ex10-2.htm


    Exhibit
      10.2


    REGISTRATION
      RIGHTS AGREEMENT

    


    This
      Registration Rights Agreement (the “Agreement”) is made and entered into as of
      this 23rd day of July, 2007 by and among Terabeam, Inc., a Delaware corporation
      (the “Company”), and the “Investors” named in that certain Purchase Agreement by
      and among the Company and the Investors (the “Purchase Agreement”).

     

    The
      parties hereby agree as follows:

     

    1.      Certain
      Definitions.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    “Affiliate”
      means, with respect to any person, any other person which directly or indirectly
      controls, is controlled by, or is under common control with, such
      person.

     

    “Business
      Day” means a day, other than a Saturday or Sunday, on which banks in New
      York City are open for the general transaction of business.

     

    “Common
      Stock” shall mean the Company’s common stock, par value $0.01 per share, and
      any securities into which such shares may hereinafter be
      reclassified.

     

    “Investors”
      shall mean the Investors identified in the Purchase Agreement and any Affiliate
      or permitted transferee of any Investor who is a subsequent holder of any
      Warrants or Registrable Securities.

     

    “Prospectus”
      shall mean (i) the prospectus included in any Registration Statement, as amended
      or supplemented by any prospectus supplement, with respect to the terms of
      the
      offering of any portion of the Registrable Securities covered by such
      Registration Statement and by all other amendments and supplements to the
      prospectus, including post-effective amendments and all material incorporated
      by
      reference in such prospectus, and (ii) any “free writing prospectus” as defined
      in Rule 405 under the 1933 Act.

     

    “Register,”
      “registered” and “registration” refer to a registration made by
      preparing and filing a Registration Statement or similar document in compliance
      with the 1933 Act (as defined below), and the declaration or ordering of
      effectiveness of such Registration Statement or document.

     

    “Registrable
      Securities” shall mean (i) the Shares, (ii) the Warrant Shares and (iii) any
      other securities issued or issuable with respect to or in exchange for
      Registrable Securities; provided, that, a security shall cease to be a
      Registrable Security upon (A) sale pursuant to a Registration Statement or
      Rule
      144 under the 1933 Act, or (B) such security becoming eligible for sale by
      the
      Investors pursuant to Rule 144(k).

     

    “Registration
      Statement” shall mean any registration statement of the Company filed under
      the 1933 Act that covers the resale of any of the Registrable Securities
      pursuant to the provisions of this Agreement, amendments and supplements to
      such
      Registration Statement, including post-effective amendments, all exhibits and
      all material incorporated by reference in such Registration
      Statement.

     

    “Required
      Investors” means the Investors holding a majority of the Registrable
      Securities.

     


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    “SEC”
      means the U.S. Securities and Exchange Commission.

     

    “Shares”
      means the shares of Common Stock issued pursuant to the Purchase
      Agreement.

     

    “1933
      Act” means the Securities Act of 1933, as amended, and the rules and
      regulations promulgated thereunder.

     

    “1934
      Act” means the Securities Exchange Act of 1934, as amended, and the rules
      and regulations promulgated thereunder.

     

    “Warrants”
      means, the warrants to purchase shares of Common Stock issued to the Investors
      pursuant to the Purchase Agreement, the form of which is attached to the
      Purchase Agreement as Exhibit A.

     

    “Warrant
      Shares” means the shares of Common Stock issuable upon the exercise of the
      Warrants.

     

    2.      Registration.

     

      
      (a)               Registration
      Statements.

     

    (i)               Promptly
      following the closing of the purchase and sale of the securities contemplated
      by
      the Purchase Agreement (the “Closing Date”) but no later than thirty (30) days
      after the Closing Date (the “Filing Deadline”), the Company shall prepare and
      file with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is
      not
      then available to the Company, on such form of registration statement as is
      then
      available to effect a registration for resale of the Registrable Securities),
      covering the resale of the Registrable Securities in an amount at least equal
      to
      the Shares and the Warrant Shares.  Subject to any SEC comments, such
      Registration Statement shall include the plan of distribution attached hereto
      as
Exhibit A.  Such Registration Statement also shall cover, to
      the extent allowable under the 1933 Act and the rules promulgated thereunder
      (including Rule 416), such indeterminate number of additional shares of Common
      Stock resulting from stock splits, stock dividends or similar transactions
      with
      respect to the Registrable Securities.  Such Registration Statement
      shall not include any shares of Common Stock or other securities for the account
      of any other holder without the prior written consent of the Required
      Investors.  The Registration Statement (and each amendment or
      supplement thereto, and each request for acceleration of effectiveness thereof)
      shall be provided in accordance with Section 3(c) to the Investors and their
      counsel prior to its filing or other submission.  If a Registration
      Statement covering the Registrable Securities is not filed with the SEC on
      or
      prior to the Filing Deadline, the Company will make pro rata payments to each
      Investor, as liquidated damages and not as a penalty, in an amount equal to
      1.0%
      of the aggregate amount invested by such Investor for each 30-day period or
      pro
      rata for any portion thereof following the Filing Deadline for which no
      Registration Statement is filed with respect to the Registrable
      Securities.  Such payments shall constitute the Investors’ exclusive
      monetary remedy for such events, but shall not affect the right of the Investors
      to seek injunctive relief.  Such payments shall be made to each
      Investor in cash.

