<PAGE> 1
As filed with the Securities and Exchange Commission on October 26, 1999
Registration No. _________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
STARBASE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0567363
- --------------------------------- ----------------------
(State or other jurisdiction (IRS employer
of incorporation or organization) Identification number)
4 HUTTON CENTRE DRIVE, SUITE 800
SANTA ANA, CA 92707-8713
(714) 445-4400
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DOUGLAS S. NORMAN
4 HUTTON CENTRE DRIVE, SUITE 800
SANTA ANA, CA 92707-8713
(714) 445-4400
- --------------------------------------------------------------------------------
(Name, address, including zip code, telephone number,
including area code, of agent for service)
COPY TO:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
(212) 704-6050
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed
Maximum Proposed
Amount Aggregate Maximum
Title of each class of To Be Price Aggregate Amount of
Securities to be registered Registered(1) Per Share(3) Offering Price Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share 1,171,822 $1.477 $1,731,207.76 $ 481.28
Common Stock, par value
$0.01 per share 1,148,867(2) $2.120 $2,435,417.77 $ 677.05
- -------------------------------------------------------------------------------------------------------------------------
Total 2,320,689 $4,166,625.53 $1,158.33
=========================================================================================================================
</TABLE>
(1) Represents the shares of common stock being registered for resale by the
selling stockholders.
(2) Represents shares of common stock issuable upon exercise of warrants
evidencing the right to purchase shares of common stock. Pursuant to Rule
416, the shares of common stock offered hereby also include such presently
indeterminate number of shares of common stock that may be issued as a
result of anti-dilution provisions included in the warrant agreements,
including, among others, stock splits, stock dividends and similar
transactions.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended,
based on the average ($1.391) of the bid ($1.375) and asked ($1.40625) price
of the common stock on the Nasdaq SmallCap Market on October 20, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
An Exhibit Index appears on page E-1
<PAGE> 3
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not seeking an offer to buy these securities in
any state where the offer or sale is not permitted.
PROSPECTUS
STARBASE CORPORATION
2,320,689 SHARES OF COMMON STOCK
o The shares of common stock offered by this prospectus are being
sold by the selling stockholders.
o We will not receive any proceeds from the sale of these shares. We
will receive proceeds from the exercise of warrants and those
proceeds will be used for our general corporate purposes.
o Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "SBAS."
o On October 20, 1999, the closing bid price of our common stock on
the Nasdaq SmallCap Market was $1.375.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
__________ , 1999
<PAGE> 4
TABLE OF CONTENTS
Page
----
Risk Factors............................................................. 3
Forward-Looking Statements............................................... 7
Use of Proceeds.......................................................... 7
Selling Stockholders..................................................... 7
Plan of Distribution..................................................... 10
Where You Can Find More Information...................................... 11
Indemnification of Directors and Officers................................ 12
Legal Matters............................................................ 12
Experts.................................................................. 12
2
<PAGE> 5
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK, INCLUDING THOSE RISKS
DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, TOGETHER WITH
ALL OF THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE DECIDING TO INVEST IN
SHARES OF OUR COMMON STOCK.
RISKS ASSOCIATED WITH OUR PAST FINANCIAL RESULTS
WE COULD BE REQUIRED TO CUT BACK OR STOP OPERATIONS IF WE ARE UNABLE TO RAISE OR
OBTAIN NEEDED FUNDING
Our ability to continue operations will depend on our positive cash
flow, if any, from future operations or our ability to raise additional funds
through equity or debt financing. We do not know if we can raise additional
funding or that such funding will be available on favorable terms. We could be
required to cut back or stop operations if we are unable to raise or obtain
needed funding.
Our cash requirements to run our business have been and will continue
to be significant. Since 1995, our negative cash flow from operations is as
follows:
Fiscal year ended: Negative Cash Flow
------------------ ------------------
o March 31, 1995 $6,179,000
o March 31, 1996 $4,949,000
o March 31, 1997 $6,506,000
o March 31, 1998 $5,662,000
o March 31, 1999 $9,430,000
Three months ended:
-------------------
o June 30, 1999 $1,177,000
WE HAVE A HISTORY OF LOSSES AND IF WE DO NOT ACHIEVE PROFITABILITY WE MAY NOT BE
ABLE TO CONTINUE OUR BUSINESS IN THE FUTURE
As of June 30, 1999 we accumulated losses of approximately $53,340,000.
We anticipate incurring additional losses until we can successfully market and
distribute our products and develop new technologies and commercially viable
products. If we are unable to do so, we will continue to have losses and might
not be able to continue our operations.
THE "GOING CONCERN" QUALIFICATION ON THE REPORT OF OUR INDEPENDENT ACCOUNTANTS
MAY HURT OUR ABILITY TO RAISE ADDITIONAL FINANCING
The report of our independent accountants on our March 31, 1999
financial statements contains an explanatory paragraph regarding our ability to
continue as an ongoing business. Our independent accountants cite recurring
losses that raise substantial doubt as to our ability to continue as an ongoing
business. This "going concern" qualification may reduce our ability to obtain
necessary financing in the future to run our business.
3
<PAGE> 6
RISKS ASSOCIATED WITH OUR BUSINESS
OUR SOFTWARE PRODUCTS MAY NOT BE SUCCESSFULLY COMPLETED OR ACCEPTED BY THE
PUBLIC WHICH COULD RESULT IN LOWER REVENUES
While we are in various stages of developing additional products, we
cannot assure you that such additional products will be completed in a timely
manner or successfully marketed. In the past we have experienced some product
release delays which resulted in lower revenues. Further, the market for our
team collaboration and software configuration management tools is evolving. This
causes the sales cycle to be longer due to the time it takes to educate
potential customers on the benefits of our products. We cannot assure you that
the products we introduce will achieve acceptance, or that other software
vendors will not develop and market products which render our products obsolete
or less competitive. Failure to obtain significant customer satisfaction or
market share for our products would significantly and negatively affect our
revenues.
WE MAY HAVE TO LOWER PRICES OR SPEND MORE MONEY TO EFFECTIVELY COMPETE AGAINST
COMPANIES WITH GREATER RESOURCES THAN US WHICH COULD RESULT IN LOWER REVENUES
AND/OR PROFITS
The success of our products in the marketplace depends on many factors,
including product performance, price, ease of use, support of industry
standards, and customer support and service. Given these factors we cannot
assure you that we will be able to compete successfully. For example, if our
competitors offer lower prices, we could be forced to lower prices which would
result in reduced margins and a decrease in revenues. If we do not lower prices
we could lose sales and market share. In either case, if we are unable to
compete against companies who can afford to cut prices, we would not be able to
generate sufficient revenues to grow the company or reverse our history of
losses.
In addition, we may have to spend more money to effectively compete for
market share, including funds to expand our infrastructure, which is a capital
and time extensive process. Further, if other companies want to aggressively
compete against us, we may have to spend more money on advertising, promotion,
trade shows, product development, marketing and overhead expenses, hiring and
retaining personnel, and developing new technologies. These higher expenses
would hurt our net income and profits.
OUR COMPUTER SYSTEMS MAY NOT RECOGNIZE THE YEAR 2000 WHICH MAY DISRUPT OUR
BUSINESS
The concerns about the upcoming year 2000 have arisen because older
computer programs that used two digits rather than four to define the applicable
year could malfunction. As a result, any computer programs that have
date-sensitive software may recognize a date using 00 as the calendar year 1900
rather than the year 2000. This could result in a computer system failure or in
miscalculations causing disruptions of operations, including a temporary
inability to process transactions, or engage in normal business activities.
