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EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
October 31, 2000, is made and entered into by and between Chromatics Color
Sciences International, Inc., a New York corporation (the "Company"), and
Crescent International Ltd., an entity organized and exiting under the laws of
Bermuda (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Stock Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), pursuant to which the Company will issue to the Investor, and the
Investor shall purchase, 200 shares of Class B Series 4 Preferred Stock, par
value $.01 per share, of the Company (the "Preferred Stock");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor entering into the Stock Purchase Agreement, the Company has
issued to the Investor an incentive warrant dated as of the date hereof,
exercisable from time to time within five (5) years following the date of
issuance (the "Incentive Warrant") for the purchase of an aggregate of up to
270,000 shares of common stock par value $.001 per share, of the Company (the
"Common Stock") at a price specified in such Incentive Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Stock Purchase Agreement, the
Company has agreed to provide the Investor with certain registration rights as
described herein;
NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained herein, in the
Incentive Warrant, and in the Stock Purchase Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree
as follows (capitalized terms used herein and not defined herein shall have
the respective meanings ascribed to them in the Stock Purchase Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. REGISTRATION STATEMENTS.
a. Filing of Registration Statements. The Company shall register
for resale all Conversion Shares issued or issuable to the Investor upon
conversion of the Preferred Stock and all Warrant Shares issued or issuable
upon full exercise of the Incentive Warrant. Subject to the terms and
conditions of this Agreement, the Company shall effect such registration in
the manner provided below. The Company shall file with the SEC on or before
the end of a 20 calendar day period immediately following the Closing Date, a
registration statement (the "Registration Statement") on such form promulgated
by the SEC for which the Company qualifies, that counsel for the Company shall
deem appropriate and which form shall be available for the sale of
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all Conversion Shares issued or issuable pursuant to the terms of the Stock
Purchase Agreement and all Warrant Shares issued or issuable upon full
exercise of the Incentive Warrant. The aggregate number of shares to be
registered under the Registration Statement shall be equal to 1,700,000.
b. Effectiveness of the Registration Statement. The Company shall
use its reasonable best efforts to have the Registration Statement declared
effective by the SEC in no event later than 90 calendar days after the Closing
Date. The Company shall ensure that the Registration Statement and any
amendments thereto remain in effect for a period ending 180 days following the
later of (i) the date of expiration of the Incentive Warrant Exercise Period
(as such term is defined in the Incentive Warrant) if the Incentive Warrant
has not been exercised in full and (ii) the date all Registrable Securities
issued or issuable to the Investor pursuant to the Stock Purchase Agreement
may be sold by the Investor without registration and without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then
in effect) under the Securities Act; provided that such period shall be
extended one day for each day after the applicable Effective Date that any
Registration Statement covering Registrable Securities is not effective during
the period such Registration Statement is required to be effective pursuant to
this Agreement; and provided further that the Company shall not be required to
ensure that any Registration Statement covering Registrable Securities remain
in effect for such 180 day period if the shares registered thereunder shall
have become freely tradable pursuant to Rule 144(k) of the Securities Act as
such Rule may be amended from time to time, or have otherwise been sold.
c. Failure to Obtain or Maintain Effectiveness of Registration
Statements.
(i) In the event the Company fails for any reason to
obtain the effectiveness of the Registration Statement within the time period
set forth in Section 1.1(b) (a "Tardy Registration Statement"), or in the
event that the Company fails for any reason to maintain the effectiveness of
the Registration Statement (or the underlying prospectus) covering Registrable
Securities for the time period set forth in Section 1.1(b) (an "Ineffective
Registration Statement" together with a Tardy Registration Statement, a
"Failed Registration Statement"), or upon the occurrence of any event of the
kind described in Section 2.1(g)(iv) hereof (unless the Registrable Securities
covered by such Registration Statement shall have become freely tradable
pursuant to Rule 144(k) of the Securities Act or have been otherwise sold)
then, an amount equal to two percent (2.0%) of the aggregate purchase price of
all of the Registrable Securities covered by any such Failed Registration
Statement then held by the Investor for each calendar month and for each
portion of a calendar month, pro rata (the "Failed Registration Statement
Fee"), during any period of such ineffectiveness or, in the case of the
occurrence of an event of the kind described in Section 2.1(g)(iv) hereof,
until the Investor shall have received copies of the supplemented or amended
prospectus contemplated by Section 2.1(g)(iv) hereof (an "Ineffective
Period"), shall become due and payable to Investor.
