EXHIBIT 4.3
FORM OF REGISTRATION RIGHTS AGREEMENT
dated as of
July 31, 1998
among
STARBASE CORPORATION
and
THE PURCHASERS LISTED ON THE SCHEDULE OF PURCHASERS HERETO
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of
July 31, 1998 between StarBase Corporation, Inc., a Delaware corporation (the
"Company"), and each of the Purchasers of shares of Series G Convertible
Preferred Stock (the "Preferred Stock") of even date herewith (the "Securities
Purchase Agreement"), whose names are set forth on the Schedule of Purchasers
hereto (individually, a "Purchaser" and collectively, the "Purchasers").
RECITALS
WHEREAS, it is a condition precedent to the obligations of each
Purchaser under the Securities Purchase Agreement that the Company grant
registration rights for the Company's common stock, par value $.01 per share
(the "Common Stock") issuable upon conversion of the Series G Convertible
Preferred Stock and exercise of the common stock warrants which may be issued
pursuant to Section 1.5 of the Securities Purchase Agreement (the "Warrants"),
and
WHEREAS, in connection with resales by the Purchasers of the Common
Stock upon or after conversion of the Preferred Stock or exercise of the
Warrants, the Company and the Purchasers now desire to enter into this Agreement
in order to facilitate such resales.
AGREEMENT
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings.
"Board" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or
other day on which banks in New York City, New York are
authorized by law to close.
"Certificate of Designations" means the certificate of powers,
designations, preferences and relative, participating,
optional or other rights of the Company's Series G Convertible
Preferred Stock and the qualifications, limitations and
restrictions thereof, as amended from time to time.
"Initial Closing Date" shall mean the date of the closing of
the initial issuance of the Preferred Stock to the Purchasers
pursuant to the Securities Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Company" means StarBase Corporation, a Delaware corporation.
"Effective Time" means the date of effectiveness of any
Registration Statement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holders" has the meaning given to it in Section 2.1(b)
hereof.
"NASD" means the National Association of Securities Dealers,
Inc.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity
or organization, including a governmental or political
subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the Series G Convertible Preferred
Stock, par value $.01 per share, of the Company, issued to the
Purchasers pursuant to the Securities Purchase Agreement.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus
supplement and by all other amendments thereto, including
post-effective amendments, and all materials incorporated by
reference into such Prospectus.
"Registration Statement" means the Shelf Registration
Statement.
"Restricted Securities" means any Securities until (i) a
registration statement covering such Securities has been
declared effective by the Commission and such Securities have
been disposed of pursuant to such effective registration
statement, (ii) such Securities are sold under circumstances
in which all the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are
met, or such Securities may be sold pursuant to Rule 144(k)
(or any similar provision then in force) under the Securities
Act, and are freely tradable after such sale by the
transferee, (iii) such Securities are otherwise transferred,
the
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Company has delivered a new certificate or other evidence of
ownership for such Securities not bearing a legend restricting
further transfer and such Securities may be resold without
registration under the Securities Act, or (iv) such Securities
shall have ceased to be outstanding.
"Securities" means the Company's Common Stock issued or
issuable upon conversion of the Preferred Stock (the
"Conversion Shares") and exercise of the Warrants (the
"Warrant Shares"), and any shares of capital stock issued or
issuable with respect to the Conversion Shares, the Warrant
Shares, the Preferred Stock or the Warrants as a result of any
stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitation
on the conversion of Preferred Stock or the exercise of the
Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the registration
statement of the Company relating to the shelf registration
for resale of Restricted Securities contemplated by Section
2.2 herein, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective
amendments) and all exhibits and materials incorporated by
reference therein.
"Securities Purchase Agreement" has the meaning given to it in
the recitals to this Agreement.
"Warrants" means the common stock warrants issued to the
holders of the Preferred Stock pursuant to Section 1.5 of the
Securities Purchase Agreement.
As used in this Agreement, words in the singular include the
plural, and in the plural include the singular.
ARTICLE 2
REGISTRATION RIGHTS
2.1 Securities Subject to this Agreement.
(a) The Securities entitled to the benefits of this Agreement
are the Restricted Securities, but only for so long as they remain Restricted
Securities.