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<PAGE> 7
RISKS ASSOCIATED WITH OUR SECURITIES
YOUR PERCENTAGE OF OWNERSHIP, VOTING POWER AND PRICE OF STARBASE COMMON STOCK
MAY DECREASE BECAUSE WE HAVE ISSUED, AND MAY CONTINUE TO ISSUE, A SUBSTANTIAL
NUMBER OF SECURITIES CONVERTIBLE OR EXERCISABLE INTO OUR COMMON STOCK
As of October 20, 1999, we had the following capital structure:
Common stock outstanding: 33,049,522
----------
Common stock issuable upon:
Conversion of series E preferred stock: 421,208
Conversion of series H preferred stock: 2,717,923
Conversion of series I preferred stock: 412,403
Exercise of warrants: 4,726,668
Exercise of options: 6,590,974
----------
Total: 47,918,698
==========
The number of shares of our common stock outstanding includes 1,418,638
shares held in escrow under a performance escrow agreement. Each share of series
E preferred stock converts into one share of common stock. The series H
preferred stock and series I preferred stock are estimates based on the number
of shares that would be issuable upon conversion of the preferred stock as of
October 20, 1999. The common stock issuable upon exercise of options must vest
and is generally issuable over a four year period. As of October 20, 1999, only
2,546,384 shares could be issued upon the exercise of options. We may conduct
additional future offerings of our common stock or other securities with rights
to convert the securities into shares of our common stock.
The series H preferred stock and series I preferred stock convert into
common stock at a discount to the market price of the common stock at the time
of conversion. In this regard, the highest the conversion price can be for the
three equal installments of series H preferred stock is $0.95, $0.73 and $1.93,
and the highest the conversion price can be for the series I preferred stock is
$1.50. Once the market price of the common stock goes below these highest
conversion prices, the conversion price then varies with and, in the case of the
series I preferred stock, is at a fixed discount to the market price of the
common stock. Therefore, although there is a limit to the number of shares that
can be issued at a discount to the market price without stockholder approval
under Nasdaq rules, there is no limit to how low the conversion price can be.
The following table sets forth the number of shares of common stock
that would be issued assuming full conversion of our outstanding preferred stock
based upon the market price of the common stock as of October 20, 1999 ($1.42)
and, assuming a market price of the common stock at $1.00 per share and at $3.00
per share. The last row of the table shows the percentage of outstanding common
stock represented by the shares issuable upon conversion at the market prices
shown.
MARKET PRICE OF COMMON STOCK: $1.00 $1.42 $3.00
CONVERSION PRICE FOR SERIES H: $1.00 $1.75 $1.93
CONVERSION PRICE FOR SERIES I: $0.90 $1.50 $1.50
SERIES H PREFERRED STOCK: 2,992,409 2,799,551 2,775,569
SERIES I PREFERRED STOCK: 868,889 868,889 868,889
PERCENTAGE OF OUTSTANDING
COMMON STOCK: 12% 10% 10%
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<PAGE> 8
Conversion or exercise of our outstanding convertible securities,
options and warrants into common stock would result in a significant number of
additional shares of common stock in the market. This may significantly and
negatively affect the prevailing market price for the common stock and will
decrease your percentage of ownership and voting power.
THE CONVERSION OF OUTSTANDING PREFERRED STOCK MAY HAVE A SIGNIFICANT NEGATIVE
EFFECT ON THE PRICE OF THE COMMON STOCK AND CAUSE THE SELLING STOCKHOLDERS TO
RECEIVE A GREATER NUMBER OF SHARES UPON SUBSEQUENT CONVERSIONS OF THE PREFERRED
STOCK
The series H preferred stock and series I preferred stock are
convertible at a floating rate that may be below the market price of the common
stock. As a result, the lower the stock price at the time the holder converts,
the more common stock the holder will get upon conversion. To the extent the
selling stockholders convert and then sell their common stock, the common stock
price may decrease due to the additional shares in the market. This could allow
the selling stockholders to convert their convertible preferred stock into
greater amounts of common stock, the sales of which could further depress the
stock price. The significant downward pressure on the price of the common stock
as the selling stockholders convert and sell material amounts of common stock
could encourage short sales by the selling stockholders and others in which the
short-sellers borrow common stock at the current market price in hope to buy it
in the future at a lower price. This could place further downward pressure on
the price of the common stock.
In addition, the conversion of the convertible preferred stock may
result in substantial dilution to the interests of other holders of common stock
since each holder of convertible preferred stock may ultimately convert and sell
the full amount issuable on conversion. Although each selling stockholder may
not convert their preferred stock if, as a result, they would own more than
4.99% of the then outstanding common stock, this restriction does not prevent a
selling stockholder from converting and selling some of its holdings and then
converting the rest of its holdings. In this way, an individual selling
stockholder could sell more than 4.99% of the outstanding common stock while
never holding more than 4.99% at one time.
YOUR INTEREST IN STARBASE MAY BE DILUTED BY THE ISSUANCE OF PREFERRED STOCK WITH
GREATER RIGHTS THAN THE COMMON STOCK WHICH WE CAN SELL OR ISSUE AT ANY TIME
The sale or issuance of any shares of preferred stock having rights
superior to those of the common stock may result in a decrease in the value or
market price of the common stock. The issuance of preferred stock could have the
effect of delaying, deferring or preventing a change of ownership without
further vote or action by the stockholders and may adversely affect the voting
and other rights of the holders of common stock.
Our board of directors is authorized to issue up to 10,000,000 shares
of preferred stock. The board has the power to establish the dividend rates,
preferential payments on our liquidation, voting rights, redemption and
conversion terms and privileges for any series of preferred stock.
IF WE CANNOT MEET THE NASDAQ SMALLCAP MARKET MAINTENANCE REQUIREMENTS AND NASDAQ
RULES, NASDAQ MAY DELIST THE COMMON STOCK WHICH COULD NEGATIVELY AFFECT THE
PRICE OF THE COMMON STOCK AND YOUR ABILITY TO SELL THE COMMON STOCK
In the future, we may not be able to meet the listing maintenance
requirements of the Nasdaq SmallCap Market and Nasdaq rules, which require,
among other things, minimum net tangible assets of $2 million, a minimum bid
price for our common stock of $1.00, and
6
<PAGE> 9
shareholder approval prior to the issuance of securities in connection with a
transaction involving the sale or issuance of common stock equal to 20 percent
or more of a company's outstanding common stock before the issuance for less
than the greater of book or market value of the stock. Although we currently
comply with Nasdaq's listing maintenance requirements, in the past there have
been times when we have not been in compliance and it is possible we may not
meet the requirements in the future. For example, the dilution resulting from
the issuance of the convertible preferred stock discussed above and the
subsequent conversion and sale of common stock could have a substantial
depressive effect on the common stock bid price, causing it to decrease below
$1.00. If we were no longer in compliance with Nasdaq rules and were unable to
receive a waiver of the rules or achieve compliance, and if our common stock
were to be delisted from the SmallCap market, an investor in our company may
find it more difficult to sell our common stock. This lack of liquidity also may
make it more difficult for us to raise capital in the future.
FORWARD - LOOKING STATEMENTS
In this prospectus, we make statements about our future financial
condition, results of operations and business. These are based on estimates and
assumptions made from information currently available to us. Although we believe
these estimates and assumptions are reasonable, they are uncertain. These
forward-looking statements can generally be identified because the context of
the statement includes words such as may, will, except, anticipate, intend,
estimate, continue, believe or other similar words. Similarly, statements that
describe our future expectations, objectives and goals or contain projections of
our future results of operations or financial condition are also forward-looking
statements. Our future results, performance or achievements could differ
materially from those expressed or implied in these forward-looking statements,
including those listed under the heading "Risk Factors" and other cautionary
statements in this prospectus.
USE OF PROCEEDS
The selling stockholders are selling all of the shares covered by this
prospectus for their own accounts. Accordingly, we will not receive any proceeds
from the resale of the shares. We will receive proceeds from the exercise of the
warrants. If all the warrants were exercised, we would receive approximately
$2,435,000. We will use the net proceeds for general corporate purposes. We will
bear all expenses relating to this registration except for brokerage or
underwriting commissions and expenses, if any, which the selling stockholders
will pay.
