediately preceding the
event giving rise to the redemption of the Warrants, and (B) the period
commencing with the 5 Trading Days immediately preceding the Holder's request
for redemption of such Warrants and ending on and including the date on which
the Premium Redemption Price with respect to such Warrants is actually paid to
the Holder.
(c) as to the Common Shares or Warrant Shares, 115% of the dollar
amount which is the product of (i) the number of shares to be redeemed, and (ii)
the greatest Market Price during (A) the 5 Trading Days immediately preceding
the event giving rise to the redemption of such securities, and (B) the period
commencing with the
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5 Trading Days immediately preceding the Holder's request for redemption of such
securities and ending on and including the date on which the Premium Redemption
Price with respect to such securities is actually paid to the Holder
"Put Notice" shall have the meaning set forth in Section 2(b)(i)(B).
"Registrable Securities" shall mean: (a) the Common Shares issuable upon
the conversion of the Initial Debentures and the Additional Debenture (as such
terms are defined in the Purchase Agreement), the Warrant Shares (issued or
issuable) and any shares of Common Stock issued or issuable upon any stock
split, stock dividend, recapitalization or similar event with respect to the
Common Shares or Warrant Shares; (b) any securities issued or issuable to each
Holder upon the conversion, exercise or exchange of any Debentures, Warrants,
Common Shares or Warrant Shares; and (c) any other security of the Company
issued as a dividend or other distribution with respect to, conversion or
exchange of, or in replacement of, Registrable Securities.
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 by the SEC.
"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 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).
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities 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 fees and
disbursements of counsel for Holders not included within "Registration Expenses"
and if the Holders engage a third party underwriter for the purpose of
distributing Registrable Securities, the fees and expenses of such underwriting
and any additional expenses of an accountant incurred in order to obtain a
"comfort letter."
2. Registration Requirements. The Company shall use its best efforts to
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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
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the sale or distribution of all the Registrable Securities in the manner
(including manner of sale) reasonably requested by the Holders 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 Initial Closing Date:
(i) But in any event by the earlier of (I) five Trading Days
following the Additional Closing and (II) 60 calendar days after the
Initial Closing Date, prepare and file a registration statement with
the Commission on Form S-3 under the Securities Act (or in the event
that the Company is ineligible to use 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 a "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; provided, however, that Holders shall not be identified as
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"underwriters" in the Registration Statement, with respect to the sale
of Registrable Securities. The number of shares of Common Stock
initially included in such Registration Statement shall be no less
than the sum of (A) 125% of the sum of the number of shares of Common
Stock that as of the date of filing would be issuable upon conversion
of the Initial Debentures and Additional Debentures (as if such
Additional Debentures were issued as of such time) plus (B) 125% of
the shares of Common Stock that would be issuable upon exercise of the
Warrants in each case without regard to any limitation on the
Purchaser's ability to convert or exercise such securities. The
Company will use its best efforts to respond to any Commission
comments on a Registration Statement within 7 business days of
receipt. The Company shall use its best efforts to cause each
Registration Statement to be declared effective as soon as
practicable, and in any event within 90 days of filing. If a
Registration Statement is not declared effective prior to the earliest
of (x) 90 days after the Initial Closing Date, in the event that the
Registration Statement is not reviewed by the SEC, or (y) within 5
days of the SEC indicating it has no comments or no further comments
with respect to such Registration Statement (the "Effectiveness
Deadline"), then the provisions of Section 2(b)(i) below shall apply.
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.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
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connection with such Registration Statement as may be necessary to
comply with the provisions of the Securities 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 Securities 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.
(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; 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 promptly of the happening of any event
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 use its best efforts to promptly
update and/or correct such prospectus.
(vi) Notify each Holder promptly 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 such 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.
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(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 or included
for quotation 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 Securities Act.
(x) Notify the Holders' counsel of receipt of any comments
from the SEC on the Registration Statement or of an SEC decision not
to review the Registration Statement.
(b) Set forth below in this Section 2(b) are (I) events that may arise
that the Purchasers consider will interfere with the full enjoyment of their
rights under the Transaction Documents (the "Interfering Events"), and (II)
certain remedies applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Holders if an Interfering
Event occurs and provide that the Holders may require that the Company
redeem outstanding Debentures, Warrants and/or Registrable Securities
at specified prices if certain Interfering Events are not timely
cured.
Paragraph (v) provides, inter alia, that each Holder shall have the
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option as to whether it would like to receive any payment required as
a remedy in the case of certain of the Interfering Events in cash or
shares of Common Stock.
