Exhibit 4.2
-----------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 4, 1998
BY AND AMONG
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P.
AND
STRATEGIC ASSOCIATES, L.P.
Table of Contents
Page
1. Definitions; Certain Rules of Construction - 1 -
1.1. "1933 Act" - 1 -
1.2. "1934 Act" - 2 -
1.3. "Board of Directors" - 2 -
1.4. "Common Shares" - 2 -
1.5. "Common Stock" - 2 -
1.6. "Company" - 2 -
1.7. "Company Indemnitees" - 2 -
1.8. "Debentures" - 2 -
1.9. "Effective Period" - 2 -
1.10. "Form S-1", "Form S-3", "Form S-4", "Form S-8"
and "Form SB-2" - 2 -
1.11. "Indemnitee" - 2 -
1.12. "Initiating Holders" - 2 -
1.13. "Investors" - 2 -
1.14. "Holder" - 2 -
1.15. "Holder Indemnitee" - 2 -
1.16. "Initial Shelf Registration" - 2 -
1.17. "Person" - 2 -
1.18. "PORTAL" - 2 -
1.19. "register", "registered" and "registration" - 3 -
1.20. "Registrable Securities" - 3 -
1.21. "Rule 144" - 3 -
1.22. "Rule 144 Information" - 3 -
1.23. "SEC" - 3 -
1.24. "Shelf Registration" - 3 -
1.25. "Securities Purchase Agreement" - 3 -
1.26. "Subsequent Shelf Registration" - 3 -
1.27. "Violation" - 3 -
1.28. "Warrant Shares" - 4 -
1.29. "Warrants" - 4 -
2. Registration Rights. - 4 -
2.1. Demand Registration - 4 -
2.2. Company Registration - 6 -
2.3. Obligations of the Company - 6 -
2.4. Furnish Information - 8 -
2.5. Expenses of Demand Registration - 8 -
2.6. Expenses of Company Registration - 8 -
2.7. Underwriting Requirements - 8 -
2.8. Indemnification - 9 -
2.9. Reports Under Securities Exchange Act of 1934 - 11 -
2.10. Form S-3 Registration; Shelf Registration - 12 -
2.11. Lock-up Agreements - 14 -
2.12. Assignment of Registration Rights - 15 -
2.13. Limitations on Subsequent Registration Rights - 15 -
3. Legend - 15 -
4. Specific Performance - 16 -
5. Notices - 16 -
6. Binding Effect; Assignment - 17 -
7. Course of Dealing; Amendments, Waivers and Consents - 17 -
8. Miscellaneous - 17 -
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE - 19 -
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of
September 4, 1998, is among TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation (the "Company"), ▇▇▇▇▇▇,
-------
▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P., a limited partnership
organized under the laws of the State of Delaware, and STRATEGIC
ASSOCIATES, L.P., a limited partnership organized under the laws
of the State of Delaware (the "Investors").
---------
WHEREAS, contemporaneously with the execution and
delivery of this Agreement, the Company and the Investors are
entering into a certain Securities Purchase Agreement dated as of
September 4, 1998 (as amended and in effect from time to time,
the "Securities Purchase Agreement"), pursuant to which the
-----------------------------
Company is issuing and selling to the Investors, and the
Investors are purchasing from the Company (i) debentures with an
aggregate principal balance of Four Million Dollars ($4,000,000)
(the "Debentures), (ii) warrants (the "Warrants") which are
---------- --------
exercisable for 2,760,918 shares (or such other number of shares
after adjustment pursuant to the terms of the Warrants) of the
Company's Common Stock (as defined below) (the "Warrant Shares"),
--------------
and (iii) upon exercise of the Company Put Option as set forth in
the Securities Purchase Agreement, shares of the Company's Common
Stock (the "Common Shares");
-------------
WHEREAS, the Company desires to enter into this
Agreement as an inducement to the Investors entering into the
Securities Purchase Agreement; and
WHEREAS, it is a condition to the issuance and
sale by the Company, and the purchase by the Investors, of the
Debentures, Warrants and Common Shares that the Company and the
Investors enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions; Certain Rules of Construction. Certain
------------------------------------------
capitalized terms are used in this Agreement with the specific
meanings defined below in this Section 1. Except as otherwise
explicitly specified to the contrary or unless the context
clearly requires otherwise, (a) the capitalized term "Section"
refers to sections of this Agreement, (b) the capitalized term
"Exhibit" refers to exhibits to this Agreement, (c) references to
a particular Section include all subsections thereof, (d) the
word "including" shall be construed as "including without
limitation", (e) references to a particular statute or regulation
include all rules and regulations thereunder and any successor
statute, regulation or rules, in each case as from time to time
in effect, (f) words in the singular or plural form include the
plural and singular form, respectively, and (g) references to a
particular Person include such Person's successors and assigns to
the extent not prohibited by this Agreement.
1.1. "1933 Act" means the Securities Act of 1933, as amended
--------
and all regulations thereunder.