SELLING STOCKHOLDERS
This prospectus covers the resale by the selling stockholders of
1,171,822 shares of our common stock issued in a private placement. This
prospectus also covers the resale by selling stockholders of 1,148,867 shares of
our common stock issuable upon exercise of warrants issued in connection with
the private placement. This prospectus also covers the resale by the selling
stockholders of 200,000 shares of our common stock issuable upon exercise of
warrants issued to a registered broker-dealer for investment banking services
not related to the private placement.
COMMON STOCK PRIVATE PLACEMENT
The holders of our common stock and warrants issued in connection with
the private placement have the material rights and obligation discussed below.
The agreements relating to these rights and obligations have been previously
filed by us with the SEC and you are urged to read them in their entirety.
7
<PAGE> 10
SECURITIES PURCHASE AGREEMENT
The investors listed in the table below agreed to purchase a total of
1,171,822 shares of our common stock, 1,017,382 shares on July 30, 1999, and
154,440 shares on September 2, 1999. The prices for each share were $1.48 on
July 30, 1999; and $1.46 on September 2, 1999 for an aggregate purchase price of
$1,725,000.
REGISTRATION RIGHTS AGREEMENT
In connection with our sale of common stock, we agreed to file a
registration statement covering the resale of the common stock and the common
stock issuable upon the exercise of warrants by August 29, 1999 and cause the
registration statement to be declared effective by the SEC by October 13, 1999.
If we do not file a registration statement by August 29, 1999 or the
registration statement is not effective by October 13, 1999, we will have to pay
to the holders liquidated damages equal to $0.037536 per share for each 30 day
period until the default has been cured.
WARRANTS
The holders of common stock also received warrants to purchase 948,867
shares of common stock of which warrants to purchase 115,830 are exercisable at
$2.11 per share and expire on July 29, 2002, and warrants to purchase 770,537
are exercisable at $2.09 per share and expire on September 2, 2002. In the event
of either (1) during the twenty trading day period ending on the trading day
immediately preceding the effective date of the registration statement, the
average of the closing bid prices of our common stock is less than $3.00 per
share or (2) during any twenty trading day period ending on any January 30 or
July 30 during the term of the warrant or the expiration date, the average of
the closing bid prices of our common stock is less than $3.00 per share, then
the warrant exercise price shall be reset to $1.00. All of the warrants have
adjustment provisions for standard dilution events including stock splits, stock
dividends and similar transactions.
INVESTORS
This prospectus covers the resale of common stock and common stock
issuable upon the exercise of warrants purchased by investors in the private
placement, none of which, to our knowledge, are broker-dealers or affiliates of
a broker-dealer. Gundyco is selling 593,472 shares of common stock, of which
254,345 shares are issuable upon the exercise of warrants. Canal Ltd. is selling
593,472 shares of common stock, of which 254,345 shares are issuable upon the
exercise of warrants. Lloyd Miller is selling 89,378 shares of common stock, of
which 38,305 shares are issuable upon the exercise of warrants. Bob Dagostino is
selling 59,348 shares of common stock, of which 25,435 shares are issuable upon
the exercise of warrants. Clay Hardman is selling 59,348 shares of common stock,
of which 25,435 shares are issuable upon the exercise of warrants. Tom Fuller is
selling 59,348 shares of common stock, of which 25,435 shares are issuable upon
the exercise of warrants. Dusseldorf Securities Limited is selling 356,083
shares of common stock, of which 222,607 are issuable upon the exercise of
warrants. Yeoman Ventures Limited is selling 240,240 shares of common stock, of
which 102,960 are issuable upon the exercise of warrants.
INVESTMENT BANKING SERVICES
This prospectus also covers the resale of 200,000 shares of common
stock issuable upon the exercise of warrants issued to Kaufman Bros., L.P. for
investment banking services. The warrants are immediately exercisable at $2.00
and expire on October 1, 2004. The warrants have adjustment provisions for
standard dilution events including stock splits, stock dividends and similar
transactions.
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<PAGE> 11
We are registering the shares of common stock offered in this
prospectus with the SEC to permit public secondary trading. As a result, the
selling stockholders may offer all or part of the shares for resale to the
public from time to time.
The table below lists information regarding the selling stockholders'
ownership of shares of our common stock. Information concerning the selling
stockholders may change from time to time. To the extent that the selling
stockholders or any of its representatives advise us of such changes and if
required, we will report those changes in a supplement to this document. Except
as set forth in this prospectus, to our knowledge, no selling stockholder has
held any position of office, or has had any material relationship, with us or
any parties related to us within the past three years.
The Amount Offered column assumes no sales are effected by the selling
stockholders during the offering period other than under the registration
statement.
<TABLE>
<CAPTION>
Percentage Amount Percentage
Amount Beneficially Beneficially Beneficially
Beneficially Owned Owned Owned
Owned Prior Prior to Amount Following Following
Name to Offering Offering Offered Offering Offering
- ---------------------------------- ------------ ------------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gundyco in Trust for
RRSP 550-98866-19(1) 1,711,437 4.7% 593,472 1,117,965 3.1%
Canal Ltd.(2) 593,472 1.6% 593,472 0 *%
Lloyd Miller (3) 89,378 *% 89,378 0 *%
Bob Dagostino (4) 59,348 *% 59,348 0 *%
Clay Hardman (4) 59,348 *% 59,348 0 *%
Tom Fuller (4) 59,348 *% 59,348 0 *%
Dusseldorf Securities Limited (5) 426,083 1.2% 426,083 0 *%
Yeoman Ventures Limited (6) 1,024,051 2.8% 240,240 783,811 2.2%
Kaufman Bros., L.P. (7) 200,000 *% 200,000 0 *%
</TABLE>
- ---------------------
* Represents less than one percent.
(1) Includes 339,127 shares of common stock. Includes 545,465 shares issuable
pursuant to conversion of series H preferred stock. Includes 826,845
shares of common stock issuable upon the exercise of warrants owned prior
to offering of which 254,345 are offered in this prospectus. The natural
person who exercises control over these shares is Mr. Mark Shoom.
(2) Includes 339,127 shares of common stock. Includes 254,345 shares of common
stock issuable upon the exercise of warrants. The natural person who
exercises control over these shares is Mr. Scott Clay.
(3) Includes 51,073 shares of common stock. Includes 38,305 shares of common
stock issuable upon the exercise of warrants.
(4) Includes 33,913 shares of common stock. Includes 25,435 shares of common
stock issuable upon the exercise of warrants.
(5) Includes 203,476 shares of common stock. Includes 222,607 shares of common
stock issuable upon the exercise of warrants. The natural person who
exercises control over these shares is Mr. Barry Herman.
(6) Includes 137,280 shares of common stock. Includes 701,311 shares issuable
pursuant to conversion of series H preferred stock. Includes 185,460
shares of common stock issuable upon the exercise of warrants owned prior
to offering of which 102,960 are offered in this prospectus. The natural
person who exercises control over these shares is Mr. Giora Lavie.
(7) Includes 200,000 shares of common stock issuable upon the exercise of
warrants. The natural person who exercises control over these shares is
Mr. Bradford Harris.
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<PAGE> 12
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common stock at
various times in one or more of the following transactions:
o On any U.S. securities exchange on which our common stock may be
listed at the time of such sale;
o In the over-the-counter market;
o In transactions other than on such exchanges or in the
over-the-counter market;
o In connection with short sales; or
o In a combination of any of the above transactions.
The selling stockholders may offer their shares of common stock at
prevailing market prices, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares of
common stock. If this occurs, broker-dealers will either receive discounts or
commission from the selling stockholder, or they will receive commissions from
the purchasers of shares of common stock for whom they acted as agents. Such
brokers may act as dealers by purchasing any and all of the shares covered by
this prospectus either as agents for others or as principals for their own
accounts and reselling such securities under the prospectus.
The selling stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be considered underwriters under the Securities Act. As such, any commissions or
profits they receive on the resale of the shares may be considered underwriting
discounts and commissions under the Securities Act.
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and the selling
stockholders with respect to the offer to sell the shares under this prospectus.