(b) A Person is deemed to be a holder of Restricted Securities
(each, a "Holder") whenever such Person is the registered holder of such
Restricted Securities on the Company's books and records.
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2.2 Shelf Registration.
(a) The Company shall:
(i) as expeditiously as practicable, but no
later than 45 days from the Initial Closing Date, cause to be filed a Shelf
Registration Statement on Form S-3, as applicable, pursuant to Rule 415 under
the Securities Act, which Shelf Registration Statement shall provide for resales
of all Restricted Securities the Holders of which shall have provided to the
Company the information required pursuant to Section 2.2(c) herein; and
(ii) cause such Shelf Registration Statement to
be declared effective by the Commission as expeditiously as practicable, but not
later than 120 days from the Initial Closing Date.
(b) In connection with the Shelf Registration Statement, the
Company shall comply with all the provisions of Section 2.4 below and shall use
its best efforts to effect such registration to permit the sale of the
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 2.2(c)). Subject to Section 2.2(d), the Company
shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Section 2.2(d) to the extent necessary to ensure that it is available for
resales of Restricted Securities by the Holders of Restricted Securities, and to
ensure that it conforms with the requirements of this Agreement, the Securities
Act and the policies, rules and regulations of the Commission as announced from
time to time, until the earlier of (i) the date as of which the Holders may sell
all of the Restricted Securities without restriction pursuant to Rule 144(k)
promulgated under the Securities Act (or successor thereto) or (ii) the date on
which (A) the Holders shall have sold all the Securities and (B) none of the
shares of Preferred Stock or Warrants is outstanding (the "Registration
Period"). Upon the occurrence of any event that would cause any Shelf
Registration Statement or the Prospectus contained therein (i) to contain a
material misstatement or omission or (ii) not to be effective and usable for the
sale or resale of Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Shelf Registration Statement or the related Prospectus or any document
incorporated therein by reference, in the case of clause (i), correcting any
such misstatement or omission, and, in the case of either clause (i) or (ii),
use its best efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for its
intended purpose(s) as soon as practicable thereafter.
(c) No Holder of Restricted Securities may include any of its
Restricted Securities in the Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Company in writing,
within 10 Business Days after receipt of a written request therefor, such
information specified in Item 507 of Regulation S-K under the Securities Act (or
any similar provision then in force) or such other information as the Company
may reasonably request for use in connection with the Shelf Registration
Statement or Prospectus or
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preliminary Prospectus included therein. Each Holder as to which the Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
(d) Notwithstanding anything to the contrary in this Section
2.2, at any time after the Registration Statement has been declared effective,
the Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a "Blackout Period"); provided, that the Company shall
promptly (i) notify the Holders in writing of the existence of material
non-public information giving rise to a Blackout Period and the date on which
the Blackout Period will begin, and (ii) notify the Holders in writing of the
date on which the Blackout Period ends; and, provided further, that (x) a
Blackout Period shall not exceed 30 days, (y) during any consecutive 365 day
period, the aggregate number days during all Blackout Periods during such time
shall not exceed 60 days and (z) no Blackout Period shall begin less than 60
days after the end of a prior Blackout Period (an "Allowable Blackout Period").
For purposes of determining the length of a Blackout Period above, the Blackout
Period shall begin on and include the date the Holders receive the notice
referred to in clause (i) and shall end on and include the date the Holders
receive the notice referred to in clause (ii). Upon expiration of the Blackout
Period, the Company shall again be bound by the first sentence of this Section
2.2(e) with respect to the information giving rise thereto. In the event of any
Blackout Period, the Mandatory Conversion Date (as defined in the Certificate of
Designations) shall be delayed one day for each day in the Blackout Period as
provided in Section 5(c)(ii) of the Certificate of Designations.
(e) The initial Registration Statement prepared pursuant
hereto shall register for resale at least that number of shares of Common Stock
equal to the product of (x) 1.5 and (y) the number of Securities as of the date
immediately preceding the date the Registration Statement is initially filed
with the Commission. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Securities or a Holder's allocated portion of the Securities pursuant
to Section 2.2(f), the Company shall amend the Registration Statement, or file a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least 150% of such Securities (based on
the market price of the Common Stock), in each case, as soon as practicable, but
in any event within fifteen (15) days after the necessity therefor arises. The
Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Securities" if at any time the number of Securities issued or
issuable upon conversion of the Preferred Stock and exercise of the Warrants is
greater than the quotient determined by dividing (i) the number of shares of
Common Stock available for resale under such Registration Statement by (ii) 1.5.
