<PAGE>
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
/ / TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
----- -----
Commission File Number: 0-25612
STARBASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0567363
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
18872 MacArthur Boulevard
Irvine, California 92612
(Address of principal executive offices) (Zip code)
(714) 442-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding as of July 31, 1996:
Common Stock: 12,548,878
Series C Preferred Stock: 340,496
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
STARBASE CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets at June 30, 1996 (Unaudited) and March 31, 1995 3
Statements of Operations (Unaudited) for the
quarters ended June 30, 1996 and 1995 4
Statements of Cash Flows (Unaudited) for the
quarters ended June 30, 1996 and 1995 5
Notes to Unaudited Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
<PAGE> 2
STARBASE CORPORATION
(a development stage company)
PART I
ITEM 1
FINANCIAL STATEMENTS
BALANCE SHEETS
(In thousands, except number of shares and par values)
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
---------- ----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,809 $ 1,252
Accounts receivable, net of
allowances of $50 and $44 127 3
Other receivables 43 10
Prepaid expenses and deferred charges 171 137
Inventories 12 14
---------- ----------
Total current assets 7,162 1,416
Property and equipment, net 610 660
Note receivable from officer 76 76
Other non-current assets 9 21
---------- ----------
Total assets $ 7,857 $ 2,173
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 903 $ 1,375
Due to director - 280
Other current liabilities 41 111
Current portion of debt 4 186
---------- ----------
Total current liabilities 948 1,952
Long-term debt 153 153
---------- ----------
Total liabilities 1,101 2,105
---------- ----------
Shareholders' equity:
Preferred stock, $.01 par value; $1,096
(June 30, 1996) and $4,456 (March 31, 1996)
liquidation value; authorized 10,000,000;
issued and outstanding 365,496 (June 30, 1996)
and 2,227,946 (March 31, 1996) 4 22
Common stock, $.01 par value; authorized
50,000,000; issued 12,473,960 (June 30, 1996)
and 7,841,812 (March 31, 1996); outstanding
12,467,699 (June 30, 1996) and
7,835,551 (March 31, 1996) 125 78
Common stock pending authorization 87 27
Additional paid-in capital 25,994 18,185
Treasury stock, 6,261 common shares (21) (21)
Deficit accumulated during development stage (19,433) (18,223)
--------- ---------
Total shareholders' equity 6,756 68
--------- ---------
Total liabilities and shareholders' equity $ 7,857 $ 2,173
========= =========
The accompanying notes are an integral part of the
financial statements.
<PAGE> 3
STARBASE CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
Three months Sept. 6, 1991
ended June 30, through
------------------------- June 30, 1996
1996 1995 (cumulative)
------------ ----------- --------------
<S> <C> <C> <C>
Revenues:
Consulting services $ - $ 361 $ 4,430
Consulting services-related party - - 281
Products, licenses and other 209 149 1,870
------------ ----------- -------------
Total revenues 209 510 6,581
Cost of Sales:
Consulting services - 484 4,716
Consulting services-related party - - 289
Products, licenses and other 1 28 332
------------ ----------- --------------
Total cost of sales 1 512 5,337
------------ ----------- --------------
Gross margin 208 (2) 1,244
Operating Expenses:
Research and development 332 807 7,767
Selling, general and administrative 1,113 1,308 13,101
------------ ----------- -------------
Total operating expenses 1,445 2,115 20,868
------------ ----------- -------------
Operating loss (1,237) (2,117) (19,624)
Interest and other income and expense, net 28 (7) 200
------------ ----------- -------------
Loss before income taxes (1,209) (2,124) (19,424)
Provision for income taxes 1 1 9
------------ ----------- -------------
Net loss $ (1,210) $ (2,125) $ (19,433)
============ =========== =============
Per share data:
Loss per common share $ (0.12) $ (0.38)
============ ===========
Weighted average number of
common shares outstanding 10,215 5,593
============ ===========
</TABLE
The accompanying notes are an integral part of the
financial statements.
<PAGE> 4
STARBASE CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
(Undaudited)
(In thousands)
</TABLE>
<TABLE>
<CAPTION>
Three months Sept. 6, 1991
ended June 30, through
------------------------- June 30, 1996
1996 1995 (cumulative)
----------- ----------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (1,210) $ (2,125) $ (19,433)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 57 69 625
Provision for doubtful accounts and sales returns 27 - 157
Loss on disposition of property, equipment
and capital lease 6 - 80
Write-down of assets - - 50
Gain on debt restructuring - - (138)
Recognition of deferred income (66) - (301)
Other adjustments - - 75
Common Stock to be issued for professional services 60 - 60
Changes in assets and liabilities, excluding
the effect of non-cash transactions:
Accounts receivable (151) 327 (283)
Other receivables (33) 1 (114)
Inventories 2 (7) (12)
Prepaid expenses and deferred charges (34) 41 (185)
Other assets 11 (3) (30)
Accounts payable and accrued liabilities (755) 306 1,350
---------- ----------- -------------
Net cash used by operations (2,086) (2,003) (18,099)
Cash Flows from Investing Activities:
Proceeds from disposition of property and equipment - - 4
Capital expenditures (12) (23) (1,257)
---------- ----------- -------------
Net cash used by investing activities (12) (23) (1,253)
Cash Flows from Financing Activities:
Proceeds from reverse acquisition - - 1,402
Proceeds from sale of preferred stock 1,021 - 7,294
Proceeds from issuance of common stock:
From stock purchase plan - - 10
From public offering - - 4,063
From private placements 6,300 - 10,698
From exercise of options 224 102 490
From exercise of warrants 1,155 - 2,179
Proceeds from convertible subordinated notes - - 381
Proceeds from promissory notes - - 1,083
Payments on promissory notes (107) - (270)
Borrowings on line of credit - - 664
Payments on line of credit - (41) (664)
Payment of financing related costs (938) - (1,343)
Payments on capitalized lease obligations - (14) (40)
Loans from officers and directors - 154 365
Repayment of loans from officers and directors - - (75)
Repayment of (disbursement of) loan to officer - - (76)
---------- ----------- --------------
Net cash provided by financing activities 7,655 201 26,161
---------- ----------- --------------
Net increase (decrease) in cash 5,557 (1,825) 6,809
Cash and cash equivalents, beginning of period 1,252 1,972 -
---------- ----------- --------------
Cash and cash equivalents, end of period $ 6,809 $ 147 $ 6,809
========== =========== ==============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE> 5
STARBASE CORPORATION
(a development stage company)
Notes to Financial Statements
1. DESCRIPTION OF BUSINESS
StarBase Corporation (the "Company"), a Delaware corporation, develops,
markets and supports team-oriented product development software that
addresses the evolving needs of personal computer users involved in projects
requiring substantial collaboration. StarBase was founded in 1991 to address
the inability of software development projects to deliver software products
on time and within budget, initially through the improvement of individual
programmer productivity tools. During 1993-1994, however, the Company began
to believe that a next generation of individual productivity tools would not
be a lasting solution to the software productivity problem. The Company was
reorganized in fiscal 1996 to focus entirely on the development and marketing
of software designed to increase team productivity, rather than individual
programmer productivity. In line with the reorganization, the 26 person
Consulting Division was discontinued.
2. BASIS OF PRESENTATION
The unaudited interim financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have not been presented. The accompanying unaudited financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the StarBase Corporation report to the
Securities and Exchange Commission on Form 10-K, as amended, for the year
ended March 31, 1996.
The interim financial statements reflect all normal recurring adjustments
which are, in the opinion of management, necessary for a fair presentation of
the Company's financial position, results of operations and cash flows for the
period presented. Certain prior period balances have been reclassified to
conform to current period classifications. The results of operations for the
three months ended June 30, 1996 are not necessarily indicative of the
operating results for a full year.
EARNINGS PER COMMON SHARE
Earnings per common share are calculated by dividing the net loss by the
weighted average shares of common stock outstanding. Common stock
equivalents are considered anti-dilutive and are excluded from this calculation.
<PAGE> 6
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
June 30, March 31,
(In thousands) 1996 1996
-------- ---------
ACCOUNTS RECEIVABLE
Trade accounts receivable $ 177 $ 47
Less allowance for doubtful accounts (50) (44)
------- -------
$ 127 $ 3
======= =======
PROPERTY AND EQUIPMENT
Computer hardware $ 882 $ 869
Furniture and fixtures 125 125
Computer software 115 115
Leasehold improvements 29 41
------- -------
1,151 1,150
Less accumulated depreciation and amortization (541) (490)
------- -------
$ 610 $ 660
======= =======
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade accounts payable $ 528 $ 910
Accrued professional fees 149 135
Accrued wages and bonuses 83 70
Other accrued expenses 143 260
------- -------
$ 903 $1,375
======= =======
4. EQUITY TRANSACTIONS
PRIVATE PLACEMENTS
The Company has authorized 50,000,000 shares of common stock and 10,000,000
shares of preferred stock with a par value of $0.01 per share. Of the
preferred stock, 2,500,000 shares have been designated as Series B Preferred
Stock, of which no shares are issued and outstanding at June 30, 1996, and
366,666 shares have been designated as Series C Preferred Stock, of which
365,496 shares are outstanding at June 30, 1996.
On May 13, 1996, a private placement of common stock was completed. In this
private placement, 2,099,832 Units were issued, each Unit consisting of one
share of common stock and one non-transferable warrant to purchase one
share of common stock. The warrants are exercisable at $2.00 per share
through January 31, 1997 and thereafter exercisable at $2.50 per share through
January 31, 1998, after which date the warrants expire. In addition, warrants
to purchase 120,000 shares of the Company's common stock were issued as a
placement agent fee.
As a result of the May 13, 1996 private placement of common stock, the
2,227,946 shares of the Company's Series B Preferred Stock, issued in a fiscal
1996 private placement, automatically converted into 2,227,946 shares of the
Company's common stock.
<PAGE> 7
During June 1996, the private placement of Series C Preferred Stock was
completed. In this private placement, 365,496 Units were issued, each Unit
consisting of one share of Series C Preferred Stock and one non-transferable
warrant to purchase one share of common stock. The warrants are exercisable
at $2.00 per share through January 31, 1997 and thereafter exercisable at
$2.50 per share through January 31, 1998, after which date the warrants
expire. The Series C Preferred Stock is not redeemable and has a liquidation
preference of $3.00 per share. The holders of Series C Preferred Stock are
not entitled to receive any dividends or, except as provided by law, vote
upon any matter relating to the business or affairs of the Company or for any
other purpose. Each share of Series C Preferred Stock is convertible,
at the option of the holder, at any time into the Company's common stock, of
which the conversion rate will be determined by dividing $3.00 by the
Conversion Price. The Conversion Price shall be the lesser of (a) $3.00 per
share or (b) 80% of the average closing bid price of the common stock as
reported by Bloomberg, L.P. for shares traded in the United States for the
five consecutive trading days preceding the conversion date.
CONVERSION OF NOTE PAYABLE
During the quarter, an investor converted a promissory note payable with a
face value of $75,000, into Series C Preferred Stock at a price of $3.00 per
Unit.
COMMON STOCK PENDING AUTHORIZATION
Common stock pending authorization represents common shares to be issued in
payment for consulting and professional services in the amount of $87,000.
WARRANTS
Warrant activity for the three month period ended June 30, 1996 is as follows:
Warrant Price
Shares per share
----------- -------------
Outstanding at March 31, 1996 2,949,595
Issued in connection with stock offerings 2,585,328 $2.00
Exercised (203,711) $5.67
Expired (5,006) $5.67
-----------
Outstanding at June 30, 1996 5,326,206
===========
<PAGE> 8
5. SUPPLEMENTAL CASH FLOW INFORMATION
Three months
ended June 30,
-----------------
(In thousands) 1996 1995
------- --------
Interest paid $ 17 $ 18
Income taxes paid 1 1
Non-cash investing and financing transactions:
Conversion of Series A Preferred Stock to
common stock -- 2,710
Conversion of Series B Preferred Stock to
common stock (Note 3) 22 --
Conversion of promissory notes to Series C
Preferred stock (Notes 3) 75 --
6. COMMITMENTS AND CONTINGENCIES
There have been no other significant subsequent developments relating to the
commitments and contingencies reported on the Company's most recent Form 10-K,
as amended.
<PAGE> 9
PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements that are subject
to risks and uncertainties. There are several important factors that could
cause actual results to differ materially from those anticipated by the
forward-looking statements contained in the following discussion. Such factors
include, but are not limited to, the growth rates of certain market segments,
the positioning of the Company's products in those segments, price pressures
and the rapidly changing competitive environment in the software industry, the
Company's ability to manage its business in its evolution from a development
stage company, and the Company's ability to establish strategic alliances.
Additional information on these and other risk factors which could affect the
Company's financial results is included in the Company's Annual Report for the
fiscal year ended March 31, 1996 on Form 10-K, as amended, on file with the
Securities and Exchange Commission.
