EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made and entered into as of
November 20, 2001 (this "Agreement"), by and among Starbase Corporation, a
Delaware corporation (the "Company"), and the purchasers listed on Schedule 1
hereto (the "Purchasers").
This Agreement is being entered into pursuant to the Convertible
Debenture and Warrant Purchase Agreement, dated as of the date hereof, by and
among the Company and the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section 3(n).
"Board" shall have the meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.01 per
share.
"Debentures" means the convertible debentures of the Company issued
to the Purchasers pursuant to the Purchase Agreement.
"Effectiveness Date" means with respect to the Registration
Statement the earlier of (a) the 90th day following the Filing Date, and (b) the
date which is within five (5) days of the date on which the Commission informs
the Company that the Commission will (i) not review the Registration Statement
or (ii) that the Company may request the acceleration of the effectiveness of
the Registration Statement.
"Effectiveness Period" shall have the meaning set forth in Section
2.
"Event" shall have the meaning set forth in Section 7(e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the earlier of the date the Registration
Statement is filed and the 30th day following the Tranche I Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities including, including without
limitation, the Purchasers and their assignees.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Liquidated Damages" shall have the meaning set forth in Section
7(e).
"Losses" shall have the meaning set forth in Section 5(a).
"Nasdaq" shall mean the NASDAQ National Market System.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), 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 the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock
issuable upon conversion of the Debentures and any interest accrued thereon (the
"Conversion Shares") and exercise of the Warrants (the "Warrant Shares"), and
upon any stock split, stock dividend, recapitalization or similar event with
respect to such Conversion Shares and Warrant Shares and (ii) any other dividend
or other distribution with respect to, conversion or exchange of, or in
replacement of, Registrable Securities; provided, however, that Registrable
Securities shall include (but not be limited to) a number of shares of Common
Stock equal to no less than 200% of the maximum number of shares of Common Stock
which would be issuable upon conversion of the Debentures and upon exercise of
the Warrants, assuming such conversion and exercise occurred on the Tranche II
Closing Date or the Filing Date, whichever date would result in the
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greater number of Registrable Securities. Notwithstanding anything herein
contained to the contrary, such registered shares of Common Stock shall be
allocated on a pro-rata basis among the Holders based on the total number of
Registrable Securities issued or issuable as of each date that a Registration
Statement, as amended, relating to the resale of the Registrable Securities is
declared effective by the Commission. Notwithstanding anything contained herein
to the contrary, if the actual number of shares of Common Stock issuable upon
conversion of the Debentures exceeds 200% of the number of shares of Common
Stock issuable upon conversion of the Debentures and exercise of the Warrants
based upon a computation as at the Tranche II Closing Date or the Filing Date,
the term "Registrable Securities" shall be deemed to include such additional
shares of Common Stock.
"Registration Statement" means the registration statement and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Tranche I Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Tranche II Closing Date" shall have the meaning set forth in the
Purchase Agreement.
2. Registration. On or prior to the Filing Date the Company shall
prepare and file with the Commission a "shelf" Registration Statement covering
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith). The Company shall (i) not permit any
securities other than the Registrable Securities to be included in the
Registration Statement, (ii) use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as soon as possible
after the filing thereof, but in any event prior to the Effectiveness Date, and
to keep such Registration Statement continuously effective under the Securities
Act until such date
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as is the earlier of (x) the date when all Registrable Securities covered by
such Registration Statement have been sold or (y) the date on which the
Registrable Securities may be sold without any restriction pursuant to Rule
144(k) as determined by the counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent to such effect (the
"Effectiveness Period"). If at any time and for any reason, an additional
Registration Statement is required to be filed because at such time the actual
number of shares of Common Stock into which the Debentures are convertible and
the Warrants are exercisable exceeds one hundred twenty-five percent (125%) of
the number of shares of Registrable Securities remaining under the Registration
Statement, the Company shall have twenty (20) Business Days to file such
additional Registration Statement, and the Company shall use its best efforts to
cause such additional Registration Statement to be declared effective by the
Commission as soon as possible, but in no event later than thirty (30) days
after filing. If at such time in the reasonable opinion of the Purchasers there
is not or will not be a sufficient number of Registrable Securities to be issued
upon conversion of the principal amount of the Debentures then outstanding, or
upon the exercise of the Warrants then outstanding, the Purchasers shall be
entitled to demand that the Company prepare and file an additional Registration
Statement.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and their counsel, copies of all such documents proposed to be filed, which
documents (other than those incorporated by reference) will be subject to the
review of such Holders and such counsel, and (ii) at the request of any Holder
cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or their counsel shall reasonably object in writing within three (3)
Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
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Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and
their counsel as promptly as possible (and, in the case of (i)(A) below, not
less than five (5) Business Days prior to such filing) and (if requested by any
such Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement and (C) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-
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effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(f) Furnish to each Holder and their counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and their counsel, without
charge, as many copies of the Registration Statement, Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
their counsel in connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable Securities for
offer and sale under the securities or blue sky laws of such jurisdictions
within the United States as any Holder requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain 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,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on Nasdaq and any other
securities exchange, quotation
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system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than forty-five (45) days after the end of
any twelve (12)-month period (or ninety (90) days after the end of any twelve
(12)-month period if such period is a fiscal year) commencing on the first day
of the first fiscal quarter of the Company after the effective date of the
Registration Statement, which statement shall conform to the requirements of
Rule 158.
