PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 22nd day
of May, 2002 by and among Starbase Corporation, a Delaware corporation (the
"Company"), and the Investors set forth on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended; and
B. The Investors wish to purchase from the Company, and the Company
wishes to sell and issue to the Investors, upon the terms and conditions stated
in this Agreement, (i) an aggregate of 1,200,000 shares of Series J Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), subject to adjustment
as specified herein, such Preferred Stock to have the relative rights,
preferences and designations set forth in the Certificate of Designations,
Preferences and Rights set forth in Exhibit A attached hereto (the "Certificate
of Designations"), and (ii) warrants to purchase an aggregate of 2,400,000
shares of common stock, par value $0.01 per share, of the Company in the form
attached hereto as Exhibit B (the "Warrants"); and
C. Contemporaneous with the sale of the Preferred Stock and Warrants,
the parties hereto will execute and deliver a Registration Rights Agreement, in
the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company will agree to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly Controls, is controlled by, or is under common control
with, such Person.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"Common Stock" means the common stock, $0.01 par value per share, of
the Company, including the stock into which the Preferred Stock is convertible,
and any securities into which the Common Stock may be reclassified.
"Company's Knowledge" means the actual knowledge of the "executive
officers" (as such term is defined in Rule 405 promulgated under the 0000 Xxx)
of the Company, after due inquiry.
"Confidential Information" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Preferred Stock.
"Intellectual Property" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
"Material Adverse Effect" means a material adverse effect on the
assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole;
provided, that none of the following alone shall be deemed, in and of itself, to
constitute a Material Adverse Effect: (i) a change in the market price or
trading volume of the Common Stock or (ii) changes in general economic
conditions or changes affecting the industry in which the Company operates
generally (as opposed to Company-specific changes) so long as such changes do
not have a disproportionate effect on the Company and its Subsidiaries taken as
a whole.
"Nasdaq" means The Nasdaq Stock Market, Inc.
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"Purchase Price" means Twelve Million Dollars ($12,000,000).
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"Reset Period" means the period of ten (10) trading days beginning
five (5) trading days after shares of Common Stock commence trading on a
post-Reverse Split basis.
"Reverse Split" means a one-for-ten reverse split of the Common
Stock.
"SEC Filings" has the meaning set forth in Section 4.6.
"Securities" means the Shares, the Conversion Shares, the Warrants
and the Warrant Shares.
"Shares" means the shares of Preferred Stock being purchased by the
Investors hereunder.
"subsidiary" means each corporation or other Person in which the
Company owns, directly or indirectly, capital stock or other equity interests
representing at least (i) 50% of the outstanding voting stock or other equity
interests, or (ii) 50% or more of the voting power of the Person.
"Subsidiaries" means, collectively, Technology Builders Ltd. and
Starbase Canada Limited.
"Transaction Documents" means this Agreement, the Certificate of
Designations, the Warrants and the Registration Rights Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares and Warrants. Subject to the terms
and conditions of this Agreement, on the Closing Date, each of the Investors
shall severally, and not jointly, purchase, and the Company shall sell and issue
to the Investors, the Shares and Warrants in the respective amounts set forth
opposite the Investors' names on the signature pages attached hereto in exchange
for the Purchase Price as specified in Section 3 below.
3. Closing. Upon confirmation that the other conditions to closing
specified herein have been satisfied, the Company shall effect the filing in
Delaware of the Certificate of Designations. Upon confirmation that the
Certificate of Designations has been appropriately filed in Delaware and become
effective, the Company shall deliver to Xxxxxxxxxx Xxxxxxx PC, in trust, a
certificate or certificates, registered in such name or names as the Investors
may designate, representing the Shares and Warrants, with instructions that such
certificates are to be
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held for release to the Investors only upon payment of the Purchase Price to the
Company. Upon receipt by Xxxxxxxxxx Xxxxxxx PC of the certificates, each
Investor shall promptly cause a wire transfer in same day funds to be sent to
the account of the Company as instructed in writing by the Company, in an amount
representing such Investor's pro rata portion of the Purchase Price as set forth
on the signature pages to this Agreement. On the date (the "Closing Date") the
Company receives such funds, the certificates evidencing the Shares and Warrants
shall be released to the Investors (the "Closing"). The purchase and sale of the
Shares and Warrants shall take place at the offices of Xxxxxxxxxx Xxxxxxx PC,
1330 Avenue of the Americas, 21st Floor, New York, New York, or at such other
location and on such other date as the Company and the Investors shall mutually
agree.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):
4.1 Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not and would not have a Material Adverse Effect. The
Subsidiaries are the only subsidiaries of the Company which have been active
since April 1, 2001.