REVENUES
In the spring of 1995 the management of StarBase made the decision to focus
the Company's business on the development and marketing of software designed
to increase team productivity, rather than individual programmer
productivity. The Company was reorganized in fiscal 1996 to reflect this
change in product and market focus and, in line with the reorganization, the
26 person Consulting Division was discontinued. Thus, consulting services
revenue for the quarter ended June 30, 1996 decreased to nil compared to
$361,000 for the same period of the previous year. Revenue from products and
licenses for the three months was $209,000 compared to $149,000 for
the same period of the previous year. Revenue from products and licenses for
the current quarter consists primarily of license fee income and sales of the
StarTeam 1.0 product.
Product revenue for the current quarter has been limited by the following two
factors: (1) a long sales cycle for software development tools such as
StarTeam and (2) insufficient working capital through the first half of the
quarter. StarTeam 1.0, which was introduced in January 1996, is a new
software product whose target market consists of technical software
professionals (developers). Marketing to technical professionals is an
educational, time consuming process. In the typical sales cycle, the product
is purchased as a pilot test program, installed and evaluated on a small scale
(3-10 seats), and, if the evaluation is satisfactory, implemented on a larger
project which may involve 10 to 25 developers. Successful implementation in
the project may lead to broader acceptance within the organization. The time
span from an initial test order to implementation throughout the customer's
organization varies depending on the organization and the level of
standardization within the individual company, but in very large companies,
may take 6 months to a year.
The second factor, insufficient working capital, had a cumulative negative
impact. In fiscal 1996, marketing and sales programs could not be developed.
When funds did become available in mid-May, the Company immediately commenced
recruiting key sales and marketing positions. As of June 30, 1996,
approximately 75% of the approved sales and marketing personnel have been
recruited. Since the commercial release of StarTeam 2.0, which replaces
StarTeam 1.0, was only months away, the Company made the decision to implement
the marketing and advertising promotions for the new product release. Thus,
StarTeam 1.0 was in the market without any significant sales and marketing
support during the quarter.
<PAGE> 10
COST OF SERVICES AND PRODUCTS
There was no consulting service revenue or cost of service revenue during the
quarter ended June 30, 1996 due to the discontinuation of the Company's
Consulting Division. The negative gross margin resulting from services for
the quarter ended June 30, 1995 reflects decreased staff utilization as the
Company reduced the scope of its consulting operations.
Cost of products consists primarily of manufacturing and related costs such as
media, documentation, product assembly and third party royalties. The Company
currently outsources manufacturing for all software products. The decrease in
cost of products as a percentage of product revenues is primarily the result
of increased license and maintenance revenue for which no related costs were
incurred.
OPERATING EXPENSES
Compared to the same quarter in the prior year, operating expenses were
reduced by approximately $0.7 million, due to a concerted effort by management
to stabilize the Company's financial condition and operations. A significant
segment of the operating expense reduction was due to headcount reductions.
Staffing levels dropped from approximately 90 employees to 26 by December
1995. Since then, however, the Company has been recruiting new marketing and
sales personnel to implement the market introduction of the integrated team
environment product line. At June 30, 1996, the Company had 32 full-time
employees, 10 in sales and marketing, 7 in general and administrative, and 15
in research and development.
Research and development expenses. While StarBase continues to make
significant investments in research and development intended to bring its
products to market and to support existing products, overall research and
development expenses have been reduced substantially. For the current quarter
research and development expenses were reduced by $475,000, approximately 59%.
Compensation and related expenses represented approximately 86% and 82% of
research and development costs in the quarters ended June 30, 1996 and 1995,
respectively. The Company has not capitalized any software development costs
since inception.
Selling, general and administrative expenses. The decrease in selling,
general and administrative expenses for the quarter ended June 30, 1996
compared to the same period of 1995 was not as pronounced as the decrease in
research and development, due to greater product marketing and sales expenses
in the latter part of the quarter. The 1996 balances also reflect increased
costs (principally compensation and related expenses) resulting from the
expansion of the Company's sales staff during the quarter.
INTEREST AND OTHER INCOME AND EXPENSE, NET
Interest and other income and expense, net consisted primarily of interest
income generated by placing available funds in short-term US Treasury Bills.
INCOME TAXES
The Company has incurred minimal income taxes due to its cumulative losses.
The provision for income taxes for the quarter represented minimum state
franchise taxes.
INFLATION
Management believes that inflation has not had a material impact on the
Company's results of operations.
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents on hand totaled $6.8 million at June
30, 1996 and $1.3 million at March 31, 1996. During the quarter ended June
30, 1996 the Company generated $7.7 million (net) in cash from financing
activities, including $7.8 million (net) from the sale of additional equity.
The Company completed a private placement of preferred stock for net proceeds
of approximately $1.0 million, a private placement of common stock
for approximately $5.4 million, exercise of options for $0.2 million, and
exercise of warrants for $1.2 million. Offsetting the proceeds from
financings, the Company made payments on promissory notes of approximately
$0.1 million.
During the quarter, the Company used $2.1 million for operations,
approximately the same level as the amount used by operations in the same
quarter of the prior year. The reduced cash requirements caused by the
decrease in operating expenses during the quarter was offset by increased
accounts receivable and the substantial pay down of accounts payable
compared to the same quarter in the prior year. Capital expenditures
were not significant in the current quarter.
The Company believes that proceeds from the sale of equity securities since
March 31, 1996 will be sufficient to allow the Company to conduct its
operations during the fiscal year that ends March 31, 1997. Continuing
operations thereafter will depend on cash flow from operations or the
Company's ability to raise additional funds through equity, debt, or other
financing. There can be no assurance, however, that such funds will be
available.
<PAGE> 12
PART II
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Ref/
Number Description Page
- ------- ------------------------------------------------------------ ----
1.1 Underwriting Agreement between the Company and
Dabney/Resnick, Inc. 16
3.1 Amended and Restated Certificate of Incorporation of the
Company. (B)
3.2 Amended and Restated Bylaws of the Company. (A)
3.3 Certificate of Designation, Series C Preferred Stock. 23
3.4 Certificate of Amendment of Certificate of Designation,
Series C Preferred Stock. 29
4.1 Investors' Rights Agreement dated September 16, 1994 among
the Company and certain investors. (B)
4.2 Registration Rights Agreement dated December 15, 1994. (B)
4.3 Registration Rights Agreement dated December 1995. (E)
4.4 Registration Rights Agreement dated May 1996. (D)
4.5 Registration Rights Agreement dated June 1996. 31
10.1 Form of Indemnity Agreement for Directors. (A)
10.2 Form of Indemnity Agreement for Officers. (A)
10.3 Performance Share Escrow Agreement, as amended, among
the Company, Montreal Trust Company of Canada as
Escrow Agent, and certain of the Company's stockholders. (A)
10.4 Sublease dated December 2, 1993 between McDonnell Douglas
Travel Company and StarBase Corporation, for
the Company's Irvine, California facilities. (B)
10.5 Incentive Stock Option, Non-Qualified Stock Option
and Restricted Stock Purchase Plan - 1992, as amended. (*) (B)
10.6 Form of Restricted Stock Issuance Agreement. (A)
10.7 Form of Restricted Stock Purchase Agreement. (A)
10.8 Forms of Common Stock Subscription Agreements and
Warrants used from time to time between the Company and
certain of its stockholders in connection with certain
equity financings, together with a list of equity investors. (A)
10.9 Forms of Common Stock Subscription Agreement and Warrants
used in November 1994 Private Placement. (B)
10.10 Forms of Common Stock Subscription Agreement and Warrants
used in March 1995 Private Placement. (C)
10.11 Regional Prototype Defined Contribution Plan and Trust
of the Company. (*) (A)
10.12 Fiscal Agency Agreement between the Company and Canaccord
Capital Corporation. (B)
10.13 Form of Agents' Warrant. (B)
10.14 Silicon Valley Bank Warrant dated December 15, 1994. (B)
10.15 Promissory Note dated November 8, 1995 payable to
William R. Stow III. (E)
10.16 Promissory Note dated December 11, 1995 payable to
Michael G. Lyons. (E)
10.17 Promissory Note dated December 11, 1995 payable to
John Snedegar. (E)
10.18 Secured Promissory Note dated July 1, 1995 from
William R. Stow, III. (E)
10.19 Forms of Preferred Stock Subscription Agreements and
Warrants used in January 1996 Private Placement,
together with a list of equity investors. (E)
10.20 Amendment No. 1 to the Sublease dated December 1, 1994
between McDonnell Douglas Travel Company and
StarBase Corporation, for the Company's Irvine,
California facilities. (E)
<PAGE> 13
10.21 Amendment No. 2 to the Sublease dated September 1, 1995
between McDonnell Douglas Travel Company and StarBase
Corporation, for the Company's Irvine, California facilities. (E)
10.22 Forms of Common Stock Subscription Agreement and Warrants
used in July 1995 Private Placement, together with a list
of equity investors. (E)
10.23 Form of Warrant used in May 13, 1996 Private Placement. (D)
10.24 Form of Common Stock Subscription Agreement used in the
May 13, 1996 private placement. (D)
10.25 Form of Common Stock Subscription Agreement and Warrants
used in June 1996 private placement, together with a list
of equity investors and placement agent. 37
27 Financial data schedule.
- ---------------------
(A) Incorporated herein by reference to the Company's
Registration Statement on Form SB-2 (file number
33-68228) filed with the Commission on November 2, 1993.
(B) Incorporated herein by reference to the Company's
Registration Statement on Form 10 (file number 0-25612)
filed with the Commission on February 23, 1995.
(C) Incorporated herein by reference to the Company's
Form 10-K (file number 0-25612) filed with the Commission
on July 14, 1995.
(D) Incorporated herein by reference to the Company's
Form 8-K (file number 0-25612) filed with the Commission
on May 16, 1996.
(E) Incorporated herein by reference to the Company's
Form 10-K, as amended, (file number 0-25612) filed with the
Commission on July 1, 1996.
* Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
In a report filed on Form 8-K dated May 15, 1996, the Company reported a
press release announcing the private placement offering of 2,100,000 shares of
the Company's common stock.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARBASE CORPORATION
(Registrant)
August 14, 1996 /s/ Robert W. Leimena
- ---------------------- ----------------------------
Date Robert W. Leimena
Chief Financial Officer
<PAGE> 15
EXHIBIT 1.1
April 9, 1996
Mr. William R. Stow
Chief Executive Office
StarBase Corporation
18872 MacArthur Boulevard
Suite 300
Irvine, California 92715
Re: StarBase Corporation Engagement Letter
Dear Mr. Stow:
This letter confirms our understanding that StarBase Corporation (which
together with its affiliates is hereinafter referred to as the "Company") has
engaged Dabney/Resnick, Inc. ("DR") to act as agent to the Company in
connection with the private placement of up to $5.5 million of equity
securities (the "Securities") constituting a unit (each a "Unit") comprised of
1 share of common stock of the Company and 1 warrant (the "Warrants") to
purchase 1 share of common stock of the Company on a best efforts basis (the
"Financing") at a price equal to $3.00 per Unit in compliance with Section
4(2) of the Securities Act of 1933, as amended (the "Act"), and other federal
and state securities laws. The warrants will be exercisable at a price of
$2.00 until January 31, 1997 and $2.50 until January 31, 1998. In addition, a
majority of the warrant holders of the Company will have 2 demand registration
rights. The Company also agrees to use its best efforts to register the
Warrants and underlying shares prior to September 25, 1996. It is understood
and agreed that $800,000 of additional Securities (the "Additional
Securities") will be sold either directly by the Company or through other
agents and DR shall not be entitled to any compensation in respect of such
Additional Securities.
Section 1. Services to be Rendered. In connection with this engagement,
DR's services to the Company will include: (i) assistance in the preparation
of a private placement memorandum (which, together with the appendices and
exhibits thereto and any amendments or supplements thereto, is herein referred
to as the "Offering Materials"); (ii) identifying and contacting selected
qualified purchasers all of whom shall be "accredited investors", as such term
is defined in Regulation D promulgated under the Act, (the "Purchasers") of
the proposed Financing and furnishing them, on behalf of the Company, with
copies of the Offering Materials; and (iii) assistance to you in structuring
and negotiating the Financing. Nothing contained herein constitutes a
commitment on the part of DR to purchase any of the securities comprising the
Financing.
Section 2. Compensation. As reasonable compensation for services to be
provided by DR hereunder, the Company agrees to pay to DR (i) a cash free
equal to 10.0% of the dollar amount of the Securities sold as part of the
Financing excluding the amount of Additional Securities sold (the "Cash Fee");
and (ii) warrants (having the same terms as the Warrants comprising a Unit) to
purchase a number of shares equal to 120,000 times a fraction the numerator of
which shall be the total dollar amount of Securities sold by DR in the
financing and the denominator of which shall be $5.5 million (such warrants
shall have standard anti-dilution protection).
<PAGE> 16
Mr. William R. Stow
StarBase Corporation
April 9, 1996
Page 2
All such fees will be payable out of the proceeds of the proposed Financing
and shall be payable upon the consummation of the Financing. Upon
consummation of the Financing, the Company agrees to reimburse DR for all
reasonable out-of-pocket expenses incurred by DR in connection with the
engagement hereunder, DR shall advise StarBase in advance before incurring any
such out-of-pocket expense in excess of $5,000. Dr. will be paid a cash
advance of $15,000 upon execution of this agreement. Such cash advance will
be used by DR to defray its reasonable out-of-pocket expenses (including DR's
reasonable legal fees) and any unused amount will be returned to the Company
upon the closing of the Financing. DR will notify the Company when such
expenses exceed $25,000. Further, the Company will be responsible for all
other expenses associated with the Financing, including, but not limited to,
its own accounting and legal fees, printing and travel costs. Reimbursement
of such out-of-pocket expenses will be paid to DR promptly by the Company at
the earlier of the Closing of the Financing or the termination of DR hereunder
upon presentation to the Company of an itemized invoice of DR whether or not
the proposed Financing is consummated.
