Document:

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                                                                     EXHIBIT 4.3

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE TRANSFERRED, ASSIGNED, SOLD
OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL, IN
FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED BECAUSE OF AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.

     THIS DEBENTURE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE DEBENTURE IN THE
EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY
REDEMPTION OR CONVERSION OF ANY PORTION OF THIS DEBENTURE, THE OUTSTANDING
PRINCIPAL AMOUNT REPRESENTED BY THIS DEBENTURE MAY BE LESS THAN THE PRINCIPAL
AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.

     No. 1                                                       $1,000,000

     Dated: October 19, 2001

                             CONSTELLATION 3D, INC.

                  5% CONVERTIBLE DEBENTURE DUE OCTOBER 1, 2006

     This Debenture ("Debenture") is one of a duly authorized issue of
Debentures of CONSTELLATION 3D, INC. (the "Company"), a corporation duly
organized and existing under the laws of the State of Delaware, designated as
the Company's 5% Convertible Debentures Due October 1, 2006, in an aggregate
principal amount of One Million Dollars (U.S. $1,000,000) (the "Debentures").

     For Value Received, the Company promises to pay to DEAM CONVERTIBLE
ARBITRAGE FUND LTD., the initial holder hereof, or its order (including
successors-in-interest, the "Holder"), the principal sum of One Million Dollars
(U.S. $1,000,000) on October 1, 2006 (the "Maturity Date") and to pay interest
on the principal sum outstanding under this Debenture ("Outstanding Principal
Amount"), at the rate of 5% per annum, compounded semi-annually, payable in
arrears on the last day of March and September of each year and on the Maturity
Date (each an "Interest Payment Date"), with the first such payment due on March
31, 2002. Interest shall accrue daily commencing on the date hereof and shall
continue until payment in full of all amounts due under this Debenture. The
interest so payable will be paid to the person in whose name this Debenture is
registered on the records of the Company regarding registration and transfers of
the Debenture (the "Debenture Register"). Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Debenture Purchase
Agreement dated as of October 19, 2001 entered into by the Company and the
Holder (the "Purchase Agreement").

     The interest on this Debenture is payable, at the Company's option:

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         (a) in such coin or currency of the United States which as of the time
of payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder hereof from time to time; or

         (b) subject, to the conditions set forth below, by paying the amount in
shares of Common Stock, with certificates for such shares (the "Interest
Shares") to be delivered to the Holder on the Interest Payment Date. The number
of Interest Shares shall be determined by dividing the interest amount by 95% of
the average Market Price for shares of Common Stock for the five (5) Trading
Days immediately preceding the Interest Payment Date ("Interest Conversion
Price"). The Company's ability to pay interest with Interest Shares is subject
to the condition that there is Effective Registration (as defined in of the
Purchase Agreement) with respect to the Interest Shares and all the shares of
Common Stock issuable upon conversation of this Debenture.

          In the event that the Interest Shares are not delivered to Holder
within 3 Trading Days of the Interest Payment Date the interest shall be
automatically due and payable in cash pursuant to paragraph (a) above, or, in
the sole option of the Holder, shall be added to the Outstanding Principal
Amount of this Debenture.

     Except as herein provided for interest, all amounts payable under this
Debenture shall be paid as provided in clause (a) above.

     The Company shall exercise its option regarding its payment of interest
hereunder by delivering an irrevocable statement in the form of Exhibit 1 hereto
                                                                ---------
("Payment Statement") at least five (5) Trading Days prior to the applicable
Interest Payment Date. Each Payment Statement shall be applicable for the
immediately succeeding Interest Payment Date only. If the Payment Statement is
not timely delivered to the Holder as provided herein, the payment with respect
to such Interest Payment Date shall be in cash.

     The Company will pay any principal due and all accrued and unpaid interest
due upon this Debenture to the person that is the Holder of this Debenture on
the records of the Company as of the applicable Interest Payment Date and
addressed to such Holder at the last address appearing on the Debenture
Register.

     The Outstanding Principal Amount and interest due hereunder shall bear
interest, from and after the day following the occurrence and during the
continuance of an Event of Default hereunder, at the per annum rate equal to the
lower of the Citibank Prime Rate per annum plus six percent (6%) and the highest
rate permitted by law (the "Default Rate"). The Holder shall have the option to
receive such interest as cash interest, Interest Shares or by adding such
interest to the Outstanding Principal Amount of this Debenture, and shall
exercise its option by delivering to the Company a statement in a form
substantially similar to the Payment Statement which shall be effective until
the Holder delivers an additional statement to the contrary. The interest shall
be payable on demand.

     Subject to applicable law, any interest otherwise payable that is not paid
for any applicable period because it would exceed the highest rate permitted by
law shall become

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payable whenever the payment thereof, together with other interest due for any
such subsequent period, would not exceed such highest legal rate.

     The Holder of this Debenture is entitled to certain rights and remedies
pursuant to the Purchase Agreement and the Registration Rights Agreement. This
Debenture does not provide voting rights to the Holder.

     This Debenture is subject to the following additional provisions:

     1.  Exchange. The Debentures are exchangeable for an equal aggregate
         --------
principal amount of Debentures of different denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange.

     2.  Transfers. This Debenture may be transferred or exchanged in the United
         ---------
States only in compliance with the 1933 Act and applicable state securities
laws, or applicable exemptions therefrom. Prior to due presentment for transfer
of this Debenture, the Company may treat the person in whose name this Debenture
is duly registered on the Company's Debenture Register as the owner hereof for
the purpose of receiving payment as herein provided, whether or not this
Debenture is overdue.

     3.  Definitions. For purposes hereof the following definitions shall apply:
         -----------

         "1933 Act" shall mean the Securities Act of 1933, as amended.

         "Affiliate" shall mean, with respect to any person or entity, another
person or entity that directly or indirectly controls, is controlled by, or is
under common control with that person or entity.

         "Change in Control Transaction" shall mean any transaction pursuant to
which (i) the Company sells, leases, transfers, conveys or otherwise disposes
of, in one or more related transactions, all or substantially all of its assets
to any person or entity other than existing stockholders and their Affiliates;
(ii) any person or group (within the meaning of Section 13(d) of the Exchange
Act), together with its affiliates and associates (as such terms are defined in
Rule 405 under the 1933 Act), obtains beneficial ownership of or is deemed to
beneficially own (as described in Rule 13d-3 under the Exchange Act; provided,
that for this purpose the right to acquire beneficial ownership, even if not
within 60 days, shall be deemed to convey beneficial ownership) in excess of 50%
of the Company's voting power; or (iii) there is a replacement of more than
one-half of the members of the Company's Board of Directors which is not
approved by those individuals who are members of the Company's Board of
Directors on the date thereof.

         "Closing Date" shall mean the date of the original issuance of this
Debenture.

         "Common Stock" shall mean the common stock, par value $0.00001, of the
Company.

         "Conversion Amount" shall mean the sum of (i) the Outstanding
Principal Amount, (ii) accrued and unpaid interest not previously added to the
Outstanding Principal

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Amount pursuant to the terms of this Debenture, and (iii) any default or delay
payments owing under the Transaction Documents.

          "Conversion Price" shall mean $.8513, as adjusted pursuant to this
Debenture and the Purchase Agreement.

          "Conversion Ratio" means, at any time, a fraction, of which the
numerator is the Conversion Amount (or such portion thereof that is being
submitted for conversion, redeemed or repurchased), and of which the denominator
is the then applicable Conversion Price.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

          "Market Price" shall mean the price of one share of Common Stock
determined as follows:

              (i)   If the Common Stock is included for quotation on the Nasdaq
                    National Market System or the Nasdaq Small-Cap Market, the
                    last reported "bid" price thereon on the date of valuation;

              (ii)  If clause (i) does not apply and the Common Stock is listed
                    on NYSE or the American Stock Exchange, the closing bid
                    price on such exchange on the date of valuation;

              (iii) If neither clause (i) nor clause (ii) applies but the
                    Common Stock is quoted in the over-the-counter market,
                    another recognized exchange, on the pink sheets or bulletin
                    board, (A) the last sales price on the date of valuation or,
                    if there is no such sales price, (B) the mean between the
                    last reported "bid" and "asked" prices thereof on the date
                    of valuation; and

              (iv)  If neither clause (i), clause (ii) or clause (iii) above
                    applies, the market value as determined by a nationally
                    recognized investment banking firm or other nationally
                    recognized financial advisor retained by the Company and
                    reasonably acceptable to the Holder for such purpose, taking
                    into consideration, among other factors, the earnings
                    history, book value and prospects for the Company, and the
                    prices at which shares of Common Stock recently have been
                    traded. Such determination shall be conclusive and binding
                    on all persons absent manifest error.

          "NYSE" shall mean the New York Stock Exchange.

          "Principal Market" shall mean the Nasdaq National Market System, or if
the Common Stock ceases to be included for quotation thereon, such other
securities market on which the Common Stock is principally listed, quoted or
traded.

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          "Public Announcement" shall mean any public filing with the Securities
and Exchange Commission, any press release by either the Company or a third
party or any other public statement.

          "Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of October 19, 2001 executed by the Company and the Holder in
connection with the Purchase Agreement.

          "Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.

          "Trading Day" shall mean a day on which the Common Stock is traded on
the Principal Market (or any similar organization or agency succeeding such
market or exchange's functions of reporting prices).

          "VWAP" shall mean the daily volume weighted average price of the
Common Stock on the Principal Market between the hours of 9:30 a.m. and 4:00
p.m. on a Trading Day (as reported by Bloomberg Financial L.P. using the AQR
function; provided that such function captures all trades on the Principal
Market that occur during the hours specified above).