4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Securities other
than, in the case of clauses (ii) and (iii), the approval of the Proposals (as
defined in Section 7.8) by the Company's stockholders in accordance with
applicable law and stock market rules and regulations,. The Transaction
Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors'
rights generally.
4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company's stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities (other
than the Shares and the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company prior to the Reverse
Split becoming effective. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of pre-emptive rights and were issued in full
compliance with applicable law and any rights of third parties. All
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of the issued and outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights, were issued in full compliance with applicable law
and any rights of third parties and are owned by the Company, beneficially and
of record, subject to no lien, encumbrance or other adverse claim. No Person is
entitled to pre-emptive or similar statutory or contractual rights with respect
to any securities of the Company. Except as described on Schedule 4.3, there are
no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. The Company has not
granted any Person the right to require the Company to register any securities
of the Company under the 1933 Act, whether on a demand basis or in connection
with the registration of securities of the Company for its own account or for
the account of any other Person.
Schedule 4.3 sets forth a true and complete table setting forth the
pro forma capitalization of the Company on a fully diluted basis giving effect
to (i) the issuance of the Shares and the Warrants, (ii) the Reverse Split,
(iii) any adjustments in other securities resulting from the issuance of the
Shares or the Warrants (as adjusted as a result of the Reverse Split), and (iv)
the exercise or conversion of all outstanding securities. Except as described on
Schedule 4.3, the issuance and sale of the Securities hereunder will not
obligate the Company to issue shares of Common Stock or other securities to any
other Person (other than the Investors) and will not result in the adjustment of
the exercise, conversion, exchange or reset price of any outstanding security.
The Company does not have outstanding stockholder purchase rights or
any similar arrangement in effect giving any Person the right to purchase any
equity interest in the Company upon the occurrence of certain events.
4.4 Valid Issuance. The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, shall be entitled to the relative rights,
preferences and designations set forth in the Certificate of Designation, and
shall be free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws. The Warrants have been duly and validly authorized.
Subject to the effectiveness of the Reverse Split, upon the due conversion of
the Shares or the due exercise of the Warrants, as applicable, the Conversion
Shares or the Warrant Shares, as applicable, issuable upon such conversion or
exercise will be validly issued, fully paid and non-assessable free and clear of
all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws. Subject
to the effectiveness of the Reverse Split, the Company has reserved a sufficient
number of shares of Common Stock for issuance upon the conversion of the Shares
and upon exercise of the Warrants, free and clear of
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all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws.
4.5 Consents. Other than the approval of the Proposals by the
stockholders of the Company in accordance with applicable law and stock market
rules and regulations and related filings under applicable federal securities
laws, the execution, delivery and performance by the Company of the Transaction
Documents and the offer, issuance and sale of the Securities require no consent
of, action by or in respect of, or filing with, any Person, governmental body,
agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws which the Company undertakes to file within
the applicable time periods. Assuming the truth and accuracy of the
representations and warranties of the Investors in Section 5, the Company has
taken, or following the Closing will take, all action necessary to exempt (i)
the issuance and sale of the Securities, (ii) the issuance of the Conversion
Shares upon due conversion of the Shares, (iii) the issuance of the Warrant
Shares upon due exercise of the Warrants, and (iv) the other transactions
contemplated by the Transaction Documents from the provisions of Section 203 of
the Delaware General Corporation Law or any provision of the Company's
Certificate of Incorporation, By-laws or any stockholder rights agreement that
is or could become applicable to the Investors as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has provided the
Investors with copies of the Company's most recent Annual Report on Form 10-K
for the fiscal year ended March 31, 2001 (the "10-K"), and all other reports
filed by the Company pursuant to the 1934 Act since the filing of the 10-K and
prior to the date hereof (collectively, the "SEC Filings"). The SEC Filings are
the only filings required of the Company pursuant to the 1934 Act for such
period. The Company and its Subsidiaries are engaged only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.
4.7 Use of Proceeds. The proceeds of the sale of the Common Stock and
the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.
4.8 No Material Adverse Change. Since March 31, 2001, except as
identified and described in the SEC Filings or as described on Schedule 4.8,
there has not been:
(i) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company's most recent Quarterly Report on
Form 10-Q, except for changes in the ordinary course of business which have not
and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
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(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or its
Subsidiaries;
(iv) any waiver, not in the ordinary course of business, by the
Company or any Subsidiary of a material right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its Subsidiaries taken as a whole (as such business is presently conducted
and as it is proposed to be conducted);
(vi) except as contemplated by this Agreement, any change or
amendment to the Company's Certificate of Incorporation or by-laws, or material
change to any material contract or arrangement by which the Company or any
Subsidiary is bound or to which any of their respective assets or properties is
subject;
(vii) any material labor difficulties or, to the Company's
Knowledge, labor union organizing activities with respect to employees of the
Company or any Subsidiary;
(viii) any material transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any key employee, or material
change in the composition or duties of the senior management of the Company or
any Subsidiary;
(x) the loss or threatened loss of any customer which has had or
would have a Material Adverse Effect; or
(xi) any other event or condition of any character that has had
or would have a Material Adverse Effect.