As DR will be acting on your behalf, the Company agrees to the
indemnification and other obligations set forth in Schedule 1 attached hereto,
which Schedule is an integral part hereof and incorporated by reference
herein.
Section 3. Term of Engagement. This Agreement and the retention of DR
hereunder may be terminated by either party hereto upon 1 (one) business day
prior written notice if the Financing is not consummated within thirty (30)
days after delivery to DRF by the Company of the initial completed private
placement memorandum. Upon any termination or expiration of this Agreement,
DR will be entitled to prompt reimbursement of all out-of-pocket expenses
described above. Sections 2 (to the extent provided in the immediately
following paragraph), 3, 5, 6, 9, 10, 11, and 12 of this Agreement and the
indemnity and other provisions contained in Schedule 1 will also remain
operative and in full force and effect regardless of any termination or
expiration of this Agreement.
In addition, if at any time prior to 12 months after the termination of
this Agreement (unless this Agreement is terminated by DR) prior to completion
of the Financing, the Company enters into a financing transaction or
transactions with proposed Purchasers introduced to the Company by DR and the
Company completes a financing of the Company with such Purchasers, DR, in
addition to any fee and expense reimbursement otherwise owing pursuant to
Section 2 of this Agreement, shall be entitled to payment in full of the
compensation described in Section 2 of this Agreement with respect to such
financing transaction or transactions.
Section 4. Cooperation. To the extent possible, the Company will
furnish DR with all financial and other information and data as DR believes
appropriate in connection with its activities on the Company's behalf, and
shall provide DR full access to its officers, directors, employees and
professional advisors. In addition, the Company with the assistance of DR
will be responsible for preparing the Offering Materials relating to the
proposed Financing. The Company agrees that it and its counsel will be solely
responsible for ensuring that the Financing and the Offering Materials comply
in all respects with the applicable law, except with regard to statements or
representations with regard to DR. The Company, to the extent possible,
authorizes DR to transmit the Offering Materials to qualified prospective
Purchasers of the proposed Financing. The Company will also cause to be
furnished to DR at the closing copies of such agreements, opinions,
certificates and other documents delivered at the closing as DR may reasonably
request. The Company will promptly notify DR if it learns of any material
inaccuracy or misstatement in, or material omission from, any information
theretofore delivered to DR. DR represents that it is a registered broker
dealer, as defined by the NASD, permitted to act as agent in the private
placement of the Securities.
<PAGE> 17
Mr. William R. Stow
StarBase Corporation
April 9, 1996
Page 3
The Company recognizes and confirms that DR, in connection with performing its
services hereunder: (I) will be relying without independent investigation
upon all information that is available from public sources or supplied to it
by or on behalf of the Company, or its advisors, (ii) shall not in any respect
be responsible for the accuracy or completeness of, or have any obligation to
verify, the same, (iii) will not conduct any appraisal of any assets of the
Company, and (iv) may require that the Offering Materials contain appropriate
disclaimers consistent with the foregoing. The Company recognizes and
confirms that DR will be relying on the Company for the information that it
will be providing to DR.
The Company has not taken, and will not take, any action, directly or
indirectly, so as to cause the Financing to fail to be exempt from the
registration requirements of the Act.
Section 5. Confidentiality. The Company agrees that any advice, written
or oral, provided by DR pursuant to this Agreement will be treated by the
Company as confidential, will be solely for the information and assistance of
the Company in connection with its consideration of a transaction of the type
referred to in Section 1 of this Agreement and will not be used, circulated,
quoted or otherwise referred to for any other purpose, nor will it be filed
with, included in or referred to, in whole or in part, in any registration
statement, proxy statement or any other communication, whether written
(including, without limitation, the Offering Materials) or oral, prepared,
issued or transmitted by the Company or any affiliate, director, officer,
employee, agent or representative of any thereof, without, in each instance,
DR's prior written consent, which consent shall not be unreasonably withheld
or delayed.
Further, in connection with this engagement of DR, it is contemplated
that the Company will supply to DR certain non-public or proprietary
information concerning the Company ("Confidential Information"). The Company
agrees to use its best efforts to appropriately mark as confidential all such
Confidential Information which is delivered to DR in written form DR shall
use the Confidential Information solely for the purposes of rendering services
pursuant to and in accordance with this Agreement and shall not, without the
prior written consent of the Company, which consent shall not be unreasonably
be withheld or delayed disclose any Confidential Information to any person or
entity, other than its officers, directors, employees and outside advisors
with a need to know the Confidential Information in connection with the
contemplated Financing; provided however, that the foregoing shall not apply
to any portion of the Confidential Information which becomes publicly
available other than as a result of the breach of DR's undertakings hereunder,
or that which DR is required to disclose by judicial or administrative process
in connection with any action, suit, proceeding or claim.
Section 6. Conflicts. The Company acknowledges that DR and its
affiliates may have and may continue to have investment banking and other
relationships with parties other than the Company pursuant to which DR may
acquire information of interest to the Company. DR shall have no obligation
to disclose such information to the Company, or to use such information in
connection with any contemplated financing. The Company recognizes that DR is
being engaged hereunder to provide the services described above only to the
Company and is not acting as an agent or a fiduciary of, and shall have no
duties or liability to, the equity holders of the Company or any third party
in connection with its engagement hereunder, other than its obligations to the
Company hereunder all of which are hereby expressly waived to the extent
permitted under applicable law. No one other than the Company is authorized
to rely upon the engagement of DR hereunder or any statements, advice,
opinions or conduct by DR.
<PAGE> 18
Mr. William R. Stow
StarBase Corporation
April 9, 1996
Page 4
Section 7. Exclusivity. The Company agrees that neither the Company nor
its affiliates or any other financial advisor is or will be authorized by it
during the term of this Agreement to perform services on its behalf of the
type which DR is authorized to perform hereunder. Except as otherwise
provided in Section 2 and the first paragraph hereof, no fee payable to any
other financial advisor (other than fees of the financial advisor related to
the sale of the Additional Securities) either by the Company or any other
entity shall reduce or otherwise affect the fees payable hereunder to DR.
Section 8. Public Announcements. DR shall have the right to place
announcements and advertisements in financial and other newspapers and
journals, at it s own expense, describing their services in connection with
the Financing, provided that DR obtains the Company's prior written consent,
which consent will not be unreasonably withheld or delayed.
Section 9. Complete Agreement: Severability: Amendments: Assignment.
This Agreement together with the schedule attached hereto embodies the entire
agreement and understanding between the parties hereto and supersedes any
prior agreements and understanding s relating to the subject matter hereof.
If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable in any respect, such determination
will not affect such provision in any other respect or any other provision of
this Agreement, which will remain in full force and effect. This Agreement
may not be amended or otherwise modified or waived except by an instrument in
writing signed by both DR and the Company. This Agreement may not be assigned
by either party without the prior written consent of the other party.
This Agreement shall be binding upon and inure to the benefit of the
Company, DR, each Indemnified Person (as defined in Schedule 1 h3435o) and
their respective successors and assigns.
Section 10. Breakup Fee. If DR presents the Company with bona fide
proposals from purchasers who are qualified purchasers prior to termination of
this Agreement to complete the Financing at the price indicated in the first
paragraph of this Agreement and the Company elects not to complete the
Financing, DR shall be entitled to the compensation set forth in Section 2 in
addition to any other compensation or expense reimbursement then due.
The Company recognizes and agrees that should the Company elect to accept
and close a Financing on any terms with DR, DR shall still be entitled to its
full fees and expenses as set forth in Section 2 and in the first paragraph of
this section.
Section 11. Future Financing. The Company agrees that consistent with
the letter agreement between the Company and DR dated January 30, 1996 (the
"January 30, 1996 Letter Agreement"), if the Company completes the Financing
with Purchasers proposed by DR hereunder, than through the period ending on
July 31, 1997, DR shall have the right to act as a placement agent and/or co-
manager in connection with any financing (excluding bank lines of credit and
similar borrowing arrangements and any financing undertaken by the Company on
terms reasonably acceptable to the Company. The Company agrees that it will
obtain DR's written consent prior to engaging the services of any other entity
to act as a co-placement agent, co-manager or lead manager in connection with
any such financing, which consent shall not be unreasonably withheld or
delayed. The Company and DR shall negotiate in good faith the
<PAGE> 19
Mr. William R. Stow
StarBase Corporation
April 9, 1996
Page 5
terms of any engagement letter with respect to any such financing which
engagement letter shall specify compensation (which shall include fees to DR
equal to or greater than the fees paid to the lead and other co-managers),
reimbursement for expenses, indemnification and such other terms and
provisions as are generally contained in such letters provided that if the
Company shall have reasonably and in good faith chosen another entity as the
lead manager for such financing, DR shall be required to accept the terms of
the engagement letter that have been negotiated by the Company and lead
manager so long as the fees to DR are equal to or greater than the fees paid
to any of the lead managers. Upon the execution and delivery of this
Agreement the January 30, 1996 Letter Agreement shall automatically become
null and void.
Section 12. Governing Law: Forum. This Agreement will be governed by,
and construed in accordance with, the laws of the State of California
applicable to agreements made and to be performed entirely in such state.
Each of the Company and DR agree that any action or proceeding based hereon,
or arising out of DR's engagement hereunder, shall be brought and maintained
exclusively in the courts of the State of California or in the United States
District Court for California. The Company and DR each hereby irrevocably
submit to the jurisdiction of the courts of the State of California and of the
United States District Court of California for the purpose of any such action
or proceeding as set forth above and irrevocably agree to be bound by any
judgment rendered thereby in connection with such action or proceeding. Each
of the Company and DR hereby irrevocably waive, to the fullest extent
permitted by law, any objection which it may have or hereafter may have to the
laying of venue of any such action or proceeding brought in any such court
referred to above and any claim that any such action or proceeding has been
brought in an inconvenient forum. The Company (for itself, anyone claiming
through it or its name, and on behalf of its equity holders) and DR each
hereby irrevocably waive any right they may have to a trial by jury in respect
of any claim based upon or arising out of this Agreement or the proposed
Financing contemplated hereby.
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to DR the enclosed original copy of this Agreement.
Very truly yours,
DABNEY/RESNICK, INC.
By /s/JASON W. REESE
---------------------
Jason W. Reese
Managing Director
Accepted as of the date written above,
STARBASE CORPORATION
By: /s/ WILLIAM R. STOW III
----------------------------------
William R. Stow, III
Chief Executive Officer
<PAGE> 20
Mr. William R. Stow
StarBase Corporation
April 9, 1996
Page 6
SCHEDULE 1
This Schedule 1 is a part of and is incorporated into that certain letter
agreement (together, the "Agreement") dated April 9, 1996 by and between
StarBase Corporation (the "Company"), and Dabney/Resnick, Inc. ("DR").
This Schedule will confirm that the Company agrees to indemnify and hold
harmless DR and its affiliates, the respective directors, officers, and
employees of DR and its affiliates and each other person, if any, controlling
DR or any of its affiliates (DR and each such person and entity being referred
to as an "Indemnified Person"), to the full extent lawful, from and against
any losses, claims, damages or liabilities or actions (including, without
limitation, shareholder actions and actions arising from the use of
information contained in the Offering Materials or omissions from such
materials) related to or arising out of this engagement or DR's role in
connection herewith, and will pay (or, if paid by an Indemnified Person,
reimburse such Indemnified Person) for all fees and expenses (including,
without limitation, counsel fees) incurred by such Indemnified Person in
connection with investigating, preparing or defending any such action or
claim, whether or not in connection with pending or threatened litigation in
which any Indemnified Person is a party. The Company will not, however, be
responsible for any claims, liabilities, losses, damages or expenses which
result from any compromise or settlement not approved by the Company or which
result primarily from the fraud, willful misconduct or gross negligence or any
Indemnified Person. The Company also agrees that no Indemnified Person shall
have any liability to the Company for or in connection with this engagement,
except for any such liability for losses, claims, damages, liabilities or
expenses incurred by the Company that result from the fraud, willful
misconduct or gross negligence of the Indemnified Person or the violation of
any applicable law, rule or regulation. The foregoing agreement shall be in
addition to any rights that any Indemnified Person may have at common law or
otherwise, including, without limitation, any right to contribution. The
Company's agreement to indemnify DR and other Indemnified Persons pursuant to
this letter shall not be disclosed publicly or made available to third parties
by either party hereto without the other party's prior written consent.
