EXHIBIT 4.3
ANNEX IV
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made as of
March 16, 1999, by and among STARBASE CORPORATION, a Delaware corporation (the
"Company"), with headquarters located at 0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxx
Xxx, Xxxxxxxxxx 00000 (the "Company"), and the undersigned (the "Purchaser").
RECITALS
A. In connection with the Securities Purchase Agreement dated of even
date herewith by and between the Company and the Purchaser (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Purchaser (i) shares of
Series I Preferred Stock of the Company (the "Preferred Stock") that is
exchangeable into shares (the "Exchange Shares") of the Company's common stock,
par value $.01 per share (the "Common Stock") and (ii) Warrants (the "Warrants")
entitling the holder thereof to purchase the number of shares of Common Stock
pursuant to the limitations and conditions set forth in the Certificate of
Designations, Preferences and Rights with respect to such Preferred Stock (the
"Certificate of Designation"), in the form attached as Exhibit A to the
Securities Purchase Agreement.
B. To induce the Purchaser to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
I. DEFINITIONS
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1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Purchasers" means the Purchaser.
(b) "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act and pursuant to
Rule 415 under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
(c) "Registrable Securities" means the Exchange
Shares (including any Exchange Shares issuable with respect to exchange default
payments under the Certificate of Designation) issued or issuable with respect
to the Preferred Stock, and the Warrant Shares issued or issuable with respect
to the Warrants (without regard to any limitations on exchange or exercise), and
any shares of capital stock issued or issuable, from time to time (with any
adjustments), on or in exchange for or otherwise with respect to the Common
Stock or any other Registrable Securities. For purposes of this Agreement, each
security described above shall cease to be a Registrable Security when such
security (i) has been effectively registered under the Securities Act, and has
been disposed of pursuant to an effective registration statement covering such
security, (ii) is distributed to the public pursuant to Rule 144 (or any similar
provisions then in force) under the Act, or (iii) may be sold or transferred
pursuant to Rule 144(k) (or any similar provision then in force) under the Act.
(d) "Registration Statement" means a registration
statement of the Company under the Securities Act.
1.2 Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings
set forth in the Securities Purchase Agreement.
II. REGISTRATION
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2.1 Mandatory Registration. The Company shall prepare, and, on or prior
to ninety (90) days after the date of the Closing (the "Filing Date"), file with
the SEC a Registration Statement on Form S-3 or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of all of the Registrable Securities covering the resale of all
of the Registrable Securities, 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 indeterminate number of additional shares of Common Stock as may become
issuable upon exchange of the Preferred Stock and the exercise of the Warrants
(i) to prevent dilution resulting from stock splits, stock dividends or similar
transactions or (ii) by reason of changes in the Exchange Price of the Preferred
Stock or the Exercise Price of the Warrants in accordance with the terms
thereof, as the case may be. The Registrable Securities included in the
Registration Statement shall be allocated among the Purchasers as set forth in
Section 11.11 hereof. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of (which
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approval shall not be unreasonably withheld or denied)) the Purchaser and a
single counsel for the Purchaser prior to its filing or other submission.
