REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of this ___ day of ____________, 2002 by and among Starbase Corporation,
a Delaware corporation (the "Company"), and the "Investors" named in that
certain Purchase Agreement by and among the Company and the Investors (the
"Purchase Agreement").
The parties hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such person.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"Common Stock" shall mean the Company's common stock, par value $0.01
per share, and any securities into which such shares may hereinafter be
reclassified.
"Conversion Shares" means the shares of Common Stock issuable upon
the conversion of the Preferred Stock.
"Investors" shall mean the Investors identified in the Purchase
Agreement and any Affiliate or permitted transferee of any Investor who is a
subsequent holder of any Preferred Stock, Warrants or Registrable Securities.
"Preferred Stock" shall mean the Company's Series J Convertible
Preferred Stock, par value $0.01 per share, and any securities into which such
shares may hereinafter be reclassified.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Register," "registered" and "registration" refer to a registration
made by preparing and filing a Registration Statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or ordering
of effectiveness of such Registration Statement or document.
"Registrable Securities" shall mean the shares of Common Stock
issuable (i) upon the conversion of the Preferred Stock, (ii) upon the exercise
of the Warrants, if any, and (iii) pursuant to the provisions of Sections 2(a)
and 2(c) below, and any other securities issued or issuable with respect to or
in exchange for Registrable Securities; provided, that, a security shall cease
to be a Registrable Security upon (A) sale pursuant to a Registration Statement
or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale
by the Investors pursuant to Rule 144(k).
"Registration Statement" shall mean any registration statement of the
Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, amendments
and supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
"Required Investors" means the Investors holding a majority of the
Registrable Securities.
"SEC" means the U.S. Securities and Exchange Commission.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Warrants" means, the warrants to purchase shares of Common Stock
issued to the Investors pursuant to the Purchase Agreement, the form of which is
attached to the Purchase Agreement as Exhibit A.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants.
2. Registration.
(a) Registration Statements.
(i) Promptly following the closing of the purchase and sale of
the Preferred Stock and Warrants contemplated by the Purchase Agreement (the
"Closing Date") but no later than thirty (30) days after the Closing Date (the
"Filing Deadline"), the Company shall prepare and file with the SEC one
Registration Statement on Form S-3 (or, if Form S-3 is not then available to the
Company, on such form of registration statement as is then available to effect a
registration for resale of the Registrable Securities, subject to the Required
Investors' consent), covering the resale of the Registrable Securities in an
amount at least equal to the number of shares of Common Stock necessary to
permit the conversion in full of the Preferred Stock and the exercise in full of
the Warrants. Such Registration Statement also shall cover, to the extent
allowable under the 1933 Act and the rules promulgated thereunder (including
Rule 416), such indeterminate number of additional shares of Common Stock
resulting from stock
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splits, stock dividends or similar transactions with respect to the Registrable
Securities. The Company shall use its reasonable best efforts to obtain from
each person who now has piggyback registration rights a waiver of those rights
with respect to the Registration Statement. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and one counsel designated by the Required Investors prior to its
filing or other submission. If a Registration Statement covering the Registrable
Securities is not filed with the SEC on or prior to the Filing Deadline other
than as a result of the failure of an Investor to satisfy its obligations under
Sections 5(a) or (b) of this Agreement, the Company will make pro rata payments
to each Investor, as liquidated damages and not as a penalty, in an amount equal
to 1.5% of the aggregate amount invested by such Investor for each 30-day period
or pro rata for any portion thereof following the date by which such
Registration Statement should have been filed for which no Registration
Statement is filed with respect to the Registrable Securities. Such payments
shall be in partial compensation to the Investors, and shall not constitute the
Investors' exclusive remedy for such events. Such payments shall be made to each
Investor in cash.