(ii) The Investor shall retain a sum of $125,000 (the
"Escrow Amount") in a separate account in respect of the Company's obligations
under this subsection (c). On the Effective Date, the Investor shall deduct
from the Escrow Amount the amount of any Failed Registration Statement Fees
then due and payable with respect to any Tardy Registration Statement. If the
amount of such Failed Registration Statement Fees exceeds the balance of the
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Escrow Amount, the Company shall pay to the Investor, in immediately available
funds into an account designated by the Investor, an amount equal to the
portion of such Failed Registration Statement Fees which exceeds the balance
of the Escrow Amount. If the amount of such Failed Registration Statement Fees
is less than the Escrow Amount, on the Effective Date the Investor shall pay
to the Company, in immediately available funds into an account designated by
the Company, an amount equal to the excess of the Escrow Amount over the
Failed Registration Statement Fees.
(iii) If Failed Registration Statement Fees accrue with
respect to any Ineffective Registration Statement, payment of such Failed
Registration Statement Fees shall be made of the first Trading Day after the
earlier to occur of (1) the expiration of the applicable Ineffective Period
and (2) the last day of each calendar month during an Ineffective Period.
d. Failure to Register Sufficient Number of Shares. If the number
of Conversion Shares and Warrant Shares included in the Registration Statement
is insufficient to permit the conversion in full of the Preferred Stock or the
exercise in full of the Incentive Warrant (such deficit in the number of
shares is referred to herein as the "Deficit Shares"), then (i) the Company
shall immediately amend such Registration Statement (or file a new
Registration Statement) to cover the Deficit Shares (such amended or new
Registration Statement is referred to herein as a "Deficit Shares Registration
Statement") and (ii) the Company shall pay to the Investor in immediately
available funds into an account designated by the Investor an amount equal to
1.5% of the product of (x) the number of Deficit Shares multiplied by (y) the
Bid Price of the Common Stock on the applicable Effective Date, for each
calendar month and for each portion of a calendar month, pro rata, during the
period from the Effective Date of the applicable Registration Statement to the
Effective Date of the applicable Deficit Shares Registration Statement.
e. Liquidated Damages. The Company and the Investor hereby
acknowledge and agree that the sums payable under subsections 1.1(c) and
1.1(e) hereof shall constitute liquidated damages and not penalties. The
parties further acknowledge that (i) the amount of loss or damages likely to
be incurred is incapable or is difficult to estimate precisely, (ii) the
amounts specified in such subsections bear a reasonable proportion and are not
plainly or grossly disproportionate to the probable loss likely to be incurred
in connection with any failure by the Company to obtain or maintain the
effectiveness of the Registration Statement, (iii) one of the reasons for the
Company and the Investor reaching an agreement as to such amounts was the
uncertainty and cost of litigation regarding the question of actual damages,
and (iv) the Company and the Investor are sophisticated business parties and
have been represented by sophisticated and able legal and financial counsel
and negotiated this Agreement at arm's length.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1. FILINGS; INFORMATION. The Company will effect the
registration of the Registrable Securities in accordance with the intended
methods of disposition thereof as furnished to the Company by any proposed
seller of such Registrable Securities. Without
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limiting the foregoing, the Company in each such case will do the following as
expeditiously as possible, but in no event later than the deadline, if any,
prescribed therefor in this Agreement:
a. The Company shall (i) prepare and file with the SEC the
Registration Statement covering the shares as described in subsection 1.1(a)
above; (ii) use its reasonable best efforts to cause such filed Registration
Statement to become and remain effective (pursuant to Rule 415 under the
Securities Act or otherwise) for the period prescribed by Section 1.1(b);
(iii) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may
be necessary to keep the Registration Statement effective for the time period
prescribed by Section 1.1(b); and (iv) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
the Registration Statement during such period in accordance with the intended
methods of disposition by the Investor set forth in the Registration
Statement.