1.2. "1934 Act" means the Securities Exchange Act of 1934,
--------
as amended and all regulations thereunder.
1.3. "Board of Directors" means the Board of Directors of
------------------
the Company.
1.4. "Common Shares" is defined in the recitals to this
-------------
Agreement.
1.5. "Common Stock" means the Company's common stock, par
------------
value $.0001 per share.
1.6. "Company" is defined in the recitals to this Agreement.
-------
1.7. "Company Indemnitees" is defined in Section 2.8(b).
-------------------
1.8. "Debentures" is defined in the recitals to this Agreement.
----------
1.9. "Effective Period" means the period from the date on
----------------
which a shelf registration becomes effective to the date on which
all of the Registrable Securities cease to be Registrable
Securities.
1.10. "Form S-1", "Form S-3", "Form S-4", "Form S-8" and
-------- -------- -------- --------
"Form SB-2" mean such respective registration forms in effect on
---------
the date hereof (or any successor registration forms subsequently
adopted by the SEC) under the ▇▇▇▇ ▇▇▇.
1.11. "Indemnitee" means each of the Company Indemnitees
----------
and the Holder Indemnitees.
1.12. "Initiating Holders" is defined in Section 2.1(a).
------------------
1.13. "Investors" is defined in the recitals to this
---------
Agreement.
1.14. "Holder" means (a) any Person that owns, or has
------
the right to acquire, Registrable Securities and (b) any assignee
thereof in accordance with Section 2.12.
1.15. "Holder Indemnitee" is defined in Section 2.8(a).
-----------------
1.16. "Initial Shelf Registration" is defined in Section
--------------------------
2.10(b).
1.17. "Person" means any present or future natural
------
person or any corporation, association, partnership, joint
venture, limited liability, joint stock or other company,
business trust, trust, organization, business or government or
any governmental agency or political subdivision thereof.
1.18. "PORTAL" is defined in Section 2.9(b).
------
1.19. "register", "registered" and "registration" refer to
-------- ---------- ------------
a registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act and
the automatic effectiveness, or the declaration or ordering of
effectiveness, of such registration statement or document.
1.20. "Registrable Securities" means (a) any Common
----------------------
Share acquired pursuant to the Securities Purchase Agreement, any
share of Common Stock issued or issuable upon the exercise of the
Warrants and (b) any share of Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right, or other
security which is issued as) a dividend or other distribution
with respect to, in exchange for, or in replacement of, any share
of Common Stock described in the foregoing clause (a); provided,
--------
however, that any share of Common Stock previously sold to the
-------
public pursuant to a registered public offering or pursuant to an
exemption from the registration requirements of the 1933 Act
shall cease to be a Registrable Security. For purposes of this
Agreement, the number of Registrable Securities at any time
outstanding shall be the sum of (i) the number of shares of
Common Stock then outstanding which are Registrable Securities
plus (ii) the number of shares of Common Stock which are issuable
pursuant to then exercisable or convertible securities and which
upon issuance would be Registrable Securities.
1.21. "Rule 144" is defined in Section 2.9(a).
--------
1.22. "Rule 144 Information" is defined in Section
--------------------
2.9(b).
1.23. "SEC" means the Securities and Exchange Commission.
---
1.24. "Shelf Registration" means a registration
------------------
statement for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 of the ▇▇▇▇ ▇▇▇.
1.25. "Securities Purchase Agreement" is defined in the
-----------------------------
recitals to this Agreement.
1.26. "Subsequent Shelf Registration" is defined in
-----------------------------
Section 2.10(b).
1.27. "Violation" means, with respect to any
---------
registration statement which includes any Registrable Securities:
(a) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto;
(b) the 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 in which they were made, not misleading; or
(c) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the 1933 Act, the
1934 Act or any state securities law in connection with any
matter relating to such registration statement.
1.28. "Warrant Shares" means the Common Stock (or any
--------------
other securities) acquired or to be acquired upon exercise of the
Warrants.
1.29. "Warrants" is defined in the recitals to this Agreement.