If any action or proceeding is brought against any Indemnified Person in
respect of which indemnity may be sought against the Company pursuant hereto,
or if any Indemnified Person receives notice from any potential litigant or a
claim which such person reasonably believes will result in the commencement of
any such action or proceeding, such Indemnified Person shall promptly notify
the Company in writing of the commencement of such action or proceeding, or of
the existence of any such claim, but the failure so to notify the Company of
any such action or proceeding shall not relieve the Company from any other
obligation or liability which it may have to any Indemnified Person otherwise
than under this Agreement or with respect to any other action or proceeding.
In case any such action or proceeding shall be brought against any Indemnified
Person, the Company shall be entitled to participate in such action or
proceeding with counsel of the Company's choice, or compromise or settle such
action or proceeding, at its expense (in which case the Company shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by such Indemnified Person); provided, however, that such counsel
shall be satisfactory to the Indemnified Person in the exercise of its
reasonable judgment. Notwithstanding the Company's election to assume the
defense of such action or proceeding, such Indemnified Person shall have the
right to employ separate counsel and to participate in the defense of such
action or proceeding, and the Company shall bear the reasonable fees, costs
and expenses of such separate counsel (and shall pay such fees, costs and
expenses at least quarterly), if (I) the use of counsel chosen by the Company
to represent such Indemnified Person would, in the reasonable judgment of the
Indemnified Person, present such counsel with a conflict of interest; (ii) the
defendants in, or targets of, any such action or proceeding include both an
Indemnified Person and the Company, and such Indemnified Person shall have
reasonably concluded that there may be legal defenses available to it or to
other Indemnified Persons which are different form or additional to those
available to the Company (in which case the Company shall not have the right
to direct
<PAGE> 21
Mr. William R. Stow
StarBase Corporation
April 9, 1996
Page 7
the defense of such action or proceeding on behalf of the Indemnified Person);
(iii) the Company shall not have employed counsel satisfactory to such
Indemnified Person to the exercise of the Indemnified Person's reasonable
judgment to represent such Indemnified Person within a reasonable time after
notice of the institution of such action or proceeding; or (iv) the Company
shall authorize such Indemnified Person to employ separate counsel at the
Company's expense.
In order to provide for the just and equitable contribution, if a claim
for indemnification hereunder is found unenforceable in a final judgment by a
court of competent jurisdiction (not subject to further appeal), even though
the express provisions hereof provide for indemnification in such case, then
the Company and DR shall contribute to the losses, claims, damages, judgments,
liability or costs to which the Indemnified Person may be subject in
accordance with the relative benefits received by, and the relative fault of,
each in connection with the statement, acts or omissions which resulted in
such losses, claims, damages, judgments, liabilities, or costs. The Company
agrees that a pro rata allocation would be unfair. No person found liable for
a fraudulent misrepresentation or omission shall be entitled to contribution
from any person who is not also found liable for such fraudulent
misrepresentation or omission. Notwithstanding the foregoing, DR shall not be
obligated to contribute to any amount hereunder that exceeds the amount of
fees previously received by DR for its services to the Company.
These indemnification provisions shall (I) remain operative and in full
force and effect regardless of any termination or completion of the engagement
of DR; (ii) inure to the benefit of any successors, assigns, heirs or personal
representative of any Indemnified Person; and (iii) be in addition to any
other rights that any Indemnified Person may have.
<PAGE> 22
EXHIBIT 3.3
_________________________________________
CERTIFICATE OF DESIGNATION
OF
STARBASE CORPORATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
_________________________________________
SERIES C PREFERRED STOCK
StarBase Corporation, a Delaware corporation (the "Corporation"), hereby
certifies that the following resolution has been duly adopted by the Board of
Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (the "Board") by the provisions of
the Restated Certificate of Incorporation of the Corporation (the "Certificate
of Incorporation"), there hereby is created, out of the 10,000,000 shares of
Preferred Stock, par value $0.01 per share, of the Corporation authorized in
Article 4 of the Certificate of Incorporation (the "Preferred Stock"), a
series of the Preferred Stock of the Corporation consisting of 300,000 shares,
which series shall have the following powers, designations, preferences and
relative, participating, optional and other rights, and the following
qualifications, limitations and restrictions:
1. Designation and Amount. This series of Preferred Stock shall be
designated "Series C Preferred Stock" and the authorized number of shares
constituting such series shall be 300,000. The par value of the Series C
Preferred Stock shall be $0.01 per share.
2. No Dividend Rights. The holders of the Series C Preferred Stock shall
not be entitled to receive any dividends.
3. Ranking. The Series C Preferred Stock shall, with respect to rights on
liquidation, winding up and dissolution, (i) rank senior to any of the Common
Stock and any other class or series of stock of the Corporation which by its
terms shall rank junior to the Series C Preferred Stock, (ii) rank junior to
the Corporation's Series B Preferred Stock and any other class or series of
stock of the Corporation which by its terms shall rank senior to the Series C
Preferred Stock, and (iii) rank on a parity with any other class or series of
stock of the Corporation which by its terms shall rank on a parity with the
Series C Preferred Stock. No approval of the holders of Series C Preferred
Stock shall be required for the authorization or issuance of any shares of any
class or series of stock of the Corporation, whether ranking senior to, junior
to or on a parity with the Series C Preferred Stock.
4. Preference on Liquidation.
1
<PAGE> 23
(a) In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, distributions to the
stockholders of the Corporation shall be made in the following manner:
(i) The holders of Series C Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of the Common Stock or any other class
or series of stock of the Corporation by reason of their ownership of the
Common Stock or any stock ranking junior to the Series C Preferred Stock in
respect of liquidation rights, but subject to the right of holders of the
Series B Preferred Stock or any other class or series of stock of the
Corporation ranking senior to the Series C Preferred Stock in respect of
liquidation rights to receive a preferential distribution, an amount for each
share of Series C Preferred Stock then held by them, equal to $3.00,
appropriately adjusted for any combinations, consolidations or stock
distributions with respect to such shares (hereinafter such amount shall be
referred to as the "Series C Preference Amount"). If upon occurrence of such
event of liquidation, dissolution or winding up, the assets and property
legally available to be distributed among the holders of the Series C
Preferred Stock and to holders of any stock ranking as to liquidation on a
parity with the Series C Preferred Stock shall be insufficient to permit the
payment to such holders of the Series C Preference Amount, then the entire
assets and property of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series C Preferred Stock
and such parity stock.
(ii) After payment has been made to the holders of the Series C Preferred
Stock of the full amounts to which they shall be entitled pursuant to Section
4(a)(i) above, all remaining assets available for distribution, if any, shall
be distributed, ratably among the holders of the Common Stock based upon the
number of outstanding shares of Common Stock then held.
(b) For purposes of this paragraph 4, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or the merger
of any other corporation or corporations into the Corporation, in which
consolidation or merger the shareholders of the Corporation receive
distributions in cash or securities of another corporation or corporations as
a result of such consolidation or merger, or a sale of all or substantially
all of the assets of the Corporation, shall be treated as a liquidation,
dissolution or winding up of the Corporation. The valuation of any securities
or other property other than cash received by the Corporation in any
transaction covered by this subparagraph 4(b) shall be computed at the fair
value thereof at the time of receipt as determined in good faith by the Board
of Directors.
(c) The holders of Series C Preferred Stock shall have no priority or
preference with respect to distributions made by the Corporation in connection
with the repurchase of shares of Common Stock issued to or held by employees,
directors or consultants upon termination of their employment or services
pursuant to agreements providing for the right of said repurchase between the
Corporation and such persons.
2
<PAGE> 24
5. Voting Rights. Except as otherwise provided by law, the holders of the
Series C Preferred Stock shall not be entitled to vote upon any matter
relating to the business or affairs of the Corporation or for any other
purpose.
6. Conversion Rights. The holders of Series C Preferred Stock shall have
conversion rights as follows:
(a) Each share of Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of American Stock Transfer & Trust Company at 40 Wall
Street, New York, New York 10008, the transfer agent for the Series C
Preferred Stock, into Common Stock as more fully described below. The number
of shares of fully paid and nonassessable Common Stock into which each share
of Series C Preferred Stock may be converted shall be determined by dividing
$3.00 by the Conversion Price (as hereinafter defined) in effect at the time
of conversion.
(b) Each share of Series C Preferred Stock shall automatically be converted
into shares of Common Stock utilizing the then effective Conversion Price for
each such share upon the first to occur of the following events: (i) if the
closing bid price of the Corporation's Common Stock as reported on any United
States exchange or automated quotation system on which the trading price of
the Corporation's Common Stock is reported on a daily basis is at least US
$6.00 for a period of 20 consecutive trading days, with such period commencing
no earlier than 41 days after the Series C Preferred Stock became issued and
outstanding; or (ii) September 25, 1998.
(c) No fractional shares of Common Stock shall be issued upon conversion of
the Series C Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to
such fraction multiplied by the fair market value of the Common Stock on the
Conversion Date, as determined by the Corporation's Board of Directors.
Before any holder of Series C Preferred Stock shall be entitled to convert the
same into full shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series C Preferred Stock, and shall give written
notice to the Corporation at such office that he elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
subparagraph 6(b) the outstanding shares of all Series C Preferred Stock,
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided further,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless either the certificates evidencing such shares of Series C Preferred
Stock are delivered to the Corporation or its transfer agent as provided
above, or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates.
3
<PAGE> 25
(d) The Corporation shall, within 2 business days after such delivery, or
after such agreement and indemnification, issue and deliver at such office to
such holder of Series C Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which it shall be entitled as aforesaid
and a check payable to the holder, or order, in the amount of any cash amounts
payable as the result of a conversion into fractional shares of Common Stock,
and a certificate for any shares of Series C Preferred Stock not so converted.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of Series C
Preferred Stock to be converted, or in the case of automatic conversion on the
date of the event causing such automatic conversion, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
(e) In the event of any taking by this Corporation of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any distribution, any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, this Corporation
shall mail to each holder of Series C Preferred Stock, at least 10 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such distribution or right, and the
amount and character of such distribution or right.
(f) Upon any conversion of Series C Preferred Stock pursuant to this Section
6, the shares of Series C Preferred Stock which are converted shall not be
reissued. Upon conversion of all of the then outstanding Series C Preferred
Stock pursuant to this Section 6 and upon the taking of any action required by
law, all matters set forth in this Certificate of Designation shall be
eliminated from the Certificate of Incorporation, shares of Series C Preferred
Stock shall not be deemed outstanding for any purpose whatsoever and all such
shares shall revert to the status of authorized and unissued shares of
Preferred Stock.
(g) Any notices required by the provisions of this Section 6 to be given to
the holders of shares of Series C Preferred Stock shall be deemed given if
deposited in the United States mail, first class, postage prepaid and
addressed to each holder of record at its address appearing on the books of
the Corporation.
7. Adjustments to Conversion Price.
(a) In the event the Corporation at any time or from time to time effects a
subdivision or combination of its outstanding Common into a greater or lesser
number of shares without a proportionate and corresponding subdivision or
combination of its outstanding Series C Preferred Stock, then and in each such
event the Conversion Price shall be decreased or increased proportionately.
(b) In the event the Corporation at any time or from time to time shall make
or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights hereinafter
4
<PAGE> 26
(a) referred to as "Common Stock Equivalents") convertible into or entitling
the holder thereof to receive additional shares of Common Stock without
payment of any consideration by such holder for such Common Stock
Equivalents or the additional shares of Common Stock, then and in each such
event the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of such Common
Stock Equivalents shall be deemed to be issued and outstanding as of the
time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date. In each such
event, the Conversion Price shall be proportionately decreased as of the
time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date.
(c) In case of any merger (other than a merger in which the Corporation is
not the continuing or surviving entity) or any reclassification of the Common
Stock of the Corporation, each share of the Series C Preferred Stock shall
thereafter be convertible into that number of shares of stock or other
securities or property to which a holder of the number of shares of Common
Stock issuable upon conversion of a share of Series C Preferred Stock
immediately prior to such merger or reclassification would have been entitled
upon such merger or reclassification. In any such case, appropriate
adjustment (as determined by the Board of Directors in good faith) shall be
made in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of Series C Preferred Stock,
such that the provisions set forth herein shall thereafter be applicable, as
nearly as reasonably may be, in relation to any share of stock or other
property thereafter issuable upon conversion.
(d) The Corporation shall at all times reserve and keep available out of its
authorized but unissued Common Stock, solely for the purpose of effecting the
conversion of Series C Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all Series C Preferred Stock from
time to time outstanding. The Corporation shall from time to time (subject to
obtaining necessary director and stockholder authorizations), in accordance
with the laws of the State of Delaware, increase the authorized amount of its
Common Stock if at any time the authorized number of shares of Common Stock
remaining unissued shall not be sufficient to permit the conversion of all of
the shares of Series C Preferred Stock at the time outstanding.
8. Certain Definitions. The following terms shall have the following
meanings:
"Conversion Date" means the date upon which the holder delivers the notice of
conversion to the Corporation.
"Conversion Price" means the lesser of (a) $3.00 per share, and (b) 80% of the
average closing bid price of the Common Stock as reported by Blumberg, L.P.
for shares traded in the United States for the five consecutive trading days
preceding the Conversion Date.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation
5
<PAGE> 27
to be signed by its President, and attested by its Chief Financial Officer,
this 10th day of May, 1996.
