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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of November 23, 1998 (this
"Agreement"), is entered into by and among STARBASE CORPORATION, a Delaware
corporation (Nasdaq SmallCap Market Symbol "SBAS"), with headquarters located at
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx 00000 (the "Company"),
and the undersigned entities (the "Buyers").
W I T N E S S E T H:
WHEREAS, the Company and the Buyers are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyers wish to purchase and the Company wishes to sell, upon
the terms and subject to the conditions of this Agreement, shares of Series H
Preferred Stock (the "Preferred Stock"), of the Company which will be
convertible into shares of Common Stock, $.01 par value per share of the Company
(the "Common Stock"), upon the terms and subject to the conditions of the
Certificate of Designation for the Preferred Stock attached hereto as Annex I
(the "Certificate of Designation") and the Nontransferable Common Stock Purchase
Warrant to purchase Common Stock attached hereto as Annex II (the "Warrants")
(the Common Stock, the Preferred Stock and the Warrants sometimes referred to
herein as the "Securities");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE. Each of the undersigned hereby agrees to initially purchase
from the Company its pro rata portion of shares of Preferred Stock and Warrants
for an aggregate purchase price of $1,166,666 and, at the option of the Company
and subject to the conditions set forth in Sections 7, 8 and 9 hereof,
additional shares of Preferred Stock and Warrants in two tranches each with an
aggregate purchase price of $1,166,666, in the amount set forth on the signature
page of this Agreement, for a total offering of $3,500,000 of such Preferred
Stock and Warrants. The purchase price for each share of Preferred Stock shall
be $1,000 and shall be payable in United States Dollars.
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b. FORM OF PAYMENT. The Buyers shall pay the purchase price for the
Preferred Stock by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Escrow
Agreement attached hereto as ANNEX II (the "Escrow Agreement") as set forth
below.
C. METHOD OF PAYMENT. Payment into escrow of the purchase price for each
tranche of the Preferred Stock shall be made by wire transfer of funds to:
CITIBANK N.A.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Account Name: Xxxxxx Xxxxxx Flattau & Klimpl, LLP
Attorney Trust Account
Account No.:
Citibank ABA No.:
Not later than 3:00 p.m., New York time, on the date the Company and the Buyers
shall have executed this Agreement and returned a signed counterpart of this
Agreement to the Escrow Agent by facsimile, and thereafter on the Tranche II
Closing Date and the Tranche III Closing Date, the Buyers shall deposit with the
Escrow Agent the aggregate purchase price for the appropriate tranche of the
Preferred Stock, in currently available funds.
2. BUYERS' REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyers represent and warrant to, and covenant and agree with, the
Company as follows:
a. Without limiting Buyers' right to sell the Common Stock pursuant to
the Registration Statement or an exemption from registration, the Buyers are
purchasing the Preferred Stock and the Warrants and will be acquiring the shares
of Common Stock issuable upon conversion of the Preferred Stock and exercise of
the Warrants for their own account for investment only and not with a view
towards the public sale or distribution thereof and not with a view to or for
sale in connection with any distribution thereof;
b. Each of the Buyers is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), and (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities;
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c. All subsequent offers and sales of the shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants (the
"Shares" or "Common Stock") by the Buyers shall be made pursuant to registration
of the Shares under the 1933 Act or pursuant to an exemption from registration;
d. The Buyers understand that the shares of Preferred Stock are being
offered and sold, and the Shares are being offered, to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and each of the Buyers' compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyers set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyers to acquire the Preferred Stock and to receive an offer
of the Shares;
e. The Buyers and their advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock and the Warrants
and the offer of the Shares which have been requested by the Buyers, including
ANNEX V hereto. The Buyers and their advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyers have also had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10-K for the fiscal year ended March 31,
1998, (2) Quarterly Report on Form 10-Q for the fiscal quarters ended June 30,
1998, December 31, 1997 and September 30, 1997, (3) Form 8-K dated August 17,
1998, and (4) Form S-3/A dated October 28, 1998 (the "Company's SEC Documents").
f. The Buyers understand that their investment in the Securities involves
a high degree of risk;
g. The Buyers understand that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyers and is a valid and binding agreement of the
Buyers enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally;
i. Neither the Buyers, nor any affiliate of the Buyers, has any present
intention of entering into, any put option, short position, or other similar
position with respect to the Preferred Stock or the Shares.