--------
2. Registration Rights.
-------------------
2.1. Demand Registration.
-------------------
(a) At any time after the date of this Agreement, if
the Company shall receive a written request from the Holders
of a majority of the Registrable Securities then outstanding
and entitled to registration rights under this Section 2
(the "Initiating Holders") that the Company effect the
------------------
registration under the 1933 Act of at least 50% of the
Registrable Securities then outstanding and that such
registration shall have a minimum anticipated aggregate net
offering price of $5,000,000, then the Company shall, within
ten days of the receipt thereof, give written notice of such
request to all Holders and shall, subject to the limitations
of this Section 2.1, use its best efforts to effect such a
registration statement as soon as practicable and in any
event to file within 75 days of the receipt of such request
a registration statement under the 1933 Act covering all the
Registrable Securities which the Holders shall in writing
request (within 20 days of receipt of the notice given by
the Company pursuant to this Section 2.1(a)) to be included
in such registration and to use its best efforts to have
such registration statement become effective. Any demand
under Section 2.10 shall constitute a demand for purposes of
this Section 2.1.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of
an underwriting, they shall so advise the Company as part of
their request made pursuant to this Section 2.1 and the
Company shall include such information in the written notice
referred to in Section 2.1(a). In such event, the right of
any Holder to include its Registrable Securities in such
registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their
securities through such underwriting shall (together with
the Company as provided in Section 2.3(d)) enter into an
underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting
by a majority in interest of the Initiating Holders. The
Initiating Holders shall consult with the Board of Directors
regarding the selection of an underwriter or underwriters
and approval by the Board of Directors, of any underwriter
selected by the Initiating Holders shall not be unreasonably
withheld. Notwithstanding any other provision of this
Section 2.1, if, in the case of a registration requested
pursuant to Section 2.1(a), the underwriter advises the
Initiating Holders in writing that marketing factors require
a limitation of the number of shares to be underwritten,
then the Initiating Holders shall so advise the Company and
all Holders of Registrable Securities which would otherwise
be underwritten pursuant hereto, and all securities other
than Registrable Securities sought to be included in the
underwriting shall first be excluded. To the extent that
further limitation is required, the number of Registrable
Securities that may be included in the underwriting shall be
allocated pro rata among all Holders thereof desiring to
participate in such underwriting (according to the number of
Registrable Securities then held by each such Holder). No
Registrable Securities requested by any Holder to be
included in a registration pursuant to Section 2.1(a) shall
be excluded from the underwriting unless all securities
other than Registrable Securities are first excluded.
(c) The Company is obligated to effect only two
registrations pursuant to Section 2.1(a) (which for purposes
hereof shall include demands under Section 2.10); provided,
--------
however, that no registration pursuant to Section 2.1(a) or
-------
Section 2.10 shall be deemed to be a registration for any
purpose of this sentence if (i) the number of Registrable
Securities included in the registration statement does not
equal or exceed 35% of the number of Registrable Securities
proposed by the Holders to be included in the offering; and
provided, further, that no registration of Registrable
-------- -------
Securities which shall not have become and remained
effective in accordance with Section 2.3 shall be deemed to
be a registration for any purpose of this sentence.
(d) Notwithstanding the foregoing provisions of this
Section 2.1, in the event that the Company is requested to
file any registration statement pursuant to Section 2.1(a):
(i) the Company shall not be obligated to effect
the filing of such registration statement, during the
180 days following the effective date of any other
registration statement pertaining to a public offering
of securities for the account of the Company;
(ii) the Company shall not be obligated to effect
more than one registration pursuant to Section 2.1(a)
or Section 2.10 in any 12-month period; and
(iii) if the Company shall furnish to the
Initiating Holders a certificate signed by the
president of the Company stating that, in the good
faith judgment of the Board of Directors, it would not
be in the best interests of the Company and its
stockholders generally for such registration statement
to be filed, the Company shall have the right to defer
such filing for a period of not more than 90 days after
receipt of the request of the relevant Initiating
Holders; provided, however, that the Company may not
-------- -------
utilize the right set forth in this Section 2.1(d)(ii)
more than once in any 12-month period.
(e) Each registration requested pursuant to Section
2.1(a) or 2.10 shall be effected by the filing of a
registration statement on Form SB-2 or Form S-3 (if
applicable) (or if such form is not available, any other
form which includes substantially the same information
(other than information which is incorporated by reference)
as would be required to be included in a registration
statement on such form as currently constituted), or unless
another form would be equally effective.
2.2. Company Registration. If (but without any obligation
--------------------
to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders
other than the Holders) any of its capital stock or other
securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a
registration on Form S-8 relating solely to the sale of
securities to participants in a Company stock plan or a
registration on Form S-4), the Company shall, at such time,
promptly give each Holder written notice of such registration.
Upon the written request of any Holder given within 20 days after
mailing of such notice by the Company, the Company shall, subject
to the provisions of Section 2.7, use its best efforts to cause a
registration statement covering all of the Registrable Securities
that each such Holder has requested to be registered to become
effective under the 1933 Act. The majority of Holders
participating in a registration under this Section 2.2 have the
right to select a co-lead underwriter, acceptable to the Company
and the lead underwriter, if such registration is for an
underwritten offering. The Company shall be under no obligation
to complete any offering of its securities it proposes to make
and shall incur no liability to any Holder for its failure to do
so.
2.3. Obligations of the Company. Whenever required under
--------------------------
this Section 2 to use its best efforts to effect the registration
of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible, prepare and file with the
SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities to be
registered thereunder, keep such registration statement effective
for up to 180 days (except with respect to any Shelf Registration
under Section 2.10(b) which may be for a longer period) or until
such Holders have informed the Company in writing that the
distribution of their Registrable Securities has been completed.