b. The Company shall file all necessary amendments to the
Registration Statement in order to effectuate the purpose of this Agreement,
the Stock Purchase Agreement, the Incentive Warrant and the Certificate of
Amendment.
c. Five Trading Days prior to filing the Registration Statement or
prospectus, or any amendment or supplement thereto (excluding amendments
deemed to result from the filing of documents incorporated by reference
therein), the Company shall deliver to the Investor and one firm of counsel
representing the Investor, in accordance with the notice provisions of Section
4.8, copies of such Registration Statement as proposed to be filed, together
with exhibits thereto, which documents will be subject to review and comment
by the Investor and such counsel, and thereafter deliver to the Investor and
such counsel, in accordance with the notice provisions of Section 4.8, such
number of copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such Registration Statement (including each preliminary prospectus) and
such other documents or information as the Investor or counsel reasonably may
request in order to facilitate the disposition of the Registrable Securities.
d. The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to each broker as directed by the Investor such
number of conformed copies of such Registration Statement and of each
amendment and supplement thereto (in each case including all exhibits and
documents incorporated by reference), such number of copies of the prospectus
contained in such Registration Statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under
Rule 424 promulgated under the Securities Act relating to the Registrable
Securities, and such other documents, as may be reasonably requested to
facilitate the disposition of the Registrable Securities.
e. After the filing of each Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or threatened by
the SEC in connection therewith and take all commercially reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
f. The Company shall use its reasonable best efforts to (i)
register or qualify the Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the
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United States as the Investor reasonably (in light of its intended plan of
distribution) may request, and (ii) cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
in the United States as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable the Investor to consummate the
disposition of the Registrable Securities; provided, however, that the Company
will not be required to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph
(f), subject itself to taxation in any such jurisdiction, or consent or
subject itself to general service of process in any such jurisdiction.
g. The Company shall promptly notify the Investor, but in no event
later than two (2) business days by facsimile and by overnight courier, upon
the occurrence of any of the following events in respect of the Registration
Statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request for additional information by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose; (iii) receipt of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in such Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the related
prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; (v) the declaration by the SEC of the
effectiveness of the Registration Statement; and (vi) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate, and the Company promptly shall make available to the
Investor any such supplement or amendment to the related prospectus.
h. The Company shall enter into customary agreements and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (whereupon the Investor, at its
option, may require that any or all of the representations, warranties and
covenants of the Company also be made to and for the benefit of the Investor).
i. The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States government or any agency or instrumentality thereof, copies of all
correspondence between the SEC and the Company, concerning the Registration
Statement, and, except during a Blackout Period, also will make available for
inspection by the Investor and any attorney, accountant or other professional
retained by the Investor (collectively, the "Inspectors"), all financial and
other records, pertinent
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corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers and employees
to supply all information reasonably requested by any Inspectors in connection
with any Registration Statement. Records that the Company determines, in good
faith, to be confidential and that it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or (ii) the disclosure or release of such Records is
requested or required pursuant to oral questions, interrogatories, requests
for information or documents or a subpoena or other order from a court of
competent jurisdiction or other process; provided, however, that prior to any
disclosure or release pursuant to clause (ii), the Inspectors shall provide
the Company with prompt notice of any such request or requirement so that the
Company may seek an appropriate protective order or waive such Inspectors'
obligation not to disclose such Records; and, provided, further, that if
failing the entry of a protective order or the waiver by the Company
permitting the disclosure or release of such Records, the Inspectors, upon
advice of counsel, are compelled to disclose such Records, the Inspectors may
disclose that portion of the Records that counsel has advised the Inspectors
that the Inspectors are compelled to disclose. The Investor agrees that
information obtained by it solely as a result of such inspections (not
including any information obtained from a third party who, insofar as is known
to the Investor after reasonable inquiry, is not prohibited from providing
such information by a contractual, legal or fiduciary obligation to the
Company) shall be deemed confidential and, if material non-public information,
the Investor shall not while in possession of such information engage in
market transactions in the securities of the Company or its affiliates unless
and until such information is made generally available to the public. The
Investor further agrees that, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, it will give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
j. To the extent required by law or reasonably necessary to effect
a sale of Registrable Securities in accordance with prevailing business
practices at the time of any sale of Registrable Securities pursuant to the
Registration Statement, the Company shall deliver to the Investor a signed
counterpart, addressed to the Investor, of (1) an opinion or opinions of
counsel to the Company and (2) a comfort letter or comfort letters from the
Company's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions of comfort letters,
as the case may be, as the Investor therefor reasonably requests.