     

    (ii)               Additional
      Registrable Securities.  Upon the written demand of any Investor
      and upon any change in the Warrant Price (as defined in the Warrant) such that
      additional shares of Common Stock become issuable upon the exercise of the
      Warrants (the “Additional Shares”), the Company shall prepare and file with the
      SEC one or more Registration

     


    
      
         

      

      
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    Statements
      on Form S-3 or amend the Registration Statement filed pursuant to clause (i)
      above, if such Registration Statement has not previously been declared effective
      (or, if Form S-3 is not then available to the Company, on such form of
      registration statement as is then available to effect a registration for resale
      of the Additional Shares) covering the resale of the Additional Shares, but
      only
      to the extent the Additional Shares are not at the time covered by an effective
      Registration Statement.  Subject to any SEC comments, such
      Registration Statement shall include the plan of distribution attached hereto
      as
Exhibit A.  Such Registration Statement also shall cover, to
      the extent allowable under the 1933 Act and the rules promulgated thereunder
      (including Rule 416), such indeterminate number of additional shares of Common
      Stock resulting from stock splits, stock dividends or similar transactions
      with
      respect to the Additional Shares.  Such Registration Statement shall
      not include any shares of Common Stock or other securities for the account
      of
      any other holder without the prior written consent of the Required
      Investors.  The Registration Statement (and each amendment or
      supplement thereto, and each request for acceleration of effectiveness thereof)
      shall be provided in accordance with Section 3(c) to the Investors and their
      counsel prior to its filing or other submission.  If a Registration
      Statement covering the Additional Shares is required to be filed under this
      Section 2(a)(ii) and is not filed with the SEC within 20 days of the request
      of
      any Investor or upon the occurrence of any of the events specified in this
      Section 2(a)(ii), the Company will make pro rata payments to each Investor,
      as
      liquidated damages and not as a penalty, in an amount equal to 1.0% of the
      aggregate amount invested by such Investor for each 30-day period or pro rata
      for any portion thereof following the date by which such Registration Statement
      should have been filed for which no Registration Statement is filed with respect
      to the Additional Shares.  Such payments shall constitute the
      Investors’ exclusive monetary remedy for such events, but shall not affect the
      right of the Investors to seek injunctive relief.  Such payments shall
      be made to each Investor in cash.

     

    (b)              Expenses.  The
      Company will pay all expenses associated with each registration, including
      filing and printing fees, the Company’s counsel and accounting fees and
      expenses, costs associated with clearing the Registrable Securities for sale
      under applicable state securities laws, listing fees, fees and expenses of
      one
      counsel to the Investors not to exceed $5,000 and the Investors’ reasonable
      expenses in connection with the registration, but excluding discounts,
      commissions, fees of underwriters, selling brokers, dealer managers or similar
      securities industry professionals with respect to the Registrable Securities
      being sold.

     

    (c)              Effectiveness.

     

       
      (i)               The
      Company shall use commercially reasonable efforts to have the Registration
      Statement declared effective as soon as practicable.  The Company
      shall notify the Investors by facsimile or e-mail as promptly as practicable,
      and in any event, within twenty-four (24) hours, after any Registration
      Statement is declared effective and shall simultaneously provide the Investors
      with copies of any related Prospectus to be used in connection with the sale
      or
      other disposition of the securities covered thereby.  If (A)(x) a
      Registration Statement covering the Registrable Securities is not declared
      effective by the SEC prior to the earlier of (i) five (5) Business Days after
      the SEC shall have informed the Company that no review of the Registration
      Statement will be made or that the SEC has no further comments on the
      Registration Statement or (ii) the 90th day after
      the
      Closing Date (the 120th day if
      the SEC
      reviews the Registration Statement) or (y) a Registration Statement covering
      Additional Shares is not

     


    
      
         

      

      
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    declared
      effective by the SEC within ninety (90) days following the time such
      Registration Statement was required to be filed pursuant to Section 2(a)(ii)
      (120 days if the SEC reviews the Registration Statement), or (B) after a
      Registration Statement has been declared effective by the SEC, sales cannot
      be
      made pursuant to such Registration Statement for any reason (including without
      limitation by reason of a stop order, or the Company’s failure to update the
      Registration Statement), but excluding any Allowed Delay (as defined below)
      or
      the inability of any Investor to sell the Registrable Securities covered thereby
      due to market conditions and except as excused pursuant to subparagraph (ii)
      below, then the Company will make pro rata payments to each Investor, as
      liquidated damages and not as a penalty, in an amount equal to 1.0% of the
      aggregate amount invested by such Investor for each 30- day period or pro rata
      for any portion thereof following the date by which such Registration Statement
      should have been effective (the “Blackout Period”).  Such payments
      shall constitute the Investors’ exclusive monetary remedy for such events, but
      shall not affect the right of the Investors to seek injunctive
      relief.  The amounts payable as liquidated damages pursuant to this
      paragraph shall be paid monthly within three (3) Business Days of the last
      day
      of each month following the commencement of the Blackout Period until the
      termination of the Blackout Period.  Such payments shall be made to
      each Investor in cash.