     4.   Change in Control, Etc.
          ----------------------

          (a) If at any time there occurs a Change in Control Transaction,
Holder shall be entitled, at its sole option, to have the Company redeem this
Debenture in whole or in part at a price equal to 115% of the Conversion Amount
(the "Redemption Price"). Such Holder shall be entitled to make such election at
any time after a Public Announcement of a pending Change in Control Transaction
and up to ten days after the effective date of the Change in Control
Transaction.

          (b) If at any time there occurs a Public Announcement of a pending
Change in Control Transaction in which the public shareholders of the Company
are to receive consideration, a portion of which is capital stock or any
security convertible into capital stock of another entity in exchange for shares
of Common Stock ("Change in Control Consideration"), then prompt provision shall
be made in a manner reasonably acceptable to the Holders so that each Holder
shall have the right (in addition to its other rights under this Debenture):

               (i)  following the closing of the transaction covered by such
                    Public Announcement, to convert its Debentures into the
                    Change in Control Consideration that such Holder would have
                    been or would be entitled to receive had it converted all of
                    its Debentures into Common Stock (notwithstanding any
                    restrictions imposed upon the Holder pursuant to this
                    Debenture or the Purchase Agreement in its ability to do so)
                    immediately prior to the Change in Control Transaction at
                    the Change in Control Conversion Price, and acquired the
                    Change in Control Consideration as a shareholder of the
                    Company, subject to adjustment thereafter pursuant to the
                    terms of the Debentures; or

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               (ii) following such Public Announcement, convert its Debentures
                    into Common Stock at the Change in Control Conversion Price.

               The "Change in Control Conversion Price" shall mean a price,
subject to adjustments in the same manner as adjustments to the Conversion
Price, equal to the least of: (i) the then existing Conversion Price; (ii) 100%
of the lowest Market Price for any of the five Trading Days immediately
preceding the Public Announcement of the Change in Control Transaction; and
(iii) 85% of the lowest Market Price on the five Trading Days immediately
following the Public Announcement. The Market Price shall be appropriately
adjusted for stock splits, reverse splits, stock dividends and other dilutive
events applicable to all stockholders, including those events occurring in
connection with the Change in Control Transaction, that occur during the Trading
Days referred to above.

               Notwithstanding the above, if there is a Public Announcement that
such Change in Control Transaction has been definitively terminated or
abandoned, the Change in Control Conversion Price shall be effective for
conversions of Debentures only until the end of the 10th Trading Day following
such Public Announcement, and the Conversion Price following such time shall be
determined as if such Change in Control Transaction had not been publicly
announced.

     5.   Conversion at the Option of the Holder. The Holder of this Debenture
          --------------------------------------
shall have the following conversion rights:

          (a) Holder's Right to Convert. The Holder shall have the right, at its
              -------------------------
option, at any time and from time to time to convert the Conversion Amount under
this Debenture in whole or in part by delivering to the Company a fully executed
notice of conversion in the form of the conversion notice attached hereto as
Exhibit 2 (the "Conversion Notice"), which may be transmitted by facsimile.
---------
Notwithstanding anything to the contrary herein, this Debenture and the
Conversion Amount hereunder shall not be convertible into Common Stock to the
extent that such conversion would result in the Holder hereof exceeding the
limitations contained in, or otherwise violating the provisions of, Section 11
below or the 20% Cap (as defined in the Purchase Agreement).

          (b) Common Stock Issuance Upon Conversion.
              -------------------------------------

               (i)  Conversion Date Procedures. Upon conversion of this
                    --------------------------
                    Debenture, the Conversion Amount hereunder shall be
                    converted into such number of fully paid, validly issued and
                    non-assessable shares of Common Stock, free of any liens,
                    claims and encumbrances, as is determined by dividing the
                    Conversion Amount being converted by the then applicable
                    Conversion Price. The date of any Conversion Notice
                    hereunder shall be referred to herein as the "Conversion
                    Date". If a conversion hereunder cannot be effected in full
                    for any reason, or if the Holder is converting less than all
                    of the entire Conversion Amount hereunder pursuant to a
                    Conversion Notice, the Company shall promptly deliver to the
                    Holder (but no later than three Trading Days after the
                    Conversion Date) a

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                    Debenture for such Conversion Amount as has not been
                    converted if this Debenture has been surrendered to the
                    Company for partial conversion. The Holder shall not be
                    required to physically surrender this Debenture to the
                    Company unless the full Conversion Amount is being
                    converted. The Holder and the Company shall maintain records
                    showing the Conversion Amount and the Outstanding Principal
                    Amount so converted and the dates of such conversions or
                    shall use such other method, reasonably satisfactory to the
                    Holder and the Company, so as not to require physical
                    surrender of this Debenture upon each such conversion.

              (ii)  Stock Certificates or DWAC. The Company will deliver to the
                    --------------------------
                    Holder not later than three Trading Days after the
                    Conversion Date, a certificate or certificates representing
                    the number of shares of Common Stock being acquired upon the
                    conversion of this Debenture. In lieu of delivering physical
                    certificates representing the shares of Common Stock
                    issuable upon conversion of this Debenture, if the Company's
                    transfer agent is participating in the Depository Trust
                    Company ("DTC") Fast Automated Securities Transfer ("FAST")
                    program, upon request of the Holder, the Company shall cause
                    its transfer agent to electronically transmit such shares
                    issuable upon conversion to the Holder (or its designee), by
                    crediting the account of the Holder's (or such designee's)
                    prime broker with DTC through its Deposit Withdrawal Agent
                    Commission system. If in the case of any conversion
                    hereunder, such certificate or certificates are not
                    delivered to or as directed by the Holder by the third
                    Trading Day after the Conversion Date, the Holder shall be
                    entitled by written notice to the Company at any time on or
                    before its receipt of such certificate or certificates
                    thereafter, to rescind such conversion, in which event the
                    Company shall immediately return this Debenture if it was
                    tendered for conversion. If the Company fails to deliver to
                    the Holder such certificate or certificates pursuant to this
                    Section in accordance herewith prior to the fifth Trading
                    Day after the Conversion Date, the Company shall pay to the
                    Holder, in cash, an amount equal to 2% of the Conversion
                    Amount per month, payable on such fifth Trading Day and at
                    the expiration of each thirty-day period thereafter.

          (c) Forced Conversion.
              -----------------

              (i)   Subject to subsection (ii) below, after the Registration
                    Statement (as defined in the Registration Rights Agreement)
                    is declared effective, in the event that the VWAP is greater
                    than 200% of the then effective Conversion Price during any
                    period of at least twenty (20) consecutive Trading Days
                    (such 20 consecutive Trading Day period being referred to as
                    the "Measuring Period"),

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                      the Company shall have the right to compel holders of
                      Debentures (on a pro rata basis among holders of
                      Debentures) to convert all or a portion of their
                      Debentures at the Conversion Price in effect on the
                      conversion date; provided, however, that (1) the Company
                                       --------
                      shall provide at least 5 Trading Days prior irrevocable
                      written notice to all holders of its election hereunder,
                      specifying the conversion date ("Forced Conversion Date")
                      and the aggregate principal amount of Debentures to be
                      converted, (2) the VWAP shall equal or exceed the
                      Conversion Price at the time of such election notice and
                      on each Trading Day thereafter through and including the
                      Forced Conversion Date, (3) the Company's election notice
                      shall have been received by the Holder no later than 2
                      Trading Days following the end of the applicable Measuring
                      Period, and (4) holders of Debentures may continue to
                      convert any or all of their Debentures after receiving the
                      Company's election notice under this Section (which
                      conversions shall be applied against the aggregate
                      principal amount of Debentures required to be converted on
                      the Forced Conversion Date). Such forced conversion shall
                      be subject to and governed by all the provisions relating
                      to voluntary conversion of the Debentures contained
                      herein.

                 (ii) Conditions Precedent. Notwithstanding the preceding
                      --------------------
                      subsection (i), no holder of Debentures shall be obligated
                      to convert any portion of the Debentures held by such
                      holder on the Forced Conversion Date unless and until each
                      of the following conditions has been satisfied or exists,
                      each of which shall be a condition precedent to any such
                      forced conversion of Debentures (waivable by any holder
                      with respect to such holder's Debentures only):

                 (A)  There shall be Effective Registration at all times from
                      the first Trading Day of the applicable Measuring Period
                      through and including the Forced Conversion Date;

                 (B)  There shall not have occurred a Change in Control
                      Transaction or the public announcement of a pending Change
                      in Control Transaction which has not been abandoned or
                      terminated; and

                 (C)  The total number of Common Shares issuable hereunder
                      (regardless of any limitations contained herein) shall
                      have been duly authorized and reserved for issuance.

        6.   Stock Splits; Stock Dividends; Adjustments; Reorganizations.
             -----------------------------------------------------------

             (a) Stock Splits, Stock Dividends, etc. If the Company, at any time
                 ----------------------------------
while the Debentures are outstanding, shall (i) pay a stock dividend or
otherwise make a distribution or distributions on any equity securities
(including investments or securities convertible into or exchangeable for such
equity securities) in shares of Common Stock, (ii) subdivide the

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outstanding shares of Common Stock into a larger number of shares, (iii) combine
outstanding shares of Common Stock into a smaller number of shares, then the
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section 6(a) shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of an issuance,
subdivision or combination.