4.9 SEC Filings; S-3 Eligibility.
(a) At the time of filing thereof, the SEC Filings complied as to
form in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each registration statement and any amendment thereto filed
by the Company since January 1, 2001 pursuant to the 1933 Act and the rules and
regulations
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thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading; and each prospectus filed since January 1, 2001 pursuant to Rule
424(b) under the 1933 Act, as of its issue date and as of the closing of any
sale of securities pursuant thereto did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(c) The Company is eligible to use Form S-3 to register the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) for resale by the Investors as contemplated by the Registration
Rights Agreement.
4.10 No Conflict, Breach, Violation or Default. Assuming
effectiveness of the Reverse Split, the execution, delivery and performance of
the Transaction Documents by the Company and the issuance and sale of the
Securities will not conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under (i) the Company's
Certificate of Incorporation or the Company's Bylaws, both as in effect on the
date hereof (copies of which have been provided to the Investors before the date
hereof), or (ii)(a) any statute, rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the
Company, any Subsidiary or any of their respective assets or properties, or (b)
any agreement or instrument to which the Company or any Subsidiary is a party or
by which the Company or a Subsidiary is bound or to which any of their
respective assets or properties is subject, except in the case of clause (ii),
for such breaches, violations and defaults that have had or would have a
Material Adverse Effect, individually or in the aggregate.
4.11 Tax Matters. The Company and each Subsidiary has timely prepared
and filed (within all applicable extension periods) all tax returns required to
have been filed by the Company or such Subsidiary with all appropriate
governmental agencies and timely paid all taxes shown thereon or otherwise owed
by it except for such failures to file or pay as have not had and would not have
a Material Adverse Effect, individually or in the aggregate. The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company or any Subsidiary nor, to the Company's
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and its
Subsidiaries, taken as a whole. All taxes and other assessments and levies that
the Company or any Subsidiary is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper governmental entity
or third party when due. There are no tax liens or claims pending or, to the
Company's Knowledge, threatened against the Company or any Subsidiary or any of
their respective assets or property. Except as described on Schedule 4.11, there
are no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.
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4.12 Title to Properties. Except as disclosed in the SEC Filings,
the Company and each Subsidiary has good and marketable title to all properties
and assets owned by it, in each case free from liens, encumbrances and defects
that would materially affect the value thereof or materially interfere with the
use made or currently planned to be made thereof by them; and except as
disclosed in the SEC Filings, the Company and each Subsidiary holds any leased
real or personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or currently planned to be
made thereof by them.
4.13 Certificates, Authorities and Permits. Except as has not and
would not have a Material Adverse Effect, individually or in the aggregate, the
Company and each Subsidiary possesses adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.
4.14 No Labor Disputes. No material labor dispute with the employees
of the Company or any Subsidiary exists or, to the Company's Knowledge, is
imminent.
4.15 Intellectual Property.
(a) All Intellectual Property of the Company and its
Subsidiaries is currently in compliance in all material respects with all legal
requirements (including timely filings, proofs and payments of fees) and is
valid and enforceable. No Intellectual Property of the Company or its
Subsidiaries which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any cancellation,
dispute or litigation, and, to the Company's Knowledge, no such action is
threatened. No patent of the Company or its Subsidiaries has been or is now
involved in any interference, reissue, re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty or
other agreements concerning Intellectual Property which are necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements") are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the
Company's Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally,
and, to the Company's Knowledge, there exists no event or condition which will
result in a material violation or breach of or constitute (with or without due
notice or lapse of time or both) a default by the Company or any of its
Subsidiaries under any such License Agreement.
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(c) The Company and its Subsidiaries own or have the valid right
to use all of the Intellectual Property that is necessary for the conduct of the
Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted and for the ownership,
maintenance and operation of the Company's and its Subsidiaries' properties and
assets, free and clear of all liens, encumbrances, adverse claims or obligations
to license all such owned Intellectual Property and Confidential Information,
other than licenses entered into in the ordinary course of the Company's and its
Subsidiaries' businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company and
its Subsidiaries.
(d) The conduct of the Company's and its Subsidiaries'
businesses as currently conducted does not infringe or otherwise impair or
conflict with (collectively, "Infringe") any Intellectual Property rights of any
third party or any confidentiality obligation owed to a third party, and, to the
Company's Knowledge, the Intellectual Property and Confidential Information of
the Company and its Subsidiaries which are necessary for the conduct of
Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted are not being Infringed by
any third party. There is no litigation or order pending or outstanding or, to
the Company's Knowledge, threatened or imminent, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of any
Intellectual Property or Confidential Information of the Company and its
Subsidiaries and the Company's and its Subsidiaries' use of any Intellectual
Property or Confidential Information owned by a third party, and, to the
Company's Knowledge, there is no valid basis for the same.