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j. Notwithstanding the provisions hereof or of the Preferred Stock, in no
event (except with respect to an automatic conversion of the Preferred Stock as
provided in the Certificate of Designation) shall a Buyer be entitled to convert
any shares of Preferred Stock to the extent after such conversion, the sum of
(1) the number of shares of Common Stock beneficially owned by the Buyers and
their affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Preferred Stock), and (2) the number of shares of Common Stock issuable upon the
conversion of the Preferred Stock and exercise of the Warrants with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Buyers and their affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such proviso.
The preceding shall not interfere with any Buyer's right to convert the
Preferred Stock or exercise the Warrants which in the aggregate total more than
4.99% of the outstanding shares of Common Stock, over time, as long as no single
Buyer owns more than 4.99% of the outstanding Common Stock at any given time.
The foregoing limitations shall not apply in the event of an automatic
conversion as contained in the Certificate of Designation.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyers that:
a. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not be expected to have a material adverse effect on the business or
financial condition of the Company, or materially and adversely affect the
ability of the Company to perform its obligations pursuant to this Agreement.
Except as disclosed in Annex V, the Company does not presently own or control,
directly or indirectly, any interest in any other corporation, partnership,
association or other business entity.
b. CONCERNING THE SHARES. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $.01 par value per share, and
Annex V sets forth the number of shares which are issued and outstanding, and
the number of shares of Preferred Stock, $.01 par value per share, which are
issued and outstanding. All of the outstanding shares of Common Stock and
Preferred Stock of the Company have been duly and validly authorized and issued
and are fully paid and nonassessable. No shares of Common Stock are subject to
preemptive or similar rights. Except as specifically disclosed herein, there are
no outstanding options, warrants, rights to subscribe to, calls or commitments
of any character
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whatsoever relating to, or, except as a result of the purchase and sale of the
Preferred Stock and the Warrants, securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any subsidiary is or may become bound to
issue additional shares of Common Stock or securities or rights convertible or
exchangeable into shares of Common Stock.
c. REPORTING COMPANY STATUS. The Company has registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Common Stock is listed and traded on the Nasdaq
SmallCap Market. The Company is in compliance, to the extent applicable, with
all reporting obligations under either Section 12(b), 12(g) or 15(d) of the 1934
Act. The Company has complied in all material respects and to the extent
applicable with all reporting obligations, under either Section 13(a) or 15(d)
of the 1934 Act for a period of at least twelve (12) months immediately
preceding the offer and sale of the Securities. Except as set forth in ANNEX V
hereto, the Company has received no notice, either oral or written, with respect
to the continued eligibility of the Common Stock for such listing on the Nasdaq
Small Cap Market.
d. AUTHORIZED SHARES. The Company has sufficient authorized and unissued
Shares as may be reasonably necessary to effect the conversion of the Preferred
Stock and the exercise of the Warrants. The Shares have been duly authorized
and, when issued upon conversion of the Preferred Stock and upon exercise of the
Warrants, will be duly and validly issued, fully paid and non-assessable and
will not subject the holder thereof to personal liability by reason of being
such holder.
e. SECURITIES PURCHASE AGREEMENT; ESCROW AGREEMENT; REGISTRATION RIGHTS
AGREEMENT AND STOCK. The Company has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement, and all Annexes
attached hereto, and to issue the Preferred Stock, Warrants, and the shares of
Common Stock underlying the Preferred Stock and the Warrants. This Agreement,
the Escrow Agreement and the Registration Rights Agreement, the form of which is
attached hereto as ANNEX IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Escrow Agreement and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally; and the Preferred Stock and Warrants
will be duly and validly authorized and, when executed and delivered on behalf
of the Company in accordance with this Agreement, will be a valid and binding
obligation of the Company in accordance with its terms, subject to general
principles of equity and to bankruptcy, insolvency, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally.