(m) Require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails to furnish such information within a reasonable time
prior to the filing of each Registration Statement, supplemented Prospectus
and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
7
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may suspend effectiveness of
a registration statement and suspend the sale of Registrable Securities under a
Registration Statement for a period not to exceed twenty (20) consecutive days,
provided that the Company may not suspend its obligation under this Section 3(n)
for more than forty-five (45) days in the aggregate during any twelve (12) month
period (each, a "Blackout Period"); provided, however, that no such suspension
shall be permitted for consecutive twenty (20) day periods, arising out of the
same set of facts, circumstances or transactions.
(o) Within two (2) business days after the Registration Statement
which includes the Registrable 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 Registrable Securities (with
copies to the Holders whose Registrable 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.
4. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation the following: (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with Nasdaq and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the Commission, and (C) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees of counsel for the Company and
counsel for the Holders, in the case of the counsel, to a maximum amount of
$5,000 (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement, including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit,
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the fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all claims, losses, damages,
liabilities, penalties, judgments, costs (including, without limitation, costs
of investigation) and expenses (including, without limitation, attorneys' fees
and expenses) (collectively, "Losses"), as incurred, arising out of or relating
to any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) hereof) and shall survive the
transfer of the Registrable Securities by the Holders.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, and the
respective successors, assigns, estate and personal representatives of each of
the foregoing, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising solely out of or based solely upon any
untrue statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in the light of the circumstances under which
they were made)
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not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus Supplement. Notwithstanding anything to
the contrary contained herein, the Holder shall be liable under this Section
5(b) for only that amount as does not exceed the net proceeds to such Holder as
a result of the sale of Registrable Securities pursuant to such Registration
Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such
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Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying,
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 5(c) for only that amount as
does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties
6. Rule 144.
As long as any Holder owns Debentures, Conversion Shares, Warrants
or Warrant Shares, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true
and complete copies of all such filings. As long as any Holder owns
11
Debentures, Conversion Shares, Warrants or Warrant Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Person to sell Conversion Shares and Warrant
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions of counsel to the Company referred to in
the Purchase Agreement. Upon the request of any Holder, the Company shall
deliver to such Holder a written certification of a duly authorized officer as
to whether it has complied with such requirements.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into and currently in effect,
nor shall the Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as set forth in Schedule
7(b) hereto, neither the Company nor any of its subsidiaries has previously
entered into any agreement currently in effect granting any registration rights
with respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict with the provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any of
its security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement, and except
as set forth in Schedule 7(b) hereto the Company shall not after the date hereof
enter into any agreement providing such right to any of its security holders,
unless the right so granted is subject in all respects to the prior rights in
full
12
of the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
(d) Piggyback Registrations. If at any time when there is not an
effective Registration Statement covering any Registrable Securities, the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or its then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within thirty (30) days after receipt of such notice, any
such holder shall so request in writing (which request shall specify the
Registrable Securities intended to be disposed of by the Holders), the Company
will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holder, to
the extent requisite to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities would materially adversely
affect the offering contemplated in such registration statement, and, based on
such determination, recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then, as applicable (x)
the number of Registrable Securities of the Holders included in such
registration statement shall be reduced pro-rata among such Holders (based upon
the number of Registrable Securities requested to be included in the
registration), if the Company after consultation with the underwriter(s)
recommends the inclusion of fewer Registrable Securities, or (y) none of the
Registrable Securities of the Holders shall be included in such registration
statement, if the Company after consultation with the underwriter(s) recommends
the inclusion of none of such Registrable Securities; provided, however, that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction of the number of Registrable Securities
intended to be offered by the Holders shall not represent a greater fraction
than the fraction of similar reductions imposed on such other persons or
entities (other than the Company). Notwithstanding the foregoing, in
13
the event the Holders request piggyback rights with respect to the Registrable
Securities pursuant to this Section 7(d), and thereafter the Company determines
not to register or delay the registration of shares of Common Stock for its own
account or the account of others under this Section 7(d), the Company's
obligation to register the Registrable Securities on the Registration Statement
pursuant to Section 2 of this Agreement shall continue and remain in full force.