(e) The consummation of the transactions contemplated hereby
will not result in the alteration, loss, impairment of or restriction on the
Company's or any of its Subsidiaries' ownership or right to use any of the
Intellectual Property or Confidential Information which is necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted.
(f) All software owned by the Company or any of its
Subsidiaries, and, to the Company's Knowledge, all software licensed from third
parties by the Company or any of its Subsidiaries, (i) is free from any material
defect, bug, virus, or programming, design or documentation error; (ii) operates
and runs in a reasonable and efficient business manner; and (iii) conforms in
all material respects to the specifications and purposes thereof.
(g) The Company and its Subsidiaries have taken reasonable steps
to protect the Company's and its Subsidiaries' rights in their Intellectual
Property and Confidential Information. Each employee, consultant and contractor
who has had access to Confidential Information which is necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company's standard
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forms thereof. Except under confidentiality obligations, there has been no
material disclosure of any of the Company's or its Subsidiaries' Confidential
Information to any third party.
4.16 Environmental Matters. Neither the Company nor any Subsidiary is
in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
4.17 Litigation. Except as described in the SEC Filings or on
Schedule 4.17, there are no pending actions, suits or proceedings against or
affecting the Company, its Subsidiaries or any of its or their properties; and
to the Company's Knowledge, no such actions, suits or proceedings are threatened
or contemplated.
4.18 Financial Statements. The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments), and
such financial statements have been prepared in conformity with United States
generally accepted accounting principles applied on a consistent basis (except
as may be disclosed therein or in the notes thereto, and, in the case of
quarterly financial statements, as permitted by Form 10-Q under the 1934 Act).
Except as set forth in the financial statements of the Company included in the
SEC Filings filed prior to the date hereof or as described on Schedule 4.18,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
contingent or otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or would have a Material Adverse Effect.
4.19 Insurance Coverage. The Company and each Subsidiary maintains in
full force and effect insurance coverage that to the Company's Knowledge is
customary for comparably situated companies for the business being conducted and
properties owned or leased by the Company and each Subsidiary, and the Company
reasonably believes such insurance coverage to be adequate against all
liabilities, claims and risks against which it is customary for comparably
situated companies to insure.
4.20 Compliance with Nasdaq Continued Listing Requirements. Except as
described in Schedule 4.20, the Company is in compliance with applicable Nasdaq
continued listing requirements. There are no proceedings pending or, to the
Company's Knowledge, threatened against the Company relating to the continued
listing of the Company's Common
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Stock on Nasdaq and the Company has not received any notice of, nor to the
Company's Knowledge is there any basis for, the delisting of the Common Stock
from Nasdaq.
4.21 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company other than as
described in Schedule 4.21.
4.22 No Directed Selling Efforts or General Solicitation. Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
4.23 No Integrated Offering. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.
4.24 Private Placement. Assuming the truth and accuracy of the
representations and warranties of the Investors in Section 5, the offer and sale
of the Securities to the Investors as contemplated hereby is exempt from the
registration requirements of the 1933 Act.
4.25 Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former stockholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Subsidiary, has on behalf of the Company
or any Subsidiary or in connection with their respective businesses: (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature.
4.26 Transactions with Affiliates. Except as disclosed in SEC Filings
made on or prior to the date hereof or as disclosed on Schedule 4.26, none of
the officers or directors of the Company and, to the Company's Knowledge, none
of the employees of the Company is presently a party to any transaction with the
Company or a Subsidiary or to a presently contemplated transaction (other than
for services as employees, officers and directors) that would be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under the 1933 Act,
without regard to the dollar thresholds contained in such Item.
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4.27 Disclosures. Neither the Company nor any Person acting on its
behalf has provided the Investors or their agents or counsel with any
information that constitutes material, non-public information. The written
materials delivered to the Investors in connection with the transactions
contemplated by the Transaction Documents do not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
5. Representations and Warranties of the Investors. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:
5.1 Organization and Existence. The Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement.
5.2 Authorization. The execution, delivery and performance by the
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and will each constitute the valid and legally binding
obligation of the Investor, enforceable against the Investor in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors' rights generally.
5.3 Purchase Entirely for Own Account. The Securities to be received
by the Investor hereunder will be acquired for the Investor's own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act. The Investor is not a registered broker
dealer, affiliated with any broker or dealer registered under Section 15(a) of
the 1934 Act, a member of the National Association of Securities Dealers, Inc.
or an entity engaged in the business of being a broker dealer.