     

      
      (ii)               For
      not more than twenty (20) consecutive days or for a total of not more than
      forty-five (45) days in any twelve (12) month period, the Company may delay
      the
      disclosure of material non-public information concerning the Company, by
      suspending the use of any Prospectus included in any registration contemplated
      by this Section containing such information, the disclosure of which at the
      time
      is not, in the good faith opinion of the Company, in the best interests of
      the
      Company (an “Allowed Delay”); provided, that the Company shall promptly (a)
      notify the Investors in writing of the existence of (but in no event, without
      the prior written consent of an Investor, shall the Company disclose to such
      Investor any of the facts or circumstances regarding) material non-public
      information giving rise to an Allowed Delay, (b) advise the Investors in writing
      to cease all sales under the Registration Statement until the end of the Allowed
      Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay
      as promptly as practicable.

     

    3.      Company
      Obligations.  The Company will use commercially reasonable efforts
      to effect the registration of the Registrable Securities in accordance with
      the
      terms hereof, and pursuant thereto the Company will, as expeditiously as
      possible:

     

    (a)                use
      commercially reasonable efforts to cause such Registration Statement to become
      effective and to remain continuously effective for a period that will terminate
      upon the earliest of (i) the date on which all Registrable Securities covered
      by
      such Registration Statement as amended from time to time, have been sold, (ii)
      the date on which all Registrable Securities covered by such Registration
      Statement may be sold pursuant to Rule 144(k) and (iii) the third anniversary
      of
      the initial effective date (the “Effectiveness Period”) and advise the Investors
      in writing when the Effectiveness Period has expired;

     

    (b)                prepare
      and file with the SEC such amendments and post-effective amendments to the
      Registration Statement and the Prospectus as may be necessary to keep the
      Registration Statement effective for the Effectiveness Period and to comply
      with
      the provisions

     


    
      
         

      

      
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    of
      the
      1933 Act and the 1934 Act with respect to the distribution of all of the
      Registrable Securities covered thereby;

     

    (c)               provide
      copies to and permit counsel designated by the Investors to review each
      Registration Statement and all amendments and supplements thereto no fewer
      than
      three (3) Business Days prior to their filing with the SEC and not file any
      document to which such counsel reasonably objects and cause its officers and
      directors, counsel, and independent auditors to respond to such inquiries as
      shall be necessary, in the opinion of counsel to the Investors, to conduct
      a
      reasonable investigation within the meaning of the 1933 Act;

     

    (d)               furnish
      to the Investors and their legal counsel (i) promptly after the same is prepared
      and publicly distributed, filed with the SEC, or received by the Company (but
      not later than two (2) Business Days after the filing date, receipt date or
      sending date, as the case may be) one (1) copy of any Registration Statement
      and
      any amendment thereto, each preliminary prospectus and Prospectus and each
      amendment or supplement thereto, and each letter written by or on behalf of
      the
      Company to the SEC or the staff of the SEC, and each item of correspondence
      from
      the SEC or the staff of the SEC, in each case relating to such Registration
      Statement (other than any portion of any thereof which contains information
      for
      which the Company has sought confidential treatment), and (ii) such number
      of
      copies of a Prospectus, including a preliminary prospectus, and all amendments
      and supplements thereto and such other documents as each Investor may reasonably
      request in order to facilitate the disposition of the Registrable Securities
      owned by such Investor that are covered by the related Registration
      Statement;

     

    (e)               use
      commercially reasonable efforts to (i) prevent the issuance of any stop order
      or
      other suspension of effectiveness and, (ii) if such order is issued, obtain
      the
      withdrawal of any such order at the earliest possible moment;

     

    (f)                prior
      to any public offering of Registrable Securities, use commercially reasonable
      efforts to register or qualify or cooperate with the Investors and their counsel
      in connection with the registration or qualification of such Registrable
      Securities for offer and sale under the securities or blue sky laws of such
      jurisdictions requested by the Investors and do any and all other commercially
      reasonable acts or things necessary or advisable to enable the distribution
      in
      such jurisdictions of the Registrable Securities covered by the Registration
      Statement; provided, however, that the Company shall not
      be required in connection therewith or as a condition thereto to (i) qualify
      to
      do business in any jurisdiction where it would not otherwise be required to
      qualify but for this Section 3(f), (ii) subject itself to general taxation
      in
      any jurisdiction where it would not otherwise be so subject but for this Section
      3(f), or (iii) file a general consent to service of process in any such
      jurisdiction;

     

    (g)                 
          use commercially reasonable efforts to cause all
      Registrable Securities covered by a Registration Statement to be listed on
      each
      securities exchange, interdealer quotation system or other market on which
      similar securities issued by the Company are then listed;

     

    (h)               
            immediately notify the Investors, at any
      time prior to the end of the Effectiveness Period, upon discovery that, or
      upon
      the happening of any event as a result of

     


    
      
         

      

      
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    which,
      the Prospectus includes an untrue statement of a material fact or omits to
      state
      any material fact required to be stated therein or necessary to make the
      statements therein not misleading in light of the circumstances then existing,
      and promptly prepare, file with the SEC and furnish to such holder a supplement
      to or an amendment of such Prospectus as may be necessary so that such
      Prospectus shall not include an untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading in light of the circumstances then existing;
      and