(e) Failure to File Registration Statement and Other Events. The
Company and the Purchaser agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
Filing Date, or is not declared effective by the Commission on or prior to the
Effectiveness Date (or in the event an additional Registration Statement must be
filed because the actual number of shares of Common Stock into which the
Debentures are convertible and the Warrants are exercisable exceeds the number
of shares of Common Stock initially registered is not filed and declared
effective within the time periods set forth in Section 2 hereof), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act within five (5)
Business Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) the Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded immediately by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (iv) trading in the Common Stock shall be suspended or if the
Common Stock is delisted from Nasdaq for any reason for more than three (3)
Business Days in the aggregate, or (v) the conversion rights of the Holders are
suspended for any reason, including by the Company, or (vi) the Company breaches
in a material respect any covenant or other material term or condition to this
Agreement, the Purchase Agreement (other than a representation or warranty
contained therein) or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated hereby and
thereby, and such breach continues for a period of thirty days after written
notice thereof to the Company, or (vii) the Company has breached Section 3(n) of
this Agreement (any such failure or breach being referred to as an "Event"), the
Company shall pay as liquidated damages to each Holder for such failure and not
as a penalty (the "Liquidated Damages") at the option of the Holder in shares of
Common Stock, on the same terms as the Conversion Shares, or in cash, an amount
equal to two percent (2%) of the purchase price paid by the Purchaser for the
Debentures purchased pursuant to the Purchase Agreement for the initial thirty
(30) day period following the Event, and an amount equal to three percent (3%)
of the purchase price paid by the Purchaser for the Debentures purchased
pursuant to the Purchase Agreement, for every thirty (30) day period thereafter
until the applicable Event has been cured, which amount shall be pro rated for
any period less than thirty (30) days (the "Periodic Amount"). Payments to be
made pursuant to this Section 7(e) shall be due and payable immediately upon
demand at the option of the Holders in cash or as an accrual to the amount
outstanding under the Debentures. Subject to Section 7(k), the parties agree
that the Periodic Amount represents a reasonable estimate on the part of the
14
parties, as of the date of this Agreement, of the amount of damages that may be
incurred by the Holders if the Registration Statement is not filed on or prior
to the Filing Date or has not been declared effective by the Commission on or
prior to the Effectiveness Date and maintained in the manner contemplated herein
during the Effectiveness Period or if any other Event as described herein has
occurred.
(f) Specific Enforcement, Consent to Jurisdiction.
(i) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Registration Rights Agreement or the Purchase 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 Registration
Rights Agreement or the Purchase Agreement and to enforce specifically the terms
and provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(ii) Each of the Company and the Purchasers (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York and the courts of the State of New
York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement or the Purchase
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 7(f) shall affect or limit any right to
serve process in any other manner permitted by law.
(iii) Each of the Company and the Purchasers hereby agree that
the prevailing party in any suit, action or proceeding arising out of or
relating to this Agreement, the Purchase Agreement, the Debentures and the
Warrants, shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.
(g) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
15
(h) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., eastern
standard time, on any date and earlier than 11:59 p.m., eastern time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on Schedule A attached hereto, or with respect to the Company,
addressed to:
Starbase Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Holder shall be sent to the addresses
listed on Schedule 1 attached hereto, if applicable. Copies of notices to the
Company and to the Holders shall be sent to Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
LLP, the Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇.