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f. NON-CONTRAVENTION. The execution and delivery of this Agreement, the
Escrow Agreement and the Registration Rights Agreement by the Company, the
issuance of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Escrow Agreement, the
Registration Rights Agreement, and the Preferred Stock do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, including any listing agreement
for the Common Stock or any "lock-up" or similar provision of any underwriting
or similar agreements except as herein set forth, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) to its knowledge, order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein.
g. COMPLIANCE WITH LAW. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not be expected to have a material adverse effect on the business or
financial condition of the Company, or materially and adversely affect the
ability of the Company to perform its obligations pursuant to this Agreement.
The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Common Stock, Preferred Stock, or Warrants, in accordance with the
terms hereof.
h. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyers as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
i. SEC FILINGS. None of the SEC Filings with the Securities and Exchange
Commission since (and including) the filing of the Form 10-K SB/A for the fiscal
year ended March 31, 1998 contained, at the time they were filed, 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 made therein in light of the
circumstances under which they were made, not misleading. Except as set forth on
Annex V hereto, the Company has since June 30, 1998 timely filed all requisite
forms, reports and exhibits thereto with the Securities and Exchange Commission
and such filings comply in all material respects with the requirements of the
1933 Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder. The Company has not provided to any of the
Buyers any information that, according to applicable
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law, rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. The financial
statements of the Company included in the documents referred to in Section 2(e)
hereof comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto.
j. ABSENCE OF CERTAIN CHANGES. Since June 30, 1998, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company, except as disclosed in Annex V or in the documents referred to in
Section 2(e) hereof.
k. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic conditions known to the public generally) or as disclosed in
the documents referred to in Section 2(e), that has not been disclosed in
writing to the Buyers that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
l. ABSENCE OF LITIGATION. Except as set forth in ANNEX V hereto, and in
the documents referred to in Section 2(e), which the Buyers have reviewed, there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a material adverse effect on the business or financial
condition of the Company or the transactions contemplated by this Agreement or
any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
Except as set forth in Annex V hereto, and in the documents referenced in
Section 2(e), no judgment, order, decree, writ or award has been issued by, or
to the Company's knowledge, requested of any court, arbitrator, or governmental
agency which would have a material adverse effect on the business or financial
condition of the Company or the transactions contemplated by this Agreement or
any of the documents annexed hereto, or which would adversely and materially
affect the Company's ability to perform its obligations under this Agreement or
any document annexed hereto.
m. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in ANNEX V hereto
and Section 3(e), no Event of Default, as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a material adverse effect on
the Company's financial condition or results of operations.
n. PRIOR ISSUES. Except as set forth in ANNEX V, during the twelve (12)
months preceding the date hereof, the Company has not issued any convertible
securities. The
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presently outstanding unconverted principal amount of each such issuance as at
June 30, 1998 are set forth in ANNEX V.
o. ACKNOWLEDGMENT OF DILUTION. The Company is aware and acknowledges that
issuance of Common Stock upon the conversion of the Preferred Stock and/or
exercise of the Warrants, may result in may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Common Stock in accordance with the Certificate of Designation and
Warrant is unconditional and absolute regardless of the effect of any such
dilution.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. Each of the Buyers acknowledges that (1) the
shares of Preferred Stock and Warrants have not been and are not being
registered under the provisions of the 1933 Act and, except as provided in the
Registration Rights Agreement, the Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) an exemption from registration exists
and the Buyers shall have delivered to the Company any information reasonably
necessary for the Company's independent counsel to prepare and deliver an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (2) any sale of the
Shares made in reliance on Rule 144 promulgated under the 1933 Act may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Shares under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (3) neither the Company nor any other person is under any obligation to
register the Shares (other than pursuant to the Registration Rights Agreement)
under the 1933 Act or to comply with the terms and conditions of any exemption
thereunder.