5.4 Investment Experience. The Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. The Investor has had an opportunity to
receive all additional information related to the Company requested by it and to
ask questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. The
Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by the Investor
shall modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they
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are being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the 1933 Act only in certain limited
circumstances.
5.7 Legends. It is understood that, except as provided below,
certificates evidencing such Securities may bear the following or any similar
legend:
(a) "The securities represented hereby may not be transferred
unless (i) such securities have been registered for sale pursuant to the
Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to
Rule 144(k), or (iii) the Company has received an opinion of counsel
satisfactory to it that such transfer may lawfully be made without registration
under the Securities Act of 1933 or qualification under applicable state
securities laws."
(b) If required by the authorities of any state in connection
with the issuance of sale of the Securities, the legend required by such state
authority.
Upon the earlier of (i) registration of any Conversion Shares or
Warrant Shares (collectively, the "Underlying Shares") for resale pursuant to
the Registration Rights Agreement and receipt by the Company of the Investor's
written certification that the Investor will comply with the prospectus delivery
requirements of the 1933 Act applicable to any sale or disposition of the
Underlying Shares, or (ii) Rule 144(k) becoming available with respect to the
Preferred Stock, the Warrants or the Underlying Shares, as applicable, and
which, in the case of clause (ii), shall be accompanied by such reasonable and
appropriate customary representations as may be reasonably requested by the
Company, the Company shall, upon an Investor's written request, promptly cause
certificates evidencing such Underlying Shares, Preferred Stock and/or Warrants,
as applicable, to be replaced with certificates which do not bear such
restrictive legends, and Conversion Shares subsequently issued upon due
conversion of the Shares and Warrant Shares subsequently issued upon due
exercise of the Warrants shall not bear such restrictive legends provided the
provisions of either clause (i) or clause (ii) above, as applicable, are
satisfied with respect to such Conversion Shares or Warrant Shares, as
applicable. When the Company is required to cause unlegended certificates to
replace previously issued legended certificates, if unlegended certificates are
not delivered to an Investor within three (3) Business Days of submission by
that Investor of legended certificate(s) to the Company's transfer agent
together with a representation letter in customary form, the Company shall be
liable to the Investor for a penalty equal to 1% of the aggregate purchase price
of the Securities evidenced by such certificate(s) for each thirty (30) day
period (or portion thereof) beyond such three (3) Business Day that the
unlegended certificates have not been so delivered.
5.8 Accredited Investor. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
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5.10 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investors.
5.11 No Short Positions. During the last ninety days prior to the
date hereof, the Investor has not sold, including any short sale whether or not
against the box, or agreed to sell any shares of Common Stock or grant any right
(including, without limitation, any put or call option) with respect to the
Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock.
6. Conditions to Closing.
6.1 Conditions to the Investors' Obligations. The obligation of the
Investors to purchase the Securities at the Closing is subject to the
fulfillment to the Investors' satisfaction, on or prior to the Closing Date, of
the following conditions, any of which may be waived by the Investors agreeing
hereunder to purchase a majority of the Shares and Warrants (the "Required
Investors"):
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section 4
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.
(b) The Company shall have obtained in a timely fashion any and
all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Securities all of
which shall be in full force and effect.
(c) The Proposals shall have been approved by the stockholders of
the Company in accordance with applicable law and stock market rules and
regulations.
(d) The Reverse Split shall have become effective.
(e) The Certificate of Designations shall have been filed with
the Secretary of State of Delaware.
(f) The Company shall have executed and delivered the
Registration Rights Agreement.
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(g) The Company shall have received oral confirmation from Nasdaq
that the Conversion Shares and the Warrant Shares have been approved for
inclusion in The Nasdaq National Market System upon official notice of issuance.
(h) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Transaction Documents.
(i) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfilment of the
conditions specified in subsections (a), (b), (c), (d), (e), (f), (g) and (h)of
this Section 6.1.
(j) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
Certificate of Incorporation and Bylaws of the Company and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company.
(k) The Investors shall have received an opinion from Xxxxxxxxxxx
& Xxxxxxxx LLP, the Company's counsel, dated as of the Closing Date, in form and
substance reasonably acceptable to the Investors and addressing those legal
matters set forth in Exhibit A hereto.
(l) No stop order or suspension of trading shall have been
imposed by Nasdaq, the SEC or any other governmental regulatory body with
respect to public trading in the Common Stock.
6.2 Conditions to Obligations of the Company. The Company's
obligation to sell and issue the Securities at the Closing is subject to the
fulfillment to the satisfaction of the Company on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company:
(a) The representations and warranties made by the Investors in
Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date. The Investors
shall have performed in all material respects all
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obligations and conditions herein required to be performed or observed by them
on or prior to the Closing Date.