(ii) Additional Registrable Securities. Upon the written demand
of any Investor and upon any change in the Conversion Price (as defined in the
Preferred Stock) or the Warrant Price (as defined in the Warrant) such that
additional shares of Common Stock become issuable upon the conversion of the
Preferred Stock or the exercise of the Warrants, the Company shall prepare and
file with the SEC one or more Registration Statements on Form S-3 or amend the
Registration Statement filed pursuant to clause (i) above, if such Registration
Statement has not previously been declared effective (or, if Form S-3 is not
then available to the Company, on such form of registration statement as is then
available to effect a registration for resale of such additional shares of
Common Stock (the "Additional Shares"), subject to the Required Investors'
consent) covering the resale of the Additional Shares, but only to the extent
the Additional Shares are not at the time covered by an effective Registration
Statement. Such Registration Statement also shall cover, to the extent allowable
under the 1933 Act and the rules promulgated thereunder (including Rule 416),
such indeterminate number of additional shares of Common Stock resulting from
stock splits, stock dividends or similar transactions with respect to the
Additional Shares. The Company shall use its reasonable best efforts to obtain
from each person who now has piggyback registration rights a waiver of those
rights with respect to such Registration Statement. The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and one counsel designated by the Required Investors to its filing or
other submission. If a Registration Statement covering the Additional Shares is
required to be filed under this Section 2(a)(ii) and is not filed with the SEC
within five Business Days of the demand made as provided in this subsection
2(a)(ii) other than as a result of the failure of an Investor to satisfy its
obligations under Sections 5(a) or (b) of this Agreement, the Company will make
pro rata payments to each Investor, as liquidated damages and not as a penalty,
in an amount equal to 1.5% of the aggregate amount invested by such Investor for
each 30-day period or pro rata for any portion thereof following the date by
which such Registration Statement should have been filed for which no
Registration Statement is filed with respect to the Additional Shares. Such
payments shall be in partial compensation to the Investors, and shall not
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constitute the Investors' exclusive remedy for such events. Such payments shall
be made to each Investor in cash.
(b) Expenses. The Company will pay all expenses associated with
each registration, including filing and printing fees, counsel and accounting
fees and expenses, costs associated with clearing the Registrable Securities for
sale under applicable state securities laws, listing fees, reasonable fees and
expenses of one counsel to the Investors, the fees of which shall not exceed
$2,500 unless the SEC comments on a Registration Statement, and the Investors'
reasonable expenses in connection with the registration, but excluding
discounts, commissions, fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals with respect to the Registrable
Securities being sold.
(c) Effectiveness.
(i) The Company shall use commercially reasonable efforts to have
the Registration Statement declared effective as soon as practicable. The
Company shall notify the Investors by facsimile or e-mail as promptly as
practicable, and in any event, within twenty-four (24) hours, after any
Registration Statement is declared effective and shall simultaneously provide
the Investors with copies of any related Prospectus to be used in connection
with the sale or other disposition of the securities covered thereby. If (A)(x)
a Registration Statement covering the Registrable Securities is not declared
effective by the SEC within ninety (90) days after the Closing Date, or (y) a
Registration Statement covering Additional Shares is not declared effective by
the SEC within ninety (90) days following the demand of an Investor relating to
the Additional Shares covered thereby, or (B) after a Registration Statement has
been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason (including without limitation by reason of
a stop order, or the Company's failure to update the Registration Statement),
but excluding the inability of any Investor to sell the Registrable Securities
covered thereby due to market conditions and except as excused pursuant to
subparagraph (ii) below, then the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5%
of the aggregate amount invested by such Investor for each 30- day period or pro
rata for any portion thereof following the date by which such Registration
Statement should have been effective (the "Blackout Period"). The Blackout
Period shall terminate upon (x) the effectiveness of the applicable Registration
Statement in the case of (A) above; and (y) in the case of (B) above, the later
of (i) the Registration Statement again being available for sales by the
Investors, and (ii) the delivery to the Investors of any updated or supplemented
Prospectus required to be delivered by such Investors as a result of the events
giving rise to the Blackout Period. Such payments shall be in partial
compensation to the Investors, and shall not constitute the Investors' exclusive
remedy for such events. The amounts payable as liquidated damages pursuant to
this paragraph shall be paid monthly within five (5) Business Days of the last
day of each month following the commencement of the Blackout Period until the
termination of the Blackout Period. Such payments shall be made to each Investor
in cash.
(ii) For not more than twenty (20) consecutive days or for a
total of not more than forty-five (45) days in any twelve (12) month period, the
Company may delay the disclosure of material non-public information concerning
the Company, by suspending the use of
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any Prospectus included in any registration contemplated by this Section
containing such information, the disclosure of which at the time is not, in the
good faith opinion of the Company, in the best interests of the Company (an
"Allowed Delay"); provided, that the Company shall promptly (a) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such Investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay, and (b) advise the Investors in writing to cease all
sales under the Registration Statement until the end of the Allowed Delay.
(d) Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Company shall have the right to select an investment banker and
manager to administer the offering, which investment banker or manager shall be
reasonably satisfactory to the Required Investors.
