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Registration Rights Agreement 3-18-97

This is an actual contract by Charles & Colvard.

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Sectors: Specialty Retail
Governing Law: North Carolina, View North Carolina State Laws
Effective Date: March 18, 1997
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THIS REGISTRATION RIGHTS AGREEMENT, (the "Agreement") dated as of March 18th, 1997, is made by and among C3, INC., a North Carolina corporation (the "Company"), and the General Electric Pension Trust ("GEPT").

WHEREAS, the Company intends to issue, in the aggregate, 682,500 shares of the Company's 1997 Series B Convertible Preferred Stock (the "Preferred Stock") to certain investors (the "Investors") pursuant to the Company's Summary of the Offering dated January 3, 1997; and

WHEREAS, in order to induce General Electric Pension Trust to purchase from the Company certain shares of the Preferred Stock, the Company desires to grant registration rights to the Investors for shares of its Common Stock which the Investors will have the right to acquire pursuant to conversion of the Preferred Stock;

NOW, THEREFORE, in consideration of the premises hereto and of the mutual covenants and agreements contained herein, the parties agree as follows:

1. Definitions.

As used herein the following defined terms shall have the following respective meanings:

(a) The term "Holders" means any holder or holders of shares of Registrable Securities.

(b) The terms "register", "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act (as defined below) and the declaration or ordering of the effectiveness of such registration statement.

(c) The term "Registrable Securities" means all shares of Common Stock issued or issuable upon the conversion of Preferred Stock.

(d) The term "Securities Act" means the Securities Act of 1933, as amended.

2. Requested Registration.

(a) If at any time after one year from the date hereof, the Company shall receive from the Holders of at least forty percent (40%) of the Registrable Securities a written request that the Company effect a registration under the Securities Act with respect to not less than twenty percent (20%) of the Registrable Securities, and having an expected aggregate offering price to the public of not less than $15,000,000, the Company will, as expeditiously as possible, notify in writing all the Holders of such request and use its diligent best efforts to effect all such registrations


(including, without limitation, the execution of an undertaking to file post-effective amendments and appropriate qualifications and approvals under the laws and regulations applicable to the Company of any applicable governmental agencies and authorities, including the applicable blue sky or other state securities laws) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of the Registrable Securities as are specified in such request, together with any Registrable Securities held by the other Holders who may desire to participate in such registrations; provided, however, that before filing any such registration statement or any amendments or supplements thereto, the Company will (x) furnish to the Holders of Registrable Securities which are to be included in such registration, copies of all such documents proposed to be filed, which documents will be subject to the review of such Holders and their counsel, and (y) give the Holders of Registrable Securities to be included in such registration statement and their representatives the opportunity to conduct a reasonable investigation of the records and business of the Company and to participate in the preparation of any such registration statement or any amendments or supplements thereto; provided, further, that the Company shall not be obligated to take any action to effect such registration pursuant to this subparagraph 2(a), (i) after (A) the Company has effected two such registrations pursuant to this subparagraph 2(a) at the request of the Holders and (B) each of such registrations have been declared or ordered effective; (ii) during the ninety (90) day period commencing with the closing date of the Company's initial public offering, or (iii) if it delivers notice to the Holders of the Registerable Securities within thirty (30) days of any registration request of its intent to file a registration statement for such initial public offering within ninety (90) days. With respect to any registration requested pursuant to this subparagraph 2(a), the Company may include in such registration any other shares of its capital stock, subject to the restrictions set forth in subparagraph 2(c).

(b) Subject to subparagraph 2(a) above and the other terms and conditions contained herein, the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practical, but in any event within ninety (90) days after (i) receipt of the request or requests of the Holders or (ii) the date in which the Holders of Registrable Securities to be included in such registration agree, pursuant to subparagraph 2(c), on the terms and conditions of an underwriting, if applicable, as evidenced by its letter of intent describing such terms and conditions, whichever is later; provided, however, that if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed at the date filing would be required hereunder and it is therefore essential to defer the filing of such registration statement, the Company shall have an additional period of not more than ninety (90) days within which to file such registration statement (which additional period may be extended to one hundred eighty (180) days if such deferral will materially reduce the expenses of such registration due to the elimination of the need for any special audits to be performed in connection with such registration).

