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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of July
__, 1999 (the "CLOSING DATE"), is entered into by and among Starbase
Corporation, a Delaware corporation, with headquarters located at ▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇. ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇ (the "COMPANY"), and the investors listed
on Schedule 1 attached hereto (individually, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of 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");
B. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate of [________] shares of the Company's common stock,
par value $.01 per share (the "COMMON SHARES"), in the respective amounts set
forth opposite each Buyer's name on Schedule 1 and warrants, in substantially
the same form attached hereto as Exhibit D (the "WARRANTS") to acquire
[________] shares of Company Common Stock (as exercised, collectively, the
"WARRANT SHARES"); and
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES.
a. Purchase of Common Shares and Warrants. In connection with
the offering (the "OFFERING") by the Company of its common stock to the Buyers,
and subject to the satisfaction (or waiver) of the conditions set forth in
Sections 6 and 7 below, the Company shall issue and sell to each Buyer and each
Buyer severally agrees to purchase from the Company the respective number of
shares of Common Shares set forth opposite such Buyer's name on Schedule 1,
along with Warrants to acquire the respective number of Warrant Shares set forth
opposite such Buyer's name on Schedule 1 (the "CLOSING"). The purchase price
(the "PURCHASE PRICE") of the Common Shares and the related Warrants at the
Closing shall be $_________.
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b. Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m. Central Time, within three (3) business days
following the date hereof, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyers). The Closing
shall occur on the Closing Date at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
c. Form of Payment. On the Closing Date, (i) subject to the
satisfaction (or waiver) of the conditions set forth in Section 7 below, each
Buyer shall pay its portion of the Purchase Price to the Escrow Agent (defined
below), for the Common Shares and Warrants to be issued and sold to such Buyer
at the Closing, by wire transfer of immediately available funds in accordance
with the Escrow Agent's written wire instructions, and (ii) subject to the
satisfaction (or waiver) of the conditions set forth in Section 6 below, the
Company shall deliver to ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as the escrow agent (the "ESCROW AGENT"), on
behalf of each Buyer, stock certificates (in the denominations as such Buyer
shall request) (the "COMMON SHARE CERTIFICATES") representing such number of the
Common Shares which such Buyer is then purchasing (as indicated opposite such
Buyer's name on Schedule 1) along with the Warrants such Buyer is purchasing (as
indicated opposite such Buyer's name on Schedule 1) hereunder, duly executed on
behalf of the Company and registered in the name of such Buyer or its designee.
Upon the completion of the conditions contained in Sections 6 and 7 of this
Agreement, the Escrow Agent shall deliver the certificates representing the
Common Shares and the Warrants to the Buyers via overnight courier and the
Escrow Agent shall simultaneously wire the Purchase Price to the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer is acquiring the Common
Shares and Warrants (the Common Shares and Warrants may also be referred to
herein as the "SECURITIES"), for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold 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 in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
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determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such Buyer and its 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 Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
e. No Governmental Review. Such Buyer understands 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
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended, (or a successor rule thereto) ("RULE 144"); and (ii) any sale
of the Securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and if Buyer intends to utilize Rule 144 but Rule 144
is not applicable to such resale, any resale of the Securities under
circumstances in which the Buyer (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Warrants and, until such time as the sale of
the Common Shares and the Warrant Shares have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement, except as set forth below,
the Common Shares and the Warrant Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
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ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS,
OR (2) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT
OR (3) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER
SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (ii) such holder provides the Company with reasonable
assurances that the Securities can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold.
h. Validity; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country and
state (if applicable) specified in its address on Schedule 1.
j. No Broker-Dealer Affiliation. Such Buyer is neither a
broker-dealer registered with the SEC nor an affiliate (as that term is defined
in Rule 144(a) promulgated under the ▇▇▇▇ ▇▇▇) of a broker-dealer registered
with the SEC.
k. Shorting. Such Buyer and any and all of its agents and
affiliates will comply with all SEC regulations regarding shorting. As of the
Closing Date, neither such Buyer, its agents nor any of its affiliates has a
short position in the Company's common stock.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns a controlling position of capital
stock or holds a controlling position of an equity or similar interest) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted.
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Except as set forth in Schedule 3(a) hereto, each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "MATERIAL
ADVERSE EFFECT" means any material adverse effect on the business, properties,
assets, operations, results or operations or financial condition of the Company
and its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below).
b. Authorization; Enforcement; Validity. (i) The Company has
the requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Transfer Agent Instructions
(as defined in Section 5), the Warrants and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "TRANSACTION DOCUMENTS"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Common Shares and the Warrants and the
reservation for issuance and the issuance of the Warrant Shares issuable upon
exercise thereof, have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, and (iv) the Transaction Documents
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. Issuance of Securities. The Common Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. _______ shares of Common
Stock (subject to adjustment pursuant to the Company's covenant set forth in
Section 4(g) below) have been duly authorized and reserved for issuance upon
exercise of the Warrants. Upon exercise in accordance with the Warrants, the
Warrant Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of common stock.