             (b) Common Stock Issuances. In the event that the Company issues or
                 ----------------------
sells any shares of Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities, or any warrants
or other rights to subscribe for or to purchase or any options for the purchase
of its Common Stock or any such convertible securities (other than (A) shares or
options issued or which may be issued pursuant to (i) the Company's current or
future employee or director option plans or shares issued upon exercise of
options, warrants, rights or convertible notes or debentures outstanding on the
date of the Agreement and listed in the Company's most recent periodic report
filed under the Exchange Act, (ii) arrangements with the Purchaser, (iii)
acquisitions of other entities by the Company, or (iv) settlements of the
Company's existing accounts payable to its trade creditors; provided, that the
                                                            --------
amounts due under such settled accounts payable shall not exceed $100,000 per
trade creditor or (B) sales of Common Stock (in one or more tranches to the same
or different purchasers) with an aggregate Market Price of less than $100,000 at
the time they are sold) at an effective exercise price per share ("Effective
Price") which is less than the then current Market Price or the Conversion Price
then in effect, then the Conversion Price in effect immediately prior to such
issue or sale shall be reduced effective concurrently with such issue or sale to
an amount determined by multiplying such Conversion Price by a fraction (x) the
numerator of which is the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at the Market Price or Conversion
Price then in effect, as the case may be; and (y) the denominator of which is
the number of shares of Common Stock of the Company outstanding immediately
after such issue or sale.

             For the purposes of the foregoing adjustment, in the case of the
issuance of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("Convertible Securities"), the maximum number of shares of Common Stock
issuable upon exercise, exchange or conversion of such Convertible Securities
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Convertible Securities.

             For purposes of the Section 6(b), if an event occurs which triggers
more than one of the above adjustment provisions, then only one adjustment shall
be made and the calculation method that yields the greatest downward adjustment
in the Conversion Price shall be used.

             (c) Reclassification. In the event that at any time or from time to
                 ----------------
time after the Closing Date, the Common Stock issuable upon the conversion of
the Debentures is changed

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into the same or a different number of shares of any class or classes of stock,
whether by merger, consolidation, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or reorganization provided for elsewhere in this Section 6), then and as a
condition to each such event, provision shall be made in a manner reasonably
acceptable to the Holders of Debentures so that each Holder of Debentures shall
have the right thereafter to convert such Debenture into the kind of stock
receivable upon such recapitalization, reclassification or other change by
holders of shares of Common Stock, all subject to further adjustment as provided
herein. In such event, the formula set forth herein for conversion shall be
equitably adjusted to reflect such change in number of shares or, if shares of a
new class of stock are issued, to reflect the market price of the class or
classes of stock (applying the same factors used in determining the Conversion
Price) issued in connection with the above described transaction.

             (d) Notice. Whenever any element of the Conversion Price is
                 ------
adjusted pursuant to this Section 6, the Company shall promptly mail to each
Holder of Debentures a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.

             (e) Record Date. In the event of any taking by the Company of a
                 -----------
record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any security or right convertible or exchangeable into or
entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
the Company shall deliver to each Holder of Debentures at least 10 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution, security
or right and the amount and character of such dividend, distribution, security
or right.

             (f) Distributions. If the Company, at any time while the Debentures
                 -------------
are outstanding, shall distribute to all holders of Shares of Common Stock
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security (excluding those referred to in Section 6(c) above)
then the Holder shall participate in such distribution on a pro rata basis with
the holders of shares of Common Stock entitled to receive such dividend,
distribution, issuance, subdivision or combination as if the Holder held that
number of shares of Common Stock that the Holder would have been entitled to
receive hereunder upon conversion of the Debenture (without regard to Section 11
or the 20% Cap (as defined in the Purchase Agreement)) immediately prior to the
record date fixed for determination of shareholders entitled to receive such
dividend, at the Conversion Price then in existence.

             (g) Additional Debentures. If the Company, at any time while the
                 ---------------------
Debentures are outstanding, issues one or more additional Debentures pursuant to
the Purchase Agreement (regardless of whether such issuance is made to the
Holder of this Debenture) with a conversion price that is lower than the then
current Conversion Price of this Debenture, the Conversion Price of this
Debenture shall be automatically reduced to equal the lowest conversion price of
such additional Debentures.

                                       10

<PAGE>

      7.   Fractional Shares. No fractional shares of Common Stock or scrip
           -----------------
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up to the nearest whole share.

      8.   Reservation of Stock Issuable Upon Conversion.
           ---------------------------------------------

           (a) Reservation Requirement. The Company covenants that it will at
               -----------------------
all times reserve and keep available out of its authorized and unissued Common
Stock solely for the purpose of the payment of Interest Shares and issuance upon
conversion of the Debentures as herein provided, free from preemptive rights or
any other present or contingent purchase rights of persons other than the
Holders of the Debentures, 125% of the maximum number of shares of Common Stock
as shall be issuable (taking into account the adjustments of Section 6 hereof)
upon the conversion of all of the Debentures pursuant hereto. The Company
covenants that all shares of Common Stock that shall be so issuable shall upon
issuance, be duly and validly authorized, issued and fully paid and
nonassessable.

           (b) Deficiency. If the Company does not have a sufficient number of
               ----------
shares of Common Stock available to satisfy the Company's obligations to a
Holder of Debentures upon receipt of a Conversion Notice or is otherwise unable
to issue such shares of Common Stock in accordance with the terms of this
Agreement such Holder shall be entitled to the rights and remedies set forth in
the Registration Rights Agreement.

      9.   No Reissuance of the Debenture. No Debentures acquired by the Company
           ------------------------------
by reason of conversion, redemption, purchase, exchange or otherwise shall be
reissued, and all such Debentures shall be retired.

      10.  No Impairment. The Company shall not knowingly and intentionally take
           -------------
any action which would impair the rights and privileges of the Debentures set
forth herein or the Holders thereof.

      11.  Limitations on Holder's Right to Convert.
           ----------------------------------------

           (a) Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by the Holder upon
conversion of this Debenture pursuant to the terms hereof shall not exceed a
number that, when added to the total number of shares of Common Stock deemed
beneficially owned by such Holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the holder's
right to convert, exercise or purchase similar to the limitation set forth
herein), together with all shares of Common Stock deemed beneficially owned at
such time (other than by virtue of the ownership of securities or rights to
acquire securities that have limitations on the right to convert, exercise or
purchase similar to the limitation set forth herein) by the Holder's
"affiliates" (as defined in Rule 144 of the 1933 Act) ("Aggregation Parties")
that would be aggregated for purposes of determining whether a group under
Section 13(d) of the Exchange Act, exists, would exceed 9.99% of the total
issued and outstanding shares of the Common Stock (the "Restricted Ownership
Percentage"). Each Holder shall have the right (i) at any time and from time to
time to reduce its Restricted Ownership Percentage immediately upon notice to
the Company

                                       11

<PAGE>

and (ii) (subject to waiver) at any time and from time to time, to increase its
Restricted Ownership Percentage immediately in the event of the announcement as
pending or planned, of a Change of Control Transaction.

           (b) The Company's obligation to issue shares of Common Stock which
would exceed such limits referred to in this Section 11 shall be suspended to
the extent necessary until such time, if any, as shares of Common Stock may be
issued in compliance with such restrictions.

      12.  Obligations Absolute. No provision of this Debenture, the Purchase
           --------------------
Agreement or the Registration Rights Agreement shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest and delay payments on, this Debenture or to issue
shares of Common Stock in response to a Conversion Notice at the time, place and
rate, and in the manner, herein prescribed, except that if the Company disputes
the Holder's calculation of the number of shares to be issued upon a conversion,
the Company shall deliver to Holder the number of shares not in dispute and the
parties shall have the calculation dispute resolved by a third party mutually
acceptable to them.

      13.  Waivers of Demand, Etc. The Company hereby expressly and irrevocably
           ----------------------
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and will be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.

      14.  Replacement Debenture. In the event that any Holder notifies the
           ---------------------
Company that its Debenture(s) have been lost, stolen or destroyed, replacement
Debenture(s) identical in all respects to the original Debenture(s) (except for
registration number and Outstanding Principal Amount, if different than that
shown on the original Debenture(s)), shall be issued to the Holder, provided
that the Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such lost, stolen or destroyed Debenture.

      15.  Issue Taxes.  The Company shall pay any and all issue and other taxes
           -----------
(other than income and similar taxes) that may be payable in respect of any
issue or delivery of Common Shares on the conversion of this Debenture.