(c) If the Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subparagraph 2(a). In such event, if so requested in writing by the Company, the Holders shall negotiate in good faith with a nationally recognized underwriter or underwriters or

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major regional underwriter or underwriters acceptable to the Holders, selected by the Company with regard to the underwriting of such requested registration; provided, however, that if the Holders have not agreed with such underwriter(s), in their discretion, as to the terms and conditions of such underwriting within thirty (30) days following commencement of such negotiations, the Holders may select an underwriter of their choice; and, provided further that any underwriter selected hereunder, shall not be an underwriter in which the General Electric Company has a direct or indirect interest of 5% or more, without the consent of GEPT. The right of the Holders to registration pursuant to this Paragraph 2 shall be conditioned upon the Holder's participation in such underwriting to the extent provided herein. The Company shall (together with all Holders proposing to distribute their Registrable Securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected pursuant to this Paragraph 2. Notwithstanding any other provision of this Paragraph 2, if the underwriter advises the Company in writing with a copy to the Holders that marketing factors require a limitation of the number of shares to be underwritten, the Company shall so advise all Holders, and the Company will include in such registration up to the maximum allowed by such underwriter (x) first, as many shares as possible of Registrable Securities requested to be included by the applicable Holders, which shall be allocated among all Holders thereof in proportion, as nearly as practicable, to the respective amounts of Registrable Securities requested by such Holders to be registered and (y) second, shares to be sold by the Company or other holders of the Company's capital stock. If any Holder of Registrable Securities disapproves of the terms of the underwriting, he or it may elect to withdraw therefrom by written notice to the Company, the underwriter and the other Holders. In the event of any such withdrawal, the Company will include in any such registration in lieu thereof any additional shares of Registrable Securities which were requested to be included by a Holder and which were excluded pursuant to the above-described underwriter limitation up to the maximum set by such underwriter.

(d) The Company will use its best efforts to do any and all other acts which may be necessary or advisable to enable each selling Holder to dispose of the Registrable Securities being sold including, without limitation, (i) furnishing to each such Holder (x) the number of copies of the registration statement and of the exhibits and the prospectus contained therein reasonably requested by each such Holder, and (y) signed counterparts, addressed to each such Holder, of an opinion of the Company's counsel and a "cold comfort" letter of the Company's independent certified public accountants with respect to the matters customarily covered in such documents delivered to underwriters in underwritten public offerings, (ii) registering or qualifying the Registrable Securities under the blue sky laws of any state in which the Registrable Securities are to be sold or obtaining exemptions therefrom; provided, however, that no blue sky filing shall be required in any state if to do so would require the Company to qualify to do business or to file a general consent to service of process in such state and (iii) listing the Registrable Securities to be sold on a national securities exchange or equivalent.

3. Company Registration.

(a) In addition to the registration rights set forth in Paragraph 2, if at any time or from time to time, the Company shall determine to register any of its securities, either for its own



account or the account of a security holder or holders, in a registration statement covering the sale of Common Stock to the general public pursuant to an underwritten public offering (except with respect to any registration filed on Form S-8, Form S-4 or any successor forms thereto), the Company will: (x) give to each Holder written notice thereof at least ninety (90) days before the initial filing of such registration (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws), or forty-five (45) days before filing if such registration is a subsequent registration; provided, however, in the case of a registration statement on Form S-3, the Company shall give each Holder written notice of the proposed filing thereof promptly after a decision to make such filings has been made and in no event less than ten (10) business days prior to filing; and (y) use its best efforts to include in such registration (and any related qualification under blue sky laws) and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within thirty (30) days after receipt of such written notice from the Company, by any Holder or Holders, except as set forth in subparagraph 3(b) below.

(b) The right of any Holder to registration pursuant to this Paragraph 3 shall be conditioned upon such Holder's participation in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the underwriter or underwriters
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