b. RESTRICTIVE LEGEND. Each of the Buyers acknowledges and agrees that
the Preferred Stock, and, until such time as the Common Stock has been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold pursuant to an effective registration statement
("Registration Statement") or an exemption from registration, the Shares issued
to the Buyer upon conversion of the Preferred Stock and exercise of the Warrants
shall bear a restrictive legend in substantially the following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN
OPINION OF
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COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter into
the Registration Rights Agreement, in substantially the form attached hereto as
ANNEX IV, on or before the Tranche I Closing Date (as defined in Section 7(b)
hereof), and the Company shall cause such Registration Rights Agreement to
remain in full force and effect for so long as the Securities are outstanding,
and the Company shall comply with the terms thereof.
d. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Preferred Stock and the Warrants to
the Buyers under any United States laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyers promptly after such filing.
e. REPORTING STATUS. So long as the Buyers beneficially own any of the
Preferred Stock and/or Warrants, the Company shall file all reports required to
be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
f. USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Preferred Stock and the Warrants (excluding amounts paid by the Company for
legal fees and finder's fees in connection with the sale of the Preferred Stock
and the Warrants) for internal working capital purposes, and new product
development and support and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation, partnership enterprise
or other person.
g. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield the number of shares of Common Stock issuable upon
conversion and/or exercise as may be required to satisfy the conversion rights
of the Buyers pursuant to the terms and conditions of the Preferred Stock and
the exercise rights of the Buyers pursuant to the terms of the Warrants.
h. WARRANTS. The Company agrees to issue to each of the Buyers on each
Closing Date such Buyers' pro rata share of the Warrants to purchase an
aggregate of one hundred thousand (100,000) shares of Common Stock. Such
Warrants shall bear an exercise price equal to one hundred ten percent (110%) of
the Closing Price (as defined in the Warrant) and shall expire on the fifth
anniversary of the issuance date of the Warrant, in the form annexed hereto as
ANNEX II, together with registration rights granted pursuant to the Registration
Rights Agreement.
i. LISTING OF COMMON STOCK. The Company shall (a) not later than thirty
(30) days following each Conversion Date (as defined in the Certificate of
Designation) prepare
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and file with the Nasdaq Small Cap Market (as well as any other national
securities exchange, market or trading facility on which the Common Stock is
then listed) an additional shares listing application covering the amount of
shares of Common Stock issued upon the conversion of the Series H Preferred
Stock or the exercise of the warrants, (b) take all steps necessary to cause the
such shares to be approved for listing on the Nasdaq Small Cap Market (as well
as on any other national securities exchange, market or trading facility on
which the Common Stock is then listed) as soon as possible thereafter, and (c)
provide to the Buyers evidence of such listing, and the Company shall maintain
the listing of its Common Stock on such exchange or market. The Company will
comply with the listing and trading requirements of its Common Stock on Nasdaq
Small Cap Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Nasdaq Small Cap
Market. In the event the Company receives notification from Nasdaq or any other
controlling entity stating that the Company is not in compliance with the
listing qualifications of the Nasdaq Small Cap Market, the Company will take all
action necessary to bring the Company within compliance with all applicable
listing standards of the Nasdaq Small Cap Market.
j. EXCHANGE ACT REGISTRATION. The Company will maintain the registration
of its Common Stock under Section 12 of the Exchange Act, will comply in all
respects with its reporting and filing obligations under the Exchange Act, and
will not take any action or file any document (whether or not permitted by
Exchange Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said Act.