Assuming the Buyers' representations and warranties set forth in Section 2 are
true and correct, the issuance by the Company of the Securities is exempt from
registration under the 1933 Act.
d. No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the Company's issuance of the Common Shares and the reservation for issuance and
issuance of the Warrant Shares) will not (i) result in a violation of the
Company's Articles of Incorporation, as amended and as in effect on
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the date hereof (the "ARTICLES OF INCORPORATION") or the Company's By-laws, as
amended and as in effect on the date hereof (the "BY-LAWS") or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market (as defined below)) applicable to the
Company or any of its Subsidiaries or by which any material property or asset of
the Company or any of its Subsidiaries is bound. Neither the Company nor its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation, or By-laws or their organizational charter or by-laws,
respectively. Neither the Company or any of its Subsidiaries is in violation or
any term of or in default under any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible
conflicts, defaults, terminations, amendments which would not reasonably be
expected to have a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted, in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations the
sanctions for which either individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. To the Company's
knowledge, the Company is not in violation of the listing requirements of the
Principal Market (as defined below).
e. SEC Documents; Financial Statements. As of the Closing, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC DOCUMENTS"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be
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otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
provided the Buyers with any material, nonpublic information.
f. Absence of Certain Changes. Since the most recent filing by
the Company with the SEC, 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 or its Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
g. Absence of Litigation. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Company's common stock, the
Common Shares or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such.
h. [Reserved].
i. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except as limited by Section 3(e) above, no event, liability,
development or circumstance has occurred or exists, or is contemplated to occur,
with respect to the Company or its Subsidiaries or their respective business,
properties, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement filed with the SEC relating to an issuance and sale by the Company of
its common stock and which has not been publicly announced.
j. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
k. No Integrated Offering. To the best of the Company's
knowledge, 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 security or solicited any offers to buy any security,
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under circumstances that would require registration of any of the Securities
under the 1933 Act or cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the Securities of the Company are listed or designated, nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings.
l. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened.
m. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service ▇▇▇▇ registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two years from the date of this
Agreement. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service ▇▇▇▇ registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade secrets or
technical information by others and the Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.
n. [Reserved.]
o. Title. The real property and facilities held under lease by
the Company and any of its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
p. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged and the Company does not have any reason to believe it
will not be able to renew its existing insurance coverage under substantially
similar terms for the next two (2) years.
q. Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign
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regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
r. Tax Status. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
s. Transactions With Affiliates. Except as set forth in the
SEC Documents filed at least ten days prior to the date hereof, none of the
officers, control parties, control entities, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
t. Eligibility. The Company is currently eligible to register
the resale of the Common Shares on a registration statement on Form S-3 under
the 1933 Act.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
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c. Reporting Status. Until the earlier of (i) the date which
is one year after the date as of which the Buyers (as that term is defined in
the Registration Rights Agreement) may sell all of the Common Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which the Buyers shall have sold all the Common
Shares and Warrant Shares (the "REGISTRATION PERIOD"), the Company shall file
all reports required to be filed with the SEC pursuant to 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 otherwise permit such termination.
d. [Reserved].
e. [Reserved.]
f. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as that term is defined in the Registration
Rights Agreement) upon each national securities exchange, automated quotation
system or bulletin board system, if any, upon which shares of the Company's
common stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of common stock shall be so listed, such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall maintain the Company's common
stock's authorization for quotation on the Nasdaq National Market, Nasdaq
Small-Cap Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc., as applicable (the "PRINCIPAL MARKET"). Neither the Company nor
any of its Subsidiaries shall take any action which would be reasonably expected
to result in the delisting or suspension of Company's common stock on the
Principal Market. The Company shall promptly, and in no event later than the
following business day, provide to each Buyer copies of any notices it receives
from the Principal Market regarding the continued eligibility of Company's
common stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
g. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of common stock needed to
provide for the issuance of the shares of Common Stock upon exercise of all
outstanding Warrants.
h. [Reserved].
i. [Reserved.]
j. Independent Auditors. The Company shall, until at least
three (3) years after the Closing Date, maintain as its independent auditors an
accounting firm authorized to practice before the SEC.