In addition, the Company shall:
(a) prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection with such registration
statement, and use its best efforts to cause each such
amendment and supplement to become effective, as may be
necessary to comply with the provisions of the 1933 Act with
respect to the disposition of all securities covered by such
registration statement;
(b) furnish to the Holders such reasonable number of
copies of a prospectus, including a preliminary prospectus,
in conformity with the requirements of the 1933 Act, and
such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities
owned by them;
(c) use its best efforts to register or qualify the
securities covered by such registration statement under such
other securities or blue sky laws of such states and
jurisdictions as shall be reasonably requested by the
Holders, except that the Company shall not be required in
connection therewith or as a condition thereto to qualify to
do business or file a general consent to service of process
in any such state or jurisdiction;
(d) in the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing
underwriter of such offering; provided, however, that each
-------- -------
Holder participating in such underwriting shall also enter
into and perform its obligations under such an underwriting
agreement, including furnishing any opinion of counsel or
entering into a lock-up agreement reasonably requested by
the managing underwriter;
(e) notify each Holder of Registrable Securities
covered by such registration statement, at any time when a
prospectus relating thereto covered by such registration
statement is required to be delivered under the 1933 Act, of
the happening of any event as a result of which the
prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing
and promptly file such amendments and supplements which may
be required pursuant to Section 2.3(b) on account of such
event and use its best efforts to cause each such amendment
and supplement to become effective;
(f) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this
Section 2, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a
registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities
are not being sold through underwriters, on the date that
the registration statement with respect to such securities
becomes effective, (i) an opinion or opinions, dated such
date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is
customarily given by company counsel to the underwriters in
an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public
accountant of the Company, in form and substance as is
customarily given by independent certified public
accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities;
(g) apply for listing and use its best efforts to list
the Registrable Securities being registered on any national
securities exchange on which a class of the Company's equity
securities is listed or, if the Company does not have a
class of equity securities listed on a national securities
exchange, apply for qualification and use its best efforts
to qualify the Registrable Securities being registered for
inclusion on the automated quotation system of the National
Association of Securities Dealers, Inc.; and
(h) without in any way limiting the types of
registrations to which this Section 2 shall apply, in the
event that the Company shall effect a Shelf Registration,
the Company shall take all necessary action, including the
filing of post-effective amendments, to permit the Investors
to include their Registrable Securities in such registration
in accordance with the terms of this Section 2.
2.4. Furnish Information. It shall be a condition precedent
-------------------
to the obligations of the Company to take any action pursuant to
this Section 2 in respect of the Registrable Securities of any
selling Holder that such selling Holder shall furnish to the
Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of
such Registrable Securities as shall be required to effect the
registration of such Registrable Securities. The Company shall
have no responsibility, to the extent such Holder fails to
provide such information in a timely manner, and if the Company
determines it appropriate, the Company may delay the filing of
any such registration statement until the Holder provides such
information.
2.5. Expenses of Demand Registration. The Company shall
-------------------------------
bear all expenses relating to Registrable Securities incurred in
connection with each registration, filing or qualification
pursuant to Section 2.1(a) and each registration, filing or
qualification pursuant to Section 2.10, including all
registration, filing and qualification fees, printing and
accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements (not to exceed
$20,000 per registration) of one counsel for the selling Holders.
2.6. Expenses of Company Registration. The Company shall
--------------------------------
bear and pay all expenses incurred in connection with any
registration, filing or qualification of Registrable Securities
with respect to any registration pursuant to Section 2.2 for each
Holder, including all registration, filing and qualification
fees, printing and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements
of one counsel for the selling Holders. All underwriting
discounts and commissions relating to Registrable Securities
included in any registration effected pursuant to Section 2.2
will be borne and paid ratably by the Holders of such Registrable
Securities and the Company.
2.7. Underwriting Requirements. In connection with any
-------------------------
offering involving an underwriting of securities being issued by
the Company, the Company shall not be required under Section 2.2
to include any of the Holders' securities in such underwriting
unless such Holders accept the terms of the underwriting as
agreed upon between the Company and the underwriters selected by
it, and then only in such quantity, if any, as will not, in the
opinion of the underwriters, jeopardize the success of the
offering by the Company. If the managing underwriter for the
offering shall advise the Company in writing that the total
amount of securities, including Registrable Securities, requested
by shareholders to be included in such offering exceeds the
amount of securities to be sold other than by the Company that
can be successfully offered, then the Company shall be required
to include in the offering only that number of such securities,
including Registrable Securities, which the managing underwriter
believes will not jeopardize the success of the offering. The
securities so included in the offering will be reduced as
follows:
(a) first, all securities which stockholders other
than the Company and the Holders seek to include in the
offering shall be excluded from the offering to the extent
limitation on the number of shares included in the
underwriting is required; and
(b) if further limitation on the number of shares to
be included in the offering is required, then the number of
shares held by Holders that may be included in the
underwriting shall be reduced pro rata among the selling
Holders in accordance with the number of shares of
Registrable Securities held by each such Holder;
provided, however, that in no event shall the amount of
-------- -------
securities of the selling Holders included in the offering be
reduced below 35% of the total amount of securities included in
such offering, except if the managing underwriter makes the
determination described above and no securities other than those
of the Company are included. For purposes of the preceding
sentence concerning apportionment, for any selling stockholder
which is a Holder of Registrable Securities and which is a
partnership or a corporation, the partners, retired partners and
stockholders of such Holder, or the estates and family members of
such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall collectively be deemed to
be a "selling Holder," and any pro rata reduction with respect to
such "selling Holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and
individuals included in such "selling Holder," as defined in this
sentence.