k. The Company otherwise shall comply with all applicable rules and
regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
l. The Company shall appoint a transfer agent and registrar for all
of the class that includes the Registrable Securities covered by the
Registration Statement not later than the effective date of the Registration
Statement.
m. The Company may require the Investor to furnish promptly in
writing to the Company such information as may be legally required in
connection with any registration
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including, without limitation, all such information as may be requested by the
SEC or the National Association of Securities Dealers, Inc. (the "NASD"). The
Investor agrees to provide such information requested in connection with any
registration within ten Trading Days after receiving such written request, and
the Company shall not be responsible for any delays in obtaining or
maintaining the effectiveness of a Registration Statement caused by the
Investor's failure to timely provide such information. Each seller of
Registrable Securities shall notify the Company as promptly as practicable of
any inaccuracy or change in information previously furnished by such seller to
the Company or of the occurrence of any event, in either case as a result of
which any prospectus relating to the Registrable Securities contains or would
contain an untrue statement of a material fact regarding such seller or its
intended method of disposition of such Registrable Securities or omits to
state any material fact regarding such seller or such seller's intended method
of disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and promptly furnish to the
Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such seller or the disposition of such Registrable
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Section 2.2. REGISTRATION EXPENSES.
a. In connection with the Registration Statement, the Company shall
pay all registration expenses incurred in connection with the registration
thereunder (the "Registration Expenses"), including, without limitation: (i)
all registration, filing, securities exchange listing and fees required by the
NASD, (ii) all registration, filing, qualification and other fees and expenses
of compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities required hereby), (iii) all of the Company's word
processing, duplicating, printing, messenger and delivery expenses, (iv) the
Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(v) the fees and expenses incurred by the Company in connection with the
listing of the Registrable Securities, (vi) reasonable fees and disbursements
of counsel for the Company and the Investor, and customary fees and expenses
for independent certified public accountants retained by the Company
(including the expenses of any special audits or comfort letters or costs
associated with the delivery by independent certified public accountants of
such special audit(s) or comfort letter(s) requested pursuant to Section
2.1(j) hereof), (vii) the fees and expenses of any special experts retained by
the Company in connection with such registration, (viii) premiums and other
costs of policies of insurance purchased at the discretion of the Company
against liabilities arising out of any public offering of the Registrable
Securities being registered, and (ix) any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but
excluding underwriting fees, discounts, transfer taxes or commissions, if any,
attributable to the sale of Registrable Securities, which shall be payable by
each holder of Registrable Securities pro rata on the basis of the number of
Registrable Securities of each such holder that are included in a registration
under this Agreement.
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b. In addition, the Company shall pay all reasonable fees and
expenses of counsel for the Investor incurred in connection with the review of
and assistance in preparation of the Registration Statement up to $10,000,
unless a greater amount is required due to the nature of the review performed
by Investor's counsel or the extent of assistance provided by Investor's
counsel (an estimate of such greater fees and expenses of such firm of counsel
to the Investor shall be provided to the Company prior to the undertaking of
such counsel's additional review or assistance).