3. Company Obligations. The Company will use commercially reasonable
efforts to effect the registration of the Registrable Securities in accordance
with the terms hereof, and pursuant thereto the Company will, as expeditiously
as possible:
(a) use commercially reasonable efforts to cause such
Registration Statement to become effective and to remain continuously effective
for a period that will terminate upon the earlier of (i) the date on which all
Registrable Securities covered by such Registration Statement as amended from
time to time, have been sold, and (ii) the date on which all Registrable
Securities covered by such Registration Statement may be sold pursuant to Rule
144(k);
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the Prospectus as
may be necessary to keep the Registration Statement effective for the period
specified in Section 3(a) and to comply with the provisions of the 1933 Act and
the 1934 Act with respect to the distribution of all of the Registrable
Securities covered thereby;
(c) provide copies to and permit one counsel designated by the
Required Investors to review each Registration Statement and all amendments and
supplements thereto no fewer than seven (7) days prior to their filing with the
SEC and not file any document to which such counsel reasonably objects;
(d) furnish to the Investors and one counsel designated by the
Required Investors (i) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company (but not later than
two (2) Business Days after the filing date, receipt date or sending date, as
the case may be, one (1) copy of any Registration Statement and any amendment
thereto, each preliminary prospectus and Prospectus and each amendment or
supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements
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thereto and such other documents as each Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor that are covered by the related Registration Statement;
(e) in the event the Company selects an underwriter for the
offering, the Company shall enter into and perform its reasonable obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter of such offering;
(f) if required by the underwriter, or if any Investor is
described in the Registration Statement as an underwriter, the Company shall
furnish, on the effective date of the Registration Statement (except with
respect to clause (i) below) and on the date that Registrable Securities are
delivered to an underwriter, if any, for sale in connection with the
Registration Statement (including any Investor deemed to be an underwriter), (i)
(A) in the case of an underwritten offering, an opinion, dated as of the closing
date of the sale of Registrable Securities to the underwriters, from independent
legal counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors
participating in such underwritten offering or (B) in the case of an "at the
market" offering wherein an Investor is described in the Registration Statement
as an underwriter, an opinion, dated as of or promptly after the effective date
of the Registration Statement to the Investors, from independent legal counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in a public offering, addressed to
the Investors, and (ii) a letter, dated as of the effective date of such
Registration Statement and confirmed as of the applicable dates described above,
from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters
(including any Investor deemed to be an underwriter), provided such Investor
deemed to be an underwriter provides the accountants providing such letter with
such written representation and legal opinions as such accountants may
reasonable request to satisfy the requirements of Statements on Auditing
Standards 72 ("SAS 72") as amended by SAS-86;
(g) use commercially reasonable efforts to (i) prevent the
issuance of any stop order or other suspension of effectiveness and, (ii) if
such order is issued, obtain the withdrawal of any such order at the earliest
possible moment;
(h) prior to any public offering of Registrable Securities, use
commercially reasonable efforts to register or qualify or cooperate with the
Investors and their counsel in connection with the registration or qualification
of such Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions requested by the Investors and do any and all
other commercially reasonable acts or things necessary or advisable to enable
the distribution in such jurisdictions of the Registrable Securities covered by
the Registration Statement; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(h), (ii) subject itself to general taxation
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in any jurisdiction where it would not otherwise be so subject but for this
Section 3(h), or (iii) file a general consent to service of process in any such
jurisdiction;
(i) use commercially reasonable efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;
(j) immediately notify the Investors, at any time when a
Prospectus relating to Registrable Securities is required to be delivered under
the 1933 Act, upon discovery that, or upon the happening of any event as a
result of which, the Prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at the
request of any such holder, promptly prepare and furnish to such holder a
reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(k) otherwise use commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC under the 1933 Act and the 1934
Act, take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and make available to its
security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period of
at least twelve (12) months, beginning after the effective date of each
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for
the purpose of this subsection 3(k), "Availability Date" means the 45th day
following the end of the fourth fiscal quarter that includes the effective date
of such Registration Statement, except that, if such fourth fiscal quarter is
the last quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter).
(l) With a view to making available to the Investors the benefits
of Rule 144 (or its successor rule) and any other rule or regulation of the SEC
that may at any time permit the Investors to sell shares of Common Stock to the
public without registration, the Company covenants and agrees to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) six months after such date as all of the
shares of Common Stock purchased by them pursuant to the Purchase Agreement
(including the Warrant Shares) may be resold pursuant to Rule 144(k) or any
other rule of similar effect or (B) such date as all of the Registrable
Securities shall have been resold; (ii) file with the SEC in a timely manner all
reports and other documents required of the Company under the 1934 Act; and
(iii) furnish to each Investor upon request, as long as such Investor owns any
Registrable Securities, (A) a written statement by the Company that it has
complied with the reporting requirements of the 1934 Act and (B) such other
information as may be reasonably requested in order to avail such Investor of
any rule or regulation of the SEC that permits the
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selling of any such Registrable Securities without registration.