If we become aware of any agreement, arrangement or understanding, to the extent
required under the Securities Act, we will file a supplemental prospectus to
disclose:
(1) the name of any such broker-dealers;
(2) the number of shares involved;
(3) the price at which such shares are to be sold;
(4) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable;
(5) that such broker-dealers did not conduct any investigation to
verify the information set out in this prospectus, as supplemented;
and
(6) other facts material to the transaction.
10
<PAGE> 13
The stock purchase agreements have reciprocal indemnification
provisions between us and each selling stockholder to indemnify each other
against liabilities under the Securities Act, which may be based upon, among
other things, any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact. We have agreed to
bear customary expenses incident to the registration of the shares for the
benefit of the selling stockholders in accordance with such agreements, other
than underwriting discounts and commissions directly attributable to the sale of
such securities by or on behalf of the investor.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, DC, New York, NY, and Chicago,
IL. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
website at http://www.sec.gov.
We have filed a registration statement on Form S-3 with the SEC to
register shares of our common stock. This prospectus is part of that
registration statement and, as permitted by the SEC's rules, does not contain
all of the information included in the registration statement. For further
information about us and this offering, you may refer to the registration
statement and its exhibits. You can review and copy the registration statement
and its exhibits at the public reference facilities maintained by the SEC or on
the SEC's website described above.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be a part of this prospectus, and information that we file with
the SEC at a later date will automatically update or supersede this information.
We incorporate by reference the following documents as well as any future filing
we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Annual Report on Form 10-KSB for the fiscal year ended March 31,
1999;
2. Quarterly Report on Form 10-QSB for the period ended June 30, 1999;
3. Current Reports on Form 8-K filed on August 17, 1998 and March 23,
1999; and
4. Registration Statement on Form 10, as amended, containing the
description of our common stock, dated April 27, 1995.
11
<PAGE> 14
You may request a copy of these filings, at no cost, by writing to us
at 4 Hutton Centre Drive, Suite 800, Santa Ana, CA 92707-8713, Attention:
Investor Relations.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows companies to
indemnify their directors and officers against expenses, judgments, fines and
amounts paid in settlement under the conditions and limitations described in the
law.
Our certificate of incorporation provides that a director is not
personally liable for monetary damages to us or our stockholders for breach of
his or her fiduciary duties as a director. A director will be held liable for a
breach of his or her duty of loyalty to us or our stockholders, his or her
intentional misconduct or willful violation of law, actions or inactions not in
good faith, an unlawful stock purchase or payment of a dividend under Delaware
law, or transactions from which the director derives an improper personal
benefit. This limitation of liability does not affect the availability of
equitable remedies against the director including injunctive relief or
rescission. Our certificate of incorporation authorizes us to indemnify our
officers, directors and other agent to the fullest extent permitted under
Delaware law.
We have entered into an indemnification agreement with each of our
directors and officers. In some cases, the provisions of the indemnification
agreement may be broader than the specific indemnification provisions contained
in our certificate of incorporation or otherwise permitted under Delaware law.
Each indemnification agreement may require us to indemnify an officer or
director against liabilities that may arise by reason of his status or service
as an officer or director, or against liabilities arising from the director's
willful misconduct of a culpable nature. The indemnification agreement may also
require us to obtain directors' and officers' liability insurance, if available
on reasonable terms. We maintain a directors and officers liability policy with
Lloyds of London and General Star Indemnity Corporation that contains an
aggregate limit of liability of $5,000,000 through 2001.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to these provisions, or otherwise, we have been advised that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
Parker Chapin Flattau & Klimpl, LLP, New York, New York will pass upon
the validity of the securities offered hereby. Martin Eric Weisberg, Esq., a
member of the firm, is our Secretary.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-KSB for the year ended March 31, 1998 have been
so incorporated in reliance on the report (which contains an explanatory
paragraph relating to the ability of StarBase to continue as a going concern, as
described in Note 2 to the financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The financial statements for the year ended March 31, 1999 incorporated
by reference in this Prospectus from the Annual Report on Form 10-K of StarBase
for the year ended March 31, 1999, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report (which contains an unqualified
opinion with an explanatory paragraph relating to substantial doubt about the
ability of StarBase to continue as a going concern, as described in Note 2 to
the financial statements) which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
12
<PAGE> 15
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL
OR BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN
THIS PROSPECTUS IS CURRENT AS OF _______________.
----------------
TABLE OF CONTENTS
Page
----
Risk Factors........................................................... 3
Forward-Looking Statements............................................. 7
Use of Proceeds........................................................ 7
Selling Stockholders................................................... 7
Plan of Distribution................................................... 10
Where You Can Find More Information.................................... 11
Indemnification of Directors and Officers.............................. 12
Legal Matters.......................................................... 12
Experts................................................................ 12
2,320,689 SHARES OF COMMON STOCK
STARBASE CORPORATION
-------------
PROSPECTUS
-------------
_______________ , 1999
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which will be paid
by StarBase in connection with the issuance and distribution of the securities
being registered on this registration statement. The selling stockholders will
not incur any of the expenses set forth below. All amounts shown are estimates.
SEC Registration Fee $ 1,158.33
Legal Fees and Expenses 6,000.00
Accounting Fees and Expenses 10,000.00
Miscellaneous Expenses 1,000.00
----------
Total $18,158.33
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in general, that a corporation incorporated under the
laws of the State of Delaware, such as the registrant, may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonable entitled to
indemnity for such expenses.
The Certificate of Incorporation of StarBase provides that directors
shall not be personally liable for monetary damages to StarBase or its
stockholders for breach of fiduciary duty as a director, except for liability
resulting from a breach of the director's duty of loyalty to StarBase or its
stockholders, intentional misconduct or willful violation of law, actions or in
actions not in good faith, an unlawful stock purchase or payment of a dividend
under Delaware law, or transactions from which the director derives improper
personal benefit. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission. The Certificate
of Incorporation of StarBase also authorizes StarBase to indemnify its officers,
directors and other agents, by bylaws, agreements or otherwise, to the fullest
extent permitted under Delaware law. StarBase has entered into an
Indemnification Agreement (the "Indemnification Agreement") with each of its
directors and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Certificate of Incorporation of
StarBase or as otherwise permitted under Delaware law. Each Indemnification
Agreement may require StarBase, among other things, to indemnify officers and
directors against
II-1
<PAGE> 17
liabilities that may arise by reason of their status or service as a director or
officer, against liabilities arising from willful misconduct of a culpable
nature, and to obtain directors' and officers' liability insurance if available
on reasonable terms.
StarBase maintains a directors and officers liability policy with
Lloyds of London and General Star Indemnity Corporation that contains an
aggregate limit of liability of $5,000,000 through 2001.
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ---------- --------------------------------------------------------------------
4.1 Form of Registration Rights Agreement. Incorporated by reference to
Exhibit 4.1 to the Company's Report on Form 10-QSB for the period
ended June 30, 1999.
4.2 Form of Securities Purchase Agreement. Incorporated by reference to
Exhibit 10.1 to the Company's Report on Form 10-QSB for the period
ended June 30, 1999.
4.3 Form of Warrant (Common Stock Private Placement). Incorporated by
reference to Exhibit 10.2 to the Company's Report on Form 10-QSB for
the period ended June 30, 1999.
4.4 Form of Warrant. (Kaufman Bros., L.P.).
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP.
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP. Included in
Exhibit 5.1.
23.2 Consent of PricewaterhouseCoopers, LLP.
23.3 Consent of Deloitte & Touche, LLP.
24.1 Powers of Attorney of certain directors and officers of StarBase.
Included as part of the signature page on page II-5 of this filing
- -----------------------
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424 (b) if, in the aggregate the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the
II-2
<PAGE> 18
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
of controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1923 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1923) that is incorporated by reference statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bonafide offering thereof.
II-3
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Santa Ana, State of California, on October 26,
1999.
STARBASE CORPORATION
By: /s/ Douglas S. Norman
------------------------
Douglas S. Norman
Director of Finance and
Chief Accounting Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William R. Stow III and Douglas S.