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Investor, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and each Person or entity, if
any, who controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with the partners,
Affiliates, officers, directors, employees and duly authorized agents of such
controlling Person or entity (collectively, the "Controlling Persons"), from
and against any and all losses, claims, damages, liabilities, costs and
expenses (including, without limitation, any and all reasonable attorneys'
fees and disbursements and costs and expenses of investigating and defending
any such claim and any and all amounts paid in settlement of, any action, suit
or proceeding between any of the indemnified parties and any indemnifying
parties or between any indemnified party and any third party, or otherwise, or
any claim asserted) (collectively, "Damages"), joint or several, and any
action or proceeding in respect thereof to which the Investor, its partners,
Affiliates, officers, directors, employees and duly authorized agents, and any
Controlling Person, may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise, as and when incurred, insofar as such Damages (or actions or
proceedings in respect thereof) (i) arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement, or in any preliminary prospectus, final
prospectus, summary prospectus, documents filed under the Exchange Act and
deemed to be incorporated by reference into any Registration Statement,
application or other document executed by or on behalf of the Company or based
on written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Registerable Securities under the
securities or blue sky laws thereof or filed with the SEC, amendment or
supplement relating to the Registerable Securities or (ii) arise out of, or
are based upon, 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, and shall reimburse the Investor, its partners, Affiliates,
officers, directors, employees and duly authorized agents, and each such
Controlling Person, for any legal and other expenses reasonably incurred by
the Investor, its partners, Affiliates, officers, directors, employees and
duly authorized agents, or any such Controlling Person, as incurred, in
investigating or defending or preparing to defend against any such Damages or
actions or proceedings; provided, however, that the Company shall not be
liable to the extent that any such Damages arise out of the Investor's failure
to send or give a copy of the final prospectus or supplement at or prior to
the written
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confirmation of the sale of Registerable Securities to the persons asserting
an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such person if such statement or omission was corrected in such
final prospectus or supplement, and provided that the Investor had been
obligated under applicable law to deliver such final prospectus or supplement
to such person; provided, further, that the Company shall not be liable to the
extent that any such Damages arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such Registration Statement, or any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by the
Investor or any other person who participates as a seller or as an underwriter
in the offering or sale of such securities, in either case, in any
questionnaire or other request by the Company, or otherwise specifically
stating that it is for use in the preparation thereof.
Section 3.2. METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 3.1
shall be asserted and resolved as follows:
a. In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 3.1 (an "Indemnified
Party") might seek indemnity under Section 3.1 is asserted against or sought
to be collected from such Indemnified Party by a person other than the
Company, the Investor or any Affiliate of the Company (a "Third Party Claim"),
the Indemnified Party shall deliver a written notification, enclosing a copy
of all papers served, if any, and specifying the nature of and basis for such
Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of Section 3.1 against any person
(the "Indemnifying Party"), together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such Third Party Claim (a "Claim Notice") with reasonable promptness to the
Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice
with reasonable promptness after the Indemnified Party receives notice of such
Third Party Claim, the Indemnifying Party shall not be obligated to indemnify
the Indemnified Party with respect to such Third Party Claim to the extent
that the Indemnifying Party's ability to defend has been materially prejudiced
by such failure of the Indemnified Party. The Indemnifying Party shall notify
the Indemnified Party as soon as practicable within the period ending 30
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period")
whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party under Section 3.1 and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to this
Section 3.2(a), then the Indemnifying Party shall have the right to defend,
with counsel reasonably satisfactory to the Indemnified Party, at the sole
cost and expense of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings shall be diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party, which consent shall not be unreasonably withheld, in the
case of any settlement that provides for any relief other than the payment of
monetary damages or that provides for the payment of monetary damages as to
which the Indemnified Party shall not be
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indemnified in full pursuant to Section 3.1). The Indemnifying Party shall
have full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the first sentence
of this clause (i), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if requested
by the Indemnifying Party, the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, will provide reasonable cooperation to the
Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (i), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the foregoing,
the Indemnified Party may take over the control of the defense or settlement
of a Third Party Claim at any time if it irrevocably waives its right to
indemnity under Section 3.1 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Third Party Claim pursuant to Section 3.2(a), or if the
Indemnifying Party gives such notice but fails to prosecute diligently or
settle the Third Party Claim, or if the Indemnifying Party fails to give any
notice whatsoever within the Dispute Period, then the Indemnified Party shall
have the right to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings, which proceedings
shall be prosecuted by the Indemnified Party in a reasonable manner and in
good faith or will be settled at the discretion of the Indemnified Party (with
the consent of the Indemnifying Party, which consent will not be unreasonably
withheld). The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying Party
will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting.