For purposes of the calculation set forth in the
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foregoing sentence, any restrictions on the convertibility of the Preferred
Stock or exerciseability of the Warrants shall be disregarded and such
calculation shall assume that the Preferred Stock and the Warrants are then
convertible and exercisable, respectively, into shares of Common Stock at the
then prevailing Conversion Rate (as defined in the Company's Certificate of
Designations) and Warrant Exercise Price (as defined in the Warrant),
respectively, if applicable.
(f) The initial number of Securities included in any
Registration Statement and each increase in the number of Securities included
therein shall be allocated pro rata among the Holders based on the number of
Securities held by each Holder at the time the Registration Statement covering
such initial number of Securities or increase thereof is declared effective by
the Commission. In the event that a Holder sells or otherwise transfers any of
such Person's Securities, each transferee shall be allocated a pro rata portion
of the then remaining number of Securities included in such Registration
Statement for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases to
hold any Securities shall be allocated to the remaining Holders, pro rata based
on the number of Securities then held by such Holders.
(g) Subject to Section 2.6 hereof, the Purchasers holding a
majority of the Securities shall have the right to select one legal counsel to
review and oversee any offering pursuant to this Section 2.2 ("Legal Counsel"),
which shall be designated by the holders of a majority of Securities. The
Company shall reasonably cooperate with Legal Counsel in performing the
Company's obligations under this Agreement.
(h) In the event that Form S-3 is not available for any
registration of Securities hereunder, the Company shall (i) register the sale of
the Securities on another appropriate form and (ii) undertake to register the
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering
Securities has been declared effective by the Commission.
(i) The Company and the Purchasers each acknowledge that each
Registration Statement prepared in accordance hereunder shall include an
indeterminate number of Securities pursuant to Rule 416 under the Securities Act
so as to cover any and all Securities which may become issuable (i) to prevent
dilution resulting from stock splits, stock dividends or similar transactions
and (ii) if permitted by law, by reason of certain antidilution provisions or
reductions in the Conversion Price (as defined in the Certificate of
Designations) of the Preferred Stock in accordance with the terms thereof,
including, without limitation, the terms which cause the Floating Conversion
Price (as defined in the Certificate of Designations) to decrease as the bid
price of the Common Stock decreases (collectively, the "Rule 416 Securities").
In this regard, the Company agrees to use all reasonable efforts to ensure that
the maximum number of Securities which may be registered pursuant to Rule 416
under the Securities Act are covered by each Registration Statement and, absent
guidance from the Commission or other definitive authority to the contrary, the
Company shall use all reasonable efforts to affirmatively support and to not
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any position adverse to the position that each Registration Statement filed
hereunder covers all of the Rule 416 Securities. If the Company determines that
the Registration Statement filed hereunder does not cover all of the Rule 416
Securities, the Company shall immediately (i) provide to each Holder written
evidence setting forth the basis for the Company's position and the authority
therefor and (ii) prepare and file an amendment to such Registration Statement
or a new Registration Statement in accordance with Section 2.2(e).