      16.  Defaults.  The occurrence of one or more of the following shall be
           --------
deemed an "Event of Default" under this Debenture:

           (a)  the Company shall default in the payment of (i) interest on this
                Debenture or any other Debenture issued pursuant to the Purchase
                Agreement, and such default shall continue for five Trading Days
                after notice of such default is received by the Company, or (ii)
                the principal of this Debenture or any other Debenture issued
                pursuant to the Purchase Agreement; or

           (b)  the Company shall fail to deliver the proper amount of Common
                Shares upon the conversion of this Debenture or any other
                Debenture issued

                                       12

<PAGE>

                           pursuant to the Purchase Agreement to the Holder
                           within five Trading Days following the Conversion
                           Date; or

                   (c)     any of the representations or warranties made by the
                           Company in any of the Transaction Documents, or in
                           any certificate or financial or other statements
                           heretofore or hereafter furnished by or on behalf of
                           the Company in connection herewith or therewith shall
                           be false or misleading at the time made; or

                   (d)     the Company shall fail to materially perform or
                           observe any covenant, provision, term, obligation or
                           agreement in the Transaction Documents and such
                           failure shall continue uncured for a period of 20
                           calendar days after notice of such failure; or

                   (e)     the Company shall (1) admit in writing its inability
                           to pay its debts generally as they mature; (2) make
                           an assignment for the benefit of creditors or
                           commence proceedings for its dissolution; or (3)
                           apply for or consent to the appointment of a trustee,
                           liquidator or receiver for it or for a substantial
                           part of its property or business; or

                   (f)     a trustee, liquidator or receiver shall be appointed
                           for the Company or for a substantial part of its
                           property or business without its consent and shall
                           not be discharged within forty-five (45) days after
                           such appointment; or

                   (g)     any governmental agency or any court of competent
                           jurisdiction at the instance of any governmental
                           agency shall assume custody or control of the whole
                           or any substantial portion of the properties or
                           assets of the Company and shall not be dismissed
                           within forty-five (45) days thereafter; or

                   (h)     the Company shall, in one or a series of
                           transactions, sell or otherwise transfer all or
                           substantially all of its assets; or

                   (i)     bankruptcy, reorganization, insolvency or liquidation
                           proceedings or other proceedings, or relief under any
                           bankruptcy law or any law for the relief of debt
                           shall be instituted by or against the Company and, if
                           instituted against the Company shall not be dismissed
                           within forty-five (45) days after such institution,
                           or the Company shall by any action or answer approve
                           of, consent to, or acquiesce in any such proceedings
                           or admit to any material allegations of, or default
                           in answering a petition filed in any such proceeding;
                           or

                   (j)     the Company shall be in default of any other of its
                           indebtedness exceeding $500,000, or any other event
                           shall have occurred such that as a result thereof the
                           holders thereof shall have accelerated or shall have
                           the right (upon the giving of notice, the passage of
                           time, or both) to accelerate such indebtedness; or

                                       13

<PAGE>

                   (k)     any money judgment, writ or warrant of attachment, or
                           similar process in excess of $500,000 in the
                           aggregate shall be entered or filed against the
                           Company or any of its properties or other assets and
                           shall remain unpaid, unvacated, unbonded and unstayed
                           for a period of forty-five (45) days; or

                   (l)     the Public Announcement of a "going private"
                           transaction under Rule 13e-3 promulgated pursuant to
                           the Exchange Act; or

                   (m)     the Public Announcement of a tender offer by the
                           Company under Rule 13e-4 promulgated pursuant to the
                           Exchange Act;

           17.     Remedies. If an Event of Default occurs and is continuing
                   --------
with respect to this Debenture, the Holder may declare this Debenture and all
other Debentures held by the Holder, to be due and payable immediately, except
that in the case of an Event of Default arising from events described in clauses
(e), (f), (g) and (i) of Section 16, this Debenture shall become immediately due
and payable without further action or notice. In the event of any Event of
Default, the amount due and owing to the Holder under this Debenture shall be
the greater of (1) the Redemption Price and (2) the product of (A) the higher of
(i) the highest Market Price during the five Trading Days immediately preceding
the event giving rise to the Event of Default and (ii) the highest Market Price
during the period commencing with the five Trading Days immediately preceding
the Holder's acceleration of this Debenture and ending on (and including) the
date on which the amount due and owing under this Debenture is paid to the
Holder, and (B) the Conversion Ratio. In either case the Company shall pay
interest on such amount in cash at the Default Rate to the Holder if such amount
is not paid in full within seven calendar days of Holder's request. The remedies
under this Debenture shall be cumulative.

           18.     Savings Clause. In case any provision of this Debenture is
                   --------------
held by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby, and such provision shall remain
effective in all other jurisdictions.

           19.     Entire Agreement. This Debenture and the agreements referred
                   ----------------
to in this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof. Neither
this Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.

           20.     Assignment, Etc. The Holder (but not the Company) may without
                   ---------------
notice, transfer or assign this Debenture or any interest herein and may
mortgage, encumber or transfer any of its rights or interest in and to this
Debenture or any part hereof and, without limitation, each assignee, transferee
and mortgagee (which may include any affiliate of the Holder) shall have the
right to transfer or assign its interest. Each such assignee, transferee and
mortgagee shall have all of the rights of the Holder under this Debenture. The
Company agrees that after receipt by the Company of written notice of assignment
from the Holder or from the Holder's assignee, all principal, interest and other
amounts which are then and thereafter become due under this

                                       14

<PAGE>

Debenture shall be paid to such assignee at the place of payment designated in
such notice. This Debenture shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of the Holder and its successors and
assigns.

     21.  No Waiver. No failure on the part of the Holder to exercise, and no
          ---------
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.

     22.  Certificate. The Company shall, upon the written request at any time
          -----------
of any Holder of Debentures, furnish or cause to be furnished to such Holder a
certificate prepared by the chief financial officer of Company setting forth any
adjustments or readjustments of the Conversion Price pursuant to this Debenture
and any right of the Holder to receive additional shares of Common Stock or any
other equity or debt security pursuant to Section 6.

     23.  Notices. The Company shall distribute to the Holders of Debentures
          -------
copies of all notices, materials, annual and quarterly reports, proxy
statements, information statements and any other documents distributed generally
to the holders of shares of Common Stock, at such times and by such method as
such documents are distributed to such holders of Common Stock, but shall not
directly or indirectly provide material non-public information to the Holder
without such Holder's prior written consent.

     24.  Specific Enforcement. The Company agrees that irreparable damage would
          --------------------
occur in the event that any of the provisions of this Debenture were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Holders of Debentures shall be entitled to
specific performance, injunctive relief or other equitable remedies to prevent
or cure breaches of the provisions of this Debenture and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled under agreement, at law or in equity.

     25.  Miscellaneous. Unless otherwise provided herein, any notice or other
          -------------
communication to a party hereunder shall be sufficiently given if in writing and
personally delivered, facsimiled or mailed to said party by certified mail,
return receipt requested, at its address set forth herein or such other address
as either may designate for itself in such notice to the other and
communications shall be deemed to have been received when delivered personally
or, if sent by mail or facsimile, then when actually received by the party to
whom it is addressed. Whenever the sense of this Debenture requires, words in
the singular shall be deemed to include the plural and words in the plural shall
be deemed to include the singular. Paragraph headings are for convenience only
and shall not affect the meaning of this document.

     26.  GOVERNING LAW; CONSENT TO JURISDICTION. THIS DEBENTURE SHALL BE
          --------------------------------------
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS TO BE EXECUTED AND PERFORMED ENTIRELY WITHIN
SUCH STATE. THE COMPANY (I) HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE

                                       15

<PAGE>

STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES
OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS DEBENTURE
AND (II) HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
SUCH COURT, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM OR THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER. THE
COMPANY CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY MAILING A COPY THEREOF TO SUCH PARTY AS PROVIDED HEREIN AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

                             Signature Page Follows

                                       16

<PAGE>

     In Witness Whereof, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

                                             CONSTELLATION 3D, INC.

                                             By: /s/ Leonardo Berezowsky
                                                 -----------------------
                                             Name:
                                             Title: Chief Financial Officer

         Signature page to 5% Convertible Debenture of CONSTELLATION 3D, INC.

                                       17

<PAGE>

                                    EXHIBIT 1

                                PAYMENT STATEMENT
                                -----------------

Date:______________

To: [Name of Holder of Debenture] ("Holder")

Re:      5% Convertible Debenture Due October 1, 2006 ("Debenture") of
CONSTELLATION 3D, INC. (the "Company"), in the Outstanding Principal Amount of
U.S.$_______________.

                  The Company hereby irrevocably elects to pay interest on the
Debenture, for the Interest Payment Date indicated below, in the following
manner (the Company should check its selection):

                  ____ cash interest; or

                  ____ Interest Shares.

                  Interest Payment Date: _________________________

                  If the selection above is Interest Shares, the Company should
fill in the following:

                  Interest Conversion Price:                U.S.$
                                                                 _______________

                  Number of Interest Shares:                U.S.$
                                                                 _______________

                  The Company hereby certifies to the Holder, its successors and
assigns that the Outstanding Principal Amount due under the Debenture after
delivery of this Payment Statement equals the amount indicated below.
Capitalized terms used in this Payment Statement and not otherwise defined shall
have the meaning ascribed thereto in the Debenture.

Outstanding Principal Amount
Due Under the Debenture
After Delivery
Of This Payment Statement:          U.S.$__________________

<PAGE>

                  IN WITNESS WHEREOF, this Payment Statement has been duly
executed and delivered on the date first written above.

                                             CONSTELLATION 3D, INC.

                                             By:
                                             Name:
                                             Title:

                                       19

<PAGE>

                                    EXHIBIT 2

                      (To be Executed by Registered Holder
                         in order to Convert Debenture)

                                CONVERSION NOTICE
                                       FOR
                  5% CONVERTIBLE DEBENTURE DUE OCTOBER 1, 2006

         The undersigned, as Holder of the 5% Convertible Debenture Due October
1, 2006 of CONSTELLATION 3D, INC. (the "Company"), in the outstanding principal
amount of U.S. $_____________ (the "Debenture"), hereby elects to convert that
portion of the outstanding principal amount of the Debenture shown on the next
page into shares of Common Stock, $0.00001 par value per share (the "Common
Stock"), of the Company according to the conditions of the Debenture, as of the
date written below. The undersigned hereby requests that share certificates for
the Common Stock to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any.