k. Corporate Existence and Taxes. The Company shall, until at
least the date that is three (3) years after the Closing Date maintain its
corporate existence in good standing
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(provided, however, that the foregoing covenant shall not prevent the Company
from entering into any merger or corporate reorganization as long as the
surviving entity in such transaction, if not the Company, has common stock
listed for trading on the Principal Market and shall pay all its taxes when due
except for taxes which the Company disputes).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to the
Transfer Agent, and any subsequent transfer agent, substantially in the form of
Exhibit B hereto (the "TRANSFER AGENT INSTRUCTIONS"). Prior to registration of
the Common Shares and Warrant Shares under the 1933 Act and the sale of the
Common Shares and Warrant Shares, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Transfer Agent Instructions referred
to in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof will be given by the Company to its Transfer Agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 5 shall affect in any way each Buyer's
obligations to comply with all applicable prospectus delivery requirements, if
any, upon resale of the Securities. If a Buyer provides the Company with an
opinion of counsel in a generally acceptable form, to the effect that a public
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act or the Buyer provides the Company with reasonable assurances
that the Securities can be sold pursuant to Rule 144 without any restriction as
to the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, promptly instruct
its Transfer Agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legend. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Common Shares and Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
a. Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Escrow Agent for
the transactions contemplated by this Agreement;
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b. The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date;
c. The Escrow Agent and the Company shall have entered into an
escrow agreement; and
d. Such Buyer shall have delivered to the Escrow Agent such
other documents relating to the transactions contemplated by this Agreement as
the Escrow Agent may reasonable request.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Common
Shares and Warrants at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:
a. The Company shall have executed each of the Transaction
Documents and delivered the same to the Escrow Agent;
b. Trading in Company common stock shall not have been
suspended by the SEC or the Principal Market;
c. The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date;
d. The Company shall have delivered to the Escrow Agent the
opinion of the Company's counsel dated as of the Closing Date, in form, scope
and substance reasonably satisfactory to such Buyer and in substantially the
form of Exhibit C attached hereto;
e. The Company shall have executed and delivered to the Escrow
Agent the Warrants and the Common Share Certificates (in such denominations as
such Buyer shall request) for the Common Shares being purchased by such Buyer at
the Closing;
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f. The Transfer Agent Instructions, in the form of Exhibit B
attached hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent and a copy of the executed Transfer Agent Instructions
shall have been delivered to the Escrow Agent;
g. The Company shall have made all filings, other than those
contemplated by the Registration Rights Agreement, under all applicable federal
and state securities laws necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws;
h. The Company shall have delivered to the Escrow Agent such
other documents relating to the transactions contemplated by this Agreement as
the Escrow Agent may reasonably request;
i. At Closing, the Placement Agent (as defined in Section
11(m)) shall reimburse the Buyers for the Buyers' attorneys' fees and expenses
(in an amount not to exceed $20,000.00) incurred by the Buyers concerning the
negotiation and preparation of the Transaction Documents and the consummation of
the transactions contemplated thereby;
j. As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the exercise of the Warrants, at least 999,041 shares of Common Stock; and
k. The Escrow Agent and the Company shall have entered into an
escrow agreement.
8. INDEMNIFICATION.
(a) Company Indemnification. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
stockholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "BUYER INDEMNITEES") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys'
fees and disbursements (the "BUYER INDEMNIFIED LIABILITIES"), incurred by any
Buyer Indemnitee as a result of, or arising out of, or relating to (a) any
material misrepresentation or breach of any representation or warranty made by
the Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby and delivered in connection with and
made a part of the Transaction Documents, or (b) any material breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby and delivered in connection with and made a part of the Transaction
Documents. To
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the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Buyer Indemnified Liabilities which is
permissible under applicable law.
b. Indemnification by Buyers. In consideration of the
Company's execution and delivery of the Transaction Documents and the Company's
performance of the transactions contemplated thereunder, each Buyer shall
severally and not jointly defend, protect, indemnify and hold harmless the
Company, its officers and directors (collectively, the "COMPANY INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith and including reasonable attorneys' fees and disbursements (the
"COMPANY INDEMNIFIED LIABILITIES"), incurred by any Company Indemnitee as a
result of, or arising out of, or relating to (a) any material misrepresentation
or breach of any representation or warranty made by such Buyer in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby and delivered in connection with and made a part
of the Transaction Documents, or (b) any material breach of any covenant,
agreement or obligation of such Buyer contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby and
delivered in connection with and made a part of the Transaction Documents;
provided, however, that no Buyer shall be jointly liable for the indemnification
obligations of any other Buyer or investor and the Buyer subject to an
indemnification obligation shall be liable under this Section 8(b) for only that
amount of Company Indemnified Liabilities as does not exceed the net proceeds to
such Buyer as a result of the sale of Common Shares held by such Buyer. To the
extent that the foregoing undertaking by a Buyer may be unenforceable for any
reason, such Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Company Indemnified Liabilities which is permissible
under applicable law; provided, however, that no Buyer shall be jointly liable
for the indemnification obligations of any other Buyer or investor and the Buyer
subject to an indemnification obligation shall be liable under this Section 8(b)
for only that amount of Company Indemnified Liabilities as does not exceed the
net proceeds to such Buyer as a result of the sale of Common Shares held by such
Buyer.