(b) The Investors shall have executed and delivered the
Registration Rights Agreement.
(c) The Investors shall have delivered the Purchase Price to the
Company.
6.3 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand, and the
Investors, on the other hand, to effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the
Required Investors;
(ii) By the Company if any of the conditions set forth in
Section 6.2 shall have become incapable of fulfillment, and shall not have been
waived by the Company;
(iii) By the Required Investors if any of the conditions set
forth in Section 6.1 shall have become incapable of fulfillment, and shall not
have been waived by the Required Investors; or
(iv) By either the Company or the Required Investors if the
Closing has not occurred on or prior to September 30, 2002;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.
(b) In the event of termination by the Company or the Required
Investors of their obligations to effect the Closing pursuant to this Section
6.3, written notice thereof shall forthwith be given to the other parties hereto
and the obligation of all parties to effect the Closing shall be terminated,
without further action by any party. Nothing in this Section 6.3 shall be deemed
to release any party from any liability for any breach by such party of the
terms and provisions of this Agreement or the other Transaction Documents or to
impair the right of any party to compel specific performance by any other party
of its obligations under this Agreement or the other Transaction Documents.
7. Covenants and Agreements of the Company.
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7.1 Reservation of Common Stock. The Company shall at all times
following the Closing reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of providing for the
conversion of the Shares and the exercise of the Warrants, such number of shares
of Common Stock as shall from time to time equal the number of shares sufficient
to permit the conversion of the Shares and the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.
7.2 Reports. The Company will furnish to such Investors and/or their
assignees such information relating to the Company and its Subsidiaries as from
time to time may reasonably be requested by such Investors and/or their
assignees; provided, however, that the Company shall not disclose material
nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company
advises the Investors, such advisors and representative that information they
have requested or that the Company otherwise intends to disclose is material
nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
7.3 No Conflicting Agreements. Subject to the provision of Section
7.8(b) of this Agreement with respect to the exercise by the Board of Directors
of its fiduciary duties, the Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any
material respect with the obligations to the Investors under the Transaction
Documents.
7.4 Insurance. The Company shall not materially reduce the insurance
coverages described in Section 4.19.
7.5 Compliance with Laws. The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.
7.6 Listing of Underlying Shares and Related Matters. Promptly
following the date hereof, the Company shall take all necessary action to cause
the Conversion Shares and the Warrant Shares to be included on The Nasdaq Stock
Market, Inc. no later than the Closing Date. Further, if the Company applies to
have its Common Stock or other securities traded on any other principal stock
exchange or market, it shall include in such application the Conversion Shares
and the Warrant Shares and will take such other action as is necessary to cause
such Common Stock to be so listed. The Company will use commercially reasonable
efforts to continue the listing and trading of its Common Stock on The Nasdaq
Stock Market, Inc. and, in accordance, therewith, will use commercially
reasonable efforts to comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of such market or
exchange, as applicable.
7.7 Termination of Covenants. The provisions of Sections 7.2 through
7.5 shall terminate and be of no further force and effect upon the earlier of
(i) the mutual consent of
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the Company and the Required Investors or (ii) the date on which the Company's
obligations under the Registration Rights Agreement to register or maintain the
effectiveness of any registration covering the Registrable Securities (as such
term is defined in the Registration Rights Agreement) shall terminate.
7.8 Proxy Statement; Stockholders Meeting. (a) Promptly following the
execution and delivery of this Agreement, the Company shall take all action
necessary to call a meeting of its stockholders (the "Stockholders Meeting") for
the purpose of seeking approval of the Company's stockholders for (i) the
issuance and sale to the Investors of the Securities, and (ii) the Reverse Split
(the "Proposals"). In connection therewith, the Company will promptly prepare
and file with the SEC proxy materials (including a proxy statement and form of
proxy) for use at the Stockholders Meeting and, after receiving and promptly
responding to any comments of the SEC thereon, shall promptly mail such proxy
materials to the stockholders of the Company. Each Investor shall promptly
furnish in writing to the Company such information relating to such Investor and
its investment in the Company as the Company may reasonably request for
inclusion in the Proxy Statement. The Company will comply with Section 14(a) of
the 1934 Act and the rules promulgated thereunder in relation to any proxy
statement (as amended or supplemented, the "Proxy Statement") and any form of
proxy to be sent to the stockholders of the Company in connection with the
Stockholders Meeting, and the Proxy Statement shall not, on the date of the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or the Stockholders
Meeting which has become false or misleading. If the Company should discover at
any time prior to the Closing, any event relating to the Company or any of its
Subsidiaries or any of their respective affiliates, officers or directors that
is required to be set forth in a supplement or amendment to the Proxy Statement,
in addition to the Company's obligations under the 1934 Act, the Company will
promptly inform the Investors thereof.