     

    (i)                  
          otherwise use commercially reasonable efforts to comply
      with all applicable rules and regulations of the SEC under the 1933 Act and
      the
      1934 Act, including, without limitation, Rule 172 under the 1933 Act, file
      any
      final Prospectus, including any supplement or amendment thereof, with the SEC
      pursuant to Rule 424 under the 1933 Act, promptly inform the Investors in
      writing if, at any time during the Effectiveness Period, the Company does not
      satisfy the conditions specified in Rule 172 and, as a result thereof, the
      Investors are required to deliver a Prospectus in connection with any
      disposition of Registrable Securities and take such other actions as may be
      reasonably necessary to facilitate the registration of the Registrable
      Securities hereunder; and make available to its security holders, as soon as
      reasonably practicable, but not later than the Availability Date (as defined
      below), an earnings statement covering a period of at least twelve (12) months,
      beginning after the effective date of each Registration Statement, which
      earnings statement shall satisfy the provisions of Section 11(a) of the 1933
      Act, including Rule 158 promulgated thereunder (for the purpose of this
      subsection 3(i), “Availability Date” means the 45th day following the end of the
      fourth fiscal quarter that includes the effective date of such Registration
      Statement, except that, if such fourth fiscal quarter is the last quarter of
      the
      Company’s fiscal year, “Availability Date” means the 90th day after the end of
      such fourth fiscal quarter).

     

     
       
(j)                  
    With a view to making available to the Investors the
      benefits of Rule 144 (or its successor rule) and any other rule or regulation
      of
      the SEC that may at any time permit the Investors to sell shares of Common
      Stock
      to the public without registration, the Company covenants and agrees
      to:  (i) make and keep public information available, as those terms
      are understood and defined in Rule 144, until the earlier of (A) six months
      after such date as all of the Registrable Securities may be resold pursuant
      to
      Rule 144(k) or any other rule of similar effect (assuming a cashless exercise
      of
      the Warrants) or (B) such date as all of the Registrable Securities shall have
      been resold; (ii) file with the SEC in a timely manner all reports and other
      documents required of the Company under the 1934 Act; and (iii) furnish to
      each
      Investor upon request, as long as such Investor owns any Registrable Securities,
      (A) a written statement by the Company that it has complied with the reporting
      requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual
      Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other
      information as may be reasonably requested in order to avail such Investor
      of
      any rule or regulation of the SEC that permits the selling of any such
      Registrable Securities without registration.

    


    4.      Due
      Diligence Review; Information.  The Company shall make available,
      during normal business hours, for inspection and review by the Investors,
      advisors to and representatives of the Investors (who may or may not be
      affiliated with the Investors and who are reasonably acceptable to the Company),
      all financial and other records, all SEC Filings (as defined in the Purchase
      Agreement) and other filings with the SEC, and all other corporate

     


    
      
         

      

      
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    documents
      and properties of the Company as may be reasonably necessary for the purpose
      of
      such review, and cause the Company’s officers, directors and employees, within a
      reasonable time period, to supply all such information reasonably requested
      by
      the Investors or any such representative, advisor or underwriter in connection
      with such Registration Statement (including, without limitation, in response
      to
      all questions and other inquiries reasonably made or submitted by any of them),
      prior to and from time to time after the filing and effectiveness of the
      Registration Statement for the sole purpose of enabling the Investors and such
      representatives, advisors and underwriters and their respective accountants
      and
      attorneys to conduct initial and ongoing due diligence with respect to the
      Company and the accuracy of such Registration Statement.

     

    The
      Company shall not disclose material
      nonpublic information to the Investors, or to advisors to or representatives
      of
      the Investors, unless prior to disclosure of such information the Company
      identifies such information as being material nonpublic information and provides
      the Investors, such advisors and representatives with the opportunity to accept
      or refuse to accept such material nonpublic information for review and any
      Investor wishing to obtain such information enters into an appropriate
      confidentiality agreement with the Company with respect thereto.

     

    5.      Obligations
      of the Investors.

     

    (a)                     Each
      Investor shall furnish in writing to the Company such information regarding
      itself, the Registrable Securities held by it and the intended method of
      disposition of the Registrable Securities held by it, as shall be reasonably
      required to effect the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request.  At least five (5) Business Days prior to the
      first anticipated filing date of any Registration Statement, the Company shall
      notify each Investor of the information the Company requires from such Investor
      if such Investor elects to have any of the Registrable Securities included
      in
      the Registration Statement.  An Investor shall provide such
      information to the Company at least two (2) Business Days prior to the first
      anticipated filing date of such Registration Statement if such Investor elects
      to have any of the Registrable Securities included in the Registration
      Statement.

     

    (b)                     Each
      Investor, by its acceptance of the Registrable Securities agrees to cooperate
      with the Company as reasonably requested by the Company in connection with
      the
      preparation and filing of a Registration Statement hereunder, unless such
      Investor has notified the Company in writing of its election to exclude all
      of
      its Registrable Securities from such Registration Statement.

     

    (c)                     Each
      Investor agrees that, upon receipt of any notice from the Company of either
      (i)
      the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
      happening of an event pursuant to Section 3(h) hereof, such Investor will
      immediately discontinue disposition of Registrable Securities pursuant to the
      Registration Statement covering such Registrable Securities, until the Investor
      is advised by the Company that such dispositions may again be made.