Conversion Information:              NAME OF HOLDER:
                                                   ______________________

                             By:
                                _________________________________________
                                     Print Name:
                                     Print Title:

                                     Print Address of Holder:

                                     ____________________________________

                                     ____________________________________

                                     Issue Common Stock to:
                                                            _____________
                                     at:
                                        _________________________________

                                     Electronically transmit and credit
                                     Common Stock to:
                                                        at:
                                     ____________________________________
                                     Date of Conversion

                THE COMPUTATION OF THE NUMBER OF COMMON SHARES TO
                  BE RECEIVED IS SET FORTH ON THE ATTACHED PAGE

<PAGE>

Page 2 to Conversion Notice for:__________________________________________
                                     (Name of Holder)

              COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
              -----------------------------------------------------
<TABLE>
<S>                                                                           <C>

A.       Outstanding Principal Amount converted:                               $_______
B.       Accrued, unpaid interest on Outstanding Principal Amount converted:   $_______
Total dollar amount converted (total of A + B)                                 $_______
                                                                               ========

Conversion Price                                                               $_______

Number of Shares of Common Stock   =    Total dollar amount converted       =  $
                                        -----------------------------          ________
                                           Conversion Price                    $

Number of shares of Common Stock   =    _____________________________
</TABLE>

If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for shares of Common Stock in the following amount(s):

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

Please issue and deliver _____ new Debenture(s) in the following amounts:

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________<PAGE>

                                                                     EXHIBIT 4.4

                          REGISTRATION RIGHTS AGREEMENT
                          -----------------------------

     This Registration Rights Agreement ("Agreement") is entered into as of
October 19, 2001 between Constellation 3D, Inc., a Delaware corporation (the
"Company") and each of the entities listed under "Purchasers" on the signature
page hereto (each a "Purchaser" and collectively the "Purchasers").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     Whereas, pursuant to that certain Debenture Purchase Agreement by and
between the Company and the Purchasers, dated as of October 19, 2001 (the
"Purchase Agreement"), the Company has agreed to sell and issue to the
Purchasers, and the Purchasers have agreed to purchase from the Company,
following the Company's satisfaction of certain conditions set forth in the
Purchase Agreement (i) an aggregate of $3,000,000 principal amount of the
Company's 5% Convertible Debentures due October 1, 2006 (the "Debentures"),
which Debentures shall be convertible into shares (the "Common Shares") of the
Company's common stock, par value $.00001 per share (the "Common Stock"); and
(ii) warrants (the "Warrants") to purchase shares of Common Stock (the "Warrant
Shares"); and

     Whereas, pursuant to the terms of, and in partial consideration for, the
Purchasers' agreement to enter into the Purchase Agreement, the Company has
agreed to provide the Purchasers with certain registration rights with respect
to the Common Shares and Warrant Shares.

     Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Purchasers agree as follows:

     1. Certain Definitions. Capitalized terms used herein and not otherwise
        -------------------
defined shall have the meaning ascribed thereto in the Purchase Agreement, the
Debentures and the Warrants. As used in this Agreement, the following terms
shall have the following respective meanings:

     "Approved Markets" shall have the meaning set forth in the Purchase
Agreement

     "Closing" and "Closing Date" shall have the meanings ascribed to such terms
in the Purchase Agreement.

     "Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

     "Conversion Amount" shall have the meaning ascribed to such term in the
Debentures.

     "Conversion Price" shall have the meaning ascribed to such term in the
Debentures.

<PAGE>

     "Conversion Price Adjustment" shall mean an adjustment to the Conversion
Price.

     "Conversion Ratio" shall have the meaning ascribed to such term in the
Debentures.

     "Delay Payment" shall mean a payment equal to 2% of the Conversion Amount
(as defined in the Debentures) of the Debentures held by the relevant Holder.

     "Effectiveness Deadline" shall have the meaning set forth in Section 2(a).

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Exercise Price" shall have the meaning ascribed to such term in the
Warrants.

     "Holder" and "Holders" shall mean the Purchaser or the Purchasers,
respectively, and any transferee of the Debentures, Warrants or Registrable
Securities which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement.

     "Interfering Events" shall have the meaning set forth in Section 2(b).

     "Market Price" shall have the meaning ascribed to such term in the
Debentures.

     "Premium Redemption Price" shall mean the following:

          (a) as to the Debentures, the greater of (i) 115% of the Conversion
Amount and (ii) the product of (A) the Conversion Ratio and (B) the greatest
Market Price during (I) the 5 Trading Days immediately preceding the event
giving rise to the redemption of the Debentures, and (II) the period commencing
with the 5 Trading Days immediately preceding the Holder's request for
redemption of such Debentures and ending on and including the date on which the
Premium Redemption Price with respect to such Debentures is actually paid to the
Holder;

          (b) as to the Warrants, 115% of the positive difference (if any)
between (i) the aggregate Exercise Price for the Warrant Shares covered by the
Warrants (without reference to any exercise limitation contained in the
Warrants) and (ii) the number of underlying Warrant Shares multiplied by the
greatest Market Price during (A) the 5 Trading Days immediately preceding the
event giving rise to the redemption of the Warrants, and (B) the period
commencing with the 5 Trading Days immediately preceding the Holder's request
for redemption of such Warrants and ending on and including the date on which
the Premium Redemption Price with respect to such Warrants is actually paid to
the Holder.

          (c) as to the Common Shares or Warrant Shares, 115% of the dollar
amount which is the product of (i) the number of shares to be redeemed, and (ii)
the greatest Market Price during (A) the 5 Trading Days immediately preceding
the event giving rise to the redemption of such securities, and (B) the period
commencing with the

                                        2

<PAGE>

5 Trading Days immediately preceding the Holder's request for redemption of such
securities and ending on and including the date on which the Premium Redemption
Price with respect to such securities is actually paid to the Holder

     "Put Notice" shall have the meaning set forth in Section 2(b)(i)(B).

     "Registrable Securities" shall mean: (a) the Common Shares issuable upon
the conversion of the Initial Debentures and the Additional Debenture (as such
terms are defined in the Purchase Agreement), the Warrant Shares (issued or
issuable) and any shares of Common Stock issued or issuable upon any stock
split, stock dividend, recapitalization or similar event with respect to the
Common Shares or Warrant Shares; (b) any securities issued or issuable to each
Holder upon the conversion, exercise or exchange of any Debentures, Warrants,
Common Shares or Warrant Shares; and (c) any other security of the Company
issued as a dividend or other distribution with respect to, conversion or
exchange of, or in replacement of, Registrable Securities.

     The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement by the SEC.

     "Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "Blue Sky"
fees and expenses and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).

     "Registration Statement" shall have the meaning set forth in Section 2(a).

     "Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for Holders not included within "Registration Expenses"
and if the Holders engage a third party underwriter for the purpose of
distributing Registrable Securities, the fees and expenses of such underwriting
and any additional expenses of an accountant incurred in order to obtain a
"comfort letter."

     2. Registration Requirements. The Company shall use its best efforts to
        -------------------------
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "Blue Sky" or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate

                                        3

<PAGE>

the sale or distribution of all the Registrable Securities in the manner
(including manner of sale) reasonably requested by the Holders and in all U.S.
jurisdictions. Such best efforts by the Company shall include the following:

          (a) The Company shall, as expeditiously as reasonably possible after
the Initial Closing Date:

               (i) But in any event by the earlier of (I) five Trading Days
          following the Additional Closing and (II) 60 calendar days after the
          Initial Closing Date, prepare and file a registration statement with
          the Commission on Form S-3 under the Securities Act (or in the event
          that the Company is ineligible to use such form, such other form as
          the Company is eligible to use under the Securities Act) covering the
          Registrable Securities (such registration statement, including any
          amendments or supplements thereto and prospectuses contained therein,
          is referred to herein as a "Registration Statement"), which
          Registration Statement, to the extent allowable under the Securities
          Act and the rules promulgated thereunder (including Rule 416), shall
          state that such Registration Statement also covers such number of
          additional shares of Common Stock as may become issuable to prevent
          dilution resulting from stock splits, stock dividends or similar
          events; provided, however, that Holders shall not be identified as
                  --------  -------
          "underwriters" in the Registration Statement, with respect to the sale
          of Registrable Securities. The number of shares of Common Stock
          initially included in such Registration Statement shall be no less
          than the sum of (A) 125% of the sum of the number of shares of Common
          Stock that as of the date of filing would be issuable upon conversion
          of the Initial Debentures and Additional Debentures (as if such
          Additional Debentures were issued as of such time) plus (B) 125% of
          the shares of Common Stock that would be issuable upon exercise of the
          Warrants in each case without regard to any limitation on the
          Purchaser's ability to convert or exercise such securities. The
          Company will use its best efforts to respond to any Commission
          comments on a Registration Statement within 7 business days of
          receipt. The Company shall use its best efforts to cause each
          Registration Statement to be declared effective as soon as
          practicable, and in any event within 90 days of filing. If a
          Registration Statement is not declared effective prior to the earliest
          of (x) 90 days after the Initial Closing Date, in the event that the
          Registration Statement is not reviewed by the SEC, or (y) within 5
          days of the SEC indicating it has no comments or no further comments
          with respect to such Registration Statement (the "Effectiveness
          Deadline"), then the provisions of Section 2(b)(i) below shall apply.
          The Company shall provide Holders and their legal counsel reasonable
          opportunity to review any such Registration Statement or amendment or
          supplement thereto prior to filing.

               (ii) Prepare and file with the SEC such amendments and
          supplements to such Registration Statement and the prospectus used in

                                        4

<PAGE>

          connection with such Registration Statement as may be necessary to
          comply with the provisions of the Securities Act with respect to the
          disposition of all securities covered by such Registration Statement
          in accordance with the intended methods of disposition by the seller
          thereof as set forth in the Registration Statement and notify the
          Holders of the filing and effectiveness of such Registration Statement
          and any amendments or supplements.