4. Due Diligence Review; Information. The Company shall make
available, during normal business hours, for inspection and review by the
Investors, advisors to and representatives of the Investors (who may or may not
be affiliated with the Investors and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of shares of Common
Stock on behalf of the Investors pursuant to a Registration Statement or
amendments or supplements thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Filings (as defined in the Purchase
Agreement) and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers, directors and employees, within a
reasonable time period, to supply all such information reasonably requested by
the Investors or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.
The Company shall not disclose material nonpublic information to the
Investors, or to advisors to or representatives of the Investors, unless prior
to disclosure of such information the Company identifies such information as
being material nonpublic information and provides the Investors, such advisors
and representatives with the opportunity to accept or refuse to accept such
material nonpublic information for review and any Investor wishing to obtain
such information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
5. Obligations of the Investors.
(a) Each Investor shall furnish in writing to the Company such
information regarding itself, the Registrable Securities and any other
securities of the Company held by it and the intended method of disposition of
the Registrable Securities held by it, as shall be reasonably required to effect
the registration of such Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request. At
least five (5) Business Days prior to the first anticipated filing date of any
Registration Statement, the Company shall notify each Investor of the
information the Company requires from such Investor if such Investor elects to
have any of the Registrable Securities included in the Registration Statement.
An Investor shall provide such information to the Company at least two (2)
Business Days prior to the first anticipated filing date of such Registration
Statement if such Investor elects to have any of the Registrable Securities
included in the Registration Statement.
(b) Each Investor, by its acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of a Registration
Statement hereunder and the processing of such
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Registration Statement with the SEC, unless such Investor has notified the
Company in writing of its election to exclude all of its Registrable Securities
from such Registration Statement.
(c) In the event the Company, at the request of the Investors,
determines to engage the services of an underwriter, such Investor agrees to
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the dispositions of the Registrable Securities.
(d) Each Investor agrees that, upon receipt of any notice from
the Company of either (i) the commencement of an Allowed Delay pursuant to
Section 2(c)(ii) or (ii) the happening of an event pursuant to Section 3(j)
hereof, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities, until the Investor's receipt of the copies of the supplemented or
amended prospectus filed with the SEC and declared effective and, if so directed
by the Company, the Investor 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 the Investor's possession of the Prospectus covering the
Registrable Securities current at the time of receipt of such notice.
(e) No Investor may participate in any third party underwritten
registration hereunder unless it (i) agrees to sell the Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions. Notwithstanding the foregoing, no Investor shall be
required to make any representations to such underwriter, other than those with
respect to itself and the Registrable Securities owned by it, including its
right to sell the Registrable Securities, and any indemnification in favor of
the underwriter by the Investors shall be several and not joint and limited in
the case of any Investor, to the proceeds received by such Investor from the
sale of its Registrable Securities. The scope of any such indemnification in
favor of an underwriter shall be limited to the same extent as the indemnity
provided in Section 6(b) hereof.
6. Indemnification.
(a) Indemnification by the Company. The Company will indemnify
and hold harmless each Investor and its officers, directors, members, employees
and agents, successors and assigns, and each other person, if any, who controls
such Investor within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof; (ii) any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in
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any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information herein called a "Blue Sky Application"); (iii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (iv)
any violation by the Company or its agents of any rule or regulation promulgated
under the 1933 Act applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such registration;
or (v) any failure to register or qualify the Registrable Securities included in
any such Registration in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake
such registration or qualification on an Investor's behalf (the undertaking of
any underwriter chosen by the Company being attributed to the Company) and will
reimburse such Investor, and each such officer, director or member and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable (i)
in any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such Investor or any such controlling person in writing
specifically for use in such Registration Statement or Prospectus (ii) with
respect to any amounts paid in settlement of any loss, claim, damage or
liability if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed, (iii)
with respect to any untrue statement or alleged untrue statement or omission or
alleged omission contained in any Prospectus if the untrue statement or alleged
untrue statement or omission or alleged omission contained in such Prospectus
was corrected on a timely basis and a corrected Prospectus was timely made
available by the Company pursuant to Section 3(c) or 3(j) hereof, and the
Investor seeking indemnity hereunder was advised in writing not to use the
incorrect Prospectus a reasonable time prior to the use giving rise to a loss,
claim, damage or liability .