Notwithstanding the foregoing provisions of this clause (ii), if the
Indemnifying Party has notified the Indemnified Party within the Dispute
Period that the Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying Party in
the manner provided in clause (iii) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this clause (ii) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause (ii),
and the Indemnifying Party shall bear its own costs and expenses with respect
to such participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability or the amount of its liability to
the Indemnified Party with respect to the Third Party Claim under Section 3.1
or fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability
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to the Indemnified Party with respect to such Third Party Claim, the Damages
in the amount specified in the Claim Notice shall be conclusively deemed a
liability of the Indemnifying Party under Section 3.1 and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of
its liability with respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the period of 30
calendar days immediately following the Dispute Period, such dispute shall be
resolved by arbitration in accordance with Section 3.3.
b. In the event any Indemnified Party should have a claim under
Section 3.1 against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim
for indemnity under Section 3.1 specifying the nature of and basis for such
claim, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such
party's rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been materially prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity Notice or fails
to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes the claim or the amount of the claim described in
such Indemnity Notice, the Damages in the amount specified in the Indemnity
Notice will be conclusively deemed a liability of the Indemnifying Party under
Section 3.1 and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within the period of 30 calendar days immediately following the
Dispute Period, such dispute shall be resolved by arbitration in accordance
with Section 3.3.
Section 3.3. ARBITRATION. Any controversy, claim or dispute arising out
of or in connection with this Agreement, including any question regarding its
existence, validity, interpretation, breach, or termination, shall be referred
to and finally resolved in accordance with Section 9.3 of the Stock Purchase
Agreement.
Section 3.4. OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding paragraphs of this Article 3 (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state
law or regulation of any governmental authority other than the Securities Act.
The provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.
Section 3.5. CONTRIBUTION. If the indemnification and reimbursement
obligations provided for in any section of this Article III is unavailable or
insufficient to hold harmless the Indemnified Parties in respect of any
Damages referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Damages as between the
Company on the one hand
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and the Investor or seller on the other, in such proportion as is appropriate
to reflect the relative fault of the Company and of the Investor or seller in
connection with such statements or omissions, as well as other equitable
considerations. The relative fault of the Company on the one hand and of the
Investor or seller on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 3.4 were determined by pro
rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the Damages referred to in the immediately preceding paragraph 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 3.4, the Investor or seller shall in no event be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of the Investor or seller were sold
to the public (less underwriting discounts and commissions) exceeds the amount
of any damages which the Investor or seller 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.
ARTICLE IV
MISCELLANEOUS
Section 4.1. OUTSTANDING REGISTRATION RIGHTS. The Company represents and
warrants to the Investor that, except as set forth on Schedule 4.1 hereto,
there is not in effect on the date hereof any agreement by the Company
pursuant to which any holders of securities of the Company have a right to
cause the Company to register or qualify such securities under the Securities
Act or any securities or blue sky laws of any jurisdiction. The Company hereby
covenants and agrees that until 270 calendar days after the Registration
Statement has been declared effective by the SEC it will not, without the
prior written consent of the Investor, enter into or amend any agreement by
the Company pursuant to which any holders of securities of the Company have a
right to cause the Company to register or qualify securities under the
Securities Act or any securities or blue sky laws of any jurisdiction;
provided, however, that the foregoing shall not apply to a Sale to a Third
Party (as such terms are defined in the Stock Purchase Agreement) for which
the Investor has elected not to exercise its right of first refusal pursuant
to Section 6.12 of the Stock Purchase Agreement
Section 4.2. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all
Registrable Securities have been issued and have ceased to be Registrable
Securities. Notwithstanding the foregoing, paragraph (c) of
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Section 1.1, Article III, Section 4.8, and Section 4.9 shall survive the
termination of this Agreement.