StarBase Corporation
By: /s/ WILLIAM R. STOW III
--------------------------
William R. Stow, III
President
Attest:
By: /s/ ROBERT W. LEIMENA
-----------------------
Robert W. Leimena
Chief Financial Officer
6
<PAGE> 28
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION
OF
STARBASE CORPORATION
StarBase Corporation, a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Company"),
hereby certifies as follows:
FIRST: Pursuant to a Certificate of Designation filed by the Company with the
Secretary of State of Delaware on May 10, 1996 (the "Certificate of
Designation"), there was established a series of preferred stock of the
Company designated as "Series C Preferred Stock."
SECOND: Pursuant to the authority contained in the Certificate of
Incorporation of the Company, and in accordance with Sections 141(f), 228 and
242 of the General Corporation Law of the State of Delaware, the Board of
Directors of the Company, and the holders of a majority of the outstanding
shares of capital stock of the Company entitled to vote thereon (namely the
holders of the Series C Preferred Stock voting separately as a class), have
authorized the following amendments to the Certificate of Designation with
respect to the terms, rights, preferences, powers and limitations of the
Series C Preferred Stock:
1. The Paragraph commencing with the word "RESOLVED" is hereby amended by
deleting the number "300,000" in the sixth line of such Paragraph, and
substituting in its place, the number "366,666".
2. Paragraph 1 ("Designations and Amount") of the Certificate of Designation
is hereby amended by deleting the number "300,000" in the third line of such
Paragraph, and substituting in its place, the number "366,666".
THIRD: The foregoing amendments to the Certificate of Designation have been
adopted by unanimous written consent of the members of the Board of Directors
of the Company in accordance with Section 141(f) of the General Corporation
Law of the State of Delaware. The foregoing amendments have also been adopted
by written consent of the holders of a majority of the outstanding shares of
the Series C Preferred Stock (voting separately as a class) of the Company in
1
<PAGE> 29
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware. Prompt written notice of the
adoption of the amendments herein certified has been given to those
stockholders who have not consented in writing thereto, as provided in Section
228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, StarBase Corporation has caused this Certificate to be
signed by its President and attested by its Chief Operating Officer on July
______, 1996.
STARBASE CORPORATION
By: /s/ WILLIAM R. STOW III
--------------------------
Name: William R. Stow III
Title: President
By: /s/ ROBERT W. LEIMENA
--------------------------
Name: Robert W. Leimena
Title: Chief Financial Officer
2
<PAGE> 30
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of June ,
--
1996, by and among StarBase Corporation, a Delaware corporation (the
"Company"), and (the "Subscriber")
--------------
WITNESSETH
WHEREAS, pursuant to Unit Subscription Agreement (the "Subscription
Agreement"), by and among the Company and the Subscriber, the Company has
agreed to sell and the Subscriber has agreed to purchase an aggregate of
units (the "Units"), each Unit consisting of one share of the
- --------
Company's Series C Preferred Stock, par value $.0l per share, (the "Series C
Preferred Stock"),with each share of Series C Preferred Stock convertible into
shares of the Company's common stock, par value $.0l per share (the "Shares");
and
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Subscriber's entering into the Subscription Agreement, the Company has agreed
to provide the Subscriber with certain registration rights with respect to the
Shares;
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Subscription Agreement
and this Registration Rights Agreement, the Company and the Subscriber agree
as follows:
1. Certain Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, par value $.0l per
share.
"Registrable Shares" shall mean (i) the Shares, (ii) any Common Stock of the
Company issued or issuable in respect of the Shares or upon any stock split,
stock dividend, recapitalization or similar event; provided, however, that
shares of Common Stock or other securities shall no longer be treated as
Registrable Shares if (a) they have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction,
(b) they have been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon
consummation of such sale or (c) the Shares are available for sale under the
Securities Act (including Rule 144) in the opinion of counsel to the Company,
without compliance with the registration and prospectus delivery requirements
of the Securities Act so that no transfer restrictions or restrictive legends
1
<PAGE> 31
will appear upon the Share certificates following the consummation of such
sale.
The terms "register registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expense incurred by the Company in
compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements of one counsel for Subscriber, and the reasonable expenses of
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares.
2.Requested Registration. The Subscriber may request registration as set
forth below:
(a)Request for Registration. If the Company shall receive from Subscriber, at
any time after 41 days following the date hereof a written request that the
Company effect a registration with respect to all but not less than all, of
the Registrable Shares held by the Subscriber (which notice shall specify the
intended method of disposition), the Company shall, as soon as practicable,
use its best efforts to effect such registration (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as may be so requested and as would permit or facilitate the
sale and distribution of all or such Registrable Shares as are specified in
such request, provided that the Company shall not be obligated to effect, or
to take any action to effect, any such registration pursuant to this Section 2
(i) after the Company has effected one such registration pursuant to this
Section 2(a) and such registration has been declared or ordered effective by
the Commission and the sale of such Registrable Shares shall have closed; or
(ii) within the period starting with the date 60 days prior to the Company's
good faith estimated date of filing of, and ending 180 days following the
effective date of, any registered offering of the Company's securities to the
general public.
Subject to the foregoing limitations in clauses (i) and (ii) above, the
2
<PAGE> 32
Company shall file a registration statement covering the Registrable Shares so
requested to be registered as soon as practicable after receipt or requests of
the holders having an aggregate initial purchase price of $375,000 or more,
but no later than 120 days following receipt of such request or requests.
(b) Underwriters. If the Subscriber intends to distribute the Registrable
Shares by means of an underwriting, it shall so advise the Company as a part
of its request made pursuant to Section 2.
3. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance of the Registrable Shares pursuant to this Agreement. All Selling
Expenses shall be born by the Subscriber.
4. Registration Procedures. The Company shall advise the Subscriber of the
initiation of a registration under this Agreement and as to the completion
thereof. At its expense, the Company will:
(a) Use reasonable efforts to keep such registration effective for a period
of 180 days or until the Subscriber has completed the distribution described
in the registration statement relating thereto, whichever first occurs.
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of securities covered by
such registration statement; and
(c) Furnish such number of prospectuses and other documents incidental
thereto, including any amendment of or supplement to the prospectus, as the
Subscriber from time to time may reasonably request.
5. Indemnification.
(a) The Company will indemnify the Subscriber with respect to which
registration has been effected pursuant to this Agreement against all
claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus or other document incident to any such registration, or based on
any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and will
reimburse the Subscriber for any legal and any other expenses as they are
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided, however, that the
indemnity contained in this Section 5(a) shall not apply to amounts paid in
settlement of any such claim, loss damage, liability or action if such
settlement is effected without the consent of the Company, and provided
further that the Company shall not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by the Subscriber and stated to be specifically
for use in the registration statement filed pursuant to this Agreement.
The foregoing indemnity agreement is further subject to the condition that
insofar as it relates to any untrue prospectus, such indemnity agreement
shall not inure to the benefit of the foregoing unindemnified parties if
copies of a final prospectus correcting the misstatement, or alleged
misstatement, omission or alleged omission upon which such loss, liability,
claim or damage is based is timely delivered to such indemnified party and
a copy thereof was not furnished to the person asserting the loss,
liability, claim or damage.
3
<PAGE> 33
(b) The Subscriber will indemnify the Company, each of its directors and
officers and each person who controls the Company within the meaning of the
Securities Act and the rules and regulations thereunder against all claims,
losses, damages and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or other
document incident to any such registration or based upon any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation of the Securities Act or any rule or regulation thereunder
applicable to the Company and will reimburse the Company, and its directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expense reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to
the extent, and only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) relating to such holder is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by the Subscriber and stated to be specifically for use
therein; provided, however, that the obligations of the Subscriber shall be
limited to an amount equal to the proceeds to the Subscriber of Registrable
Shares sold under such registration and provided further that such
indemnification obligations shall not apply if the Company modifies or changes
to a material extent the written information furnished by such Holder.
(c) Each party entitled to indemnification under this Section 5 (an
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld or delayed), and the
Indemnified Party may participate in such defense at such indemnified
party's expense, and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Agreement. No Indemnifying Party, in
the defense of any such claim or litigation, shall except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the
claim in question as an Indemnifying Party may reasonably request in
writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
4
<PAGE> 34
6. Information by Holder of Registrable Shares. The Subscriber shall
furnish to the Company such information regarding the Subscriber and the
distribution proposed by such holder of Registrable Shares as the Company may
reasonably request in writing and as shall be reasonably required in
connection with any registration referred to in this Agreement.
7. Transfers or Assignments of Registration Rights. The Subscriber's
rights under this Agreement to cause the Company to register the Registrable
Shares may be transferred or assigned by the Subscriber only to affiliates of
the Subscriber or to a purchaser of at least 11,833 Shares or 11,833 shares of
Series C Preferred Stock and such assignment shall only be effective upon
delivery of written notice of such assignment to the Company within thirty
(30) days of the assignment. Upon such assignment the assignee shall have all
the rights and obligations of the Subscriber hereunder.
8. Miscellaneous
8.1 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflict of laws.
8.2 Successors and As . Except as otherwise provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
8.3 Entire Agreement. This Agreement constitutes the full and entire
understanding
and agreement between the parties with regard to the subject matter hereof
8.4 Notices, etc. All notices and other communications required or
permitted
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand or by messenger or courier delivery service,
addressed (a) if to the Subscriber, at
--------------------------------------
or at such other address as the Subscriber shall have furnished to the Company
in writing, or (b) if to the Company, at 18872 MacArthur Boulevard, Irvine,
California 92715 or at such other address as the Company shall have furnished
to the Subscriber in writing.
5
<PAGE> 35
8.5 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Registrable Shares, upon any breach or
default of the Company under this Agreement, shall impair any such right,
power, or remedy of such holder nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereunder occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
8.6 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.7 Severability. In the case any provision of this agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
8.8 Amendments. This provisions of this Agreement may be amended at any
time and form time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the owners of all of the Registrable Shares as of the date of
such amendment or waiver.
8.9 Termination of Registration Rights. This Agreement shall terminate on
April 30, 1997.
The foregoing Registration Rights Agreement is hereby executed as of the date
first above written.
STARBASE CORPORATION
By: /s/ ROBERT W. LEIMENA
-----------------------
Name: Robert W. Leimena
Title: Chief Financial Officer
[Holder]
By:
-----------------------
Name:
Title:
6
<PAGE> 36
EXHIBIT 10.25
STARBASE CORPORATION
UNIT SUBSCRIPTION AGREEMENT
THIS UNIT SUBSCRIPTION AGREEMENT dated as of , 1996 by and between
------------
StarBase Corporation, a Delaware corporation (the "Company"), and
, an entity organized under the laws of (the
- --------------- -------------
"Purchaser").
W I T N E S S E T H :
WHEREAS, the Company is offering to sell, upon the terms and subject to the
conditions hereinafter set forth, up to 199,998 units (the "Units") each Unit
consisting of one share of the Company's Series C Preferred Stock, par value
$0.01 per share (the "Series C Preferred Stock"), with each share of Series C
Preferred Stock convertible into a share of common stock, par value $0.01 per
share (the "Common Stock"), and one warrant to purchase a share of Common
Stock", substantially in the form of Exhibit A hereto (each, a "Warrant"); and
WHEREAS, the Purchaser desires to purchase, upon such terms and subject to
such conditions, the number of Units set forth on the signature page hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF UNITS
1.1 Issuance and Sale of Units
Upon the terms and subject to the conditions of this Agreement, the Company
shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, at a purchase price, in lawful money of the United States, of $3.00
per Unit, the number, not less than 199,998 Units set forth opposite the
Purchaser's name on the signature page hereof for the aggregate purchase price
set forth thereon (the "Purchase Price"). In addition to the number of Units
to be purchased hereunder and the Purchase Price, the Purchaser shall specify
on the signature page hereof the address of the residence or principal
executive offices of the Purchaser, and, if different, an address for any
notices given hereunder. The offer and sale of the Units are being effected
in accordance with and in reliance on the provisions of Regulation S under the
United States Securities Act of 1933, as amended (the "Act").
1
<PAGE> 37
1.2 Offering Expenses
Of the Purchase Price so payable by the Purchaser, an amount, not in excess of
$0.25 per Unit, shall be applied to pay brokerage commissions, attorneys' fees
and disbursements and other expenses incurred in connection with the offer and
sale of the Units hereunder.
1.3 Closing
Promptly upon the execution and delivery of this Agreement by the Company and
the Purchaser:
(a) the Purchaser shall deliver to Parker Chapin Flattau & Klimpl, LLP, at
1211 Avenue of the Americas, New York, New York 10036-8735, U.S.A., Attention:
Martin Eric Weisberg, Esq. (the "Closing Agent"), (i) an executed copy of the
Agreement (or a photocopy or other facsimile thereof) and (ii) payment of the
Purchase Price by wire transfer of immediately available funds to the account
specified by the Closing Agent; and
(b) the Company shall deliver to the Closing Agent (i) certificates
registered in the name of the Purchaser or, if the Purchaser shall have
designated a nominee, such nominee, representing the number of shares of
Series C Preferred Stock included within the Units purchased by the Purchaser
hereunder (the "Certificates") and (ii) a Warrant to purchase shares of Common
Stock.