Paragraph (vi) provides, inter alia, that if payments required as the
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remedy in the case of certain of the Interfering Events are not paid
when due, the Company may be required by the Holders to redeem
outstanding Debentures, Warrants and/or Registrable Securities at
specified prices.
Paragraph (viii) provides, inter alia, that the Holders have the right
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to specific performance.
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.
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In the event that a Registration Statement covering all of
the Registrable Securities has not been declared effective by the
Effectiveness Deadline, then the Conversion Price and the
Exercise
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Price shall each be reduced by 2% for the first 30 day
period (or portion thereof) following the Effectiveness
Deadline and an additional 1.5% for each succeeding 30-day
period (or portion thereof) during which the Registration
Statement has not been declared effective. (For example
commencing with the 61st day following the Effectiveness
Deadline if the Registration Statement is still not
effective, the Conversion Price shall be reduced by 5% from
what it would have been in the Debentures.) In the event
that a Registration Statement covering all of the
Registrable Securities has not been declared effective
within 30 days of the Effectiveness Deadline, then each
Holder shall, in addition, have the option to have its
Debentures, Warrants, Warrant Shares and Common Shares
redeemed at a price equal to the Premium Redemption Price.
(ii) No Listing; Premium Price Redemption for Delisting of
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Class of Shares.
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(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 with the applicable
Approved Markets and each other securities exchange and
market on which the Common Stock is then traded at all times
during the period ("Listing Period") commencing on the
effective date of the Registration Statement and continuing
thereafter for so long as the Debentures or Warrants are
outstanding, then the Company shall pay in cash or Common
Stock, as provided in Section 2(b)(v), to each Holder a
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, which Delay
Payments shall not in the aggregate exceed the maximum
percentage permitted by law.
(B) In the event that shares of Common Stock of the
Company are delisted from the applicable Approved Markets at
any time following the Initial 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 5 business days notice either (1) pay in
cash or Common Stock (as provided in Section 2(b)(v)) to
such Holder a Delay Payment for each 30-day period that the
shares are delisted or (2) redeem the Debentures, Warrants,
Warrant Shares and Common Shares held by such Holder, in
whole or in part, at a redemption price equal to the Premium
Redemption Price; provided, however, that such Holder may
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revoke such request at any time prior to receipt of payment
of such Delay Payments or Premium Redemption Price,
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as the case may be. Delay Payments shall no longer
accrue on Debentures after such Debentures have been
redeemed by the Company pursuant to the foregoing
provision.
(iii) Blackout Periods. In the event any Holder is
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unable to sell Registrable Securities under the Registration
Statement for more than (A) seven (7) consecutive days or (B)
an aggregate of thirty (30) 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 pay in cash or Common
Stock (as provided in Section 2(b)(v)) to each Holder a Delay
Payment for each 30-day period (or portion thereof) from and
after the expiration of the Suspension Grace Period, which
Delay Payment shall not exceed the maximum percentage
permitted by law. In lieu of receiving the Delay Payment as
provided above, a Holder shall have the right but not the
obligation to elect to have the Company redeem its Debentures,
Warrants, Common Shares and Warrant Shares at the price equal
to the Premium Redemption Price.
(iv) Conversion or Exercise Deficiency; Premium Price
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Redemption for Conversion or Exercise Deficiency. In the event
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that: (x) the Company does not have a sufficient number of
Common Shares available to satisfy the Company's obligations
to any Holder upon receipt of a Conversion Notice (as defined
in the Debentures) or is otherwise unable or unwilling to
issue such Common Shares in accordance with the terms of the
Debentures and the Purchase Agreement for any reason after
receipt of a Conversion Notice or (y) the Company does not
have a sufficient number of Warrant Shares available to
satisfy the Company" obligations to any Holder upon receipt of
a Notice of Exercise (as defined in the Warrants) or is
otherwise unable or unwilling to issue such Warrant Shares in
accordance with the terms of the Warrants and the Purchase
Agreement for any reason after receipt of such Notice of
Exercise, then:
(A) The Company shall pay in cash or Common
Stock (as provided in Section 2(b)(v)) to each Holder
a Delay Payment for each 30-day period (or portion
thereof) that the Company fails or refuses to issue
Common Shares in accordance with the terms of the
Debentures and the Purchase Agreement, which Delay
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Payment shall not exceed the maximum percentage
permitted by law; and
(B) At any time five days after the
commencement of the running of the first 30-day
period described above in clause (A) of this
paragraph (iv), at the request of any Holder pursuant
to a redemption notice, the Company promptly (1)
shall purchase from such Holder, at a purchase price
equal to the Premium Redemption Price, the principal
amount of Debentures equal to such Holder's pro rata
share of the Deficiency (as such term is defined
below), if the failure to issue Common Shares results
from the lack of a sufficient number thereof and (2)
shall purchase all (or such portion as such Holder
may elect) of such Holder's Debentures at such
Premium Redemption Price if the failure to issue
Common Shares in accordance with the Debentures and
the Purchase Agreement results from any other cause.