2.8. Indemnification. In the event any Registrable
---------------
Securities are included in a registration statement under this
Section 2:
(a) The Company will indemnify and hold harmless each
Holder, the officers, directors, partners, agents and
employees of each Holder, any underwriter (as defined in the
▇▇▇▇ ▇▇▇) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of
the 1933 Act or the 1934 Act (collectively, the "Holder
------
Indemnitees"), against any losses, claims, damages or
-----------
liabilities (joint or several) to which they may become
subject under the 1933 Act, the 1934 Act or any other
federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any Violation. The Company will
reimburse each Holder Indemnitee for any legal or other
expenses reasonably incurred by such Holder Indemnitee in
connection with investigating or defending any such loss,
claim, damage, liability or action. The indemnity agreement
contained in this Section 2.8(a) shall not apply to amounts
paid in settlement of any loss, claim, damage, liability or
action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable to any Holder
Indemnitee in any such case for any such loss, claim,
damage, liability or action (i) to the extent that it arises
out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished
expressly for use in connection with such registration by or
on behalf of such Holder Indemnitee; provided, however, that
-------- -------
the Company shall not be required to indemnify any Holder
for information supplied by another Holder or (ii) in the
case of a sale directly by a Holder of Registrable
Securities (including a sale of such Registrable Securities
through any underwriter retained by such Holder engaging in
a distribution solely on behalf of such Holder), such untrue
statement or alleged untrue statement or omission or alleged
omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and such Holder
failed to deliver a copy of the final or amended prospectus
at or prior to the confirmation of the sale of the
Registrable Securities to the Person asserting any such
loss, claim, damage or liability in any case in which such
delivery is required by the ▇▇▇▇ ▇▇▇.
(b) Each Holder which includes any Registrable
Securities in any registration statement (i) will indemnify
and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement,
each person, if any, who controls the Company within the
meaning of the 1933 Act, each agent and any underwriter for
the Company, and any other Holder or other stockholder
selling securities in such registration statement or any of
its directors, officers, partners, agents or employees or
any Person who controls such Holder or such other
stockholder or such underwriter (collectively, the "Company
-------
Indemnitees"), against any losses, claims, damages or
-----------
liabilities (joint or several) to which any Company
Indemnitee may become subject under the 1933 Act, the 1934
Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with
written information furnished by or on behalf of such Holder
expressly for use in connection with such registration and
(ii) will reimburse any legal or other expenses reasonably
incurred by any Company Indemnitee in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the liability
-------- -------
of any Holder hereunder shall be limited to the amount of
net proceeds (after deduction of all underwriters' discounts
and commissions paid by such Holder in connection with the
registration in question) received by such Holder in the
offering giving rise to the Violation; and provided,
--------
further, that the indemnity agreement contained in this
-------
Section 2.8(b) 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 such Holder
(which consent shall not be unreasonably withheld) nor, in
the case of a sale directly by the Company of its securities
(including a sale of such securities through any underwriter
retained by the Company to engage in a distribution solely
on behalf of the Company), shall such Holder be liable to
the Company in any case in which such untrue statement or
alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a
final or amended prospectus, and the Company failed to
deliver a copy of the final or amended prospectus at or
prior to the confirmation of the sale of the securities to
the Person asserting any such loss, claim, damage or
liability in any case in which such delivery is required by
the 1933 Act.
(c) Promptly after receipt by any Indemnitee under
this Section 2.8 of notice of the commencement of any action
(including any governmental action), such Indemnitee will,
if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.8, deliver to the
indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly
noticed, to assume and control the defense thereof with
counsel mutually satisfactory to the parties; provided,
--------
however, that such Indemnitee shall have the right to retain
-------
its own counsel, with the fees and expenses to be paid by
the indemnifying party, if representation of such Indemnitee
by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing
interests, as reasonably determined by either party, between
such Indemnitee and any other party represented by such
counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such
indemnifying party of any liability to the Indemnitee under
this Section 2.8 to the extent of such prejudice, but the
omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have
to such Indemnitee otherwise than under this Section 2.8.
(d) The obligations of the Company and the Holders
under this Section 2.8 shall survive the completion of any
offering of Registrable Securities in a registration
statement whether under this Section 2 or otherwise.