               (iii) After the registration, furnish to each Holder such numbers
          of copies of a current prospectus conforming with the requirements of
          the Securities Act, copies of the Registration Statement, any
          amendment or supplement thereto and any documents incorporated by
          reference therein and such other documents as such Holder may
          reasonably require in order to facilitate the disposition of
          Registrable Securities owned by such Holder.

               (iv)  Use its best efforts to register and qualify the securities
          covered by such Registration Statement under such other securities or
          "Blue Sky" laws of all U.S. jurisdictions; provided that the Company
          shall not be required in connection therewith or as a condition
          thereto to qualify to do business or to file a general consent to
          service of process in any such states or jurisdictions.

               (v)   Notify each Holder promptly of the happening of any event
          as a result of which the prospectus (including any supplements thereto
          or thereof and any information incorporated or deemed to be
          incorporated by reference therein) included in such Registration
          Statement, as then in effect, includes an untrue statement of material
          fact or omits 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 use its best efforts to promptly
          update and/or correct such prospectus.

               (vi)  Notify each Holder promptly of the issuance by the
          Commission or any state securities commission or agency of any stop
          order suspending the effectiveness of the Registration Statement or
          the initiation of any proceedings for that purpose. The Company shall
          use its best efforts to prevent the issuance of any stop order and, if
          any stop order is issued, to obtain the lifting thereof at the
          earliest possible time.

               (vii) Permit a single firm of counsel, designated as Holders'
          counsel by the Holders of a majority of the Registrable Securities
          included in such Registration Statement, to review the Registration
          Statement and all amendments and supplements thereto within a
          reasonable period of time prior to each filing, and shall not file any
          document in a form to which such counsel reasonably objects.

                                        5

<PAGE>
               (viii) Use its best efforts to list the Registrable Securities
          covered by such Registration Statement with all securities exchange(s)
          and/or markets on which the Common Stock is then listed or included
          for quotation and prepare and file any required filings with the
          National Association of Securities Dealers, Inc. or any exchange or
          market where the Common Stock is then traded.

               (ix)   If applicable, take all steps necessary to enable Holders
          to avail themselves of the prospectus delivery mechanism set forth in
          Rule 153 (or successor thereto) under the Securities Act.

               (x)    Notify the Holders' counsel of receipt of any comments
          from the SEC on the Registration Statement or of an SEC decision not
          to review the Registration Statement.

          (b) Set forth below in this Section 2(b) are (I) events that may arise
that the Purchasers consider will interfere with the full enjoyment of their
rights under the Transaction Documents (the "Interfering Events"), and (II)
certain remedies applicable in each of these events.

          Paragraphs (i) through (iv) of this Section 2(b) describe the
          Interfering Events, provide a remedy to the Holders if an Interfering
          Event occurs and provide that the Holders may require that the Company
          redeem outstanding Debentures, Warrants and/or Registrable Securities
          at specified prices if certain Interfering Events are not timely
          cured.

          Paragraph (v) provides, inter alia, that each Holder shall have the
                                  ----- ----
          option as to whether it would like to receive any payment required as
          a remedy in the case of certain of the Interfering Events in cash or
          shares of Common Stock.

          Paragraph (vi) provides, inter alia, that if payments required as the
                                   ----- ----
          remedy in the case of certain of the Interfering Events are not paid
          when due, the Company may be required by the Holders to redeem
          outstanding Debentures, Warrants and/or Registrable Securities at
          specified prices.

          Paragraph (viii) provides, inter alia, that the Holders have the right
                                     ----- ----
          to specific performance.

     The preceding paragraphs in this Section 2(b) are meant to serve only as an
introduction to this Section 2(b), are for convenience only, and are not to be
considered in applying, construing or interpreting this Section 2(b).

               (i) Delay in Effectiveness of Registration Statement.
                   ------------------------------------------------

                    In the event that a Registration Statement covering all of
               the Registrable Securities has not been declared effective by the
               Effectiveness Deadline, then the Conversion Price and the
               Exercise

                                        6

<PAGE>

                    Price shall each be reduced by 2% for the first 30 day
                    period (or portion thereof) following the Effectiveness
                    Deadline and an additional 1.5% for each succeeding 30-day
                    period (or portion thereof) during which the Registration
                    Statement has not been declared effective. (For example
                    commencing with the 61st day following the Effectiveness
                    Deadline if the Registration Statement is still not
                    effective, the Conversion Price shall be reduced by 5% from
                    what it would have been in the Debentures.) In the event
                    that a Registration Statement covering all of the
                    Registrable Securities has not been declared effective
                    within 30 days of the Effectiveness Deadline, then each
                    Holder shall, in addition, have the option to have its
                    Debentures, Warrants, Warrant Shares and Common Shares
                    redeemed at a price equal to the Premium Redemption Price.

                    (ii) No Listing; Premium Price Redemption for Delisting of
                         -----------------------------------------------------
               Class of Shares.
               ---------------

                         (A) In the event that the Company fails, refuses or is
                    unable to cause the Registrable Securities covered by the
                    Registration Statement to be listed with the applicable
                    Approved Markets and each other securities exchange and
                    market on which the Common Stock is then traded at all times
                    during the period ("Listing Period") commencing on the
                    effective date of the Registration Statement and continuing
                    thereafter for so long as the Debentures or Warrants are
                    outstanding, then the Company shall pay in cash or Common
                    Stock, as provided in Section 2(b)(v), to each Holder a
                    Delay Payment for each 30-day period (or portion thereof)
                    during the Listing Period from and after such failure,
                    refusal or inability to so list the Registrable Securities
                    until the Registrable Securities are so listed, which Delay
                    Payments shall not in the aggregate exceed the maximum
                    percentage permitted by law.

                         (B) In the event that shares of Common Stock of the
                    Company are delisted from the applicable Approved Markets at
                    any time following the Initial Closing Date and remain
                    delisted for 5 consecutive business days, then at the option
                    of each Holder and to the extent such Holder so elects, the
                    Company shall on 5 business days notice either (1) pay in
                    cash or Common Stock (as provided in Section 2(b)(v)) to
                    such Holder a Delay Payment for each 30-day period that the
                    shares are delisted or (2) redeem the Debentures, Warrants,
                    Warrant Shares and Common Shares held by such Holder, in
                    whole or in part, at a redemption price equal to the Premium
                    Redemption Price; provided, however, that such Holder may
                                      --------
                    revoke such request at any time prior to receipt of payment
                    of such Delay Payments or Premium Redemption Price,

                                       7

<PAGE>
                         as the case may be. Delay Payments shall no longer
                         accrue on Debentures after such Debentures have been
                         redeemed by the Company pursuant to the foregoing
                         provision.

                         (iii)  Blackout Periods. In the event any Holder is
                                ----------------
                  unable to sell Registrable Securities under the Registration
                  Statement for more than (A) seven (7) consecutive days or (B)
                  an aggregate of thirty (30) days in any 12 month period
                  ("Suspension Grace Period"), including without limitation by
                  reason of a suspension of trading of the Common Stock on the
                  Approved Market, any suspension or stop order with respect to
                  the Registration Statement or the fact that an event has
                  occurred as a result of which the prospectus (including any
                  supplements thereto) included in such Registration Statement
                  then in effect includes an untrue statement of material fact
                  or omits 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, or the
                  number of shares of Common Stock covered by the Registration
                  Statement is insufficient at such time to make such sales (a
                  "Blackout"), then the Company shall pay in cash or Common
                  Stock (as provided in Section 2(b)(v)) to each Holder a Delay
                  Payment for each 30-day period (or portion thereof) from and
                  after the expiration of the Suspension Grace Period, which
                  Delay Payment shall not exceed the maximum percentage
                  permitted by law. In lieu of receiving the Delay Payment as
                  provided above, a Holder shall have the right but not the
                  obligation to elect to have the Company redeem its Debentures,
                  Warrants, Common Shares and Warrant Shares at the price equal
                  to the Premium Redemption Price.

                         (iv)   Conversion or Exercise Deficiency; Premium Price
                                ------------------------------------------------
                  Redemption for Conversion or Exercise Deficiency. In the event
                  ------------------------------------------------
                  that: (x) the Company does not have a sufficient number of
                  Common Shares available to satisfy the Company's obligations
                  to any Holder upon receipt of a Conversion Notice (as defined
                  in the Debentures) or is otherwise unable or unwilling to
                  issue such Common Shares in accordance with the terms of the
                  Debentures and the Purchase Agreement for any reason after
                  receipt of a Conversion Notice or (y) the Company does not
                  have a sufficient number of Warrant Shares available to
                  satisfy the Company" obligations to any Holder upon receipt of
                  a Notice of Exercise (as defined in the Warrants) or is
                  otherwise unable or unwilling to issue such Warrant Shares in
                  accordance with the terms of the Warrants and the Purchase
                  Agreement for any reason after receipt of such Notice of
                  Exercise, then:

                                (A) The Company shall pay in cash or Common
                         Stock (as provided in Section 2(b)(v)) to each Holder
                         a Delay Payment for each 30-day period (or portion
                         thereof) that the Company fails or refuses to issue
                         Common Shares in accordance with the terms of the
                         Debentures and the Purchase Agreement, which Delay

                                        8

<PAGE>
                           Payment shall not exceed the maximum percentage
                           permitted by law; and

                                    (B) At any time five days after the
                           commencement of the running of the first 30-day
                           period described above in clause (A) of this
                           paragraph (iv), at the request of any Holder pursuant
                           to a redemption notice, the Company promptly (1)
                           shall purchase from such Holder, at a purchase price
                           equal to the Premium Redemption Price, the principal
                           amount of Debentures equal to such Holder's pro rata
                           share of the Deficiency (as such term is defined
                           below), if the failure to issue Common Shares results
                           from the lack of a sufficient number thereof and (2)
                           shall purchase all (or such portion as such Holder
                           may elect) of such Holder's Debentures at such
                           Premium Redemption Price if the failure to issue
                           Common Shares in accordance with the Debentures and
                           the Purchase Agreement results from any other cause.
                           The "Deficiency" shall be equal to the aggregate
                           principal amount of Debentures that would not be able
                           to be converted for Common Shares, due to an
                           insufficient number of Common Shares available, if
                           all the outstanding Debentures were submitted for
                           conversion at the Conversion Price set forth in the
                           Debentures as of the date such Deficiency is
                           determined. Any request by a Holder pursuant to this
                           paragraph (iv)(B) shall be revocable by that Holder
                           at any time prior to its receipt of the Premium
                           Redemption Price.