Section 4.3. RULE 144. If the Company is required to file reports under
the Exchange Act, the Company will file in a timely manner, information,
documents and reports in compliance with the Securities Act and the Exchange
Act and, at its expense, promptly will take such further action as holders of
Registrable Securities reasonably may request to enable such holders of
Registrable Securities to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided by
(a) Rule 144 under the Securities Act ("Rule 144"), as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. If at any time the Company is not required to file such
reports, it will, at its expense, forthwith upon the written request of any
holder of Registrable Securities who intends to make a sale under Rule 144,
make available adequate current public information with respect to the Company
within the meaning of paragraph (c)(2) of Rule 144 or such other information
as necessary to permit sales pursuant to Rule 144. Upon the request of the
Investor, the Company will deliver to the Investor a written statement, signed
by the Company's principal financial officer, as to whether it has complied
with such requirements. This Section 4.3 shall terminate at the same time as
the registration rights as provided in Section 4.2.
Section 4.4. CERTIFICATE. The Company will, at its expense, promptly
upon the request of any holder of Registrable Securities, deliver to such
holder a certificate, signed by the Company's principal financial officer,
stating (a) the Company's name, address and telephone number (including area
code), (b) the Company's Internal Revenue Service identification number, (c)
the Company's SEC file number, (d) the number of shares of each class of stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be
filed under the Exchange Act for a period of at least ninety (90) days prior
to the date of such certificate and in addition has filed the most recent
annual report required to be filed thereunder.
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this Agreement
may be waived, provided that such waiver is set forth in a writing executed by
both parties to this Agreement. 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 Company has obtained the written consent of the holders of a
majority of the then outstanding Registrable Securities. Notwithstanding the
foregoing, the waiver of any provision hereof with respect to a matter that
relates exclusively to the rights of holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and does not
directly or indirectly affect the rights of other holders of Registrable
Securities may be given by holders of at least a majority of the Registrable
Securities being sold by such holders; provided that the provisions of this
sentence may not be amended, modified or supplemented except in accordance
with the provisions of the immediately preceding sentence. No course of
dealing between or among any Person having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of this Agreement
or any rights or obligations of any person under or by reason of this
Agreement.
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Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement
and all of the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. The
Investor may assign its rights under this Agreement to any subsequent holder
the Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement and agree to be bound by the provisions of this Agreement as a
condition to such holder's claim to any rights hereunder. This Agreement,
together with the Stock Purchase Agreement, the Incentive Warrant, the
Certificate of Amendment and the exhibits and schedules to such agreements
together set forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
Section 4.7. SEPARABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be
illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be affected except to
the extent necessary to delete such illegal, invalid or unenforceable
provision unless that provision held invalid shall substantially impair the
benefits of the remaining portions of this Agreement.
Section 4.8. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be
in writing and shall be (i) deposited in the mail, registered or certified,
return receipt requested, postage prepaid, (ii) delivered by reputable air
courier service with charges prepaid, or (iii) transmitted by hand delivery,
telegram or facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day during normal business hours where such notice is to be received) or (b)
on the second business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Chromatics Color Sciences International, Inc.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxx
Chairperson
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Patterson, Belknap, Xxxx & Tyler LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. La Gueux, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor:
Crescent International Ltd.
c/o GreenLight (Switzerland) SA
00, xx Xxxxx-Xxxxx
0000 Xxxxxx, Xxxxxxxx
Xxxxxxxxxxx
Attention: Xxx Xxxx/Maxi Brezzi
Telephone: x00 00 000 00 00
Facsimile: x00 00 000 00 00
with a copy (which shall not constitute notice) to:
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 4.8 by giving at least 10 days' prior
written notice of such changed address or facsimile number to the other
party hereto.