2.2 Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2.1 hereof involves an underwritten offering, the
Purchasers who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, shall have the right to select a total of one
legal counsel to represent the Purchasers and an investment banker or bankers
and manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
2.3 Payments by the Company. The Company shall use its best efforts to
cause the registration statement to become effective as soon as practicable, but
in no event later than the one hundred and fiftieth (150th) day following the
date of the Closing (the "Registration Deadline"). If (i) the registration
statement(s) covering the Registrable Securities required to be filed by the
Company pursuant to Section 2.1 hereof is not declared effective by the SEC on
or before the Registration Deadline, or (ii) after the registration statement
has been declared effective by the SEC, sales of all the Registrable Securities
(including any Registrable Securities required to be registered pursuant to
Section 3.2 hereof) cannot be made pursuant to the registration statement (by
reason of a stop order or the Company's failure to update the registration
statement or any other reason outside the control of the Purchaser), then the
Company will make payments to the Purchasers in such amounts and at such times
as shall be determined pursuant to this Section 2.3 as relief for the damages to
the Purchasers by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). In such event, the Company shall
pay to each Purchaser an amount equal to (A) .02 times (B) the aggregate
purchase price of the Preferred Stock held by such Purchaser (including, without
limitation, shares of Preferred Stock that have been exchanged into Exchange
Shares) for each thirty (30) day period (pro rated based on the number of days
if less than 30) following the Registration Deadline for the first two (2)
thirty day periods, and then .03 times the aggregate purchase price of the
Preferred Stock held by such purchaser for each thirty (30) day period
thereafter prior to the date the Registration Statement filed pursuant to
Section 2.1 is declared effective by the SEC (the "Effective Date"). Such
amounts shall be paid in cash or, at each Purchaser's option, may be
exchangeable into Common Stock at the Exchange Price (as defined in the
Certificate of Designation). If the Purchaser desires to exchange or exercise
the amounts due hereunder into Registrable Securities it shall so notify the
Company in writing within two (2) days prior to the date on which such amounts
are first payable in cash and such amounts shall be so exchangeable (pursuant to
the terms of the Certificate of Designation), beginning on the last day upon
which the cash amount would otherwise be due in accordance with the following
sentence. Payments of cash pursuant hereto shall be made within five (5) days
after the end of each period that gives rise to such obligation, provided that,
if any such period extends for more than thirty (30) days, payments shall be
made for each such thirty (30) day period within five (5) days after the end of
such thirty (30) day period.
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2.4 Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Registration Statement
required to be filed and/or amended pursuant to this Agreement is not effective,
and during such period of ineffectiveness, the Company shall file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), then the Company shall send to each Purchaser who
has a right to have Registrable Securities covered by a Registration Statement
pursuant to this Agreement written notice of such determination and, if within
ten (10) days after the date of such notice, such Purchaser shall so request in
writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Purchaser requests to be registered,
except that if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Purchaser has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Purchasers seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Purchasers; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement. No
right to registration of Registrable Securities under this Section 2.4 shall be
construed to limit any registration required under Section 2.1 or 3.2 hereof. If
an offering in connection with which a Purchaser is entitled to registration
under this Section 2.4 is an underwritten offering, then each Purchaser whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
2.5 Eligibility for Form S-3. The Company represents and warrants that
it meets the current requirements for the use of Form S-3 for registration of
the sale by the Purchaser of the Registrable Securities and the Company shall
file all reports required to be filed by the Company with the SEC in a timely
manner so as to maintain such eligibility for the use of Form S-3.
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III. OBLIGATIONS OF THE COMPANY
--------------------------
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
3.1 The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2.1, and use its best efforts to
cause such Registration Statement relating to Registrable Securities to become
effective, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold (and no further Registrable Securities may
be issued in the future) and (ii) the date on which all of the Registrable
Securities (in the reasonable opinion of counsel to the Purchaser) may be
immediately sold to the public without registration and without restriction as
to the number of Registrable Securities to be sold, whether pursuant to Rule 144
or otherwise (the "Registration Period"). The Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein and all
documents incorporated by reference therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading,
except for any such untrue statement or omission provided to the Company by any
Purchaser which is provided in writing by Purchaser expressly for use therein.
3.2 The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until the termination of the Registration Period or, if earlier, such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is, for any five (5)
consecutive trading days (the last of such five (5) trading days being the
"Registration Trigger Date"), insufficient to cover one hundred twenty-five
percent (125%) of the Registrable Securities issued or issuable upon exchange of
the Preferred Stock held by any Purchaser, the Company shall amend, if
permissible, the Registration Statement, or file a new Registration Statement
(on the short form available therefor, if applicable), or both, so as to cover
one hundred twenty-five percent (125%) of the Registrable Securities issued or
issuable to such Purchaser, in each case, as soon as practicable, but in any
event within five (5) business days in the case of an amendment and ten (10)
business days in the case of a Registration Statement after the Registration
Trigger Date (based on the market price of the Common Stock and other relevant
factors on which the Company reasonably elects to rely). The Company shall use
its best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof.