Norman, each acting alone, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place an
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement (or any other
registration statement for the same offering) that is to be effective upon
filing pursuant to Rule 462(b) under the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William R. Stow III President, Chief Executive Officer October 26, 1999
- ---------------------------------------- and Chairman of the Board
William R. Stow III
/s/ Donald R. Farrow Vice Chairman and Director October 26, 1999
- ----------------------------------------
Donald R. Farrow
/s/ Frank R. Caccamo Director October 26, 1999
- ----------------------------------------
Frank R. Caccamo
/s/ John R. Snedegar Director October 26, 1999
- ----------------------------------------
John R. Snedegar
/s/ Phillip E. Pearce Director October 26, 1999
- ----------------------------------------
Phillip E. Pearce
/s/ Daniel P. Ginns Director October 26, 1999
- ----------------------------------------
Daniel P. Ginns
/s/ Barry W. Sullivan Director October 26, 1999
- ----------------------------------------
Barry W. Sullivan
/s/ Douglas S. Norman Director of Finance and October 26, 1999
- ---------------------------------------- Chief Accounting Officer
Douglas S. Norman
</TABLE>
II-4
<PAGE> 20
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ----------------------------------------------------------------
4.1 Form of Registration Rights Agreement. Incorporated by reference
to Exhibit 4.1 to the Company's Report on Form 10-QSB for the
period ended June 30, 1999.
4.2 Form of Securities Purchase Agreement. Incorporated by reference
to Exhibit 10.1 to the Company's Report on Form 10-QSB for the
period ended June 30, 1999.
4.3 Form of Warrant. (Common Stock Private Placement). Incorporated
by reference to Exhibit 10.2 to the Company's Report on Form
10-QSB for the period ended June 30, 1999.
4.4 Form of Warrant. (Kaufman Bros., L.P.)
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP.
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP. Included in
Exhibit 5.1.
23.2 Consent of PricewaterhouseCoopers, LLP
23.3 Consent of Deloitte & Touche, LLP
24.1 Powers of Attorney of certain directors and officers of
StarBase. Included as part of the signature page on page II-5 of
this filing.
E-1
<PAGE> 1
EXHIBIT 4.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT.
THE TRANSFER OF THIS WARRANT IS
RESTRICTED AS DESCRIBED HEREIN.
Starbase
Warrant for the Purchase of Shares of Common Stock,
par value $0.01 per Share
1999-CMN-038 200,000 Shares
THIS CERTIFIES that, for value received, KAUFMAN BROS., L.P., 800 Third
Avenue - 25th Floor, New York, New York 10022 (the "Holder"), is entitled to
subscribe for and purchase from Starbase, a California corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after October 1, 1999, and before 5:00 P.M. on October 1, 2004, New
York time (the "Exercise Period"), 200,000 shares of the Company's Common Stock,
par value $0.01 per share ("Common Stock"), at a price of $2.00 per share (the
"Exercise Price"). As used herein the term "this Warrant" shall mean and include
this Warrant and any Common Stock or Warrants hereafter issued as a consequence
of the exercise or transfer of this Warrant in whole or in part. This Warrant
may not be sold, transferred, assigned or hypothecated except that it may be
transferred, in whole or in part, to (i) one or more officers or partners of the
Holder (or the officers or partners of any such partner); (ii) a successor to
the Holder, or the officers or partners of such successor; (iii) a purchaser of
substantially all of the assets of the Holder; or (iv) by operation of law; and
the term the "Holder" as used herein shall include any transferee to whom this
Warrant has been transferred in accordance with the above.
The number of shares of Common Stock issuable upon exercise of the
Warrant (the "Warrant Shares") and the Exercise Price may be adjusted from time
to time as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of whole Warrant Shares, by the surrender of this
Warrant (with the election at the end hereof duly executed) to the Company at
its office at 4 Hutton Centre Drive Suite 800, Santa Ana, California 92707, or
at such other place as is designated in writing by the Company, together with a
certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised (the "Stock Purchase Price").
<PAGE> 2
2. (a) In lieu of the payment of the Stock Purchase Price, the
Holder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or in part, into shares of
Common Stock (the "Conversion Right") as provided for in this Section
2. Upon exercise of the Conversion Right, the Company shall deliver to
the Holder (without payment by the Holder of any of the Stock Purchase
Price) that number of shares of Common Stock (the "Conversion Shares")
equal to the quotient obtained by dividing (x) the value of this
Warrant (or portion thereof as to which the Conversion Right is being
exercised if the Conversion Right is being exercised in part) at the
time the Conversion Right is exercised (determined by subtracting the
aggregate Stock Purchase Price of the shares of Common Stock as to
which the Conversion Right is being exercised in effect immediately
prior to the exercise of the Conversion Right from the aggregate
Current Market Price (as defined in Section 6(e) hereof) of the shares
of Common Stock as to which the Conversion Right is being exercised) by
(y) the Current Market Price of one share of Common Stock immediately
prior to the exercise of the Conversion Right.
(b) The Conversion Right provided under this Section 2 may be
exercised in whole or in part and at any time and from time to time
while this Warrant remains outstanding. In order to exercise the
Conversion Right, the Holder shall surrender to the Company, at its
offices, this Warrant with the Notice of Conversion at the end hereof
duly executed. The presentation and surrender shall be deemed a waiver
of the Holder's obligation to pay all or any portion of the aggregate
purchase price payable for the shares of Common Stock as to which such
Conversion Right is being exercised. This Warrant (or so much thereof
as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant for conversion in accordance with the
foregoing provisions.
3. Upon each exercise of the Holder's rights to purchase Warrant Shares
or Conversion Shares, the Holder shall be deemed to be the holder of record of
the Warrant Shares or Conversion Shares issuable upon such exercise or
conversion, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing such Warrant Shares or Conversion Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise or conversion of this Warrant, the Company
shall issue and deliver to the Holder a certificate or certificates for the
Warrant Shares or Conversion Shares issuable upon such exercise or conversion,
registered in the name of the Holder or its designee. If this Warrant should be
exercised or converted in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the right
of the Holder to purchase the balance of the Warrant Shares (or portions
thereof) subject to purchase hereunder.
4. Any Warrant issued upon the transfer or exercise or conversion in
part of this Warrant shall be numbered and shall be registered in a Warrant
Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall
2
<PAGE> 3
not be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations thereunder.
5. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares and/or Conversion
Shares granted pursuant to this Warrant, such number of shares of Common Stock
as shall, from time to time, be sufficient therefor. The Company covenants that
all shares of Common Stock issuable upon exercise of this Warrant, upon receipt
by the Company of the full Exercise Price therefor, and all shares of Common
Stock issuable upon conversion of this Warrant, shall be validly issued, fully
paid, non-assessable, and free of preemptive rights.
6. (a) In case the Company shall at any time after the date the shares
of its capital stock, (ii) subdivide the outstanding Common Stock, (iii)
combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Exercise Price, and the number and kind of
securities issuable upon exercise or conversion of this Warrant, in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination, or reclassification, shall be proportionately
adjusted so that the Holder after such time shall be entitled to receive the
aggregate number and kind of shares which, if such Warrant had been
exercised or converted immediately prior to such time, he would have owned
upon such exercise or conversion and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion
or exchange price per share, if a
3
<PAGE> 4
security convertible into or exchangeable for Common Stock) less than the
Current Market Price per share of Common Stock on such record date, then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
on such record date plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so to
be offered (or the aggregate initial conversion or exchange price of the
convertible or exchangeable securities so to be offered) would purchase at
such Current Market Price and the denominator of which shall be the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock to be offered for subscription or purchase
(or into which the convertible or exchangeable securities so to be offered
are initially convertible or exchangeable). Such adjustment shall become
effective at the close of business on such record date; provided, however,
that, to the extent the shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) are not delivered, the
Exercise Price shall be readjusted after the expiration of such rights,
options, or warrants (but only with respect to Warrants exercised after such
expiration), to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights, options, or warrants been
made upon the basis of delivery of only the number of shares of Common Stock
(or securities convertible into or exchangeable for shares of Common Stock)
actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive
absent manifest error. Shares of Common Stock owned by or held for the
account of the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company is
the continuing corporation) evidences of its indebtedness or assets (other
than cash dividends or distributions and dividends payable in shares of
Common Stock), or rights, options, or warrants to subscribe for or purchase
Common Stock, or securities convertible into or exchangeable for shares of
Common Stock (excluding those with respect to the issuance of which an
adjustment of the Exercise Price is provided pursuant to Section 6(b)
hereof), then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record
date for the determination of stockholders entitled to receive such
distribution by a fraction, the numerator of which shall be the Current
Market Price per share of Common Stock on such record date, less the fair
market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of
the portion of the evidences of indebtedness or assets so to be distributed,
or of such rights, options, or warrants or convertible or exchangeable
securities, applicable to one share, and the denominator of which shall be
such Current Market Price per share of Common Stock. Such adjustment shall
be made whenever any such distribution is made, and shall become effective
on the record date for the determination of stockholders entitled to receive
such distribution.