(b) Indemnification by the Investors. In connection with any
registration pursuant to the terms of this Agreement, each Investor will furnish
to the Company in writing such information as the Company reasonably requests
concerning the holders of Registrable Securities or the proposed manner of
distribution for use in connection with any Registration Statement or Prospectus
and agrees, severally but not jointly, to indemnify and hold harmless, to the
fullest extent permitted by law, the Company, its directors, officers,
employees, agents, stockholders and each person who controls the Company (within
the meaning of the 0000 Xxx) against any losses, claims, damages, liabilities
and expense (including reasonable attorney fees) resulting from any untrue
statement of a material fact or any omission of a material fact required to be
stated in the Registration Statement or Prospectus or preliminary prospectus or
amendment or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue statement or
omission is contained in any information furnished in writing by such Investor
to the Company specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto. In no event shall the liability
of an Investor be greater in amount than the dollar amount of the proceeds (net
of all expense paid by such Investor in connection with any claim relating to
this Section 6 and the amount of any damages such holder has otherwise been
required to pay by reason of such
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untrue statement or omission) received by such Investor upon the sale of the
Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled
to indemnification hereunder shall (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and (ii)
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.
(d) Contribution. If for any reason the indemnification provided
for in the preceding paragraphs (a) and (b) is unavailable to an indemnified
party or insufficient to hold it harmless, other than as expressly specified
therein, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of all expenses
paid by such holder in connection with any claim relating to this Section 6 and
the amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities giving rise
to such contribution obligation.
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7. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended only by
a writing signed by the Company and the Required Investors. The Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Required Investors.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made as set forth in Section 9.4 of the Purchase
Agreement.
(c) Assignments and Transfers by Investors. The provisions of
this Agreement shall be binding upon and inure to the benefit of the Investors
and their respective successors and assigns. An Investor may transfer or assign,
in whole or from time to time in part, to one or more persons its rights
hereunder in connection with the transfer of Registrable Securities by such
Investor to such person, provided that (i) such transfer relates to at least $1
million of Registrable Securities, (ii) the Company is furnished with written
notice of (x) the name and address of such transferee or assignee, and (y) the
Registrable Securities with respect to which such registration rights are being
transferred, (iii) the transferee or assignee agrees to be bound by all of the
provisions contained herein and the applicable provisions of the Purchase
Agreement relating to the transfer of the Registrable Securities, and (iv) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement and all laws applicable thereto.
(d) Assignments and Transfers by the Company. This Agreement may
not be assigned by the Company (whether by operation of law or otherwise)
without the prior written consent of the Required Investors, provided, however,
that the Company may assign its rights and delegate its duties hereunder to any
surviving or successor corporation in connection with a merger or consolidation
of the Company with another corporation, or a sale, transfer or other
disposition of all or substantially all of the Company's assets to another
corporation, without the prior written consent of the Required Investors, after
notice duly given by the Company to each Investor.
(e) Benefits of the Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(f) Counterparts; Faxes. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
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(g) Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(h) Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provisions hereof prohibited or
unenforceable in any respect.
(i) Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
(j) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(k) Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of the courts
of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
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IN WITNESS WHEREOF, the parties have executed this Agreement or
caused their duly authorized officers to execute this Agreement as of the date
first above written.
The Company: STARBASE CORPORATION
By:_________________________
Name:
Title:
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The Investors: SPECIAL SITUATIONS FUND III, L.P.
By:_____________________________
Name: Xxxxxx Xxxxx
Title: General Partner
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By:______________________________
Name: Xxxxxx Xxxxx
Title: General Partner
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By:_______________________________
Name: Xxxxxx Xxxxx
Title: General Partner
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
By:_______________________________
Name: Xxxxxx Xxxxx
Title: General Partner
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PRISM PARTNERS I, L.P.
By:_______________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Managing General Partner
PRISM PARTNERS II OFFSHORE FUND
By:_______________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Managing General Partner
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MICROCAPITAL FUND, L.P.
By:_______________________________
Name: Xxx X. Xxxxx,
Title: President and Portfolio Manager
MICROCAPITAL FUND, LTD
By:_______________________________
Name: Xxx X. Xxxxx,
Title: President and Portfolio Manager
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SF CAPITAL PARTNERS, LTD.
By:_______________________________
Name: Xxxxx X. Xxxxxxxx,
Title: Authorized Signatory
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VICTORVILLE INVESTMENTS LIMITED
By:_______________________________
Name: ,
Title: Director
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COMVEST VENTURE PARTNERS, L.P.
By:_______________________________
Name: Xxx Xxxxxx,
Title:
COMVEST OPPORTUNITY FUND, L.P.
By:_______________________________
Name: Xxx Xxxxxx,
Title:
-00-
XXXXXXXXXXXX XXXXXXXXX ASSOCIATES, L.P.
By:_______________________________
Name: Xxxxxxx Xxxxxxxxxxxx,
Title: Authorized Signatory
-21-