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3.3 The Company shall furnish to each Purchaser whose Registrable
Securities are included in the Registration Statement and its legal counsel (a)
promptly after the same is prepared and publicly distributed or filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2.1, each letter written by or on behalf of the Company to the SEC
or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion, if any, thereof which contains information for which the
Company has sought confidential treatment), and (b) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Purchaser may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned (or to be owned) by such Purchaser.
3.4 The Company shall use reasonable efforts to (a) register and
qualify the Registrable Securities covered by the Registration Statement under
securities laws of such jurisdictions in the United States as each Purchaser who
holds (or has the right to hold) Registrable Securities being offered reasonably
requests, (b) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (c) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (d) take all other actions which the Company reasonably
deems necessary or advisable to qualify the Registrable Securities for sale in
such jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3.4, (ii) subject itself to taxation in any such jurisdiction,
(iii) file a general consent to service of process in any such jurisdiction, or
(iv) provide any undertakings that cause the Company material expense or burden.
3.5 As soon as practicable after becoming aware of such event, the
Company shall notify (by telephone and also by facsimile and, if telephone
contact is not made, by reputable overnight courier) each Purchaser of the
happening of any event, of which the Company has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and use its best efforts promptly (but in any event within ten
(10) days) to prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, and deliver such number of copies of
such supplement or amendment to each Purchaser as such Purchaser may reasonably
request.
3.6 The Company shall use its reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable time and to notify (by
telephone and also by facsimile and reputable overnight carrier) each Purchaser
who holds Registrable Securities
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being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof.
3.7 The Company shall permit a single firm of counsel designated by the
Purchaser to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
3.8 The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Section 11(a) of the Securities Act and Rule 158 under the
Securities Act) covering a twelve-month period beginning not later than the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement.
3.9 At the request of any Purchaser, the Company shall furnish, on the
date of effectiveness of the Registration Statement and thereafter from time to
time on such dates as a Purchaser may reasonably request written confirmation by
the Company that the Registration Statement is effective.
3.10 The Company shall make available at reasonable times for
inspection by (i) any Purchaser and (ii) one firm of attorneys and one firm of
accountants retained by the Purchasers (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), to enable each
Inspector to exercise its due diligence responsibility, if any, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; provided,
however, that Records which the Company determines, in good faith, to be
confidential and which the Company notifies the Inspectors are confidential
shall not be disclosed by the Inspectors for any reason unless the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Each Purchaser agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential by the Company. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
reasonable substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3.11.
3.11 The Company shall hold in confidence and not make any disclosure
of information concerning a Purchaser provided to the Company unless (a)
disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or is otherwise
required by applicable law or legal
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process, (d) such information has been made generally available to the public
other than by disclosure in violation of this or any other agreement (to the
knowledge of the Company), or (e) such Purchaser consents to the form and
content of any such disclosure. The Company agrees that it shall, upon learning
that disclosure of such information concerning a Purchaser is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Purchaser prior to making such disclosure, and allow
the Purchaser, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
3.12 The Company shall cause the listing and the continuation of
listing of all the Registrable Securities covered by the Registration Statement
on the Nasdaq National Market System, the Nasdaq SmallCap Market, the New York
Stock Exchange or the American Stock Exchange, and cause the Registrable
Securities to be quoted or listed on each additional national securities
exchange or quotation system upon which the Common Stock is then listed or
quoted.
3.13 The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
3.14 At the reasonable request of any Purchaser, the Company shall
promptly prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.
3.15 The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the
Commission).
3.16 The Company shall take all such other actions as any Purchaser or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
IV. OBLIGATIONS OF THE PURCHASERS
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In connection with the registration of the Registrable Securities, the
Purchasers shall have the following obligations:
4.1 It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Purchaser that such Purchaser shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and
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shall execute such documents in connection with such registration as the Company
may reasonably request. At least ten (10) business days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Purchaser of the information the Company requires from each such Purchaser.