Promptly upon receipt of the funds and documents required so to be delivered
(the date upon which all such funds and documents are actually received by the
Closing Agent being hereinafter referred to as the "Closing Date"), the
Closing Agent shall (a) deliver the Certificates and Warrant to the Purchaser
(or its nominee, if any), and (b) pay over, as directed, the Purchase Price to
the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
2.1 Organization and Good Standing
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted.
2.2 Capitalization
The authorized capital of the Company consisted of 50,000,000 shares of Common
Stock, of which 7,848,479 shares were issued and outstanding as of March 31,
1996, of which 6,261 are treasury stock, and 10,000,000 shares of preferred
2
<PAGE> 38
stock, par value $.01 per share (the "Preferred Stock), of which 2,500,000
shares were designated Series B Preferred Stock, of which 2,227,946 were
issued and outstanding as of March 31, 1996. The outstanding shares of Common
Stock and Preferred Stock are all duly and validly authorized and issued,
fully paid and nonassessable.
2.3 Authorization
The Company has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by the Company do not, and the
performance of its obligations hereunder will not, violate or conflict with
any provision of the Company's Certificate of Incorporation or By-laws. All
corporate action on the part of the Company required for the authorization,
execution and delivery of this Agreement and the performance of its
obligations hereunder, including the issuance and delivery of the Units, have
been taken. This Agreement has been duly executed and delivered by the
Company, and assuming due execution and delivery by the Purchaser, constitutes
a valid and legally binding obligation of the Company enforceable in
accordance with its terms, except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally and (ii) equitable
principles relating to the availability of specific performance, injunctive
relief and other equitable remedies.
2.4 Valid Issuance of Series C Preferred Stock
The Series C Preferred Stock which is being purchased by the Purchaser
hereunder is duly authorized and, when issued, sold and delivered in
accordance with the terms hereof, will be duly and validly issued, fully paid
and nonassessable, and, based upon the representations of the Purchaser in
this Agreement, will be issued in compliance with the registration
requirements of all applicable federal and state securities laws. The Common
Stock issuable upon exercise of the Warrants being purchased hereunder is duly
authorized and has been duly and validly reserved for issuance and, upon
issuance to the Purchaser in accordance with the terms of the Warrant, will be
duly and validly issued, fully paid and nonassessable, and issued in
compliance with the registration requirements of all applicable federal and
state securities laws or exemption therefrom, as presently in effect, of the
United States.
2.5 Governmental Consents
No consent, approval or authorization of, or designation, declaration or
filing on the part of the Company with, any United States federal or state
governmental authority or, to the best knowledge of the Company, with any
foreign governmental authority, is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of
the Units or the consummation of any other transaction contemplated hereby,
except as required pursuant to Regulation S under the Act.
3
<PAGE> 39
2.6 Offering
Based upon the Purchaser's representations set forth in Section 3 of this
Agreement, the offer, sale and issuance of the Units as contemplated by this
Agreement are exempt from the registration requirements of the Act, and
neither the Company nor any authorized agent acting on its behalf has taken
any action that would cause the loss of such exemption.
2.7 No "Directed Selling Efforts".
In connection with the offer and sale of the Units, no distributor or any
affiliates or any person acting on behalf of the Company or any affiliate of
the Company or any distributor has engaged in any "directed selling efforts"
(as such term is defined under Regulation S) nor conducted any general
solicitation relating to the offer to persons residing within the United
States or to "U.S. Persons" (as that term is defined under Regulation S).
2.8 Filings Under the Act and the Securities Exchange Act
The Company has filed all registration statements, reports and other documents
required to be filed by it under the Act and the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and no such document,
at the time it was filed, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
3.1 Organization and Good Standing
The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the Province of British Columbia, Canada and has
all requisite corporate power and authority to carry on its business as now
conducted.
3.2 Authorization
The Purchaser has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by the Purchaser do not, and the
performance of its obligations hereunder will not, violate or conflict with
any provision of the Purchaser's Certificate of Incorporation or By-laws. All
corporate action on the part of the Purchaser required for the authorization,
execution and delivery of this Agreement and the performance of its
obligations hereunder have been taken. This Agreement has been duly executed
and delivered by the Purchaser, and assuming execution and delivery by the
4
<PAGE> 40
Company, constitutes a valid and legally binding obligation of the Purchaser
enforceable in accordance with its terms, except as limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally and (ii)
equitable principles relating to the availability of specific performance,
injunctive relief and other equitable remedies.
3.3 Foreign Purchaser
The Purchaser is not a "U.S. person" (as defined in Rule 902(o) of Regulation
S), including, without limitation, if a business organization, such as a
corporation or partnership, it is organized under the laws of a jurisdiction
other than the United States and if organized by a "U.S. person" principally
for the purpose of investing in securities not registered under the Act, it
was organized and is owned by "accredited investors" within the meaning of
Rule 501 of Regulation D of the Act who are not natural persons, estates or
trusts. The Purchaser is not acquiring the Units for the account or benefit
of any U.S. person. The Purchaser has not engaged in any "directed selling
efforts" (as defined in Rule 902(b) of Regulation S).
3.4 Accredited or Sophisticated Purchaser
The Purchaser is (a) an "accredited investor" within the meaning of Rule 501
of Regulation D under the Act, as presently in effect and (b) is an investor
in securities of companies in the development stage and is able to fend for
itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Units.
3.5 Offshore Transaction
The document effecting this purchase and sale has been executed by the
Purchaser outside the "United States" (as defined in Rule 902(p) of Regulation
S). The Purchaser is acquiring the Units in an "offshore transaction" (as
defined in Rule 902(i) of Regulation S). The Units were not offered to the
Purchaser in the United States and at the time of execution of this Agreement
and the time of any offer to the Purchaser to purchase the Units hereunder,
the Purchaser was physically outside of the United States.
3.6 Economic Risk
The Purchaser has carefully reviewed and understands the risks of, and other
considerations relating to, a purchase of the Units and an investment in the
Company. The Purchaser has such experience in business and financial matters
that it is capable of evaluating the risks of its investment and determining
the suitability of its investment. The Purchaser has received and has
carefully read this Agreement. The Purchaser has consulted the Purchaser's
own financial, legal and tax advisors with respect to the economic, legal and
tax consequences of an investment in the Units and has not relied on the
Company, its officers, directors, affiliates or professional advisors for
advice as to such consequences.
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<PAGE> 41
3.7 Independent Investigation; Advertisements
The Purchaser, in offering to purchase for the Units hereunder, has relied
solely upon an independent investigation made by it and its representatives,
if any, and has, prior to the date hereof, been given access to and the
opportunity to examine all books and records of the Company, and all material
contracts and documents of the Company. In making its investment decision to
purchase the Units, the Purchaser is not relying on any oral or written
representations or assurances from the Company or any other person or any
representation of the Company or any other person other than as set forth in
this Agreement, or on any information other than contained in the Company's
public filings required under the Act and the Exchange Act. The Purchaser is
not subscribing for the Units as a result of or subsequent to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar.
3.8 Investment for Own Account
Except as otherwise indicated herein, the Purchaser is the sole party in
interest as to its investment in the Company, and it is acquiring the Units
solely for investment for the Purchaser's own account and has no present
agreement, understanding or arrangement to subdivide, sell, assign, transfer
or otherwise dispose of all or any part of the Units subscribed for to any
other person.
3.9 Holding Period
The Purchaser acknowledges and understands that the Purchaser's agreement not
to sell or otherwise dispose of any of the Units, directly or indirectly,
prior to the expiration of a period of 40 days after the Closing Date (the
"Holding Period") is a material inducement for the Company to accept the
Purchaser's subscription.
3.10 No Government Recommendation or Approval
The Purchaser understands that no United States federal or state agency or
similar agency of any other country, has reviewed, approved, passed upon or
made any recommendation or endorsement of the Company, this transaction or the
purchase of the Units.
3.11 No Registration
The Purchaser understands that the Units and the Common Stock issuable upon
conversion of the Series C Preferred Stock and the Warrant have not been
registered under the Act and are being offered and sold pursuant to Regulation
S based in part upon the representations of the Purchaser contained herein.
6
<PAGE> 42
3.12 No Sale in Violation of the Securities Laws
The Purchaser covenants that he or she will not knowingly make any sale,
transfer or other disposition of the Units in violation of the Act (including
Regulation S), the Exchange Act, or the rules and regulations of the
Securities and Exchange Commission promulgated under any of the foregoing.
3.13 No Legal Advice from Company
The Purchaser acknowledges that he or she has had the opportunity to review
this Agreement and the transactions contemplated by this Agreement with his or
her own legal counsel. The Purchaser is relying solely on such counsel and
not on any statements or representations of the Company or any of its agent
for legal advice with respect to the investment or the transactions
contemplated by this Agreement.
4. COMPLIANCE WITH SECURITIES LAWS
4.1 Resales Subject to U.S. Securities Laws
The Purchaser acknowledges that the Units have not been registered under the
Act, and agrees to resell the Units, or the Series C Preferred Stock or the
Warrants included therein, only in accordance with the provisions of
Regulation S under the Act, pursuant to registration under the Act, or
pursuant to an available exemption from such registration.
4.2 Legends
The Certificates, the Warrants and any certificate representing shares of
Common Stock issuable upon the conversion of the Series C Preferred Stock and
the exercise of the Warrants shall bear in substance the following legend, as
determined by the Company's counsel:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD OR OFFERED FOR SALE
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
(i) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (ii) OTHERWISE UNTIL 40 DAYS
FROM CLOSING, MAY , 1996, EXCEPT IN EITHER CASE IN ACCORDANCE WITH
--
REGULATIONS UNDER THE ACT. TERMS USED IN THIS LEGEND HAVE THE MEANING GIVEN
TO THEM BY REGULATION S."
7
<PAGE> 43
4.3 Further Restrictions on Transfer
The Company shall not register any transfer of the Units (or Common Stock
issued upon the conversion of the Series C Preferred Stock or the exercise of
a Warrant) not made in accordance with the provisions of Regulation S or other
applicable registration or exemption under the Act and shall not treat as the
owner of such securities, or otherwise accord voting or dividend rights to,
any transferee to whom such securities have been transferred in contravention
of this Agreement.
4.4 Stop Transfer Instructions
Stop transfer instructions have been or will be provided to the Company's
transfer agent to be placed on such transfer agent's books, records or other
documents evidencing the Units so as to restrict the resale, pledge,
hypothecation or other transfer thereof in accordance with the provisions
hereof and the provisions of Regulation S promulgated under the Act.
4.5 Transferability of Common Stock
If the Purchaser delivers a Notice of Conversion and an Officer's Certificate
(substantially in the form of Exhibits B and C hereto) to the Company, the
Company will issue one or more certificates representing the shares of Common
Stock without a restricted legend upon conversion of the Series C Preferred
Stock into shares of Common Stock. The Company warrants that no instructions,
other than those instructions for a stop transfer until the end of the Holding
Period, have been or will be given to the transfer agent. The Company further
warrants that the shares of Common Stock shall be otherwise freely
transferable by the Purchaser on the books and the records of the Company.
4.6 Representations Upon Conversion.
If the transfer agent requests an opinion of counsel as a condition to issuing
the shares of Common Stock without restrictive legend or stop transfer
instructions, the Company at its sole expense shall cause an opinion of
counsel to be delivered to the transfer agent by counsel acceptable to the
Company to the effect that the shares of Common Stock underlying the Shares
delivered upon conversion thereof have been registered under the Act or are
exempt from registration therein.
5. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING
The obligations of the Purchaser under Section 1 of this Agreement are subject
to the fulfillment on or before the Closing of each of the following
conditions:
8
<PAGE> 44
5.1 Representations and Warranties
The representations and warranties of the Company contained in Section 2 shall
be true in all material respects on and as of the Closing with the same effect
as though such representations and warranties had been made on and as of the
Closing Date.
5.2 Performance
The Company shall have, in all material respects, performed and complied with
all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
5.3 Qualifications
All authorizations, approvals or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Units pursuant
to this Agreement shall be duly obtained and effective as of the Closing.
5.4 Registration Rights Agreement
The Company shall deliver to the Purchaser at the time of the closing a
Registration Rights Agreement in the form of the attached Exhibit D executed
by the Company.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company to the Purchaser under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
6.1 Representations and Warranties
The representations and warranties of the Purchaser contained in Section 3
shall be true in all material respects on and as of the Closing with the same
effect as though such representations and warranties had been made on and as
of the Closing Date.
6.2 Payment of Purchase Price
The Purchaser shall have delivered the Purchase Price and documents specified
in Section 1 to the Closing Agent.
6.3 Qualifications
All authorizations, approvals or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Units pursuant
to this Agreement shall be duly obtained and effective as of the Closing.
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<PAGE> 45
7. INDEMNIFICATIONS
7.1 Indemnification of the Company
The Purchaser hereby agrees to indemnify the Company and its directors,
officers, employees, agents, representatives and controlling persons (within
the meaning of that term in Section 15 of the Act) for, and to hold each of
them harmless against, all claims, liabilities, damages, costs or expenses
(including without limitation reasonable attorneys' fees and expenses) arising
out of or in connection with (a) the sale or distribution, or the alleged sale
or distribution, of the Units (or the Series C Preferred Stock or the Warrants
included therein) by the Purchaser in violation of the Act, Regulation S or
any other applicable law or regulation, or (b) any breach, or any alleged
breach, of any representation or warranty of the Purchaser or any covenant or
agreement of the Purchaser set forth herein.