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(d) In case the Company shall issue shares of Common Stock or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for Common Stock (excluding
shares, rights, options, warrants, or convertible or exchangeable
securities, issued or issuable (i) in any of the transactions with respect
to which an adjustment of the Exercise Price is provided pursuant to
Sections 6(a), 6(b), or 6(c) above, or (ii) upon exercise of the Warrants),
at a price per share (determined, in the case of such rights, options,
warrants, or convertible or exchangeable securities, by dividing (x) the
total amount received or receivable by the Company in consideration of the
sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum aggregate consideration payable to
the Company upon exercise, conversion, or exchange thereof, by (y) the
maximum number of shares covered by such rights, options, warrants, or
convertible or exchangeable securities) lower than the Current Market Price
per share of Common Stock in effect immediately prior to such issuance, then
the Exercise Price shall be reduced on the date of such issuance to a price
(calculated to the nearest cent) determined by multiplying the Exercise
Price in effect immediately prior to such issuance by a fraction, (iii) the
numerator of which shall be an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such issuance plus
(B) the quotient obtained by dividing the consideration received by the
Company upon such issuance by such Current Market Price, and (iv) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such issuance. For the purposes of such
adjustments, the maximum number of shares which the holders of any such
rights, options, warrants, or convertible or exchangeable securities, shall
be entitled to initially subscribe for or purchase or convert or exchange
such securities into shall be deemed to be issued and outstanding as of the
date of such issuance, and the consideration received by the Company
therefor shall be deemed to be the consideration received by the Company for
such rights, options, warrants, or convertible or exchangeable securities,
plus the minimum aggregate consideration or premiums stated in such rights,
options, warrants, or convertible or exchangeable securities, to be paid for
the shares covered thereby. No further adjustment of the Exercise Price
shall be made as a result of the actual issuance of shares of Common Stock
on exercise of such rights, options, or warrants, or on conversion or
exchange of such convertible or exchangeable securities. On the expiration
or the termination of such rights, options, or warrants, or the termination
of such right to convert or exchange, the Exercise Price shall forthwith be
readjusted (but only with respect to Warrants exercised or converted after
such expiration or termination) to such Exercise Price as would have
obtained had the adjustments made upon the issuance of such rights, options,
warrants, or convertible or exchangeable securities, been made upon the
basis of the delivery of only the number of shares of Common Stock actually
delivered upon the exercise of such rights, options, or warrants, or upon
the conversion or exchange of any such securities; and on any change of the
number of shares of Common Stock deliverable upon the exercise of any such
rights, options, or warrants or conversion, or exchange of such convertible
or exchangeable
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<PAGE> 6
securities, or any change in the consideration to be received by the Company
upon such exercise, conversion, or exchange, including, but not limited to,
a change resulting from the anti-dilution provisions thereof, the Exercise
Price, as then in effect, shall forthwith be readjusted (but only with
respect to Warrants exercised or converted after such change) to such
Exercise Price as would have been obtained had an adjustment been made upon
the issuance of such rights, options, or warrants not exercised prior to
such change, or securities not converted or exchanged prior to such change,
on the basis of such change. In case the Company shall issue shares of
Common Stock or any such rights, options, warrants, or convertible or
exchangeable securities, for a consideration consisting, in whole or in
part, of property other than cash or its equivalent, then the "price per
share" and the "consideration received by the Company" for purposes of the
first sentence of this Section 6(d) shall be as determined in good faith by
the board of directors of the Company, whose determination shall be
conclusive absent manifest error. Shares of Common Stock owned by or held
for the account of the Company or any majority-owned subsidiary shall not be
deemed outstanding for the purpose of any such computation.
(e) For the purpose of any computation under this Section 6, the
Current Market Price per share of Common Stock on any date shall be deemed
to be the average of the daily closing prices for the 30 consecutive trading
days immediately preceding the date in question. The closing price for each
day shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price regular way, in
either case on the principal national securities exchange (including, for
purposes hereof, the NASDAQ National Market System) on which the Common
Stock is listed or admitted to trading or, if the Common Stock is not listed
or admitted to trading on any national securities exchange, the highest
reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information. If on any
such date the Common Stock is not listed or admitted to trading on any
national securities exchange and is not quoted by NASDAQ or any similar
organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
(f) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which
by reason of this Section 6 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 6 shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.
(g) In any case in which this Section 6 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of
such event, issuing to the Holder, if the Holder exercised or converted this
Warrant after such record date, the shares of Common Stock, if any, issuable
upon such exercise or conversion
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<PAGE> 7
over and above the shares of Common Stock, if any, issuable upon such
exercise or conversion on the basis of the Exercise Price in effect prior to
such adjustment; provided, however, that the Company shall deliver to the
Holder a due bill or other appropriate instrument evidencing the Holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(h) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 6(b), 6(c), or 6(d) hereof, this Warrant shall
thereafter evidence the right to purchase, at the adjusted Exercise Price,
that number of shares (calculated to the nearest thousandth) obtained by
dividing (i) the product obtained by multiplying the number of shares
purchasable upon exercise of this Warrant prior to adjustment of the number
of shares by the Exercise Price in effect prior to adjustment of the
Exercise Price, by (ii) the Exercise Price in effect after such adjustment
of the Exercise Price.
(i) Whenever there shall be an adjustment as provided in this
Section 6, the Company shall promptly cause written notice thereof to be
sent by registered mail, postage prepaid, to the Holder, at its address as
it shall appear in the Warrant Register, which notice shall be accompanied
by an officer's certificate setting forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment and the computation thereof, which officer's certificate
shall be conclusive evidence of the correctness of any such adjustment
absent manifest error.
(j) The Company shall not be required to issue fractions of shares
of Common Stock or other capital stock of the Company upon the exercise or
conversion of this Warrant. If any fraction of a share would be issuable on
the exercise or conversion of this Warrant (or specified portions thereof),
the Company shall purchase such fraction for an amount in cash equal to the
same fraction of the Current Market Price of such share of Common Stock on
the date of exercise or conversion of this Warrant.
7. (a) In case of any consolidation with or merger of the Company with
or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any
sale, lease, or conveyance to another corporation of the property and assets
of any nature of the Company as an entirety or substantially as an entirety,
such successor, leasing, or purchasing corporation, as the case may be,
shall (i) execute with the Holder an agreement providing that the Holder
shall have the right thereafter to receive upon exercise or conversion of
this Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
consolidation, merger, sale, lease, or conveyance by a holder of the number
of shares of Common Stock for which this Warrant might have been exercised
or converted immediately prior to such consolidation, merger, sale, lease,
or conveyance, and (ii) make effective provision in its certificate of
incorporation or otherwise, if necessary, to effect such agreement. Such
agreement shall provide for adjustments which shall be as nearly equivalent
as practicable to the adjustments in Section 6.
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<PAGE> 8
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise or conversion of this Warrant (other
than a change in par value or from no par value to a specified par value, or
as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a
reclassification or change (including a change to the right to receive cash
or other property) of the shares of Common Stock (other than a change in par
value, or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the shares into two
or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise or conversion of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash, or
any combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock
for which this Warrant might have been exercised or converted immediately
prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall
be as nearly equivalent as practicable to the adjustments in Section 6.