The "Deficiency" shall be equal to the aggregate
principal amount of Debentures that would not be able
to be converted for Common Shares, due to an
insufficient number of Common Shares available, if
all the outstanding Debentures were submitted for
conversion at the Conversion Price set forth in the
Debentures as of the date such Deficiency is
determined. Any request by a Holder pursuant to this
paragraph (iv)(B) shall be revocable by that Holder
at any time prior to its receipt of the Premium
Redemption Price.
(C) In the case of Warrant exercises, at any
time five days after failure of the Company to have a
sufficient number of Warrant Shares reserved or to
comply with the delivery requirements for Warrant
Shares set forth above, at the request of any Holder
pursuant to a redemption notice, the Company promptly
(1) shall purchase from such Holder, at a purchase
price equal to the Premium Redemption Price, the
amount of Warrants equal to such Holder's pro rata
share of the Warrant Deficiency (as such terms is
defined below), if the failure to issue Warrant
Shares results from lack of a sufficient number
thereof and (2) shall purchase all (or such portion
as such Holder may elect) of such Holder's Warrants
at such Premium Redemption Price if the failure to
issue Warrant Shares in accordance with the Warrants
and the Purchase Agreement results from any other
cause. The "Warrant Deficiency" shall be equal to the
amount of Warrant Shares that would not be able to be
exercised for Warrant Shares, due to an insufficient
number of Warrant Shares available, if all the
outstanding Warrants were exercised at the Exercise
Price set forth in the Warrants as of the date of
such Warrant Deficiency is determined. Any request by
a Holder pursuant to this paragraph (iv)(C) shall be
revocable by that Holder at any time prior to its
receipt of the Premium Redemption Price.
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(v) Delay Payment Terms; Status of Unpaid Delay
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Payments. All Delay Payments (which payments shall be pro rata
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on a per diem basis for any period of less than 30 days)
required to be made in connection with the above provisions
shall be paid at any time upon demand, for the partial or full
calendar month occurring prior to that date. Such Delay
Payments shall be payable in cash or Common Stock, as
determined by each Holder in its sole discretion. If the
Holder elects to be paid in Common Stock, the Holder shall be
entitled to that number of shares of Common Stock as shall
equal to the amount of such Delay Payment multiplied by a
fraction, the numerator of which is one and the denominator of
which is equal to the average of the Market Price for the
three (3) business days prior to, but not including, the date
upon which such payments are due. Unless the Company shall
receive written notice to the contrary from the respective
Holder, the Delay Payments shall be paid in cash. Until paid
as required in this Agreement, Delay Payments shall be deemed
added to, and a part of, the outstanding principal amount of a
Holder's Debentures.
(vi) Premium Price Redemption for Delay Payment
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Defaults. In the event that the Company fails or refuses to
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pay any Delay Payment provided for in the foregoing
paragraphs (ii) through (v) when due, at any Holder's request
and option, the Company shall purchase all or a portion of the
Debentures, Warrants, Warrant Shares and Common Shares held by
such Holder (with Delay Payments accruing through the date of
such purchase), within five (5) days of such request, at a
purchase price equal to the Premium Redemption Price; provided
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that such Holder may revoke such request at any time prior to
receipt of such payment of such purchase price. Until such
time as the Company purchases such Debentures at the request
of such Holder pursuant to the preceding sentence, at any
Holder's request and option the Company shall as to such
Holder pay such amount by adding and including the amount of
such Delay Payment to the outstanding principal amount of a
Holder's Debentures.