7.2 Indemnification of the Closing Agent
The Company and the Purchaser, jointly and severally agree to indemnify the
Closing Agent, its partners, employees, agents and representatives for, and to
hold each of them harmless against, all claims, liabilities, damages, costs or
expenses (including without limitation reasonable attorneys' fees and
expenses) arising out of or in connection with the performance of its
obligations pursuant to Section 1.3 hereof.
8. MISCELLANEOUS
8.1 Survival of Representations and Warranties
The representations and warranties of each party herein shall survive the
Closing, notwithstanding any investigation or inquiry made by the other party.
8.2 Notices
Any notice hereunder to or upon either party hereto shall be deemed to have
been duly given for all purposes if (a) in writing and sent by (i) messenger
or an overnight courier service against receipt, or (ii) certified or
registered mail, postage paid, return receipt requested, or (b) sent by
telegram, telecopy, telex or similar electronic means, provided that a written
copy thereof is sent on the same day by postage paid first-class mail, to such
party at the following address:
To Purchaser: at its address set forth on the signature page hereof
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<PAGE> 46
To the Company at: 18872 MacArthur Boulevard
Irvine, CA 92715
U.S.A.
Attn: William R. Stow III
Fax: 714-442-4404
With a copy to: Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
Attn: Martin Eric Weisberg, Esq.
Fax: (212) 704-6288
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this
Section. The date of giving of any such notice shall be, in the case of
clause (a)(i), the date of the receipt; in the case of clause (a)(ii), five
business days after such notice or demand is sent; and, in the case of clause
(b), the business day next following the date such notice is sent.
8.3 Amendment
Except as otherwise provided herein, no amendment of this Agreement shall be
valid or effective, unless in writing and signing by or on behalf of the
parties hereto.
8.4 Waiver
No course of dealing or omission or delay on the part of either party hereto
in asserting or exercising any right hereunder shall constitute or operate as
a waiver of any such right. No waiver of any provision hereof shall be
effective, unless in writing and signed by or on behalf of the party to be
charged therewith. No waiver shall be deemed a continuing waiver or waiver in
respect of any other or subsequent breach or default, unless expressly so
stated in writing.
8.5 Governing Law
This Agreement shall be governed by, and interpreted and enforced in
accordance with, the laws of the State of New York without regard to
principles of choice of law or conflict of laws.
8.6 Jurisdiction
Each of the parties hereto hereby irrevocably consents and submits to the
jurisdiction of the Supreme Court of the State of New York and the United
States District Court for the Southern District of New York in connection with
any suit, action or other proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, waives any objection to
11
<PAGE> 47
venue in the County of New York, State of New York, or such District and
agrees that service of any summons, complaint, notice or other process
relating to such suit, action or other proceeding may be effected in the
manner provided by clause (a)(ii) of Section 8.2.
8.7 Remedies
In the event of any actual or prospective breach or default by either party
hereto, the other party shall be entitled to equitable relief, including
remedies in the nature of rescission, injunction and specific performance.
All remedies hereunder are cumulative and not exclusive, and nothing herein
shall be deemed to prohibit or limit either party from pursuing any other
remedy or relief available at law or in equity for such actual or prospective
breach or default, including the recovery of damages.
8.8 Severability
The provisions hereof are severable and in the event that any provision of
this Agreement shall be determined to be invalid or unenforceable in any
respect by a court of competent jurisdiction, the remaining provisions hereof
shall not be affected, but shall, subject to the discretion of such court,
remain in full force and effect, and any invalid or unenforceable provision
shall be deemed, without further action on the part of the parties hereto,
amended and limited to the extent necessary to render the same valid and
enforceable.
8.9 Counterparts
This Agreement may be executed in counterparts, each of which shall be deemed
an original and which together shall constitute one and the same agreement.
8.10 Further Assurances
Each party hereto covenants and agrees promptly to execute, deliver, file or
record such agreements, instruments, certificates and other documents and to
perform such other and further acts as the other party hereto may reasonably
request or as may otherwise be necessary or proper to consummate and perfect
the transactions contemplated hereby.
8.11 Assignment
This Agreement, and each right, interest and obligation hereunder, may not be
assigned by either party hereto without the prior written consent of the other
party hereto, and any purported assignment without such consent shall be void
and without effect.
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<PAGE> 48
8.12 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement
is not intended, and shall not be deemed, to create or confer any right or
interest for the benefit of any person not a party hereto.
8.13 Titles and Captions
The titles and captions of the Articles and Sections of this Agreement are for
convenience of reference only and do not in any way define or interpret the
intent of the parties or modify or otherwise affect any of the provisions
hereof.
8.14 Grammatical Conventions
Whenever the context so requires, each pronoun or verb used herein shall be
construed in the singular or the plural sense and each capitalized term
defined herein and each pronoun used herein shall be construed in the
masculine, feminine or neuter sense.
8.15 No Presumptions
Each party hereto acknowledges that it has participated, with the advice of
counsel, in the preparation of this Agreement. No party hereto is entitled to
any presumption with respect to the interpretation of any provision hereof or
the resolution of any alleged ambiguity herein based on any claim that the
other party hereto drafted or controlled the drafting of this Agreement.
8.16 Incorporation by Reference
The Exhibits hereto are an integral part of this Agreement and are
incorporated in their entirety herein by this reference.
8.17 Entire Agreement
This Agreement embodies the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes any prior agreement,
commitment or arrangement relating thereto.
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<PAGE> 49
IN WITNESS WHEREOF, the Company and the Purchaser, by their respective duly
authorized officers, have duly executed this Agreement on the date set forth
in the Preamble hereto.
STARBASE CORPORATION
By: /s/ ROBERT W. LEIMENA
------------------------
Name: Robert W. Leimena
Title: Chief Financial Officer
Number of Units Purchased: PURCHASER:
------------
Purchase Price: -------------------------------
---------------
By:
----------------------------
Name:
Name and address of Nominee (if any): Title
Address of Principal Executive
Offices:
-------------------------------
-------------------------------
-------------------------------
Telephone No.:
Address for Notices (if
different):
-------------------------------
-------------------------------
Fax:
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<PAGE> 50
EXHIBIT A
NONTRANSFERABLE WARRANT
THIS WARRANT AND THE COMMON STOCK TO BE ISSUED UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY "U.S.
PERSON" (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS
REGISTERED UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION.
THIS CERTIFICATE IS NOT TRANSFERABLE AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED.
No. 1996-CMN- Warrant to Purchase Share
---- ------
of Common Stock (subject to adjustment)
WARRANT TO PURCHASE COMMON STOCK
of
STARBASE CORPORATION
Void after January 31, 1998
This certifies that, for value received, (the
----------------------------
"Holder"), is entitled, subject to the terms set forth below, to purchase from
StarBase Corporation, a Delaware corporation (the "Company"), shares
--------
of the Company's common stock, par value $.01 per share (the "Common Stock"),
as constituted on the date hereof (the "Warrant Issue Date"), upon surrender
hereof, at the principal office of the Company referred to below, with the
Notice of Exercise and the Purchaser's Certificate attached hereto duly
executed, and simultaneous payment therefor in lawful money of the United
States, or otherwise as hereinafter provided, at the exercise price as set
forth in Section 2 below. The number of, and exercise price for, such shares
of Common Stock are subject to adjustment as provided herein.
1.Term of Warrant. Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, during the term commencing
on the Warrant Issue Date and terminating on or before January 31, 1998.
2.Exercise Price. The exercise price shall be U.S. $2.00 per share through
January 31, 1997, and U.S. $2.50 per share thereafter.
1
<PAGE> 51
3.Exercise of Warrant.
(a) This Warrant is exercisable by the Holder, in whole or in part, but not
for less than 1,000 shares of Common Stock at a time (or such lesser number of
shares as may then constitute the maximum number purchasable; such number
being subject to adjustment as provided in Section 14 below), at any time, or
from time to time, during the term hereof as described in Section 1 above, by
the surrender of this Warrant, the Notice of Exercise annexed hereto as
Exhibit 1, and the Purchaser's Certificate annexed hereto as Exhibit 2, each
duly completed and executed on behalf of the Holder, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company), upon payment (i) in cash or by check acceptable to the
Company, (ii) by cancellation by the Holder of indebtedness of the Company to
the Holder, or (iii) by a combination of (i) and (ii), for the purchase price
of the shares to be purchased.
(b) This Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of record
of such shares as of the close of business on such date. Unless exercised in
connection with an underwritten public offering, as promptly as practicable on
or after such date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised. In the event of exercise at the time of an
underwritten public offering, the Company will provide instructions as to the
exercise of this Warrant into such shares.
4.No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu
of any fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the exercise price multiplied by
such fraction.
5.Replacement of Warrant. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and substance to the Company or, in
the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6."Piggy-Back" Registration. The Holder of this Warrant shall have the right
to include all of the shares of Common Stock underlying this Warrant (the
"Registrable Securities") as part of any registration of securities filed by
the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act or pursuant to Form S-8) provided, however,
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<PAGE> 52
that if any registration pursuant to this Section shall be underwritten, in
whole or in part, the Corporation may require that the Registrable Securities
requested for inclusion pursuant to this Section 6 be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. If in the good faith judgment of the
underwriter evidenced in writing of such offering only a limited number of
Registrable Securities should be included in such offering, or no such shares
should be included, the Holder, and all other selling stockholders, shall be
limited to registering such proportion of their respective shares as shall
equal the proportion that the number of shares of selling stockholders
permitted to be registered by the underwriter in such offering bears to the
total number of all shares then held by all selling stockholders desiring to
participate in such offering. Those Registrable Securities which are excluded
from an underwritten offering pursuant to the foregoing provisions of this
Section 6 (and all other Registrable Securities held by the selling
stockholders) shall be withheld from the market by the Holders thereof for a
period, not to exceed 180 days, which the underwriter may reasonably determine
is necessary in order to effect such underwritten offering.
7.Rights of Stockholder. Subject to Sections 11 and 13 of this Warrant, the
Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholder at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock,
consolidation, merger or otherwise) or to receive notices of meetings, or to
receive dividends or subscription rights or otherwise until the Warrant shall
have been exercised and the shares of Common Stock purchasable upon the
exercise hereof shall have been issued, as provided herein.
8.Transferability and Non-Negotiability of Warrant. This Warrant may not be
assigned or transferred in whole or in part.
9.Compliance with Securities Laws.
(a) The Holder of this Warrant, by acceptance hereof, acknowledges that the
shares of Common Stock to be issued upon exercise hereof are being acquired
solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of any shares of Common Stock to be issued upon exercise
hereof, except under circumstances that will not result in a violation of
the United States Securities Act of 1933, as amended (the "Act"), or any
foreign or state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased
are being acquired solely for the Holder's own account and not as a nominee
for any other party, for investment, and not with a view toward
distribution or resale.
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<PAGE> 53
(b) All shares of Common Stock issued upon exercise hereof may be stamped or
imprinted with one or more of the following legends (in addition to any legend
required by the Act and the securities laws of any state of the United States)
as determined by counsel for the Company:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD OR OFFERED FOR SALE
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
(i) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (ii) OTHERWISE UNTIL AFTER
, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S UNDER THE
- -----------
ACT. TERMS USED IN THIS LEGEND HAVE THE MEANING GIVEN TO THEM BY REGULATION
S.
10.Restrictions on Transfer of Underlying Common Stock. The Holder of this
Warrant by acceptance hereof agrees that the transfer of the shares of Common
Stock issuable upon the exercise of all or any portion of this Warrant (the
"Securities") is subject to the provisions of this Warrant, which include
restrictions on transfer of the Securities.
11.Reservation of Common Stock. The Company covenants that during the term
this Warrant is exercisable, the Company will reserve from its authorized and
unissued shares of Common Stock a sufficient number of shares to provide for
the issuance of Common Stock upon the exercise of this Warrant and, from time
to time, will take all steps necessary to amend its Certificate of
Incorporation (the "Certificate") to provide a sufficient reserve of shares of
Common Stock issuable upon exercise of the Warrant. The Company further
covenants that all shares that may be issued upon the exercise of rights
represented by this Warrant, upon exercise of the rights represented by this
Warrant and payment of the exercise price, all as set forth herein, will be
free from all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Warrant.
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<PAGE> 54
12.Notices.
(a) Whenever the exercise price or number of shares purchasable hereunder
shall be adjusted pursuant to Section 14 hereof, the Company shall issue a
certificate signed by its Secretary setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated and the exercise price and number of
shares purchasable hereunder after giving effect to such adjustment, and shall
cause a copy of such certificate to be mailed (by first class mail, postage
prepaid) to the Holder of this Warrant.
(b) In case
(i) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise of this
Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities, or to receive any other right, or
(ii) of any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation, or any sale, lease or conveyance of all or
substantially all of the assets of the Company to another person, or
(iii) of any voluntary dissolution, liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to
the Holder or Holders a notice specifying, as the case may be, (A) the date on
which a record is to be taken for the purpose of such dividend, distribution
or right, and stating the amount and character of such dividend, distribution
or right, or (B) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is
to take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such stock or securities at the time receivable
upon the exercise of this Warrant) shall be entitled to exchange their shares
of Common Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up.