4.2 Each Purchaser, by such Purchaser's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statements and any amendments and supplements thereto hereunder, unless such
Purchaser has notified the Company in writing of such Purchaser's election to
exclude all of such Purchaser's Registrable Securities from the Registration
Statement.
4.3 Each Purchaser whose Registrable Securities are included in a
Registration Statement understands that the Securities Act may require delivery
of a prospectus relating thereto in connection with any sale thereof pursuant to
such Registration Statement, and each such Purchaser shall comply with the
applicable prospectus delivery requirements of the Securities Act in connection
with any such sale.
4.4 Each Purchaser agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3.6, such
Purchaser will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Purchaser's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3.6 and, if so directed by the Company, such
Purchaser shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of destruction) all copies in
such Purchaser's possession (other than a limited number of permanent file
copies), of the prospectus covering such Registrable Securities current at the
time of receipt of such notice.
4.5 Without limiting a Purchaser's rights under Section 2.1 or 3.2
hereof, no Purchaser may participate in any underwritten distribution hereunder
unless such Purchaser (a) agrees to sell such Purchaser's Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (c)
agrees to pay its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company pursuant to Article
V.
V. EXPENSES OF REGISTRATION
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All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Articles II and III, including, without limitation, all registration, listing
and qualification fees, printers and accounting fees, the fees and disbursements
of counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Purchasers pursuant to Section 2.2, hereof shall be
borne by the Company.
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VI. INDEMNIFICATION
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In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify, hold
harmless and defend (a) each Purchaser who holds such Registrable Securities,
(b) each underwriter of Registrable Securities and (c) the directors, officers,
partners, members, employees, agents and persons who control any Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any, (each,
an "Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6.3 with respect to the number of legal
counsel, the Company shall reimburse the Purchasers, each such underwriter and
controlling person, and each such other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6.1: (x) shall
not apply to an Indemnified Person with respect to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (y) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (z) with respect
to any preliminary prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made
available by the Company pursuant to Section 3.3 hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
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notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Purchasers pursuant to Article IX.
6.2 In connection with any Registration Statement in which a Purchaser
is participating, each such Purchaser agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner set forth in Section 6.1, the
Company, each of its directors, each of its officers, its employees, agents and
persons, if any, who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and any other stockholder
selling securities pursuant to the Registration Statement, together with its
directors, officers and members, and any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act (each
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such
Purchaser expressly for use in connection with such Registration Statement; and
subject to Section 6.3 such Purchaser will reimburse any legal or other expenses
(promptly as such expenses are incurred and are due and payable) reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6.2
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Purchaser, which consent
shall not be unreasonably withheld; provided, further, however, that a Purchaser
shall be liable under this Agreement (including this Section 6.2 and Article
VII) for only that amount as does not exceed the net proceeds actually received
by such Purchaser as a result of the sale of Registrable Securities pursuant to
such Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Purchasers pursuant to Article IX. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6.2
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, and the Indemnified Party failed to utilize
such corrected prospectus.
6.3 Promptly after receipt by an Indemnified Person or Indemnified
Party under this Article VI of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Article VI, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall diligently pursue such defense and
that such indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have
11
the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential conflicts of interest between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person or the Indemnified Party and any such
Indemnified Person or Indemnified Party reasonably determines that there may be
legal defenses available to such Indemnified Person or Indemnified Party which
are different from or in addition to those available to such indemnifying party.
The indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Purchasers holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates (with the approval of the Purchaser if they hold Registrable Securities
included in such Registration Statement), if the Purchasers are entitled to
indemnification hereunder, or by the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Article VI, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Article VI shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
VII. CONTRIBUTION
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Article VI to the fullest extent permitted by law; provided, however, that
(i) 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 is a holder of Registrable Securities who was not guilty of such
fraudulent misrepresentation, and (ii) contribution (together with any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
VIII. REPORTS UNDER THE EXCHANGE ACT
------------------------------
With a view to making available to the Purchasers the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Purchasers to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
8.1 File with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long
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as the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4.3 of the
Securities Purchase Agreement) and the filing and availability of such reports
and other documents is required for the applicable provisions of Rule 144; and
8.2 Furnish to each Purchaser so long as such Purchaser holds Preferred
Stock, Warrants or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Purchasers to sell such securities pursuant
to Rule 144 without registration.