                                    (C) In the case of Warrant exercises, at any
                           time five days after failure of the Company to have a
                           sufficient number of Warrant Shares reserved or to
                           comply with the delivery requirements for Warrant
                           Shares set forth above, at the request of any Holder
                           pursuant to a redemption notice, the Company promptly
                           (1) shall purchase from such Holder, at a purchase
                           price equal to the Premium Redemption Price, the
                           amount of Warrants equal to such Holder's pro rata
                           share of the Warrant Deficiency (as such terms is
                           defined below), if the failure to issue Warrant
                           Shares results from lack of a sufficient number
                           thereof and (2) shall purchase all (or such portion
                           as such Holder may elect) of such Holder's Warrants
                           at such Premium Redemption Price if the failure to
                           issue Warrant Shares in accordance with the Warrants
                           and the Purchase Agreement results from any other
                           cause. The "Warrant Deficiency" shall be equal to the
                           amount of Warrant Shares that would not be able to be
                           exercised for Warrant Shares, due to an insufficient
                           number of Warrant Shares available, if all the
                           outstanding Warrants were exercised at the Exercise
                           Price set forth in the Warrants as of the date of
                           such Warrant Deficiency is determined. Any request by
                           a Holder pursuant to this paragraph (iv)(C) shall be
                           revocable by that Holder at any time prior to its
                           receipt of the Premium Redemption Price.

                                        9

<PAGE>

                       (v)   Delay Payment Terms; Status of Unpaid Delay
                             -------------------------------------------
                  Payments. All Delay Payments (which payments shall be pro rata
                  --------
                  on a per diem basis for any period of less than 30 days)
                  required to be made in connection with the above provisions
                  shall be paid at any time upon demand, for the partial or full
                  calendar month occurring prior to that date. Such Delay
                  Payments shall be payable in cash or Common Stock, as
                  determined by each Holder in its sole discretion. If the
                  Holder elects to be paid in Common Stock, the Holder shall be
                  entitled to that number of shares of Common Stock as shall
                  equal to the amount of such Delay Payment multiplied by a
                  fraction, the numerator of which is one and the denominator of
                  which is equal to the average of the Market Price for the
                  three (3) business days prior to, but not including, the date
                  upon which such payments are due. Unless the Company shall
                  receive written notice to the contrary from the respective
                  Holder, the Delay Payments shall be paid in cash. Until paid
                  as required in this Agreement, Delay Payments shall be deemed
                  added to, and a part of, the outstanding principal amount of a
                  Holder's Debentures.

                       (vi)  Premium Price Redemption for Delay Payment
                             ------------------------------------------
                  Defaults. In the event that the Company fails or refuses to
                  --------
                  pay any Delay Payment provided for in the foregoing
                  paragraphs (ii) through (v) when due, at any Holder's request
                  and option, the Company shall purchase all or a portion of the
                  Debentures, Warrants, Warrant Shares and Common Shares held by
                  such Holder (with Delay Payments accruing through the date of
                  such purchase), within five (5) days of such request, at a
                  purchase price equal to the Premium Redemption Price; provided
                                                                        --------
                  that such Holder may revoke such request at any time prior to
                  receipt of such payment of such purchase price. Until such
                  time as the Company purchases such Debentures at the request
                  of such Holder pursuant to the preceding sentence, at any
                  Holder's request and option the Company shall as to such
                  Holder pay such amount by adding and including the amount of
                  such Delay Payment to the outstanding principal amount of a
                  Holder's Debentures.

                       (vii) Cumulative Remedies. Each Delay Payment triggered
                             -------------------
                  by an Interfering Event provided for in the foregoing
                  paragraphs (ii) through (v) shall be in addition to each other
                  Delay Payment triggered by another Interfering Event;
                  provided, however, that in no event shall the Company be
                  --------
                  obligated to pay to any Holder Delay Payments in an aggregate
                  amount greater than one Delay Payment for any 30-day period
                  (or portion thereof). The Delay Payments and mandatory
                  redemptions provided for above are in addition to and not in
                  lieu or limitation of any other rights the Holders may have at
                  law, in equity or under the terms of the Debentures, the
                  Purchase Agreement, the Warrants or this Agreement, including
                  without limitation the right to specific performance. Each
                  Holder shall be entitled to specific performance of any and
                  all obligations of the Company in connection with the
                  registration rights of the Holders hereunder.

                                       10

<PAGE>

                       (viii) Certain Acknowledgments. The Company acknowledges
                              -----------------------
                  that any failure, refusal or inability by the Company
                  described in the foregoing paragraphs (i) through (iv) and
                  paragraph (vi) will cause the Holders to suffer damages in an
                  amount that will be difficult to ascertain, including without
                  limitation damages resulting from the loss of liquidity in the
                  Registrable Securities and the additional investment risk in
                  holding the Registrable Securities. Accordingly, the parties
                  agree that it is appropriate to include in this Agreement the
                  foregoing provisions for Conversion and Exercise Price
                  adjustments and the Delay Payments and mandatory redemptions
                  in order to compensate the Holders for such damages. The
                  parties acknowledge and agree that the Conversion and Exercise
                  Price adjustments and the Delay Payments and mandatory
                  redemptions set forth above represent the parties' good faith
                  effort to quantify such damages and, as such, agree that the
                  form and amount of such adjustments, Delay Payments and
                  mandatory redemptions are reasonable and will not constitute a
                  penalty. The parties agree that the provisions of this clause
                  (viii) consist of certain acknowledgments and agreements
                  concerning the remedies of the Holders set forth in clauses
                  (i) through (vi) and paragraph (vii) of this paragraph;
                  nothing in this clause (viii) imposes any additional default
                  payments and mandatory redemptions for violations under this
                  Agreement.

                  (c)  If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by investment bankers
reasonably satisfactory to the Company.

                  (d)  The Company shall enter into such customary agreements
for secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities. In the event that
the offering in which the Registrable Securities are to be sold is deemed to be
an underwritten offering or any Holder selling Registrable Securities is deemed
to be an underwriter, the Company shall:

                       (i)    make such representations and warranties to the
                  Holders and the underwriter or underwriters, if any, in form,
                  substance and scope as are customarily made by issuers to
                  underwriters in secondary offerings;

                       (ii)   cause to be delivered to the sellers of
                  Registrable Securities and the underwriter or underwriters,
                  if any, opinions of independent counsel to the Company, on and
                  dated as of the effective day (or in the case of an
                  underwritten offering, dated the date of delivery of any
                  Registrable Securities sold pursuant thereto) of the
                  Registration Statement, and within ninety (90) days following
                  the end of each fiscal year thereafter, which counsel and
                  opinions (in form, scope and substance) shall be reasonably
                  satisfactory to the Holders and the underwriter(s), if

                                       11

<PAGE>

                  any, and their counsel and covering, without limitation, such
                  matters as the due authorization and issuance of the
                  securities being registered and compliance with securities
                  laws by the Company in connection with the authorization,
                  issuance and registration thereof and other matters that are
                  customarily given to underwriters in underwritten offerings,
                  addressed to the Holders and each underwriter, if any.

                       (iii) cause to be delivered, immediately prior to the
                  effectiveness of the Registration Statement (and, in the case
                  of an underwritten offering, at the time of delivery of any
                  Registrable Securities sold pursuant thereto), and at the
                  beginning of each fiscal year following a year during which
                  the Company's independent certified public accountants shall
                  have reviewed any of the Company's books or records, a
                  "comfort letter" from the Company's independent certified
                  public accountants addressed to the Holders and each
                  underwriter, if any, stating that such accountants are
                  independent public accountants within the meaning of the
                  Securities Act and the applicable published rules and
                  regulations thereunder, and otherwise in customary form and
                  covering such financial and accounting matters as are
                  customarily covered by letters of the independent certified
                  public accountants delivered in connection with secondary
                  offerings; such accountants shall have undertaken in each such
                  letter to update the same during each such fiscal year in
                  which such books or records are being reviewed so that each
                  such letter shall remain current, correct and complete
                  throughout such fiscal year; and each such letter and update
                  thereof, if any, shall be reasonably satisfactory to the
                  Holders.