     


    
      
         

      

      
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    6.      Indemnification.

     

    (a)                     Indemnification
      by the Company.  The Company will indemnify and hold harmless each
      Investor and its officers, directors, members, employees and agents, successors
      and assigns, and each other person, if any, who controls such Investor within
      the meaning of the 1933 Act, against any losses, claims, damages or liabilities,
      joint or several, to which they may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon: (i) any untrue statement or
      alleged untrue statement of any material fact contained in any Registration
      Statement, any preliminary Prospectus or final Prospectus, or any amendment
      or
      supplement thereof; (ii) any blue sky application or other document executed
      by
      the Company specifically for that purpose or based upon written information
      furnished by the Company filed in any state or other jurisdiction in order
      to
      qualify any or all of the Registrable Securities under the securities laws
      thereof (any such application, document or information herein called a “Blue Sky
      Application”); (iii) the omission or alleged omission to state in a Blue Sky
      Application a material fact required to be stated therein or necessary to make
      the statements therein not misleading; (iv) any violation by the Company or
      its
      agents of any rule or regulation promulgated under the 1933 Act applicable
      to
      the Company or its agents and relating to action or inaction required of the
      Company in connection with such registration; or (v) any failure to register
      or
      qualify the Registrable Securities included in any such Registration Statement
      in any state where the Company or its agents has affirmatively undertaken or
      agreed in writing that the Company will undertake such registration or
      qualification on an Investor’s behalf and will reimburse such Investor, and each
      such officer, director or member and each such controlling person for any legal
      or other expenses reasonably incurred by them in connection with investigating
      or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case if and
      to
      the extent that any such loss, claim, damage or liability arises out of or
      is
      based upon an untrue statement or alleged untrue statement or omission or
      alleged omission so made in conformity with information furnished by such
      Investor or any such controlling person in writing specifically for use in
      such
      Registration Statement or Prospectus.

     

    (b)                     Indemnification
      by the Investors.  Each Investor agrees, severally but not
      jointly, to indemnify and hold harmless, to the fullest extent permitted by
      law,
      the Company, its directors, officers, employees, stockholders and each person
      who controls the Company (within the meaning of the 1933 Act) against any
      losses, claims, damages, liabilities and expense (including reasonable attorney
      fees) resulting from any untrue statement of a material fact or any omission
      of
      a material fact required to be stated in the Registration Statement or
      Prospectus or preliminary Prospectus or amendment or supplement thereto or
      necessary to make the statements therein not misleading, to the extent, but
      only
      to the extent that such untrue statement or omission is contained in any
      information furnished in writing by such Investor to the Company specifically
      for inclusion in such Registration Statement or Prospectus or amendment or
      supplement thereto.  In no event shall the liability of an Investor be
      greater in amount than the dollar amount of the proceeds (net of all expense
      paid by such Investor in connection with any claim relating to this Section
      6
      and the amount of any damages such Investor has otherwise been required to
      pay
      by reason of such untrue statement or omission) received by such Investor upon
      the sale of the Registrable Securities included in the Registration Statement
      giving rise to such indemnification obligation.

     


    
      
         

      

      
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    (c)                     Conduct
      of Indemnification Proceedings.  Any person entitled to
      indemnification hereunder shall (i) give prompt notice to the indemnifying
      party
      of any claim with respect to which it seeks indemnification and (ii) permit
      such
      indemnifying party to assume the defense of such claim with counsel reasonably
      satisfactory to the indemnified party; provided that any person entitled
      to indemnification hereunder shall have the right to employ separate counsel
      and
      to participate in the defense of such claim, but the fees and expenses of such
      counsel shall be at the expense of such person unless (a) the indemnifying
      party
      has agreed to pay such fees or expenses, or (b) the indemnifying party shall
      have failed to assume the defense of such claim and employ counsel reasonably
      satisfactory to such person or (c) in the reasonable judgment of any such
      person, based upon written advice of its counsel, a conflict of interest exists
      between such person and the indemnifying party with respect to such claims
      (in
      which case, if the person notifies the indemnifying party in writing that such
      person elects to employ separate counsel at the expense of the indemnifying
      party, the indemnifying party shall not have the right to assume the defense
      of
      such claim on behalf of such person); and provided, further, that
      the failure of any indemnified party to give notice as provided herein shall
      not
      relieve the indemnifying party of its obligations hereunder, except to the
      extent that such failure to give notice shall materially adversely affect the
      indemnifying party in the defense of any such claim or litigation.  It
      is understood that the indemnifying party shall not, in connection with any
      proceeding in the same jurisdiction, be liable for fees or expenses of more
      than
      one separate firm of attorneys at any time for all such indemnified
      parties.  No indemnifying party will, except with the consent of the
      indemnified party, consent to entry of any judgment or enter into any settlement
      that does not include as an unconditional term thereof the giving by the
      claimant or plaintiff to such indemnified party of a release from all liability
      in respect of such claim or litigation.