(e) If the indemnification provided for in this
Section 2.8 is unavailable to a party that would have been
an Indemnitee under this Section 2.8 in respect of any
losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to herein, then
each party that would have been an indemnifying party
hereunder shall, in lieu of indemnifying such Indemnitee,
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof)
in such proportion as is appropriate to reflect the relative
fault of such indemnifying party, on the one hand, and such
Indemnitee, on the other hand, in connection with the
statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof). The relative fault shall be determined by
reference to, among other things, whether the Violation
relates to information supplied by such indemnifying party
or such Indemnitee and the parties' relative intent,
knowledge, access to information and opportunity to correct
or prevent such Violation. The parties agree that it would
not be just and equitable if contribution pursuant to this
Section 2.8(e) were determined by pro rata allocation or by
any other method of allocation which does not take account
of the equitable considerations referred to in the preceding
sentence. The amount paid or payable by a contributing
party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof)
referred to above in this Section 2.8(e) shall include any
legal or other expenses reasonably incurred by such
Indemnitee in connection with investigating or defending any
such action or claim. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any
Person who was not guilty of such fraudulent
misrepresentation. The liability of any Holder of
Registrable Securities in respect of any contribution
obligation of such Holder (after deduction of all
underwriters' discounts and commissions paid by such Holder
in connection with the registration in question) arising
under this Section 2.8(e) shall not in any event exceed an
amount equal to the net proceeds to such Holder from the
disposition of the Registrable Securities disposed of by
such Holder pursuant to such registration.
2.9. Reports Under Securities Exchange Act of 1934.
---------------------------------------------
(a) With a view to making available to the Holders the
benefits of Rule 144 promulgated under the 1933 Act ("Rule
----
144") and any other rule or regulation of the SEC that may
---
at any time permit a Holder to sell securities of the
Company to the public without registration, and with a view
to making it possible for Holders to register the
Registrable Securities pursuant to a registration on Form S-3,
the Company agrees to:
(i) use its best efforts to make and keep public
information available, as those terms are understood
and defined in Rule 144, at all times;
(ii) take such action, including the voluntary
registration of its Common Stock under Section 12 of
the 1934 Act or compliance with the reporting
requirements of Section 15(d) of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for
the sale of their Registrable Securities, for the
offering of its securities to the general public is
declared effective;
(iii) use its best efforts to file with the
SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934
Act; and
(iv) furnish to any Holder, so long as such Holder
owns any Registrable Securities, forthwith upon request
(A) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, or as to its
qualification as a registrant whose securities may be
resold pursuant to Form S-3, (B) a copy of the most
recent annual or quarterly report of the Company and
such other reports and documents so filed by the
Company and (C) such other information as may be
reasonably requested in availing any Holder of any rule
or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to
such form.
(b) The Company agrees that, at all times during which
the Company is neither subject to the reporting requirement
of Sections 13 or 15(d) of the 1934 Act, nor exempt from
reporting pursuant to Rule 12g3-2(b) under the 1934 Act, it
will provide in written form, upon the written request of
any Holder, or a prospective purchaser of securities of the
Company from such Holder, all information required by Rule
144A(d)(4)(i) of the General Regulations promulgated by the
SEC under the 1933 Act (the "Rule 144A Information"). The
---------------------
Company further agrees, upon written request, to cooperate
with and assist any Holder or any member of the National
Association of Securities Dealers, Inc. system for Private
Offerings Resales and Trading through Automated Linkages
("PORTAL") in applying to designate and thereafter
------
maintaining the eligibility of the Company's securities for
trading through PORTAL. With respect to each Holder, the
Company's obligations under this Section 2.9(b) shall at all
times be contingent upon such Holder's obtaining from a
prospective purchaser an agreement to take all reasonable
precautions to safeguard the Rule 144A Information from
disclosure to anyone other than employees of the prospective
purchaser who require access to the Rule 144A Information
for the sole purpose of evaluating its purchase of the
Company's securities.
2.10. Form S-3 Registration; Shelf Registration.
-----------------------------------------
(a) In case the Company shall receive from Holders of
at least 50% of the Registrable Securities a written request
that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder, the
Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or
compliance, to all other Holders; and
(ii) use its best efforts to effect, as soon as
practicable, such registration, qualification or
compliance as may be so requested and as would permit
or facilitate the sale and distribution of all or such
portion of such Holder's Registrable Securities as are
specified in such request, together with all or such
portion of the Registrable Securities of any other
Holder joining in such request as are specified in a
written request given within 20 days after receipt of
such written notice from the Company; provided,
--------
however, that the Company shall not be obligated to
-------
effect any such registration, qualification or
compliance, pursuant to this Section 2.10 if: (A) Form
S-3 is not available for such offering by the Holders;
(B) the Company has already effected one registration
on Form S-3 or pursuant to Section 2.1 within the
previous twelve-month period; or (C) 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 not
be in the best interests of the Company and its
stockholders for such Form S-3 registration to be
effected at such time, in which event the Company shall
have the right to defer the filing of such Form S-3
registration for a period of not more than 90 days
after receipt of the request of the Holder or Holders
under this Section 2.10; provided, however, that the
-------- -------
Company shall not utilize this right more than once in
any 12-month period and that any demand under this
Section 2.10 shall count as a demand under Section 2.1.
