EXHIBIT 5
REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 4, 1998
BY AND AMONG
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.,
XXXXXX XXXXXXX 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"), XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P., a limited partnership
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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").
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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
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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
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"Warrants") which are exercisable for 2,760,918 shares (or such other number of
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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
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of the Company Put Option as set forth in the Securities Purchase Agreement,
shares of the Company's Common Stock (the "Common Shares");
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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
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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
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regulations thereunder.
1.2 "1934 Act" means the Securities Exchange Act of 1934, as amended and
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all regulations thereunder.
1.3 "Board of Directors" means the Board of Directors of the Company.
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1.4 "Common Shares" is defined in the recitals to this Agreement.
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1.5 "Common Stock" means the Company's common stock, par value $.0001 per
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share.
1.6 "Company" is defined in the recitals to this Agreement.
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1.7 "Company Indemnitees" is defined in Section 2.8(b).
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1.8 "Debentures" is defined in the recitals to this Agreement.
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1.9 "Effective Period" means the period from the date on which a shelf
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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
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such respective registration forms in effect on the date hereof (or any
successor registration forms subsequently adopted by the SEC) under the 0000
Xxx.
1.11 "Indemnitee" means each of the Company Indemnitees and the Holder
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Indemnitees.
1.12 "Initiating Holders" is defined in Section 2.1(a).
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1.13 "Investors" is defined in the recitals to this Agreement.
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1.14 "Holder" means (a) any Person that owns, or has the right to acquire,
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Registrable Securities and (b) any assignee thereof in accordance with Section
2.12.
1.15 "Holder Indemnitee" is defined in Section 2.8(a).
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1.16 "Initial Shelf Registration" is defined in Section 2.10(b).
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1.17 "Person" means any present or future natural person or any
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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).
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1.19 "register", "registered" and "registration" refer to a registration
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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
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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
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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
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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).
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1.22 "Rule 144 Information" is defined in Section 2.9(b).
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1.23 "SEC" means the Securities and Exchange Commission.
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1.24 "Shelf Registration" means a registration statement for an offering to
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be made on a delayed or continuous basis pursuant to Rule 415 of the 1933 Act.
1.25 "Securities Purchase Agreement" is defined in the recitals to this
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Agreement.
1.26 "Subsequent Shelf Registration" is defined in Section 2.10(b).
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1.27 "Violation" means, with respect to any registration statement which
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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)
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acquired or to be acquired upon exercise of the Warrants.
1.29 "Warrants" is defined in the recitals to this Agreement.
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2. Registration Rights.
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2.1 Demand Registration.
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(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
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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
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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
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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,
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however, that the Company may not utilize the right set forth in this
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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
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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
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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,
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however, that each Holder participating in such underwriting shall also
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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
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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
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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
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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
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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
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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 0000 Xxx) 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
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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
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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 0000 Xxx.
(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 "),
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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
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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
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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
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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 0000 Xxx) 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
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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
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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
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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
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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
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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.
X.X. Xxx 000
0 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
(b) if to the Purchasers:
c/x Xxxxxx, Xxxxxxx & Company, L.L.C.
Xxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
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
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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:
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive Officer
INVESTORS:
XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P.
By: XXXXXX XXXXXXX STRATEGIC PARTNERS, L.P.,
its General Partner
By:________________________________
Name: Xxxxx X. Xxxxxxx
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: XXXXXX, XXXXXXX & COMPANY, LLC, its
General Partner
By:________________________________
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