(vii) Cumulative Remedies. Each Delay Payment triggered
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by an Interfering Event provided for in the foregoing
paragraphs (ii) through (v) shall be in addition to each other
Delay Payment triggered by another Interfering Event;
provided, however, that in no event shall the Company be
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obligated to pay to any Holder Delay Payments in an aggregate
amount greater than one Delay Payment for any 30-day period
(or portion thereof). The 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 Debentures, the
Purchase Agreement, the Warrants or this Agreement, 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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(viii) Certain Acknowledgments. The Company acknowledges
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that any failure, refusal or inability by the Company
described in the foregoing paragraphs (i) through (iv) and
paragraph (vi) 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 that it is appropriate to include in this Agreement the
foregoing provisions for Conversion and Exercise Price
adjustments and the Delay Payments and mandatory redemptions
in order to compensate the Holders for such damages. The
parties acknowledge and agree that the Conversion and Exercise
Price adjustments and the 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 adjustments, Delay Payments and
mandatory redemptions are reasonable and will not constitute a
penalty. The parties agree that the provisions of this clause
(viii) consist of certain acknowledgments and agreements
concerning the remedies of the Holders set forth in clauses
(i) through (vi) and paragraph (vii) of this paragraph;
nothing in this clause (viii) imposes any additional default
payments and mandatory redemptions for violations under this
Agreement.
(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 any Holder 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 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 ninety (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
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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.
(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
12
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, upon
reasonable written notice and during regular business hours, 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), pertinent corporate documents and properties of the
Company, and use its reasonable best efforts to 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.
(f) The Company shall file a Registration Statement with respect
to any newly authorized and/or reserved shares, with respect to its obligation
to reserve or register Registrable Securities, within 15 days of any corporate
action authorizing or reserving same and shall file a Registration Statement
with respect to additional Registrable Securities within 15 days of the
occurrence of an event referred to in Section 2(a)(x) and shall use its best
efforts to cause, in either case, such Registration Statement to become
effective within sixty (60) days of such corporate action or such occurrence, as
the case may be. If the Holders become entitled, pursuant to an event described
in 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 remedy
provisions contained in Section 2(b) 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.
13
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 of (i) such time as sales are
permitted of all Registrable Securities without registration under Rule 144 and
(ii) such time as no Warrants or Debentures remain outstanding and the
Commitment Period (as defined in the Purchase Agreement) has expired.
6. Indemnification.
---------------
(a) 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
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, in
light of the circumstances when made, 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 and officers, each person who controls the
Company 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,
14
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 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 (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
15
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.
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 Purchaser 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
16
such Holder may not require an intended method of disposition which violates
applicable securities law.
10. Replacement Certificates. The certificate(s) representing the Common
------------------------
Shares held by the Purchaser (or then Holder) may be exchanged by the Purchaser
(or such Holder) at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Common Shares,
as reasonably requested by the Purchaser (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
11. 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 Purchasers 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 Debentures, Warrants or Registrable Securities, and all other
rights granted to the Purchasers by the Company hereunder may be transferred or
assigned to any transferee or assignee of any Debentures, Warrants or
Registrable Securities; provided in each case that: the Company must be given
written notice by the such Purchaser 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; and further provided that
------- --------
the transferee or assignee of such rights agrees in writing to be bound by the
provisions of this Agreement.
12. Miscellaneous.
-------------
(a) Remedies. The Company and the Purchasers 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 PURCHASERS (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 PURCHASERS
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY
17
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.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
to one or more of the Purchasers:
c/o The Palladin Group, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 212-986-8866
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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.
18
(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 Purchaser contained herein shall survive each
of the Closings.
(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 Purchaser 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 Purchaser and any public announcement including the name of an Purchaser
to such Purchaser, prior to the publication of such announcements.
(h) No Piggyback on Registration. Other than as set forth in the
Disclosure Letter, neither the Company nor any of its security holders (and
other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statement other than the Registrable
Securities, and the Company shall not after the date hereof enter into any
agreement providing any such right to any of its security holders.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Debentures, 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.
(j) 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.
(k) Severability. The parties acknowledge and agree that the
Purchasers are not agents, affiliates or partners of each other, that all
representations,
19
warranties, covenants and agreements of the Purchasers hereunder are several and
not joint, that no Purchaser shall have any responsibility or liability for the
representations, warrants, agreements, acts or omissions of any other Purchaser,
and that any rights granted to "Purchasers" hereunder shall be enforceable by
each Purchaser hereunder.
(l) Jury Trial. Each party hereto waives the right to a trial by jury.
(m) Titles. The titles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
(n) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then issued or issuable
Registrable Securities; provided, however, that, for the purposes of this
-------- -------
sentence, Registrable Securities that are owned, directly or indirectly, by the
Company, or an affiliate of the Company are not deemed outstanding.
[Signature page follows]
20
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/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------
Name:
Title: Chief Financial Officer
PURCHASER:
▇▇▇▇ CONVERTIBLE ARBITRAGE FUND LTD.
By: The Palladin Group, L.P., as Attorney-in-Fact
By: /s/ The Palladin Group, L.P.
----------------------------
Name:
Title: Attorney-in-Fact
[Signature page to Registration Rights Agreement]