2.3 Registration Procedures. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Restricted Securities, the Company shall:
(a) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period set forth
in Section 2.2(b) herein; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with the applicable
provision of Rules 424 and 430A, as applicable, under the Securities Act in a
timely manner; and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Registration Statement
or supplement or the Prospectus;
(b) advise the Holders covered by such Registration Statement
in writing, (i) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and when the same has become effective
(provided that in the case of effectiveness, the Company shall deliver such
advice by facsimile on the same day that the Company is advised by the
Commission of such effectiveness), (ii) of any request by the Commission for
post-effective amendments to such Registration Statement or post-effective
amendments or supplements to the Prospectus or for additional information
relating thereof, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any such Registration Statement under the
Securities Act or of the suspension by any state securities commission of the
qualification of the Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, and (iv) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in any such Registration
Statement, the related Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the making
of any additions to or changes in any such Registration Statement or the related
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness of
such Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Restricted Securities under state securities
or Blue Sky laws, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
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(c) promptly furnish to each Holder of Restricted Securities
and Legal Counsel covered by any Registration Statement if any, without charge,
at least one conformed copy of any Registration Statement, as first filed with
the Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference) and such other documents as such Holder may
reasonably request and deliver to Legal Counsel one copy of each such document;
(d) deliver to each Holder covered by any Registration
Statement, and each underwriter, if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such person reasonably may request;
(e) take all such reasonable action in connection therewith
(including those reasonably requested by the selling Holders or the
underwriter(s), if any) required in order to expedite or facilitate the
disposition of such Restricted Securities pursuant to such Registration
Statement, including, but not limited to, provide for the indemnification
provisions and procedures of Section 2.5 hereof with respect to selling Holders.
(f) cooperate with the selling Holders and the Legal Counsel
in connection with the registration and qualification of the Restricted
Securities under the securities or Blue Sky laws of such U.S. jurisdictions as
the selling Holders may reasonably request in writing by the time any
Registration Statement is declared effective by the Commission, and do any and
all other acts or filings necessary or advisable to enable disposition in such
U.S. jurisdictions of the Restricted Securities covered by any Registration
Statement and to file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required to register or qualify
as a foreign corporation in any jurisdiction where it is not then so qualified
or as a dealer in securities in any jurisdiction where it would not otherwise be
required to register or qualify but for this Section 2.3, or to take any action
that would subject it to taxation or require it to file a general consent to
service of process, in any jurisdiction where it is not then so subject or
required;
(g) in connection with any sale of Restricted Securities that
will result in such securities no longer being Restricted Securities, cooperate
with the selling Holders to facilitate the timely preparation and delivery of
certificates representing Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Restricted Securities to be in such
denominations and registered in such names as the Holders may request at least
two (2) Business Days prior to any sale of Restricted Securities;
(h) use its reasonable efforts to cause the disposition of the
Restricted Securities covered by any Registration Statement to be registered
with or approved by such other U.S. governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof to consummate the
disposition of such Restricted Securities, subject to the proviso contained in
Section 2.2(f);
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(i) if any fact or event contemplated by Section 2.3(b) shall
exist or have occurred, prepare and file with the Commission as promptly as
practicable a supplement or post-effective amendment to any Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statement therein not misleading;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders with regard to such Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 (which need not be audited) for the twelve-month period beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of any Registration Statement;
(k) if applicable, use its best efforts to list, not later
than the effective date of such Registration Statement, all Restricted
Securities covered by such Registration Statement on any trading market on which
any Common Stock of the Company is then admitted for trading; and
(l) provide promptly to each Holder covered by any
Registration Statement upon request each document filed with the Commission
pursuant to the requirements of Section 12 and Section 14 of the Exchange Act.
(m) The Company shall hold in confidence and not make any
disclosure of information concerning a Holder provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(n) If requested by a Holder, the Company shall (i)
immediately incorporate in a prospectus supplement or post-effective amendment
such information as the Holder agrees should be included therein relating to
information relating to such Holder or the sale and distribution of the
Securities; (ii) make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment.
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(o) The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission in connection with
any registration hereunder.
(p) Within two (2) business days after the Registration
Statement which includes the Securities is ordered effective by the Commission,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Securities (with copies to the Holders
whose Securities are included in such Registration Statement) confirmation that
the Registration Statement has been declared effective by the Commission in the
form attached hereto as Exhibit A.
Each Holder agrees by acquisition of a Restricted Security that, upon
receipt of any notice from the Company of the existence of any fact of the kind
described in Section 2.3(b)(iv) or the commencement of an Allowable Blackout
Period, such Holder will forthwith discontinue disposition of Restricted
Securities pursuant to any Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
2.3(i), or until it is advised in writing, in accordance with the notice
provisions of Section 2.2(d) or Section 5.3 herein (the "Advice"), by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Company, each Holder will deliver to the
Company all copies, other than permanent file copies, then in such Holder's
possession, of the Prospectus covering such Restricted Securities that was
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time period regarding the effectiveness of the Shelf
Registration Statement set forth in Section 2.2(b) shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 2.3(b)(iv) or the commencement of a Blackout
Period to and including the date when each selling Holder covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 2.3(i) or shall have received (in
accordance with the notice provisions of Section 5.3) the Advice.