(c) The above provisions of this Section 7 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
8. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares
of Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 7; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price;
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<PAGE> 9
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
9. The issuance of any shares or other securities upon the exercise or
conversion of this Warrant, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to the Holder for any tax or other charge in respect of such issuance.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any certificate
in a name other than that of the Holder and the Company shall not be required to
issue or deliver any such certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.
10. (a) If, at any time prior to October 1, 2006, the Company shall
file a registration statement (other than on Form S-4, Form S-8, or any
successor form) with the Securities and Exchange Commission (the
"Commission") while any Warrant or Warrant Shares are outstanding, the
Company shall give the Holder at least 45 days prior written notice of the
filing of such registration statement. If requested by the Holder in writing
within 30 days after receipt of any such notice, the Company shall, at the
Company's sole expense (other than the fees and disbursements of counsel for
the Holder and the underwriting discounts, if any, payable in respect of the
Warrant or Warrant Shares sold by the Holder), register or qualify all or,
at the Holders' option, any portion of the Warrant or Warrant Shares of the
Holder concurrently with the registration of such other securities, all to
the extent requisite to permit the public offering and sale of the Warrant
or Warrant Shares through the facilities of all appropriate securities
exchanges and the over-the-counter market, and will use its best efforts
through its officers, directors, auditors, and counsel to cause such
registration statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such
offering shall advise the Company in writing that, in its opinion, the
distribution of all or a portion of the Warrant or Warrant Shares requested
to be included in the registration concurrently with the securities being
registered by the Company would materially adversely affect the distribution
of such securities by the Company for its own account, then the Holder shall
delay the offering and sale of Warrant or Warrant Shares (or the portions
thereof so designated by such managing underwriter) for such period, not to
exceed 90 days (the "Delay Period"), as the managing underwriter shall
request, provided that no such delay shall be required as
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<PAGE> 10
to any Warrant or Warrant Shares if any securities of the Company are
included in such registration statement and eligible for sale during the
Delay Period for the account of any person other than the Company and the
Holder unless the securities included in such registration statement and
eligible for sale during the Delay Period for such other person shall have
been reduced pro rata to the reduction of the Warrant or Warrant Shares
which were requested to be included and eligible for sale during the Delay
Period in such registration. As used herein, "Warrant or Warrant Shares"
shall mean the Warrants and the Warrant Shares and the Conversion Shares
which, in each case, have not been previously sold pursuant to a
registration statement or Rule 144 promulgated under the Act.
(b) If, at any time prior to October 1, 2004, the Company shall
receive a written request, from the Holder to register the sale of all or a
portion of the Warrant or Warrant Shares, the Company shall, as promptly as
practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Warrant or Warrant
Shares through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its
officers, directors, auditors, and counsel to cause such registration
statement to become effective as promptly as practicable; provided, however,
that the Company shall only be obligated to file one such registration
statement for which all expenses incurred in connection with such
registration (other than the fees and disbursements of counsel for the
Holder and underwriting discounts, if any, payable in respect of the Warrant
or Warrant Shares sold by the Holder) shall be borne by the Company and one
additional such registration statement for which all such expenses shall be
paid by the Holder. Within three business days after receiving any request
contemplated by this Section 10(b), the Company shall give written notice to
the Holder, advising each of them that the Company is proceeding with such
registration.
(c) In the event of a registration pursuant to the provisions of
this Section 10, the Company shall use its best efforts to cause the Warrant
or Warrant Shares so registered to be registered or qualified for sale under
the securities or blue sky laws of such jurisdictions as the Holder may
reasonably request; provided, however, that the Company shall not be
required to qualify to do business in any state by reason of this Section
10(c) in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 10 and shall from time to time
amend or supplement each applicable registration statement, preliminary
prospectus, final prospectus, application, document, and communication for
such period of time as shall be required to permit the Holder to complete
the offer and sale of the Warrant or Warrant Shares covered thereby. The
Company shall in no event be required to keep any such registration or
qualification in effect for a period in excess of nine months from the date
on which the Holder is first free to sell such Warrant or Warrant Shares;
provided, however, that, if the Company is required to keep any such
registration or qualification in effect with respect to securities other
than the Warrant or Warrant Shares beyond such period, the Company shall
keep such registration or qualification in effect as it relates to the
Warrant or Warrant Shares for so long as such registration or qualification
remains or is required to remain in effect in respect of such other
securities.
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(e) In the event of a registration pursuant to the provisions of
this Section 10, the Company shall furnish to the Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of
copies of each prospectus contained in such registration statement and each
supplement or amendment thereto (including each preliminary prospectus), all
of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as the Holder may
reasonably request to facilitate the disposition of the Warrant or Warrant
Shares included in such registration.
(f) In the event of a registration pursuant to the provisions of
this Section 10, the Company shall furnish the Holder so registered with an
opinion of its counsel (reasonably acceptable to the Holder) to the effect
that (i) the registration statement has become effective under the Act and
no order suspending the effectiveness of the registration statement,
preventing or suspending the use of the registration statement, any
preliminary prospectus, any final prospectus, or any amendment or supplement
thereto has been issued, nor has the Commission or any securities or blue
sky authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order, (ii) the registration statement
and each prospectus forming a part thereof (including each preliminary
prospectus), and any amendment or supplement thereto, complies as to form
with the Act and the rules and regulations thereunder, and (iii) such
counsel has no knowledge of any material misstatement or omission in such
registration statement or any prospectus, as amended or supplemented. Such
opinion shall also state the jurisdictions in which the Warrant or Warrant
Shares have been registered or qualified for sale pursuant to the provisions
of Section 10(c).
(g) In the event of a registration pursuant to the provision of this
Section 10, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if
any, and, if requested, enter into an underwriting agreement containing
conventional representations, warranties, allocation of expenses, and
customary closing conditions, including, but not limited to, opinions of
counsel and accountants' cold comfort letters, with any underwriter who
acquires any Warrant or Warrant Shares.
(h) The Company agrees that until all the Warrant or Warrant Shares
have been sold under a registration statement or pursuant to Rule 144 under
the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit the Holder to
sell the Warrant or Warrant Shares under Rule 144.
(i) Except for rights granted hereof, the Company will not, without
the written consent of the Holder, grant to any persons the right to request
the Company to register any securities of the Company, provided that the
Company may grant such registration rights to other persons so long as such
rights are subordinate to the rights of the Holder.
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11. (a) Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless the Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who
controls any such person within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all loss, liability, charge,
claim, damage, and expense whatsoever (which shall include, for all purposes
of this Section 11, but not be limited to, attorneys' fees and any and all
reasonable expense whatsoever incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in
connection with (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any registration statement, preliminary
prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale
of any of the Warrant or Warrant Shares, or (B) in any application or other
document or communication (in this Section 11 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to register or qualify any of the Warrant or Warrant
Shares under the securities or blue sky laws thereof or filed with the
Commission or any securities exchange; or any omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, unless such statement or omission was
made in reliance upon and in conformity with written information furnished
to the Company with respect to the Holder by or on behalf of the Holder
expressly for inclusion in any registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or
in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company contained in
this Warrant. The foregoing agreement to indemnify shall be in addition to
any liability the Company may otherwise have, including liabilities arising
under this Warrant.
If any action is brought against the Holder or any of its officers,
directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which
indemnity may be sought against the Company pursuant to the foregoing
paragraph, such indemnified party or parties shall promptly notify the
Company in writing of the institution of such action (but the failure so to
notify shall not relieve the Company from any liability pursuant to this
Section 11(a) and the Company shall promptly assume the defense of such
action, including the employment of counsel (reasonably satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified
party or parties shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in
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<PAGE> 13
connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party
or parties to have charge of the defense of such action or such indemnified
party or parties shall have reasonably concluded that there may be one or
more legal defenses available to it or them or to other indemnified parties
which are different from or additional to those available to the Company, in
any of which events such fees and expenses shall be borne by the Company and
the Company shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties. Anything in this Section 11 to
the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. The Company shall not, without the
prior written consent of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a
default or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, in respect of which indemnity
may be sought hereunder (whether or not any indemnified party is a party
thereto), unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all
liability in respect of such action. The Company agrees promptly to notify
the Holder of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the sale of
any Warrant or Warrant Shares or any preliminary prospectus, prospectus,
registration statement, or amendment or supplement thereto, or any
application relating to any sale of any Warrant or Warrant Shares.