k. CORPORATE EXISTENCE. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
l. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION. The Company will
immediately notify each of the Buyers upon the occurrence of any of the
following events in respect of a registration statement or related prospectus in
respect of an offering of Registrable Securities (as defined in the Registration
Rights Agreement): (i) receipt of any request for additional information by the
SEC or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt 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; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to
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state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the related
prospectus, 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; and (v) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate. The
Company will promptly make available to the Buyers any such supplement or
amendment to the related prospectus.
m. LEGAL OPINION. The Company's independent counsel shall deliver to the
Buyers upon execution of this Agreement and upon the Closing of each subsequent
tranche (dated as of the applicable closing), an opinion in the form of Annex
VI. The Company will obtain for the Buyers, at the Company's expense, any and
all opinions of counsel which may be reasonably required in order to convert the
Preferred Stock and/or exercise the Warrants, including, but not limited to,
obtaining for the Buyers an opinion of counsel, subject only to receipt of a
notice of conversion, and/or subject only to a receipt of a notice of exercise
in the form annexed to the Warrant, and in connection with the resale of the
Shares by the Buyers directing the transfer agent to remove the legend from the
certificate.
n. RESTRICTIONS ON FUTURE FINANCINGS. The Company may enter into a
subsequent or further offer or sale of Common Stock, or any securities or other
instruments convertible into shares of Common Stock, with any party that is not
a party to this Agreement; provided, that the investor in such future financing
shall not be permitted to convert its securities into Common Stock or to have
the right to receive freely tradeable shares of Common Stock until the Buyers
shall have freely tradeable shares of Common Stock. The Company must disclose
the terms of any proposed financing to the Buyers prior to closing on such
financing and the Buyers shall have the benefit of any terms in such financing
that are more beneficial to the terms of this Agreement. Notwithstanding the
foregoing, the Company may issue shares of its Common Stock in connection with:
(a) the issuance of securities (other than for cash) in connection with a
merger, consolidation, sale of assets, or other disposition, (b) the exchange of
capital shares for assets, stock, or joint venture interest, (c) an offering of
any of the Company's securities at then current market prices with no repricing
or reset provisions, or (d) any employee benefit plan.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the Tranche I Closing Date, the Company will
irrevocably instruct its transfer agent to issue Common Stock from time to time
upon conversion of the Preferred Stock and/or exercise of the Warrants in such
amounts as specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement prior
to registration of the Shares under the 1933 Act and resale of the Shares,
registered in the name of the Buyers or its nominee and in such denominations to
be specified by the Buyers in connection with each conversion of the Preferred
Stock and/or exercise of the Warrants. The Company warrants that no instruction
other than such instructions referred to in this Section 5 and stop transfer
instructions to give effect to Section 4(a) hereof prior to
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registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyers' obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyers provide the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyers of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Shares and, in the case of the Shares, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without legend
in such name and in such denominations as specified by the Buyers.
b. The Company will permit the Buyers to exercise its right to convert
the Preferred Stock in accordance with the terms of the Certificate of
Designation.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the Escrow Agent
pursuant to Section 1(b) hereof, on a delivery against payment basis on each
Closing Date.
7. CLOSING DATE.
a. The date and time of the issuance and sale of each tranche of the
Preferred Stock (each, a "Closing Date") shall occur no later than 3:00 P.M.,
New York time on the date of the fulfillment or waiver of all of the closing
conditions pursuant to Sections 8 and 9, or such other mutually agreed to time.
The closing shall occur on such date at the offices of the Escrow Agent.