Section 4.9. GOVERNING LAW. This Agreement shall be construed under the
laws of the State of New York.
Section 4.10. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.
Section 4.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and
all of which together shall constitute one and the same instrument.
Section 4.12. FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
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Section 4.13 ABSENCE OF PRESUMPTION. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 4.14. REMEDIES. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement
and granted by law. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision
may be inadequate compensation for any loss.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
CRESCENT INTERNATIONAL LTD.
By:
-------------------------------------------------------
GreenLight (Switzerland) S.A. as Investor's manager
Name:
Title:
CHROMATICS COLOR SCIENCES INTERNATIONAL,
INC.
By:
-------------------------------------------------------
Name:
Title:
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SCHEDULE 4.1
The Company has agreed to register (i) the 854,701 shares of its Common
Stock to be issued to Millennium Partners, L.P. ("Millennium"), (ii) the
150,000 shares of Common Stock underlying the warrant to purchase Common Stock
of the Company issued to Millennium, (iii) the 30,000 shares of Common Stock
underlying the warrant to purchase Common Stock of the Company issued to
Xxxxxxx Capital Partners, Ltd. and (iv) the number of shares of common stock
(the "Adjustable Warrant Shares") underlying the adjustable warrant (the
"Adjustable Warrant") to purchase Common Stock of the Company issued to
Millennium, each pursuant to the Securities Purchase Agreement, dated as of
August 16, 2000, between the Company and Millennium, for resale under the
Securities Act of 1933, as amended (the "Securities Act"). The number of
Adjustable Warrant Shares issuable upon the exercise of the Adjustable Warrant
cannot be determined at the present time. However, the formula for calculating
this number of shares is as follows:
(Applicable Share Number) x [$4.68/.87 - (Adjustment Period Price)]
-------------------------------------------------------------------
Adjustment Period Price
Applicable Share Number = 284,900 shares of Common Stock on the First
Vesting Date (as defined in the Adjustable Warrant); 569,801 shares of Common
Stock on the Second Vesting Date (as defined in the Adjustable Warrant).
Adjustment Period Price = the greater of (i) $1.00 and (ii) the average
of the ten lowest Per Share Market Values (as defined in the Adjustable
Warrant) (which need not occur on consecutive trading days) during the forty
consecutive trading days preceding the First Vesting Date; the average of the
ten lowest Per Share Market Values (which need not occur on consecutive
trading days) preceding the Second Vesting Date.
In addition, the Company has agreed to register the 721,231 shares of its
Common Stock issued to the shareholders of Xxxxxx Acquisition Corp. ("Xxxxxx")
pursuant to the Agreement of Purchase and Sale, dated as of April 17, 2000, as
amended, for resale under the Securities Act.
The Company has also agreed to register under the Securities Act (i) 79,491
shares of Common Stock and the Common Stock underlying the 79,491 warrants to
purchase the Common Stock of the Company issued to LB Pension Plan & Trust,
(ii) 298,718 shares of Common Stock underlying the 200,000 warrants to
purchase the Common Stock of the Company issued to Josephthal & Co. Inc.
pursuant to a Financial Advisory and Investment Banking Agreement with that
company, (iii) 1,500,000 shares of Common Stock underlying options issuable
under the Company's 1992 Stock Option Plan, as amended, and (iv) 1,963,951
additional shares of Common Stock pursuant to the terms of the Agreements, by
and between the Company and LB I Group Inc., dated as of June 11, 1999 and
February 11, 2000, respectively. The number of shares the Company has agreed
to register as described in clauses (ii) and (iv) is subject to adjustment in
the future pursuant to so-called "full ratchet" anti-dilution provisions which
as currently in effect would be activated if the Company issued shares of
Common Stock at less than $4.68 per share.
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