IX. ASSIGNMENT OF REGISTRATION RIGHTS
---------------------------------
The rights of the Purchasers hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assigned by each Purchaser to any entity majority-owned by
Talisman Capital if: (a) the Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee, and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act or applicable state securities laws, (d) at or before the
time the Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing for the benefit of the
Company to be bound by all of the provisions contained herein, and (e) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement and applicable laws. No such assignment shall
cause the Company to amend a registration statement.
X. AMENDMENT OF REGISTRATION RIGHTS
------------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Purchasers who hold a majority interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Article X shall be binding
upon each Purchaser and the Company. Notwithstanding the foregoing, no amendment
or waiver shall retroactively affect any Purchaser without its consent or
prospectively adversely affect any Purchaser who no longer owns any Preferred
Stock, Warrants or Registrable Securities without its consent. Neither Article
VI nor Article VII hereof may be amended or waived in a manner adverse to a
Purchaser without its consent.
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XI. MISCELLANEOUS
-------------
11.1 A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
11.2 Any notices herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier or by confirmed
facsimile, and shall be deemed delivered at the time and date of receipt (which
shall include telephone line facsimile transmission). The addresses for such
communications shall be:
If to the Company:
Starbase Corporation
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
Attention: Chief Financial Officer
If to Purchaser:
Talisman Capital Opportunity Fund Ltd.
00000 XxXxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
and if to any other Purchaser, at such address as such Purchaser, shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11.2.
11.3 Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
11.4 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed in the State of New York. The Company irrevocably consents to the
jurisdiction of the federal courts located in the State of New York and the
state courts of the State of New York located in the County of New York in the
State of New York in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such
14
courts. Each party irrevocably waives the defense of an inconvenient forum to
the maintenance of such suit or proceeding. The parties hereto further agree
that service of process upon the parties hereto mailed by first class mail shall
be deemed in every respect effective service of process upon each such party in
any such suit or proceeding. Nothing herein shall affect either party's right to
serve process in any other manner permitted by law. The parties hereto agree
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
11.5 This Agreement, the Preferred Stock, Warrants and the Securities
Purchase Agreement (including all schedules and exhibits thereto and all
certificates and opinions required thereby) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the Preferred
Stock, the Warrants and the Securities Purchase Agreement supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
11.6 Subject to the requirements of Article IX hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto. Notwithstanding anything to the contrary contained
herein, including, without limitation, Article IX, the rights of a Holder
hereunder shall be assignable to and exercisable by a bona fide pledgee of the
Registrable Securities in connection with a Holder's margin or brokerage
accounts.
11.7 The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
11.8 This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto, by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
11.9 Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
11.10 All consents and other determinations to be made by the
Purchasers or the Purchaser pursuant to this Agreement shall be made by the
Purchasers or the Purchaser holding a majority of the Registrable Securities
(determined as if all Preferred Stock then outstanding had been exchanged into
Registrable Securities) held by all Purchasers or Purchaser, as the case may be.
11.11 The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata
15
among the Purchasers based on the number of Registrable Securities held by each
Purchaser at the time of such establishment or increase, as the case may be. In
the event a Purchaser shall sell or otherwise transfer any of such holder's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the number of Registrable Securities included on a Registration Statement for
such transferor. Any shares of Common Stock included on a Registration Statement
and which remain allocated to any person or entity which does not hold any
Registrable Securities shall be allocated to the remaining Purchasers, pro rata
based on the number of shares of Registrable Securities then held by such
Purchasers. For purposes of making the pro rata allocations set forth in this
paragraph, all Preferred Stock then outstanding shall be deemed to have been
exchanged into Registrable Securities.
11.12 If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement.
* * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
STARBASE CORPORATION
By: ______________________________________
Its: ___________________________________
17