Such notice shall be mailed at least 10 days prior to the date therein
specified.
(c) All such notices and communications shall be deemed to have been
received (i) in the case of personal delivery, on the date of such delivery
and (ii) in the case of mailing, on the second business day following the date
of such mailing.
13. Amendments.
(a) Any term of this Warrant may be amended with the written consent of the
Company and the holders of not less than fifty-one percent (51%) of the
shares of Common Stock issuable upon exercise of any and all outstanding
warrants for shares of Common Stock issued by the Company (the "Common
Stock Warrants"), even without the specific consent of the Holder. An
amendment effected in accordance with this Section 13 shall be binding upon
each holder of any of the Common Stock Warrants, each future holder of all
such Common Stock Warrants, and the Company. The Company shall promptly
give notice to all holders of Common Stock Warrants of any amendment
effected in accordance with this Section 13.
5
<PAGE> 55
(b) No waivers of or exceptions to any term, condition or provision of this
Warrant, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
14. Adjustments. The exercise prices and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
14.1 Merger, Sale of Assets, Etc.
If at any time, while this Warrant, or any portion thereof, is outstanding and
unexpired there shall be (i) a reorganization (other than a combination,
reclassification exchange or subdivision of shares otherwise provided for
herein), (ii) a merger or consolidation of the Company with or into another
corporation in which the Company is not the surviving person, or a reverse
triangular merger in which the Company is the surviving person but the shares
of the Company's capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in the form of
cash, securities or otherwise, or (iii) a sale or transfer of the Company's
properties and assets as, or substantially as, an entirety to any other
person, then, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the Holder shall thereafter
be entitled to receive upon exercise of this Warrant, during the period
specified herein and upon payment of the exercise price then in effect, the
number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale or
transfer which a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 14.
The foregoing provisions of this Section 14.1 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and
to the stock or securities of any other corporation which are at the time
receivable upon the exercise of this Warrant. If the per share consideration
payable to the Holder for shares in connection with any such transaction is in
a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors, whose determination shall be final and binding. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction,
to the end that the provisions of this Warrant shall be applicable after that
event, as nearly as reasonably may be, in relation to any shares or other
property deliverable after that event upon exercise of this Warrant.
6
<PAGE> 56
14.2 Reclassification, etc. If the Company at any time while this Warrant,
or any portion thereof, remains outstanding and unexpired shall, by
reclassification of securities or otherwise, change any of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities
as would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the exercise
price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 14.
14.3 Split, Subdivision or Combination of Shares. If the Company at any time
while this Warrant, or any portion thereof, remains outstanding and unexpired
shall split, subdivide or combine the securities as to which purchase rights
under this Warrant exist, into a different number of securities of the same
class, the exercise price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased
in the case of a combination.
14.4 Adjustments for Dividends in Stock or Other Securities or Property. If
while this Warrant, or any portion thereof, remains outstanding and unexpired
the holders of the securities as to which purchase rights under this Warrant
exist at the time shall have received, or, on or after the record date fixed
for the determination of eligible stockholder, shall have become entitled to
receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend,
then and in each case, this Warrant shall represent the right to acquire, in
addition to the number of shares of the security receivable upon exercise of
this Warrant, and without payment of any additional consideration therefor,
the amount of such other or additional stock or other securities or property
(other than cash) of the Company which such holder would hold on the date of
such exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise,
retained such shares and/or all other additional stock available by it as
aforesaid during such period, giving effect to all adjustments called for
during such period by the provisions of this Section 14.
14.5 Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment pursuant to this Section 14, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of any such Holder, furnish or cause to be furnished
to such Holder a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the exercise price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the
time would be received upon the exercise of the Warrant.
7
<PAGE> 57
14.6 No Impairment. The Company will not, by any voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section
14 and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holders against impairment.
15. Miscellaneous Provisions.
(a) Market Stand-Off Provisions.
(i) In connection with any public offering by the Company of its equity
securities pursuant to an effective registration statement filed under the
Act, the Holder shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions
with respect to, this Warrant or any Common Stock or other security received
on exercise hereof without the prior written consent of the Company and the
representative of the underwriters. Such limitations shall be in effect for
such reasonable period of time from and after the effective date of such
registration statement as may be requested by the Company or such
underwriters. The limitations of this Section 15(a) shall remain in effect
for the two-year period immediately following the effective date of public
offering and shall thereafter terminate and cease to have any force or effect.
(ii) In the event of any stock dividend, stock split, recapitalization or
other change affecting the Company's outstanding Common Stock effected without
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the Common Stock or any warrant or other security
convertible into said Common Stock shall be immediately subject to the
provisions of this Section 15(a), to the same extent the Common Stock is at
such time covered by such provisions.
(iii) In order to enforce the limitations of this Section 15(a), the Company
may impose stop-transfer instructions with respect to the Common Stock or any
warrant or other security convertible into such Common Stock until the end of
the applicable market stand-off period.
(b) Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of New York, as such laws are applied
to contracts entered into and performed in such State, without resort to that
State's conflict-of-laws rules.
(c) Attorney's Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements, in addition
to any other relief to which such party may be entitled.
8
<PAGE> 58
IN WITNESS WHEREOF, STARBASE CORPORATION has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated as of May 17, 1996
STARBASE CORPORATION
By: /s/ ROBERT W. LEIMENA
------------------------------
Name: Robert W. Leimena
Title: Chief Financial Officer
9
<PAGE> 59
EXHIBIT 1
NOTICE OF EXERCISE
To: STARBASE CORPORATION
18872 MacArthur Boulevard
Suite 300
Irvine, California 92715
Attn: Chief Financial Officer
(1) The undersigned hereby elects to purchase shares of Common Stock
--------
of STARBASE CORPORATION, pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price for such shares.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and that
the undersigned will not offer, sell or otherwise dispose of any such shares
of Common Stock, except under circumstances that will not result in a
violation of the United States Securities Act of 1933, as amended, or any
foreign or state securities laws.
(3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or, if the undersigned has
designated a nominee, such nominee as is specified below. The certificates
representing said shares of Common Stock will be delivered to undersigned
outside of the United States.
(4) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or, if the undersigned has designated a
nominee, such nominee as is specified below.
- ------------------------------------ -----------------------------------
[Date] Name:
Title:
10
<PAGE> 60
EXHIBIT 2
PURCHASER'S CERTIFICATE
The undersigned, an individual who is
--------------------------------------
(the "Purchaser"), hereby certifies to STARBASE CORPORATION (the "Company")
and to its counsel, that:
1. The Purchaser acquired Units (the "Units"), each Unit consisting
---------
of one share of the Company's Series C Preferred Stock, par value $0.01 per
share (the "Series C Preferred Stock"), with each share of Series C Preferred
Stock convertible into a share of common stock, par value $0.01 per share, of
the Company ("Common Stock"), and one warrant to purchase a share of Common
Stock (each, a "Warrant"), pursuant to the Unit Subscription Agreement dated
as of May 17, 1996 between the Purchaser and the Company (the "Subscription
Agreement").
2. From the date of the acquisition of the Units through the fortieth day
thereafter (the "Period"), the Purchaser has been the sole beneficial and
record owner of the Units and did not take any short position in the Company's
Common Stock.
3. Each of the representations and warranties of the Purchaser in the
Subscription Agreement were true and accurate when made and continue to be
true and accurate as of the date hereof.
4. The Purchaser has held the Units for more than forty days and has paid the
full purchase price with respect to the Units to the Company and it was not at
the time of the purchase of the Units, during the Period nor is it currently a
"U.S. Person" as such term is defined in Regulation S promulgated under the
Securities Act of 1933, as amended (the "Act").
5. The Purchaser is not an "underwriter" or a "dealer" (as those terms are
defined in sections 2(11) and 2(12) of the Act) and is not receiving or will
not receive a selling commission, fee or other remuneration in respect of the
Warrants being exercised or in respect of the sale or potential sale of the
Common Stock issuable upon exercise of the Warrants.
6. The Purchaser is not the issuer or distributor of the shares of Common
Stock issuable upon exercise of the Warrant, or an affiliate of the Company,
and is not acting on behalf of any of the foregoing.
1
<PAGE> 61
The Purchaser understands that this certificate is being delivered to
provide the Company and its counsel with certain information necessary to make
a determination of the applicability of the registration requirements of the
Act. The Purchaser agrees that the Company and its counsel may rely upon the
statements contained herein with regard to issuing an opinion of counsel with
regard to such requirements.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this day
----
of , 19 .
------------ ---
-----------------------------------
[Name]
2
<PAGE> 62
EXHIBIT B
NOTICE OF CONVERSION
, 199
------- --
StarBase Corporation
18872 MacArthur Boulevard
Irvine, CA 92715
Attn: Finance Department
The undersigned, (the "Holder"), does hereby give notice that
----------------
it wishes to convert shares of Series C Preferred Stock (the
-------------
"Shares") of StarBase Corporation (the "Issuer"), held by it into shares of
Common Stock of the Issuer, which have been reserved for issuance upon such
conversion. The Holder represents and warrants that (i) all of the
requirements of Regulation S promulgated under the Securities Act of 1933, as
amended (the AAct@) applicable to the Holder have been complied with by the
Holder and (ii) the Holder has not engaged in any transaction or series of
transactions that, although in technical compliance with all of the
requirements of Regulation S, is part of a plan or scheme to evade the
registration requirements of the Act.
[Holder]
By:
------------------
Name:
Title:
1
<PAGE> 63
EXHIBIT C
PURCHASER'S CERTIFICATE
The undersigned, an entity organized under the laws of the British Virgin
Islands (the "Purchaser"), hereby certifies to STARBASE CORPORATION (the
"Company") and to its counsel, that:
1. The Purchaser acquired 199,998 Units (the "Units"), each Unit consisting
of one share of the Company's Series C Preferred Stock, $.01 par value per
share ("Preferred Stock"), convertible into the Company's common stock, $.01
par value per share ("Common Stock"), and one warrant to purchase a share of
Common Stock (each, a "Warrant") in accordance with Regulation S ("Regulation
S") promulgated under the Securities Act of 1933, as amended (the "Act"). The
Preferred Stock are represented by stock certificate number(s) .
--------
2. From the date of the acquisition of the Units through the fortieth day
thereafter (the "Period"), the Purchaser has been the sole beneficial and
record owner of the Units and did not take any short position in the Company's
Common Stock.
3. Each of the representations and warranties made by the Purchaser in the
Unit Subscription Agreement, dated as of June __, 1996, entered into by the
Company and the Purchaser were true and accurate when made and continue to be
true and accurate as of the date hereof.
4. The Purchaser has held the Units for more than forty days and has paid
the full purchase price with respect to the Units to the Company and it was
not at the time of the purchase of the Units, during the Period nor is it
currently a "U.S. Person" as such term is defined in Regulation S.
5. The Purchaser is not an "underwriter" or a "dealer" (as those terms are
defined in sections 2(11) and 2(12) of the Act) and is not receiving or will
not receive a selling commission, fee or other renumeration in respect of the
Units being converted or in respect of the sale or potential sale of the
Common Stock issuable upon conversion of the Units.
6. The Purchaser is not the issuer or distributor of the Units or of the
shares of Common Stock issuable upon conversion of the Preferred Stock, or an
affiliate of the Company, and is not acting on behalf of any of the foregoing.
The Purchaser understands that this certificate is being delivered to provide
the Company and its counsel with certain information necessary to make a
determination of the applicability of the registration requirements of the
Act. The Purchaser agrees that the Company and its counsel may rely upon the
statements contained herein with regard to issuing an opinion of counsel with
regard to such requirements.
2
<PAGE> 64
IN WITNESS WHEREOF, the undersigned has executed this Certificate this day
---
of , 19 .
--------- --
[Holder]
By:
-----------------------
Name:
Title:
3
<PAGE> 65
Units
Purchased Warrants
--------- --------
List of Investors:
- -----------------------
Gundy Co. 250,000 250,000
Channing Investment 25,000 25,000
M.K. Wong & Associates 23,830 23,830
Hisaya Limited 66,666 66,666
Placement Agent:
- -----------------------
Dabney/Resnick, Inc. 120,000
4
<PAGE> 66
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STARBASE
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 6809
<SECURITIES> 0
<RECEIVABLES> 177
<ALLOWANCES> 50
<INVENTORY> 12
<CURRENT-ASSETS> 7162
<PP&E> 1151
<DEPRECIATION> 541
<TOTAL-ASSETS> 7857
<CURRENT-LIABILITIES> 948
<BONDS> 0
0
4
<COMMON> 212
<OTHER-SE> 6540
<TOTAL-LIABILITY-AND-EQUITY> 7857
<SALES> 55
<TOTAL-REVENUES> 209
<CGS> 1
<TOTAL-COSTS> 1
<OTHER-EXPENSES> 1445
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (1209)
<INCOME-TAX> 1
<INCOME-CONTINUING> (1210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1210)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