2.4 Preparation; Reasonable Investigation. In connection with
preparation and filing of each Registration Statement under the Securities Act,
the Company will give the Holders of Restricted Securities registered under such
Registration Statement and their respective counsel and accountants, the
opportunity to review such Registration Statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or supplement
thereto a reasonable period of time, but in no event less than five (5) business
days, prior to filing each such Registration Statement, amendment or supplement
with the Commission, and, if warranted, will give each of them the financial
statements, contracts and other corporate records as requested, and such
opportunities to discuss the business, finances and accountants of the Company
and its subsidiaries with its officers, directors and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such Holders and such Holders' respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act. If any such
information is reasonably deemed to be confidential, then the Holders receiving
such
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confidential information shall execute a confidentiality agreement with the
Company in a form reasonably acceptable to the Company.
2.5 Certain Rights of Holders. Unless required by applicable law, the
Company will not file any registration statement under the Securities Act which
refers to any Holder of Restricted Securities by name or otherwise without the
prior written approval of such Holder, which may not be unreasonably withheld.
2.6 Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all
reasonable fees and expenses of compliance with federal securities and state
Blue Sky or securities laws; (iii) all expenses of printing, messenger and
delivery services and telephone calls; (iv) all fees and disbursements of
counsel for the Company; and (v) all fees and disbursements of independent
certified public accountants of the Company.
2.7 Indemnification; Contribution.
(a) The Company agrees to indemnify, hold harmless and defend
(i) each Holder covered by any Registration Statement, (ii) each person, if any,
who controls (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) any such Holder or underwriter (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any such Holder or underwriter or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "indemnified person"), to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, fines,
amounts paid in settlement, costs or expenses, joint or several, (collectively,
"Claims") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body of the Commission, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto ("Indemnified Damages"), to which
any indemnified person may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon, or are caused by: (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment or supplement thereto filed with the Commission) or in any filing made
in connection with the qualification of the offering under the securities or
other "blue sky" laws of any jurisdiction in which Securities are offered ("Blue
Sky Filings"), or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (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 any
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final Prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the Commission) or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary, in light of the circumstances under which the statements therein were
made, not misleading or (iii) a violation by the Company of the Securities Act,
the Exchange Act or any state securities law, or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
law, or any other law applicable to the Company relating to any such
registration or qualification (the matters in the foregoing clauses (i) through
(iii) being, collectively, "Violations"); except insofar as such Claims or an
indemnified person: (x) are caused by any such untrue statement or omission or
alleged untrue statement or omission that is based upon and in conformity with
information relating to such indemnified person furnished in writing to the
Company by or on behalf of any of such indemnified person expressly for use
therein; or (y) with respect to any preliminary Prospectus, result from the fact
that such person sold Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus, as amended or supplemented, if the Company shall have previously
furnished copies thereof to such person in accordance with this Agreement and
said Prospectus, as amended or supplemented, would have corrected such untrue
statement or omission. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any indemnified person
and shall survive the transfer of such securities by such Holder.