(b) The Company's Board of Directors shall recommend to the
Company's stockholders (and not revoke or amend such recommendation) that the
stockholders vote in favor of the Proposals and shall cause the Company to take
all commercially reasonable action (including, without limitation, the hiring of
a proxy solicitation firm of nationally recognized standing) to solicit the
approval of the stockholders for the Proposals. Notwithstanding the foregoing,
the Company's Board of Directors is permitted to withdraw or modify its
recommendation if required in order to comply with the fiduciary duties of the
Company's Board of Directors under applicable law as determined by such Board of
Directors in good faith after consultation with the Company's outside counsel.
Whether or not the Company's Board of Directors determines at any time after the
date hereof that, due to its fiduciary duties, it must revoke or amend its
recommendation to the Company's stockholders, the Company shall be required to,
and will take, in accordance with applicable law and its Certificate of
Incorporation and Bylaws, all action necessary to convene the Stockholders
Meeting as promptly as practicable to consider and vote upon the approval of the
Proposals.
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7.9 Limitation on Certain Actions. Commencing on the date hereof and
continuing until the earlier of (i) one Business Day following the end of the
Reset Period, and (ii) the termination of this Agreement in accordance with its
terms, except for the Reverse Split, the Company shall not take or agree to take
any action, including without limitation, effecting or approving any stock
split, reverse stock split, stock dividend or other reclassification or
combination of any class or series of its capital stock or the issuance of any
shares of its capital stock, if such action would result in an adjustment of the
Warrant Price (as defined in the Warrants) or the Conversion Price (as defined
in the Certificate of Designations).
8. Survival and Indemnification.
8.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive the
execution and delivery of this Agreement for a period of three (3) years from
the date of this Agreement; provided, however, that the provisions contained in
Section 7 hereof shall survive in accordance therewith.
8.2 Indemnification. The Company agrees to indemnify and hold
harmless, on an after-tax and after insurance recovery basis, each Investor and
its Affiliates and their respective directors, officers, employees and agents
from and against any and all losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorney fees and disbursements and
other expenses incurred in connection with investigating, preparing or defending
any action, claim or proceeding, pending or threatened and the costs of
enforcement hereof) (collectively, "Losses") to which such Person may become
subject as a result of any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under the
Transaction Documents, and will reimburse any such Person for all such amounts
as they are incurred by such Person.
8.3 Conduct of Indemnification Proceedings. Promptly after receipt by
any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. In no event shall the Company be liable for the fees and
expenses of more than one separate counsel (together with local counsel), for
all of the Indemnified Persons who are parties to such proceeding. The Company
shall not be liable for any settlement of any proceeding effected without its
written
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consent, which consent shall not be unreasonably withheld, but if settled with
such consent, or if there be a final judgment for the plaintiff, the Company
shall indemnify and hold harmless such Indemnified Person from and against any
loss or liability (to the extent stated above) by reason of such settlement or
judgment. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, the Company shall not effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Person from all liability arising out
of such proceeding.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Required
Investors, as applicable, provided, however, that an Investor may assign its
rights and delegate its duties hereunder in whole or in part to an Affiliate or
to a third party acquiring at least $1 million of Securities in a private
transaction without the prior written consent of the Company or the other
Investors, after notice duly given by such Investor to the Company and the other
Investors, provided, that no such assignment or obligation shall affect the
obligations of such Investor hereunder; and, provided further, that the assignee
can truthfully make, and does in fact make, the representations and warranties
to the Company set forth in Section 5 and otherwise agrees in writing to be
bound by the provisions of this Agreement. The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.2 Counterparts; Faxes. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
9.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one day after delivery to
such carrier. All notices shall be addressed to the party to be notified at the
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address as follows, or at such other address as such party may designate by ten
days' advance written notice to the other party:
If to the Company:
Starbase Corporation
0 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of counsel to the Investors in connection with the
documentation and negotiation of the Transaction Documents and the review of the
Proxy Statement, but not in excess of $30,000. Counsel fees and expenses
attributable to the documentation and negotiation of the Transaction Documents
shall be paid by the Company at the Closing. The Company shall reimburse the
Investors upon demand for all reasonable out-of-pocket expenses incurred by the
Investors, including without limitation reimbursement of attorneys' fees and
disbursements, in connection with any amendment, modification or waiver of this
Agreement or the other Transaction Documents. In the event that legal
proceedings are commenced by any party to this Agreement against another party
to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys' fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.
9.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Required Investors. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Securities purchased under this Agreement at the time
outstanding, each future holder of all such securities, and the Company.
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9.7 Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or Special Situations Fund III, L.P. ("SSF") (in
the case of a release or announcement by the Company) (which consents shall not
be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities
exchange or securities market, in which case the Company or the Investors, as
the case may be, shall allow SSF or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance.