     

    (d)                     Contribution.  If
      for any reason the indemnification provided for in the preceding paragraphs
      (a)
      and (b) is unavailable to an indemnified party or insufficient to hold it
      harmless, other than as expressly specified therein, then the indemnifying
      party
      shall contribute to the amount paid or payable by the indemnified party as
      a
      result of such loss, claim, damage or liability in such proportion as is
      appropriate to reflect the relative fault of the indemnified party and the
      indemnifying party, as well as any other relevant equitable
      considerations.  No person guilty of fraudulent misrepresentation
      within the meaning of Section 11(f) of the 1933 Act shall be entitled to
      contribution from any person not guilty of such fraudulent
      misrepresentation.  In no event shall the contribution obligation of a
      holder of Registrable Securities be greater in amount than the dollar amount
      of
      the proceeds (net of all expenses paid by such holder in connection with any
      claim relating to this Section 6 and the amount of any damages such holder
      has
      otherwise been required to pay by reason of such untrue or alleged untrue
      statement or omission or alleged omission) received by it upon the sale of
      the
      Registrable Securities giving rise to such contribution obligation.

     

    7.      Miscellaneous.

     

    (a)                     Amendments
      and Waivers.  This Agreement may be amended only by a writing
      signed by the Company and the Required Investors.  The Company may
      take any action herein prohibited, or omit to perform any act herein required
      to
      be performed by it, only if the Company shall have obtained the written consent
      to such amendment, action or omission to act, of the Required
      Investors.

     


    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    


    (b)                     Notices.  All
      notices and other communications provided for or permitted hereunder shall
      be
      made as set forth in Section 9.4 of the Purchase Agreement.

     

    (c)                     Assignments
      and Transfers by Investors.  The provisions of this Agreement
      shall be binding upon and inure to the benefit of the Investors and their
      respective successors and assigns.  An Investor may transfer or
      assign, in whole or from time to time in part, to one or more persons its rights
      hereunder in connection with the transfer of Registrable Securities by such
      Investor to such person, provided that such Investor complies with all laws
      applicable thereto and provides written notice of assignment to the Company
      promptly after such assignment is effected.

     

    (d)                     Assignments
      and Transfers by the Company.  This Agreement may not be assigned
      by the Company (whether by operation of law or otherwise) without the prior
      written consent of the Required Investors, provided, however, that the Company
      may assign its rights and delegate its duties hereunder to any surviving or
      successor corporation in connection with a merger or consolidation of the
      Company with another corporation, or a sale, transfer or other disposition
      of
      all or substantially all of the Company’s assets to another corporation, without
      the prior written consent of the Required Investors, after notice duly given
      by
      the Company to each Investor.

     

    (e)                     Benefits
      of the Agreement.  The terms and conditions of this Agreement
      shall inure to the benefit of and be binding upon the respective permitted
      successors and assigns of the parties.  Nothing in this Agreement,
      express or implied, is intended to confer upon any party other than the parties
      hereto or their respective successors and assigns any rights, remedies,
      obligations, or liabilities under or by reason of this Agreement, except as
      expressly provided in this Agreement.

     

    (f)                     Counterparts;
      Faxes.  This Agreement may be executed in two or more
      counterparts, each of which shall be deemed an original, but all of which
      together shall constitute one and the same instrument.  This Agreement
      may also be executed via facsimile (including via electronic transmission of
      scanned documents), which shall be deemed an original.

     

    (g)                     Titles
      and Subtitles.  The titles and subtitles used in this Agreement
      are used for convenience only and are not to be considered in construing or
      interpreting this Agreement.

     

    (h)                     Severability.  Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof but shall be interpreted as if it were written so as to be
      enforceable to the maximum extent permitted by applicable law, and any such
      prohibition or unenforceability in any jurisdiction shall not invalidate or
      render unenforceable such provision in any other jurisdiction.  To the
      extent permitted by applicable law, the parties hereby waive any provision
      of
      law which renders any provisions hereof prohibited or unenforceable in any
      respect.

     


    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    


    (i)                     Further
      Assurances.  The parties shall execute and deliver all such
      further instruments and documents and take all such other actions as may
      reasonably be required to carry out the transactions contemplated hereby and
      to
      evidence the fulfillment of the agreements herein contained.

     

    (j)                     Entire
      Agreement.  This Agreement is intended by the parties as a final
      expression of their agreement and intended to be a complete and exclusive
      statement of the agreement and understanding of the parties hereto in respect
      of
      the subject matter contained herein.  This Agreement supersedes all
      prior agreements and understandings between the parties with respect to such
      subject matter.

     

    (k)                     Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.  This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof.  Each of the parties hereto irrevocably submits to the
      exclusive jurisdiction of the courts of the State of New York located in New
      York County and the United States District Court for the Southern District
      of
      New York for the purpose of any suit, action, proceeding or judgment relating
      to
      or arising out of this Agreement and the transactions contemplated
      hereby.  Service of process in connection with any such suit, action
      or proceeding may be served on each party hereto anywhere in the world by the
      same methods as are specified for the giving of notices under this
      Agreement.  Each of the parties hereto irrevocably consents to the
      jurisdiction of any such court in any such suit, action or proceeding and to
      the
      laying of venue in such court.  Each party hereto irrevocably waives
      any objection to the laying of venue of any such suit, action or proceeding
      brought in such courts and irrevocably waives any claim that any such suit,
      action or proceeding brought in any such court has been brought in an
      inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
      REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
      REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
      WAIVER.