Notwithstanding anything to the contrary contained herein, the Escrow Agent will
be authorized to release the funds representing the Purchase Price for the
Preferred Stock and the Warrants, and the Preferred Stock and the Warrants only
upon satisfaction of each of the conditions set forth in Sections 8 and 9
hereof.
b. Notwithstanding anything to the contrary contained in Section 7(a),
the Closing Date of the first tranche (the "Tranche I Closing Date") shall be
upon the execution by the parties of this Agreement, and the payment of the
Purchase Price and the delivery of the original stock certificates evidencing
the Preferred Stock and the Warrants, the Closing Date of the second tranche
(the "Tranche II Closing Date") shall be December 30, 1998, and the Closing Date
of the third tranche (the "Tranche III Closing Date") shall be 40 calendar days
after the Tranche II Closing Date; provided, that such Closing Date is a
business day, and, if not, then the immediately following business day. In
addition to the conditions contained in Sections 8 and 9 below, the closing of
each tranche shall be subject to the following restrictions:
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i. The Common Stock must have a closing bid price of at least $0.50
per share for the five consecutive trading days prior to the
Closing Date of the applicable tranche.
ii. The average trading volume for the Common Stock over the five
consecutive trading days prior to the Closing Date of the
applicable tranche must be at least 100,000 shares per day if the
Common Stock is trading between $0.50 - $0.75 per share, 95,000
shares per day if the Common Stock is trading between $0.76 -
$1.00 per share, 90,000 shares per day if the Common Stock is
trading between $1.01 - $1.25 per share, 80,000 shares per day if
the Common Stock is trading between $1.26 - $1.50 per share and
at least 75,000 shares per day if the price of the Common Stock
is in excess of $1.50 per share.
iii. If, using the closing bid price of the Common Stock on the
trading date immediately preceding the Closing Date of the
applicable tranche, the number of shares of Common Stock that
would be issued as a result of complete conversion of the
Preferred Stock associated with the tranches previously funded
and the tranche to be funded exceeds 17% of the then issued and
outstanding Common Stock of the Company, the Buyers shall not be
obligated to fund the additional tranche.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Each of the Buyers understands that the Company's obligation to sell the
Preferred Stock and the Warrants on each Closing Date to the Buyers pursuant to
this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of such Agreement as
evidenced by execution of this Agreement and all agreements annexed hereto by
the Company for at least $1,666,666 principal amount of Preferred Stock (or such
lesser amount as the Company, in its sole discretion, shall determine);
b. Delivery by the Buyers to the Escrow Agent of good funds as payment in
full of an amount equal to the purchase price for the Preferred Stock and the
Warrants in accordance with Section 1(c) hereof;
c. The accuracy in all material respects on each Closing Date of the
representations and warranties of the Buyers contained in this Agreement as if
made on such Closing Date and the performance by the Buyers on or before each
Closing Date of all covenants and agreements of the Buyers required to be
performed on or before such Closing Date;
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d. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
9. CONDITIONS TO EACH BUYERS' OBLIGATION TO PURCHASE.
The Company understands that each Buyer's obligation to purchase the
Preferred Stock on each Closing Date is conditioned upon:
a. Acceptance by Buyers of an Agreement for the sale of Preferred Stock
and Warrants, as indicated by execution of this Agreement and all agreements
annexed hereto;
b. Delivery by the Company to the Escrow Agent of the original shares of
Preferred Stock and Warrants in accordance with this Agreement;
c. The accuracy in all material respects on each Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on each Closing Date and the performance by the Company on or before each
Closing Date of all covenants, agreements and conditions of the Company required
by this Agreement, the Registration Rights Agreement, the Escrow Agreement and
the Warrants to be performed on or before each Closing Date; and
d. On each Closing Date, the Buyers having received an opinion of counsel
for the Company, dated the such Closing Date, in form, scope and substance
reasonably satisfactory to the Buyers, to the effect set forth in Annex VI
attached hereto, and the Registration Rights Agreement annexed hereto as Annex
IV.
e. The Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Preferred Stock and
Warrants, or shall have the availability of exemptions therefrom. The sale and
issuance of the Preferred Stock and Warrants shall be legally permitted by all
laws and regulations to which the Company is subject.
f. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits or
directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
this Agreement.
g. Since the Tranche I Closing Date, no event that had or is reasonably
likely to have a material adverse effect on the business or financial condition
of the Company,
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or materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement has occurred.