9. [Reserved.]
10. LIQUIDATED DAMAGES.
The Company agrees that Buyers will suffer damages if the
Company violates any provision of or fails to fulfill any of its obligations or
duties pursuant to Sections 4(c), 4(f), 4(g), 4(j) and 5 of this Agreement (a
"COMPANY VIOLATION"), and that it would not be possible to ascertain the extent
of such damages. Accordingly, in the event of such Company Violation, the
Company hereby agrees to pay liquidated damages ("LIQUIDATED DAMAGES") to each
Buyer following the occurrence of such Company Violation in an amount determined
by multiplying (i) $.037536 per Common Share then held by such Buyer by (ii) the
percentage derived by dividing (A) the actual number of days elapsed from the
last day of the date of the Company Violation or the prior 30-day period, as
applicable, to the day such Company Violation has been completely cured by (B)
30, in cash, or at the Buyer's option, in the number of shares of Company common
stock equal to the quotient of (v) the dollar amount of the Liquidated Damages
on the Payment
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Date (as defined below) divided by (w) the closing bid price of the Company's
common stock as of the date of the Company Violation (as quoted in the Principal
Market or the market or exchange where the Company's common stock is then
traded). The Liquidated Damages payable pursuant hereto shall be payable within
five (5) business days from the end of the calendar month commencing on the
first calendar month in which the Company Violation occurs (each, a "PAYMENT
DATE"). In the event the Buyer elects to receive the Liquidated Damages amount
in shares of Company common stock, such shares shall also be considered Common
Shares and shall have the piggy-back registration rights set forth in Section
2(b) of the Registration Rights Agreement.
11. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. This Agreement
shall be governed by and construed in all respects by the internal laws of the
State of New York (except for the proper application of the United States
federal securities laws), without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking
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with respect to such matters. No provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and the Buyers, and
no provision hereof may be waived other than by an instrument in writing signed
by the party against whom enforcement is sought.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
if sent during normal business hours, and if after such normal business hours,
on the next business day (provided confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Starbase Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
If to a Buyer, to it at the address and facsimile number set forth on Schedule 1
with copies to such Buyer's representatives as set forth on Schedule 1, or at
such other address and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given to each
other party five days prior to the effectiveness of such change.
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g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyers. A Buyer
may assign some or all of its rights hereunder without the consent of the
Company, provided, however, that any such assignment shall not release such
Buyer from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
11(l), the agreements and covenants set forth in Sections 4, 5 and 11, the
indemnification provisions set forth in Section 8, and the liquidated damage
provisions set forth in Section 10 shall survive the Closing. Each Buyer shall
be responsible only for its own representations, warranties, agreements and
covenants hereunder.
j. [Reserved].
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before three (3) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 11(l), the Company shall remain obligated to reimburse the
nonbreaching Buyers for the expenses described in Section 7(i) above.
m. Placement Agent. The Company acknowledges that it has
engaged Wales Securities Limited as placement agent in connection with the sale
of the Common Shares and Warrants, which placement agent may have formally or
informally engaged other agents on its behalf. The Company shall be responsible
for the payment of any placement agent's fees or broker's commissions relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out of pocket expenses)
arising in connection with any such claim.
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n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
STARBASE CORPORATION
By: By:
------------------------- -------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------- -------------------------
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SCHEDULE 1: LIST OF INVESTORS
-----------------------------
INVESTOR'S LEGAL
REPRESENTATIVES'
INVESTOR ADDRESS PURCHASE NUMBER OF NUMBER OF ADDRESS AND FACSIMILE
INVESTOR'S NAME AND FACSIMILE NUMBER PRICE COMMON SHARES WARRANT SHARES NUMBER
--------------- -------------------- ----- ------------- -------------- ------
21
EXHIBITS
--------
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Transfer Agent Instructions
Exhibit C Form of Company Counsel Opinion
Exhibit D Form of Warrant
22
SCHEDULE 3(a)
-------------
None.