     


    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, the parties have
      executed this Agreement or caused their duly authorized officers to execute
      this
      Agreement as of the date first above written.

     

    
      	
              The
                Company:

            	
              TERABEAM,
                INC.

            
	 	 
	 	 
	 	 
	 	
              By:
                /s/ Robert E. Fitzgerald

            
	 	
              Name:
                Robert E. Fitzgerald

            
	 	
              Title:
                Chief Executive Officer

            


    

    



    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    


    


    
      	 	
              The
                Investors:

            
	 	 
	 	
              SRB
                GREENWAY CAPITAL, L.P.

            
	 	 
	 	
              By:  SRB
                Management, L.P., General Partner

            
	 	 
	 	
              By:  BC
                Advisors, L.L.C., General Partner

            
	 	 
	 	 
	 	 
	 	
              By:  /s/
                Steven R. Becker

            
	 	
              Name:  Steven
                R. Becker

            
	 	
              Title:  Member

            
	 	 
	 	 
	 	
              SRB
                GREENWAY CAPITAL (Q.P.), L.P.

            
	 	 
	 	
              By:  SRB
                Management, L.P., General Partner

            
	 	 
	 	
              By:  BC
                Advisors, L.L.C., General Partner

            
	 	 
	 	 
	 	 
	 	
              By:  /s/
                Steven R. Becker

            
	 	
              Name:  Steven
                R. Becker

            
	 	
              Title:  Member

            
	 	 
	 	 
	 	
              SRB
                GREENWAY OFFSHORE

            
	 	
              OPERATING
                FUND, L.P.

            
	 	 
	 	
              By:  SRB
                Management, L.P., General Partner

            
	 	 
	 	
              By:  BC
                Advisors, L.L.C., General Partner

            
	 	 
	 	 
	 	 
	 	
              By:  /s/
                Steven R. Becker

            
	 	
              Name:  Steven
                R. Becker

            
	 	
              Title:  Member

            
	 	
               

            


    

    



    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    


    


    


    
      	 	
              Lloyd
                I. Miller, III

               

               

              /s/
                Lloyd I. Miller, III

            
	 	
              Lloyd
                I. Miller, III

            
	 	 
	 	 
	 	
              MILFAM
                II, LP

            
	 	 
	 	
              By:
                Milfam LLC, its General Partner

            
	 	 
	 	 
	 	 
	 	
              By:
                /s/ Lloyd I. Miller, III

            
	 	
              Name:  Lloyd
                I. Miller, III

            
	 	
              Title:  Manager

            


    


    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    


    


    
      	 	
              CLARION
                CAPITAL CORP.

            
	 	 
	 	 
	 	 
	 	
              By:
                /s/ Morton A. Cohen

            
	 	
              Name:  Morton
                A. Cohen

            
	 	
              Title:  Chairman

            
	 	 
	 	
              CLARION
                WORLD OFFSHORE FUND, LTD.

            
	 	 
	 	 
	 	 
	 	
              By:
                /s/ Morton A. Cohen

            
	 	
              Name:  Morton
                A. Cohen

            
	 	
              Title:  Investment
                Manager

            
	 	 
	 	
              THE
                AMENDED & RESTATED DECLARATION OF

            
	 	
              TRUST
                OF MORTON A. COHEN, DATED MAY 9, 2005

            
	 	 
	 	 
	 	 
	 	
              By:
                /s/ Morton A. Cohen

            
	 	
              Name:  Morton
                A. Cohen

            
	 	
              Title:  Trustee

            
	 	 
	 	
              SHAKER
                INVESTMENTS TOWER, L.P.

            
	 	 
	 	 
	 	 
	 	
              By:
                /s/ Edward Hemmelgarn

            
	 	
              Name:  Edward
                Hemmelgarn

            
	 	
              Title:  Managing
                Member

            


    

    


    



    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    


    Exhibit
      A

    


    Plan
      of Distribution

    


    The
      selling stockholders, which as used
      herein includes donees, pledgees, transferees or other successors-in-interest
      selling shares of common stock or interests in shares of common stock received
      after the date of this prospectus from a selling stockholder as a gift, pledge,
      partnership distribution or other transfer, may, from time to time, sell,
      transfer or otherwise dispose of any or all of their shares of common stock
      or
      interests in shares of common stock on any stock exchange, market or trading
      facility on which the shares are traded or in private
      transactions.  These dispositions may be at fixed prices, at
      prevailing market prices at the time of sale, at prices related to the
      prevailing market price, at varying prices determined at the time of sale,
      or at
      negotiated prices.