In case any Claim shall be brought or asserted against any of
the indemnified persons with respect to which indemnity may be sought against
the Company, such indemnified person shall promptly notify the Company and the
Company shall assume the defense thereof. Such indemnified person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified person unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any implied parties) include both
the indemnified person and the Company and the indemnified person shall have
been advised in writing by its counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
assume the defense of such action on behalf of the indemnified person), it being
understood, however, that the Company shall not, in connection with such action
or similar or related actions or proceedings arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for all the indemnified persons, which firm shall be (x) designated by
such indemnified persons holding a majority in interest of the Securities
included in the Registration Statement to which the Claim relates and (y)
reasonably satisfactory to the Company. The Company shall not be liable for any
settlement of any such action or proceeding effected without the Company's prior
written consent, which consent shall not be withheld unreasonably, and the
Company agrees to indemnify and hold harmless any indemnified person from and
against any loss, claim, damage, liability, judgment or expense by reason of any
settlement of any action effected with the written consent of the
12
Company. The Company shall not, without the prior written consent of each
indemnified person, settle or compromise or consent to the entry of judgment on
or otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or contribution may
be sought hereunder (whether or not any indemnified person is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each indemnified person from all liability arising out
of such action, claim, litigation or proceeding. The failure by an indemnified
person to promptly notify the Company with respect to any Claim brought or
asserted against an indemnified person with respect to which indemnity is sought
shall not relieve the Company of any liability to the indemnified person under
this Section 2.7, except to the extent that the Company is prejudiced in its
ability to defend such action. The indemnification required by this Section 2.2
shall be made by periodic payments of the amounts thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
(b) Each Holder of Restricted Securities covered by any
Registration Statement agrees, severally and jointly, to indemnify and hold
harmless the Company and its directors, officers and any person controlling
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Company, and the respective officers, directors, partners,
employees, representatives and agents of each person, to the same extent as the
foregoing indemnity from the Company to each of the indemnified persons, but
only with respect to actions based on and in conformity with information
relating to such Holder furnished in writing by or on behalf of such Holder
expressly for use in any Registration Statement or Prospectus. In case any
action or proceeding shall be brought against the Company or its directors or
officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Restricted Securities covered by any Registration
Statement, such Holder shall have the rights and duties given the Company in the
second paragraph of Section 2.7(a) (except that the Holder may but shall not be
required to assume the defense thereof), and the Company or its directors or
officers or such controlling person shall have the rights and duties given to
each Holder by the second paragraph of Section 2.7(a). Notwithstanding the
foregoing, the Holder shall be liable under this Section 2.7(b) only for that
amount of a Claim or Indemnified Damages as does not exceed the proceeds to such
Holder as a result of the sale of Securities pursuant to such Registration
Statement.
(c) If the indemnification provided for in this Section 2.7 is
unavailable to an indemnified party under Section 2.7(a) or (b) (other than by
reason of exceptions provided in those Sections) in respect of any Claims or
Indemnified Damages referred to therein, then each applicable indemnifying party
(in the case of the Holders severally and not jointly), in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Claims or Indemnified Damages in such
proportion as is appropriate to reflect the relative fault of the Company and
such Holder in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities, judgments or expenses, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of such Holder on the other shall be determined by reference
to,
13
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by such Holder. The amount paid to a
party as a result of the Claims or Indemnified Damages referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 2.7(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company and each Holder of Restricted Securities covered
by any Registration Statement agree that it would not be just and equitable if
contribution pursuant to this Section 2.7(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 2.7(c), no Holder (and none of
its related indemnified persons) shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the dollar amount of
proceeds received by such Holder upon the sale of the Restricted Securities
pursuant to such Registration Statement exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution provisions contained in this
Section 2.7 are in addition to any liability which the indemnifying person may
otherwise have to the indemnified persons referred in this Section 2.7.
ARTICLE 3
DAMAGES
If the Registration Statement covering the resale of all of the
Securities is not (i) declared effective by the Commission on or before 120 days
after the Initial Closing Date (the "Scheduled Effective Date"); or (ii) if
after the Registration Statement has been declared effective by the Commission,
sales of all such Securities cannot be made pursuant to the Registration
Statement (whether because of a failure to keep the Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to the Registration Statement, to register sufficient shares of Common
Stock or otherwise), then, as partial relief for the damages to any Holder by
reason of any such delay in or reduction of its ability to sell the Securities
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to each Holder an amount in cash equal to the
product of (i) $1,000 multiplied by (ii) the sum of (A) the number of shares of
Preferred Stock held by such Holder plus (B) the number of Conversion Shares
held by such Holder divided by the Conversion Rate at which such shares were
issued, multiplied by (iii) the quotient of .02 divided by 30, multiplied by
(iv) the sum of (x) if
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applicable, the number of days (with respect to which Registration Delay
Payments have not previously been made) after the Scheduled Effective Date that
the relevant Registration Statement has not been declared effective by the
Commission, and (y) if applicable, the number of days (with respect to which
Registration Delay Payments have not previously been made and excluding days
during an Allowable Blackout Period) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective. The payments to which a Holder shall be entitled pursuant to this
Article 3 are referred to herein as "Registration Delay Payments." Registration
Delay Payments shall be paid within five business days of the earlier of (A) the
first day of the month following the occurrence of the event resulting in the
requirement to make Registration Delay Payments, or (B) the date on which the
event resulting in the requirement to make Registration Delay Payments is cured.