                       (iv)  if an underwriting agreement is entered into, the
                  same shall include customary indemnification and contribution
                  provisions to and from the underwriters and procedures for
                  secondary underwritten offerings;

                       (v)   deliver such documents and certificates as may be
                  reasonably requested by the Holders of the Registrable
                  Securities being sold or the managing underwriter or
                  underwriters, if any, to evidence compliance with clause (i)
                  above and with any customary conditions contained in the
                  underwriting agreement, if any; and

                       (vi)  deliver to the Holders on the effective day (or in
                  the case of an underwritten offering, dated the date of
                  delivery of any Registrable Securities sold pursuant thereto)
                  of the Registration Statement, and at the beginning of each
                  fiscal quarter thereafter, a certificate in form and substance
                  as shall be reasonably satisfactory to the Holders, executed
                  by an executive officer of the Company and to the effect that
                  all the representations and warranties of the Company
                  contained in the Purchase Agreement are still true and correct
                  except as disclosed in such certificate; the Company shall, as
                  to each such certificate delivered at the beginning of each
                  fiscal quarter, update or cause to be updated each such
                  certificate

                                       12

<PAGE>

               during such quarter so that it shall remain current, complete and
               correct throughout such quarter; and such updates received by the
               Holders during such quarter, if any, shall have been reasonably
               satisfactory to the Holders.

               (e) The Company shall make available for inspection, upon
reasonable written notice and during regular business hours, by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of the
Company and review of any Registration Statement, all SEC Documents (as defined
in the Purchase Agreement), pertinent corporate documents and properties of the
Company, and use its reasonable best efforts to cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with such
Registration Statement, provided that such parties agree to keep such
information confidential.

               (f) The Company shall file a Registration Statement with respect
to any newly authorized and/or reserved shares, with respect to its obligation
to reserve or register Registrable Securities, within 15 days of any corporate
action authorizing or reserving same and shall file a Registration Statement
with respect to additional Registrable Securities within 15 days of the
occurrence of an event referred to in Section 2(a)(x) and shall use its best
efforts to cause, in either case, such Registration Statement to become
effective within sixty (60) days of such corporate action or such occurrence, as
the case may be. If the Holders become entitled, pursuant to an event described
in the definition of Registrable Securities, to receive any securities in
respect of Registrable Securities that were already included in a Registration
Statement, subsequent to the date such Registration Statement is declared
effective, and the Company is unable under the securities laws to add such
securities to the then effective Registration Statement, the Company shall
promptly file, in accordance with the procedures set forth herein, an additional
Registration Statement with respect to such newly Registrable Securities. The
Company shall use its best efforts to (i) cause any such additional Registration
Statement, when filed, to become effective under the Securities Act, and (ii)
keep such additional Registration Statement effective during the period
described in Section 5 below. All of the registration rights and remedies under
this Agreement shall apply to the registration of such newly reserved shares and
such new Registrable Securities, including without limitation the remedy
provisions contained in Section 2(b) herein.

            3. Expenses of Registration. All Registration Expenses incurred in
               ------------------------
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.

            4. Registration on Form S-3; Other Forms. The Company shall use its
               -------------------------------------
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms, or in the event that the Company is ineligible to use
such form, such form as the Company is eligible to use under the Securities Act.

                                       13

<PAGE>

     5. Registration Period. In the case of the registration effected by the
        -------------------
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until the later of (i) such time as sales are
permitted of all Registrable Securities without registration under Rule 144 and
(ii) such time as no Warrants or Debentures remain outstanding and the
Commitment Period (as defined in the Purchase Agreement) has expired.

     6. Indemnification.
        ---------------

        (a) Company Indemnity. The Company will indemnify each Holder, each of
its officers, directors and partners, and each person controlling each Holder,
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any 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 when made, not misleading, or any violation by the
Company of the Securities Act or any state securities law or in either case, any
rule or regulation thereunder applicable to the Company and relating to action
or inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to a Holder to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or the underwriter (if any) therefor and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 6(a) 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 the Company (which consent will not be unreasonably withheld).

        (b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each person who controls the
Company within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder(s),
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,

                                       14

<PAGE>

prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, and will reimburse the
Company and such other Holder(s) and their directors, officers and partners or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein, and provided that the maximum amount for which such Holder shall be
liable under this indemnity shall not exceed the net proceeds received by such
Holder from the sale of the Registrable Securities. The indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any such claims, losses, damages or liabilities if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld).

        (c) Procedure. Each party entitled to indemnification under this Section
6 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim in any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, 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 under this Article except to the extent
that the Indemnifying Party is materially and adversely affected by such failure
to provide notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which 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 to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.

     7. Contribution. If the indemnification provided for in Section 6 herein is
        ------------
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of indemnifying
each of such Indemnified Parties, shall contribute to the amount paid or payable
by each such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any

                                       15

<PAGE>

other relevant equitable considerations. The relative fault of the Company on
the one hand and of any Holder on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by such Holder.

     In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.

     The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that such Holder or underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

     8. Survival. The indemnity and contribution agreements contained in
        --------
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.

     9. Information by Holders. Each Holder shall reasonably promptly furnish to
        ----------------------
the Company such information regarding such Holder and the distribution and/or
sale proposed by such Holder as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement. The intended method
or methods of disposition and/or sale (Plan of Distribution) of such securities
as so provided by such Purchaser shall be included without alteration in the
Registration Statement covering the Registrable Securities and shall not be
changed without written consent of such Holder, except that

                                       16

<PAGE>

such Holder may not require an intended method of disposition which violates
applicable securities law.

     10. Replacement Certificates. The certificate(s) representing the Common
         ------------------------
Shares held by the Purchaser (or then Holder) may be exchanged by the Purchaser
(or such Holder) at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Common Shares,
as reasonably requested by the Purchaser (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.

     11. Transfer or Assignment. Except as otherwise provided herein, this
         ----------------------
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Purchasers by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Debentures, Warrants or Registrable Securities, and all other
rights granted to the Purchasers by the Company hereunder may be transferred or
assigned to any transferee or assignee of any Debentures, Warrants or
Registrable Securities; provided in each case that: the Company must be given
written notice by the such Purchaser at the time of or within a reasonable time
after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned; and further provided that
                                                           ------- --------
the transferee or assignee of such rights agrees in writing to be bound by the
provisions of this Agreement.

     12. Miscellaneous.
         -------------

         (a) Remedies. The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.

         (b) Jurisdiction. THE COMPANY AND EACH OF THE PURCHASERS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE PURCHASERS
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY

                                       17

<PAGE>

THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

          (c) Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:

          to the Company:

                   Constellation 3D, Inc.
                   805 Third Avenue, 14/th/ Floor
                   New York, New York 10022
                   Telephone: 212-308-3572
                   Facsimile: 212-308-3573
                   Attention: Craig Weiner, Esq.

          with a  copy to:

                   Baker & McKenzie
                   1200 Brickell Avenue, 19/th/ Floor
                   Miami, Florida 33131
                   Telephone: 305-789-8999
                   Facsimile: 305-789-8953
                   Attention: Roy J. Larson, Esq.

          to one or more of the Purchasers:

                   c/o The Palladin Group, L.P.
                   195 Maplewood Avenue
                   Maplewood, New Jersey 07040
                   Telephone: 973-313-6400
                   Facsimile: 973-313-6494
                   Attention: Robert Chender

          with a copy to:

                   Kleinberg, Kaplan, Wolff & Cohen, P.C.
                   551 Fifth Avenue, 18th Floor
                   New York, New York 10176
                   Telephone: 212-986-6000
                   Facsimile: 212-986-8866
                   Attention: Stephen M. Schultz, Esq.

     Any party hereto may from time to time change its address for notices by
giving at least 10 days' written notice of such changed address to the other
parties hereto.

                                       18

<PAGE>

          (d) Indemnity. Each party shall indemnify each other party against any
loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.

          (e) Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Purchaser contained herein shall survive each
of the Closings.

          (f) Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.

          (g) Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of any Purchaser without its
express written approval, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement. The
Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Purchaser and any public announcement including the name of an Purchaser
to such Purchaser, prior to the publication of such announcements.

          (h) No Piggyback on Registration. Other than as set forth in the
Disclosure Letter, neither the Company nor any of its security holders (and
other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statement other than the Registrable
Securities, and the Company shall not after the date hereof enter into any
agreement providing any such right to any of its security holders.

          (i) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Debentures, the Warrants and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be modified or terminated except by a written
agreement signed by both parties.

          (j) Governing Law. THIS AGREEMENT AND THE VALIDITY AND PERFORMANCE OF
THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED ENTIRELY IN SUCH STATE.

          (k) Severability. The parties acknowledge and agree that the
Purchasers are not agents, affiliates or partners of each other, that all
representations,

                                       19

<PAGE>

warranties, covenants and agreements of the Purchasers hereunder are several and
not joint, that no Purchaser shall have any responsibility or liability for the
representations, warrants, agreements, acts or omissions of any other Purchaser,
and that any rights granted to "Purchasers" hereunder shall be enforceable by
each Purchaser hereunder.

          (l) Jury Trial. Each party hereto waives the right to a trial by jury.

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

          (n) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then issued or issuable
Registrable Securities; provided, however, that, for the purposes of this
                        --------  -------
sentence, Registrable Securities that are owned, directly or indirectly, by the
Company, or an affiliate of the Company are not deemed outstanding.

                            [Signature page follows]

                                       20

<PAGE>

     In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                             CONSTELLATION 3D, INC.

                             By: /s/ Leonardo Berezowsky
                                 -----------------------
                                 Name:
                                 Title: Chief Financial Officer

                             PURCHASER:

                             DEAM CONVERTIBLE ARBITRAGE FUND LTD.
                             By: The Palladin Group, L.P., as Attorney-in-Fact

                                 By: /s/ The Palladin Group, L.P.
                                     ----------------------------
                                 Name:
                                 Title: Attorney-in-Fact

                [Signature page to Registration Rights Agreement]

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