(b) The Holder agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have
signed any registration statement covering Warrant or Warrant Shares held by
the Holder, each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and
its or their respective counsel, to the same extent as the foregoing
indemnity from the Company to the Holder in Section 11(a), but only with
respect to statements or omissions, if any, made in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written information
furnished to the Company with respect to the Holder by or on behalf of the
Holder expressly for inclusion in any such registration statement,
preliminary prospectus, or final prospectus, or any amendment or supplement
thereto, or in any application, as the case may be. If any action shall be
brought against the Company or any other person so indemnified based on any
such registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect
of which indemnity may be sought against the Holder pursuant to this Section
11(b), the Holder shall have the rights and duties given to the Company, and
the Company and each other person so indemnified shall have the rights and
duties given to the indemnified parties, by the provisions of Section 11(a).
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(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section
11(a) or 11(b) (subject to the limitations thereof) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agreement
expressly provides for indemnification in such case, or (ii) any indemnified
or indemnifying party seeks contribution under the Act, the Exchange Act or
otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any director of the Company, any officer of the
Company who signed any such registration statement, any controlling person
of the Company, and its or their respective counsel), as one entity, and the
Holder (including for this purpose any contribution by or on behalf of an
indemnified party), as a second entity, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them
may be subject, on the basis of relevant equitable considerations such as
the relative fault of the Company and such Holder in connection with the
facts which resulted in such losses, liabilities, claims, damages, and
expenses. The relative fault, in the case of an untrue statement, alleged
untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission, or
alleged omission relates to information supplied by the Company or by such
Holder, and the parties' relative intent, knowledge, access to information,
and opportunity to correct or prevent such statement, alleged statement,
omission, or alleged omission. The Company and the Holder agree that it
would be unjust and inequitable if the respective obligations of the Company
and the Holder for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Holder and the other indemnified parties were treated
as one entity for such purpose) or by any other method of allocation that
does not reflect the equitable considerations referred to in this Section
11(c). In no case shall the Holder be responsible for a portion of the
contribution obligation imposed on it in excess of its pro rata share based
on the number of shares of Common Stock owned (or which would be owned upon
exercise of all Warrant or Warrant Shares) by it and included in such
registration as compared to the total number of shares of Common Stock
included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 11(c), each
person, if any, who controls the Holder within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act and each officer, director,
partner, employee, agent, and counsel of each such Holder or control person
shall have the same rights to contribution as such Holder or control person
and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, each officer of
the Company who shall have signed any such registration statement, each
director of the Company, and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 11(c). Anything in this Section 11(c) to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its
written consent. This Section 11(c) is intended to supersede any right to
contribution under the Act, the Exchange Act or otherwise.
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<PAGE> 15
12. Unless registered pursuant to the provisions of Section 10 hereof,
the Warrant Shares or Conversion Shares issued upon exercise or conversion of
the Warrants shall be subject to a stop transfer order and the certificate or
certificates evidencing such Warrant Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE
OFFERED OR SOLD IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT."
13. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of this Warrant (and upon surrender of this
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
14. The Holder shall not have, solely on account of such status, any
rights of a stockholder of the Company, either at law or in equity, or to any
notice of meetings of stockholders or of any other proceedings of the Company,
except as provided in this Warrant.
15. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
16. The Company irrevocably consents to the jurisdiction of the courts
of the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint or other process and agrees that
service thereof may be made in accordance with Section 12 of the Underwriting
Agreement. Within 30 days after such service, or such other time as may be
mutually agreed upon in writing by the attorneys for the parties to such action
or proceeding, the Company shall appear to answer such summons, complaint or
other process. Should the Company so served fail to appear or answer within such
30-day period or such extended period, as the case may be, the Company shall be
deemed in default and judgment may be entered against the Company for the amount
as demanded in any summons, complaint or other process so served.
Dated: October 1, 1999 Starbase
By: /s/ DOUGLAS S. NORMAN
-----------------------------
Douglas S. Norman
Assistant Secretary
[Seal]
15
<PAGE> 16
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ____________________________ hereby sells, assigns,
and transfers unto __________________ a Warrant to purchase __________ shares of
Common Stock, par value $[.01] per share, of [Company] (the "Company"), together
with all right, title, and interest therein, and does hereby irrevocably
constitute and appoint ___________________ attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated:
-----------------------------
By:
--------------------------------
Signature
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
<PAGE> 17
To: Starbase
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase _______
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $_________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:
-------------------------------
By:
----------------------------------
Print Name
----------------------------------
Signature
Address:
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
<PAGE> 18
To: Starbase
CASHLESS EXERCISE FORM
(To be executed upon conversion of the attached Warrant)
The undersigned hereby irrevocably elects to surrender its Warrant for
the number of shares of Common Stock as shall be issuable pursuant to the
cashless exercise provisions of the within Warrant, in respect of __________
shares of Common Stock underlying the within Warrant, and requests that
certificates for such securities be issued in the name of and delivered to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, that a new Warrant for the balance of the
Warrant Shares covered by the within Warrant be registered in the name of, and
delivered to, the undersigned at the addressed stated below.
Dated: Name
------------------------------- --------------------------------
(Print)
Address:
----------------------------------------------------------------------
----------------------------------
(Signature)
<PAGE> 1
EXHIBIT 5.1
October 26, 1999
StarBase Corporation
4 Hutton Centre Drive, Suite 800
Santa Ana, CA 92707-87130
Ladies and Gentlemen:
We have acted as counsel to StarBase Corporation (the "Company") in
connection with a Registration Statement on Form S-3 filed by the Company with
the Securities and Exchange Commission (the "Registration Statement") relating
to 2,320,689 shares (the "Shares") of the Company's common stock, par value
$0.01 per share (the "Common Stock"). Of such Shares, 1,148,867 may be issued
upon the exercise of warrants issuable to the holders of the Shares
(the "Warrants") and 1,171,822 shares of common stock have been issued by the
Company (the "Other Shares").
In connection with the foregoing, we have examined, among other things, the
Registration Statement, the Warrants and originals or copies, satisfactory to
us, of all such corporate records and of all such agreements, certificates and
other documents as we have deemed relevant and necessary as a basis for the
opinion hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents submitted to us as
copies. As to any facts material to such opinion, we have, to the extent that
relevant facts were not independently established by us, relied on certificates
of public officials and certificates, oaths and declarations of officers or
other representatives of the Company.
Based upon the foregoing, we are of the opinion that (i) the Shares
issuable upon the exercise of the Warrants (when such Shares are paid for and
issued in accordance with the terms of the Warrants) will be legally issued,
fully paid and non-assessable; and (ii) the Other Shares are legally issued,
fully paid and non-assessable.
We hereby consent to the use of our name under the caption "Legal Matters"
in the Prospectus constituting a part of the Registration Statement and to the
filing of a copy of this opinion as an exhibit.
Very truly yours,
PARKER CHAPIN FLATTAU & KLIMPL, LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated June 26, 1998 relating to the
financial statements, which appears in StarBase Corporation's Annual Report on
Form 10-KSB for the year ended March 31, 1999. We also consent to the reference
to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Costa Mesa, California
October 25, 1999
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Starbase Corporation on Form S-3 of our report dated June 18, 1999 (which report
expresses an unqualified opinion and includes an explanatory paragraph related
to substantial doubt about the Company's ability to continue as a going concern)
appearing in the Form 10-KSB of Starbase Corporation for the year ended March
31, 1999, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Costa Mesa, California
October 25, 1999