(b) As soon as practicable after Closing, and in any
event not more than 45 days from the date of this Agreement, the
Company shall prepare and file with the SEC a Shelf Registration
registering the resale from time to time of all of the
Registrable Securities (the "Initial Shelf Registration") held by
--------------------------
the Holders. The registration statement for any Shelf
Registration shall be on Form S-3 or another appropriate form
permitting registration of such Registrable Securities for resale
by the Holders in the manner or manners designated by them, from
time to time, which may include an underwritten offering, subject
to the underwriter being reasonably acceptable to the Company.
The Company shall use its best efforts to cause the Initial Shelf
Registration to become effective under the 1933 Act as promptly
as is practicable and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the end of
the Effective Period. The following provisions shall also apply
with respect to a Shelf Registration:
(i) From and after the exercise of any Warrant, in
whole or in part, within 45 days after receipt of written notice
from the Holder, the Company shall effect a Shelf Registration
for all or a portion of the Conversion Shares which have been
theretofore issued to Holder; provided, however, that (A) the
-------- -------
number of Conversion Shares sought to be included in any Shelf
Registration shall not be less than 50% of the shares of Common
Stock or other securities for which the Warrant is exercisable
and (B) in no event shall the Company be obligated to effect a
Shelf Registration pursuant to this paragraph on more than one
occasion in any 12-month period.
(ii) If the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below) ceases to be
effective for any reason at any time during the Effectiveness
Period (other than because all Registrable Securities shall have
been sold or shall have ceased to be Registrable Securities), the
Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and
in any event shall within thirty (30) days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably
expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration
covering all of the Registrable Securities then outstanding (a
"Subsequent Shelf Registration"). If a Subsequent Shelf
-----------------------------
Registration is filed, the Company shall use all reasonable
efforts to cause the Subsequent Shelf Registration to become
effective as promptly as is practicable after such filing and to
keep such registration statement continuously effective until the
end of the Effectiveness Period.
(iii) The Company shall supplement and amend the Shelf
Registration if required by the rules, regulations or
instructions applicable to the registration form used by the
Company for such Shelf Registration, if required by the 1933 Act
or the SEC, or if reasonably requested by the majority of Holders
or by any managing underwriter, if any, of such Registrable
Securities with respect to the offer and sale or other
disposition of the Registrable Securities during the Effective
Period.
(iv) From time to time, the Company shall (A) prepare and
file with the SEC a post-effective amendment to the Shelf
Registration or a supplement to the related prospectus or a
supplement or amendment to any document incorporated therein by
reference or any other required document, so that such
registration statement will not contain any 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 not
misleading, so that, as thereafter delivered to purchasers of the
Registrable Securities being sold thereunder, such prospectus
will not contain any 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 light of the
circumstances under which they were made, not misleading; (B)
provide the Holders with copies of any registration statement,
prospectus, document incorporated by reference therein, or such
other documents filed with the SEC in such numbers as the
Holders shall reasonably request; and (C) inform the Holders that
the Company has complied with its obligations and that the
registration statement and related prospectus may be used for the
purpose of selling all or any of such Registrable Securities (or
that, if the Company has filed a post-effective amendment to the
Shelf Registration which has not yet been declared effective, the
Company will notify the Holders to that effect, will use its best
efforts to secure the effectiveness of such post-effective
amendment and will immediately so notify the Holders when the
amendment has become effective).
2.11. Lock-up Agreements. If reasonably requested by
------------------
the Company and the managing underwriter, the Holders agree to
enter into lock-up agreements pursuant to which they will not,
for a period of 180 days following the effective date of a
registration statement for a public offering of the Company's
securities, offer, sell or otherwise dispose of any Registrable
Securities (except Registrable Securities sold pursuant to such
registration statement) without the prior consent of the Company
and the underwriter, provided that the officers, directors and
all holders of more than 5% of the shares of Common Stock
(calculated for the purpose as if all securities convertible into
or exercisable for Common Stock, directly or indirectly, are so
converted or exercised) of the Company enter such lock-up
agreements for the same period and on the same terms.
2.12. Assignment of Registration Rights. The rights to
---------------------------------
cause the Company to register Registrable Securities pursuant to
this Section 2 may be assigned by any Holder to a permitted
transferee, and by such transferee to a subsequent permitted
transferee, but only if such rights are transferred (a) to an
affiliate, subsidiary, partner or stockholder of such Holder or
transferee or an account managed or advised by the manager or
adviser of such Holder or transferee or (b) in connection with
the sale or other transfer of not less than an aggregate of five
percent (5%) of the Registrable Securities held by such Holder or
some lesser number, if such lesser number represents all the
Registrable Securities then held by such Holder; provided,
--------
however, that such transfer does not constitute a "distribution"
-------
within the meaning of the 1933 Act. Any transferee to which
rights under this Agreement are transferred shall: (i) as a
condition to such transfer, deliver to the Company a written
instrument by which such transferee agrees to be bound by the
obligations imposed upon Holders under this Agreement to the same
extent as if such transferee were a Holder under this Agreement;
and (ii) be deemed to be a Holder hereunder.