In the event the Company fails to make Registration Delay Payments in a timely
manner, such Registration Delay Payments shall bear interest at the rate of 2.0%
per month (prorated for partial months) until paid in full.
ARTICLE 4
RULE 144
With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Holders to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
so long as the Company remains subject to such requirements and the filing of
such reports and other documents is required for the applicable provisions of
Rule 144;
c. furnish to each Holder so long as such Holder owns
Restricted 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 investors to sell such securities pursuant to Rule 144 without
registration; and
d. upon compliance by the Holders with clause (iii) of Section
6.1 of the Securities Purchase Agreement, cause an opinion of counsel to be
delivered to the transfer agent regarding the availability of Rule 144 for the
sale of securities of the Company by the Holders.
15
ARTICLE 5
MISCELLANEOUS
5.1 Entire Agreement. This Agreement, together with the Securities
Purchase Agreement and the Certificate of Designations, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof.
5.2 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent holders of Preferred Stock, Warrants or Restricted Securities;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Preferred Stock, Warrants or Restricted Securities
from such Holder at a time when such Holder could not transfer such Restricted
Securities pursuant to pursuant to Rule 144(k) under the Securities Act as
contemplated by clause (ii) of the definition of Restricted Securities.
5.3 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the
16
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses and facsimile numbers for
such communications shall be:
If to the Company: Chief Financial Officer
StarBase Corporation
If to any Purchaser: At the address of such Purchaser
set forth on the Schedule of Purchasers to this
Agreement, with copies to Purchaser's counsel as set
forth on the Schedule of Purchasers or as specified
in writing by such Purchaser
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
5.4 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
5.5 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, such facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
5.6 Applicable Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the
principles of conflict of laws.
5.7 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
17
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchasers (i) hereby
irrevocably submits to the jurisdiction of the state and federal courts sitting
in the City of New York, borough of Manhattan for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement or the
Registration Rights Agreement and (ii) hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Company and the Purchasers consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section shall affect or
limit any right to serve process in any other manner permitted by law.
5.8 Amendment and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the Restricted Securities. No
provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least two-thirds (2/3) of
the Restricted Securities and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Restricted Securities then outstanding. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
5.9 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or part
of such provision, had never been contained herein, so that such provisions
would be valid, legal and enforceable to the maximum extent possible.
5.10 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
5.11 Remedies. Each Purchaser shall have all rights and remedies
set forth in this Agreement and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any
18
person having any rights under any provision of this Agreement shall be entitled
to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights granted by law.
5.12 Payment Set Aside. To the extent that the Company makes a payment
or payments to the Purchasers hereunder or the Purchasers enforce or exercise
their rights hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
STARBASE CORPORATION
By:
Name:
Its:
THE PURCHASERS
By:
Name:
Its:
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SCHEDULE OF PURCHASERS
Number of
Initial /
Additional
Investor Address Preferred Investor's Representatives'
Investor Name and Facsimile Number A Shares Address and Facsimile Number
------------- -------------------- ---------- -----------------------------
22
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn:
Re: StarBase Corporation
Ladies and Gentlemen:
We are counsel to StarBase Corporation, a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the buyers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders shares of its Series G
Convertible Preferred Stock, par value $.01 per share, (the "Preferred Stock")
convertible into shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), and, pursuant to Section 1.5 of the Purchase Agreement,
may issue warrants to purchase shares of the Common Stock (the "Warrants").
Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Preferred
Stock and exercise of the Warrants, under the Securities Act of 1933, as amended
(the "1933 Act"). In connection with the Company's obligations under the
Registration Rights Agreement, on _________ ___, 1998, the Company filed a
Registration Statement on Form S-3 (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Securities which names each of the Holders as a selling
stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Securities are
available for resale under the 1933 Act pursuant to the Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
cc: [LIST NAMES OF HOLDERS]
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