    


    The
      selling stockholders may use any
      one or more of the following methods when disposing of shares or interests
      therein:

    


    -
      ordinary brokerage transactions and
      transactions in which the broker-dealer solicits purchasers;

    


    -
      block trades in which the
      broker-dealer will attempt to sell the shares as agent, but may position and
      resell a portion of the block as principal to facilitate the
      transaction;

    


    -
      purchases by a broker-dealer as
      principal and resale by the broker-dealer for its account;

    


    -
      an exchange distribution in
      accordance with the rules of the applicable exchange;

    


    -
      privately negotiated
      transactions;

    


    -
      short sales effected after the date
      the registration statement of which this Prospectus is a part is declared
      effective by the SEC, subject to the restrictions on short selling contained
      in
      the purchase agreement relating to the placement of the shares covered
      hereby;

    


    -
      through the writing or settlement of
      options or other hedging transactions, whether through an options exchange
      or
      otherwise;

    


    -
      broker-dealers may agree with the
      selling stockholders to sell a specified number of such shares at a stipulated
      price per share; and

    


    -
      a combination of any such methods of
      sale.

    


    The
      selling stockholders may, from time
      to time, pledge or grant a security interest in some or all of the shares of
      common stock owned by them and, if they default in the performance of their
      secured obligations, the pledgees or secured parties may offer and sell the
      shares of common stock, from time to time, under this prospectus, or under
      an
      amendment to this prospectus under Rule 424(b)(3) or other applicable provision
      of the Securities Act amending the


    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    


    list
      of
      selling stockholders to include the pledgee, transferee or other successors
      in
      interest as selling stockholders under this prospectus.  The selling
      stockholders also may transfer the shares of common stock in other
      circumstances, in which case the transferees, pledgees or other successors
      in
      interest will be the selling beneficial owners for purposes of this
      prospectus.

    


    In
      connection with the sale of our
      common stock or interests therein, the selling stockholders may enter into
      hedging transactions with broker-dealers or other financial institutions, which
      may in turn engage in short sales of the common stock in the course of hedging
      the positions they assume.  The selling stockholders may also sell
      shares of our common stock short and deliver these securities to close out
      their
      short positions, or loan or pledge the common stock to broker-dealers that
      in
      turn may sell these securities.  The selling stockholders may also
      enter into option or other transactions with broker-dealers or other financial
      institutions or the creation of one or more derivative securities which require
      the delivery to such broker-dealer or other financial institution of shares
      offered by this prospectus, which shares such broker-dealer or other financial
      institution may resell pursuant to this prospectus (as supplemented or amended
      to reflect such transaction).

    


    The
      aggregate proceeds to the selling
      stockholders from the sale of the common stock offered by them will be the
      purchase price of the common stock less discounts or commissions, if
      any.  Each of the selling stockholders reserves the right to accept
      and, together with their agents from time to time, to reject, in whole or in
      part, any proposed purchase of common stock to be made directly or through
      agents.  We will not receive any of the proceeds from this offering.
      Upon any exercise of the warrants by payment of cash, however, we will receive
      the exercise price of the warrants.

    


    The
      selling stockholders also may
      resell all or a portion of the shares in open market transactions in reliance
      upon Rule 144 under the Securities Act of 1933, provided that they meet the
      criteria and conform to the requirements of that rule.

    


    The
      selling stockholders and any
      underwriters, broker-dealers or agents that participate in the sale of the
      common stock or interests therein may be "underwriters" within the meaning
      of
      Section 2(11) of the Securities Act.  Any discounts, commissions,
      concessions or profit they earn on any resale of the shares may be underwriting
      discounts and commissions under the Securities Act.  Selling
      stockholders who are "underwriters" within the meaning of Section 2(11) of
      the
      Securities Act will be subject to the prospectus delivery requirements of the
      Securities Act.

    


    To
      the extent required, the shares of
      our common stock to be sold, the names of the selling stockholders, the
      respective purchase prices and public offering prices, the names of any agents,
      dealer or underwriter, any applicable commissions or discounts with respect
      to a
      particular offer will be set forth in an accompanying prospectus supplement
      or,
      if appropriate, a post-effective amendment to the registration statement that
      includes this prospectus.

    


    In
      order to comply with the securities
      laws of some states, if applicable, the common stock may be sold in these
      jurisdictions only through registered or licensed brokers or
      dealers.  In addition, in some states the common stock may not be sold
      unless it has been registered or


    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    


    qualified
      for sale or an exemption from registration or qualification requirements is
      available and is complied with.

    


    We
      have advised the selling
      stockholders that the anti-manipulation rules of Regulation M under the Exchange
      Act may apply to sales of shares in the market and to the activities of the
      selling stockholders and their affiliates.  In addition, to the extent
      applicable we will make copies of this prospectus (as it may be supplemented
      or
      amended from time to time) available to the selling stockholders for the purpose
      of satisfying the prospectus delivery requirements of the Securities
      Act.  The selling stockholders may indemnify any broker-dealer that
      participates in transactions involving the sale of the shares against certain
      liabilities, including liabilities arising under the Securities
      Act.

    


    We
      have agreed to indemnify the selling
      stockholders against liabilities, including liabilities under the Securities
      Act
      and state securities laws, relating to the registration of the shares offered
      by
      this prospectus.

    


    We
      have agreed with the selling
      stockholders to keep the registration statement of which this prospectus
      constitutes a part effective until the earlier of (1) such time as all of the
      shares covered by this prospectus have been disposed of pursuant to and in
      accordance with the registration statement, (2) the date on which the shares
      may
      be sold pursuant to Rule 144(k) of the Securities Act and (3) the third
      anniversary of the initial effective date of the registration statement of
      which
      this prospectus constitutes a part.

    


     

    -18-