2.13. Limitations on Subsequent Registration Rights.
---------------------------------------------
From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of a majority of
the Registrable Securities then outstanding, enter into any
agreement with any holder or prospective holder of any securities
of the Company relating to registration rights (other than
registration rights disclosed on Schedule 4.12 to the Securities
Purchase Agreement), unless such agreement includes (a) to the
extent such agreement would allow such holder or prospective
holder to include such securities in any registration filed under
Section 2.1, 2.2 or 2.10, a provision that such holder or
prospective holder may include such securities in any such
registration only to the extent that the inclusion of its
securities will not reduce the amount of the Registrable
Securities of the Holders which would otherwise be included and
(b) no provision which would allow such holder or prospective
holder to make a demand registration which could result in such
registration statement being declared effective prior to November
1, 2003.
3. Legend. Each certificate representing any Registrable
------
Security shall bear on its face substantially the following
legends:
(a) "THESE SECURITIES ARE SUBJECT TO THE PROVISIONS OF
A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF
SEPTEMBER 4, 1998, AS AMENDED AND IN EFFECT FROM TIME TO
TIME, AMONG THE CORPORATION AND THE STOCKHOLDERS NAMED
THEREIN, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
CORPORATION."
(b) Any legends required by (i) the Securities
Purchase Agreement or (ii) the laws of any applicable
jurisdiction.
4. Specific Performance. The parties recognizes that their
--------------------
respective rights under this Agreement are unique, and,
accordingly, each party shall, in addition to such other remedies
as may be available to it at law or in equity, have the right to
enforce its rights hereunder by actions for injunctive relief and
specific performance to the extent permitted by law. This
Agreement is not intended to limit or abridge any rights of
either party which may exist apart from this Agreement.
5. Notices. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if in writing and
delivered in Person, transmitted by facsimile transmission (fax)
or sent by registered or certified mail (return receipt
requested) or recognized overnight delivery service, postage pre-paid,
addressed as follows, or to such other address has such
party may notify to the other parties in writing:
(a) if to the Company:
Touchstone Applied Science Associates, Inc.
▇.▇. ▇▇▇ ▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Purchasers:
c/▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
A notice or communication will be effective (i) if delivered in
Person or by overnight courier, on the business day it is
delivered, (ii) if transmitted by telecopier, on the business day
of actual confirmed receipt by the addressee thereof, and (iii)
if sent by registered or certified mail, three (3) business days
after dispatch.
6. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon, and inure to the benefit of, the parties and their
respective personal representatives, successors and permitted
assigns; provided, however, that the Company shall not have the
-------- -------
right to assign its rights and obligations hereunder, or any
interest herein, without the prior written consent of the holders
of a majority of the Registrable Securities then outstanding.
7. Course of Dealing; Amendments, Waivers and Consents. No
---------------------------------------------------
course of dealing between the parties shall operate as a waiver
of any party's rights under this Agreement. Each party
acknowledges that if any party, without being required to do so
by this Agreement, gives any notice or information to, or obtains
any consent from, the other party, such party shall not by
implication have amended, waived or modified any provision of
this Agreement, or created any duty to give any such notice or
information or to obtain any such consent on any future occasion.
No delay or omission on the part of any party in exercising any
right under this Agreement shall operate as a waiver of such
right or any other right hereunder or thereunder. A waiver on
any one occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion. No amendment, waiver
or consent with respect to this Agreement shall be binding unless
it is in writing and signed by each of the Company and the
holders of a majority of the Registrable Securities then
outstanding.
8. Miscellaneous. If any provision of this Agreement shall be
-------------
found by any court of competent jurisdiction to be invalid or
unenforceable, the parties hereby waive such provision to the
extent that it is found to be invalid or unenforceable. Such
provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as
modified, shall be enforced as any other provision hereof, all
the other provisions hereof continuing in full force and effect.
The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or
interpretation hereof. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior understandings and
agreements, whether written or oral, with respect to such subject
matter. This Agreement may be executed in counterparts, which
together shall constitute one and the same instrument. This
Agreement shall be governed by and construed in accordance with
the laws (other than the conflict of laws rules) of the State of
New York.
[Remainder of page left blank intentionally --
signature page follows.]
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the Company and the Investors
have caused this Agreement to be executed effective as of the
date first above written.
THE COMPANY:
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
INVESTORS:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC PARTNERS, L.P.,
its General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & COMPANY, LLC, its
General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member