9.8 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
9.9 Entire Agreement. This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
9.10 Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
9.11 Trading Restrictions. From the date hereof until the earlier of
(i) the termination of this Agreement or (ii) fifteen (15) days after the end of
the Reset Period, no Investor nor any of its Affiliates shall purchase or sell,
including any short sale whether or not against the box, or agree to purchase or
sell any shares of Common Stock or grant any right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derived any significant
part of its value from the Common Stock.
9.12 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of the courts
of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same
-23-
methods as are specified for the giving of notices under this Agreement. Each of
the parties hereto irrevocably consents to the jurisdiction of any such court in
any such suit, action or proceeding and to the laying of venue in such court.
Each party hereto irrevocably waives any objection to the laying of venue of any
such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
[signature page follows]
-24-
IN WITNESS WHEREOF, the parties have executed this Agreement or
caused their duly authorized officers to execute this Agreement as of the date
first above written.
The Company: STARBASE CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
-25-
The Investors: SPECIAL SITUATIONS FUND III, L.P.
By: /s/ Xxxxx Greenhouse
--------------------------------
Name: Xxxxx Greenhouse
Title: General Partner
Aggregate Purchase Price: $2,400,000
Number of Shares: 240,000
Number of Warrants: 480,000
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By: /s/ Xxxxx Greenhouse
--------------------------------
Name: Xxxxx Greenhouse
Title: General Partner
Aggregate Purchase Price: $800,000
Number of Shares: 80,000
Number of Warrants: 160,000
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
-26-
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By: /s/ Xxxxx Greenhouse
--------------------------------
Name: Xxxxx Greenhouse
Title: General Partner
Aggregate Purchase Price: $1,200,000
Number of Shares: 120,000
Number of Warrants: 240,000
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
By: /s/ Xxxxx Greenhouse
--------------------------------
Name: Xxxxx Greenhouse
Title: General Partner
Aggregate Purchase Price: $600,000
Number of Shares: 60,000
-27-
Number of Warrants: 120,000
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
-28-
PRISM PARTNERS I, L.P.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Managing General Partner
Aggregate Purchase Price: $625,000
Number of Shares: 62,500
Number of Warrants: 125,000
Address for Notice:
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
PRISM PARTNERS II OFFSHORE FUND
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Managing General Partner
Aggregate Purchase Price: $625,000
Number of Shares: 62,500
Number of Warrants: 125,000
Address for Notice:
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
-00-
XXXXXXXXXXXX XXXX, X.X.
By: /s/ Xxx X. Xxxxx
--------------------------------
Name: Xxx X. Xxxxx,
Title: President and Portfolio Manager
Aggregate Purchase Price: $600,000
Number of Shares: 60,000
Number of Warrants: 120,000
Address for Notice:
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
MICROCAPITAL FUND, LTD
By: /s/ Xxx X. Xxxxx
--------------------------------
Name: Xxx X. Xxxxx,
Title: President and Portfolio Manager
Aggregate Purchase Price: $400,000
Number of Shares: 40,000
Number of Warrants: 80,000
Address for Notice:
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
-30-
SF CAPITAL PARTNERS, LTD.
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxx X. Xxxx,
Title: Authorized Signatory
Aggregate Purchase Price: $1,000,000
Number of Shares: 100,000
Number of Warrants: 200,000
Address for Notice:
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
-31-
VICTORVILLE INVESTMENTS LIMITED
By: /s/ Xxxxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxxxx Xxxxxxxxx
Title: Director
Aggregate Purchase Price: $1,000,000
Number of Shares: 100,000
Number of Warrants: 200,000
Address for Notice:
c/o Beacon Capital Management
Harbor House, 0xx Xxxxx
Xxxxxxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxx BVI
-32-
COMVEST VENTURE PARTNERS, L.P.
By: /s/ Xxx Xxxxxx
--------------------------------
Name: Xxx Xxxxxx,
Title: President/Mging Director
Aggregate Purchase Price: $2,000,000
Number of Shares: 200,000
Number of Warrants: 400,000
Address for Notice:
c/o Commonwealth Associates L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
COMVEST OPPORTUNITY FUND, L.P.
By: /s/ Xxx Xxxxxx
--------------------------------
Name: Xxx Xxxxxx,
Title: President/Mging Director
Aggregate Purchase Price: $500,000
Number of Shares: 50,000
Number of Warrants: 100,000
Address for Notice:
c/o Commonwealth Associates L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
-33-
XXXXXXXXXXXX QUALIFIED ASSOCIATES, L.P.
By: /s/ Xxxxxxx Xxxxxxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxxxxxx,
Title: Authorized Signatory
Aggregate Purchase Price: $250,000
Number of Shares: 25,000
Number of Warrants: 50,000
Address for Notice:
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
-34-