(i) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Holder may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(j) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Debentures or Warrants or shares of Registrable Securities
if: (i) the Holder agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated
16
by clause (ii) of this Section, the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions of this Agreement, and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement. In addition, each Holder shall have the
right to assign its rights hereunder to any other Person with the prior written
consent of the Company, which consent shall not be unreasonably withheld. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
(k) Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Agreement shall be cumulative
and in addition to all other remedies available under this Agreement, the
Purchase Agreement, the Debentures and the Warrants, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief). No remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a Holder's right to pursue actual damages for any failure by the
Company to comply with the terms of this Agreement. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Holders and that the remedy at law for any such breach may be inadequate.
Therefore the Company agrees that, in the event of any such breach or threatened
breach, the Holders shall be entitled, in addition to all other available rights
and remedies, to an injunction restraining any such breach or threatened breach,
without the necessity of showing economic loss and without any bond or other
security being required.
(l) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(m) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law thereof. This Agreement shall not be interpreted
or construed with any presumption against the party causing this Agreement to be
drafted.
(n) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(o) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would
17
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(p) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(q) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage and shall not be counted as outstanding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
STARBASE CORPORATION
By:
---------------------------------
Name:
Title:
▇▇▇▇▇▇▇▇▇▇▇ LIMITED PARTNERSHIP
By:
---------------------------------
Name:
Title:
ALPHA CAPITAL AKTIENGESELLSCHAFT
By:
---------------------------------
Name:
Title:
NILES HOLDINGS LIMITED
By:
---------------------------------
Name:
Title:
BRISTOL INVESTMENT FUND, LTD.
By:
---------------------------------
Name:
Title:
SDS MERCHANT FUND
By:
---------------------------------
Name:
Title:
MANCHESTER ASSET MANAGEMENT
By:
---------------------------------
Name:
Title:
▇▇▇▇▇ ENTERPRISES, INC.
By:
---------------------------------
Name:
Title:
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
American Stock Transfer & Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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
Convertible Debentures and Warrant Purchase Agreement (the "PURCHASE
AGREEMENT"), dated as of November 16, 2001, by and among the Company and the
purchasers named therein (the "PURCHASERS") pursuant to which the Company issued
to the Holders debentures (the "DEBENTURES") convertible into the Company's
Common Stock, par value $.01 per share (the "COMMON STOCK") and warrants (the
"WARRANTS") exercisable for shares of the Common Stock. Pursuant to the Purchase
Agreement, the Company has also entered into a Registration Rights Agreement
with the Purchasers (the "REGISTRATION RIGHTS AGREEMENT"), dated as of November
16, 2001, pursuant to which the Company agreed, among other things, to register
the Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Debentures
and exercise of the Warrants, under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on ________________, 200_, the Company filed a
Registration Statement on Form ___ (File No. 333-________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the resale of the Registrable Securities which names each of the present 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 Securities 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, accordingly,
the Registrable Securities are available for resale under the Securities Act in
the manner specified in, and pursuant to the terms of the Registration
Statement.
Very truly yours,
STARBASE CORPORATION
By:
--------------------------
Name:
Title:
cc: [LIST NAMES OF PURCHASERS]
Schedule 1
Names and Addresses of Purchasers
▇▇▇▇▇▇▇▇▇▇▇ Limited Partnership
c/o Canaccord Capital
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Alpha Capital Aktiengesellschaft
Pradafant 7
Furstentums 9490, Vaduz
Liechtenstein
Niles Holdings Limited
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇
Grand Turks
Turks & Caicos, BWI
Bristol Investment Fund, Ltd.
Caledonian House
▇▇▇▇▇▇▇ Street
▇▇▇▇▇▇ Town
Grand Cayman, Cayman Islands
SDS Merchant Fund
c/o SDS Capital Partners, LLC
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Manchester Asset Management
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ Enterprises, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Schedule 7(b)
The Company has agreed to issued shares of Common Stock pursuant to
certain fee arrangements with ▇▇ ▇▇▇▇▇ & Co. and UBS Warburg, LLP. The Company
has agreed to grant ▇▇ ▇▇▇▇▇ & Co. and UBS Warburg, LLP registration rights with
respect to these shares of Common Stock.