h. The trading of the Common Stock is not suspended by the SEC or the
Nasdaq Small Cap Market, and the Common Stock shall have been approved for
listing or quotation on and shall not have been delisted from the Nasdaq Small
Cap Market. The issuance of shares of Preferred Stock and Warrants with respect
to the applicable Closing, if any, shall not violate the shareholder approval
requirements of the Nasdaq Small Cap Market.
i. On each Closing Date, the number of shares of Common Stock underlying
the Preferred Stock and Warrants then to be purchased by each Buyer will not
exceed the number of such shares which, when aggregated with all other shares of
Common Stock then owned by such Buyer beneficially or deemed beneficially owned
by such Buyer, would result in any buyer owning more than 4.99% of all of such
Common Stock as would be outstanding on such Closing Date.
j. The parties hereto shall have entered into the Escrow Agreement to
hold the Preferred Stock and Warrants issuable upon each Closing Date and the
Purchase Prices due hereunder, which shall remain in full force and effect as of
each Closing Date.
10. GOVERNING LAW; SPECIFIC PERFORMANCE.
a. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. Each party waives its right to a trial by
jury.
b. The Company and the Purchaser acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement or
the Registration Rights 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 or the Registration Rights
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.
11. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States Postal Service by regular or certified mail, or (iii) three business days
mailing by international express courier, with postage and fees prepaid,
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other
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addresses as a party may designate by ten days advance written notice to each of
the other parties hereto.
COMPANY: STARBASE CORPORATION
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on Schedule of Buyers attached hereto.
ESCROW AGENT: Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's representations
and warranties shall survive the execution and delivery hereof of this Agreement
and the delivery of the Preferred Stock.
13. MISCELLANEOUS
a. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
each of the Buyers and each officer, director of the Buyers or person, if any,
who controls the Buyers within the meaning of the Securities Act against any
losses, claims, damages or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), to which the Buyers may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon the breach of any term of this Agreement. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
b. ASSIGNMENT. The provisions of this Agreement shall be binding upon and
inure to the benefit of, the parties and their respective successors and
assigns.
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c. COUNTERPARTS; FACSIMILE; AMENDMENTS. This Agreement may be executed in
multiple counterparts, each of which may be executed by less than all of the
parties and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original. This Agreement may be amended only by a writing executed by the
Company on the one hand, and all of the Buyers, on the other hand.
d. ENTIRE AGREEMENT. This Agreement, the Exhibits or Annexes, which
include, but are not limited to the Certificate of Designation, the Warrant, the
Escrow Agreement, and the Registration Rights Agreement, set forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Annexes to
this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
e. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party
f. TITLE AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
g. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given trading day for the purposes of this Agreement and all
Annexes shall be Bloomberg, L.P. or any successor thereto. The written mutual
consent of the Buyers and the Company shall be required to employ any other
reporting entity.
h. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of a
certificate representing the Preferred Stock, Warrants, or shares of Common
Stock underlying the Preferred Stock or Warrants, and (ii) in the case of any
such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new certificate of like tenor.
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i. PUBLICITY. The Company and the Buyers shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
parties with prior notice of such public statement. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of the Buyers
without the prior written consent of the Buyers, except to the extent required
by law, in which case the Company shall provide the Buyers with prior written
notice of such public disclosure.
[end of page]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyers or
one of their officers thereunto duly authorized as of the date first above
written.
STARBASE CORPORATION
By:
-------------------------------------
Name:
Title:
THE BUYERS:
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SCHEDULE OF BUYERS TO THE
SERIES H CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
FOR STARBASE CORPORATION
NUMBER OF
INITIAL/
ADDITIONAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES AND FACSIMILE NUMBER
------------------------ -------------------------------------- ---------- -----------------------------------
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ANNEX I CERTIFICATE OF DESIGNATION
ANNEX II FORM OF WARRANT
ANNEX III ESCROW AGREEMENT
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI OPINION OF COUNSEL
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