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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 8, 1996
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BASE TEN SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 0-7100 22-1804206
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Electronics, Drive, Trenton, New Jersey 08619
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(Address of principal executive offices) (Zip Code)
(609) 586-7010
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(Registrant's telephone number, including area code)
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<PAGE>
Item 5. Other Events.
On August 8, 1996, Base Ten Systems, Inc. (the "Company") entered into a
Purchase Agreement with Jesse L. Upchurch (the "Purchase Agreement") for the
sale of up to $10,000,000 of the Company's 9.01% Convertible Subordinated
Debentures due August 31, 2003 (the "Debentures"). On August 12, 1996, the
Company issued and sold a Debenture in the original principal amount of
$4,500,000 to Mr. Upchurch and on August 22, 1996 the Company will issue and
sell to Mr. Upchurch a Debenture in the original principal amount of not less
than $4,500,000 and up to $5,500,000.
Item 7. Exhibits.
4(a) Purchase Agreement dated as of August 8, 1996 between Base Ten
Systems, Inc. and Jesse L. Upchurch.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BASE TEN SYSTEMS, INC.
Dated: August 12, 1996 By:/S/ MYLES M. KRANZLER
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Myles M. Kranzler
Chief Executive Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DOCUMENT PAGE
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4(a) Purchase Agreement dated as of August 8, 4
1996 between Base Ten Systems, Inc. and
Jesse L. Upchurch.
PURCHASE AGREEMENT
9.01% CONVERTIBLE SUBORDINATED DEBENTURES
DUE AUGUST 31, 2003
THIS PURCHASE AGREEMENT (this "Agreement") is made as of the 8th
day of August, 1996, by and between BASE TEN SYSTEMS, INC., a New Jersey
corporation with its principal executive offices located at One Electronics
Drive, Trenton, New Jersey 08619 (the "Company") and JESSE L. UPCHURCH, an
individual with an address at c/o Upchurch Corporation, 500 Main Street, Fort
Worth, Texas 76102 (the "Purchaser").
The parties hereto, intending to be legally bound, agree as
follows:
1. AUTHORIZATION OF CONVERTIBLE DEBENTURES.
The Company has authorized the issuance and sale of an
aggregate of up to $10,000,000 principal amount of its 9.01% Convertible
Subordinated Debentures due August 31, 2003 (the "Convertible Debentures"). The
Convertible Debentures are convertible into shares of the Company's Class A
Common Stock, par value $1.00 per share (such shares to be issued upon
conversion of the Convertible Debentures being hereinafter referred to herein as
the "Shares"), at the Conversion Price defined in Article 12 of this Agreement.
Interest on the Convertible Debentures is payable semi-annually on the last day
of February and August in each year, commencing on February 28, 1997 (which
first interest payment shall be for the period from and including the date of
issuance of the respective Convertible Debenture through February 28, 1997, at
the interest rate specified in the form of Convertible Debenture attached hereto
as Exhibit A).
2. SALE AND PURCHASE OF CONVERTIBLE DEBENTURES.
Subject to the terms and conditions hereof, the Company
hereby sells to the Purchaser, and the Purchaser hereby purchases from the
Company, (i) on the Closing Date specified in Article 3, a Convertible Debenture
in the aggregate principal amount of $4,500,000 at a purchase price of 100% of
the principal amount, and (ii) on August 22, 1996, a Convertible Debenture in
the aggregate principal amount of not less than $4,500,000 and up to $5,500,000
at a purchase price of 100% of the principal amount.
3. CLOSING.
The closing (the "Closing") of the purchase and sale of the
Convertible Debentures will take place on August 8, 1996 or such other time and
date as shall be mutually agreed upon by the Purchaser and the Company. Such
time and date is herein called the "Closing Date."
On the Closing Date the Company shall deliver to the
Purchaser a Convertible Debenture in the aggregate principal amount of
$4,500,000, dated the Closing Date, against delivery by the Purchaser to the
Company of a certified or official bank check(s) or wire transfer(s) in an
aggregate amount equal to the aggregate purchase price for such Convertible
Debenture, payable to the order of the Company in immediately available funds.
On August 22, 1996, Company shall deliver to the Purchaser a
Convertible Debenture in the aggregate principal amount of not less than
$4,500,000 and up to $5,500,000, dated as of such date, against delivery by the
Purchaser to the Company of a certified or official bank check(s) or wire
transfer(s) in an aggregate amount equal to the aggregate purchase price for
such Convertible Debenture, payable to the order of the Company in immediately
available funds.
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants that:
4.1 Organization and Existence, Authority, etc. The Company is
a corporation duly organized and validly existing and in good standing under the
laws of the State of New Jersey, and has all requisite corporate power and
authority to carry on its business as now conducted and proposed to be
conducted; the Company has all requisite corporate power and authority to enter
into this Agreement, to issue the Convertible Debentures as contemplated herein
and to carry out the provisions and conditions of this Agreement and of the
Convertible Debentures, including the issuance of the Shares in accordance with
the terms of this Agreement and the Convertible Debentures. This Agreement and
the Convertible Debentures have been duly executed and delivered by, and
constitute the valid and binding obligations of, the Company, enforceable in
accordance with their respective terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to the effect of
general principals of equity which may limit the availability of remedies
(whether in a proceeding at law or in equity). The Company is duly qualified and
is authorized to do business and is in good standing as a foreign corporation in
each jurisdiction in which the conduct of its business or ownership of its
properties would so require, except where the failure to be so qualified would
not have a material adverse effect on its business and financial condition,
taken as a whole.
4.2 Litigation. Except as disclosed in the Company Commission
Filings (as hereinafter defined), to the knowledge of the Company, there is no
action, suit or proceeding pending, or threatened, against the Company before
any court, administrative agency or arbitrator which could reasonably be
expected to result in any material adverse change in the business, properties,
condition (financial or otherwise) of the Company taken as a whole, or which
challenges the validity of any action taken or to be taken pursuant to or in
connection with this Agreement or the Convertible Debentures.
4.3 Charter Documents. Neither the execution nor the delivery
of this Agreement or the Convertible Debentures, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with the terms and
provisions hereof or thereof, will conflict with, or result in a breach of or
creation of a lien under, the terms, conditions or provisions of, or constitute
a default under, the charter or by-laws of the Company, as amended, copies of
which have been provided to the Purchaser.
4.4 Authorized and Outstanding Capital Stock. The Company has
authorized (i) 22,000,000 shares of Class A Common Stock, par value $1.00 per
share (the "Common Stock"), of which 7,323,068 shares are issued and outstanding
as of July 31, 1996, and (ii) 12,000,000 shares of Class B Common Stock, par
value $1.00 per share of which 449,645 shares are issued and outstanding as of
July 31, 1996, and (iii) 1,000,000 shares of preferred stock, none of which are
issued and outstanding. All of such outstanding shares of Common Stock have been
validly issued and are fully paid and non-assessable. The Company has authorized
(i) the issuance and sale to the Purchaser of an aggregate of $9,000,000
principal amount of the Convertible Debentures and (ii) the issuance upon
conversion of the Convertible Debentures of the Shares of the Company's Common
Stock into which such Convertible Debentures are convertible in accordance with
Article 11 or 12, as applicable, of this Agreement. The Shares, when issued in
accordance with the terms of this Agreement and the Convertible Debentures, will
be validly issued, fully paid and non-assessable.
4.5 Broker's and Finder's Fees. The Company will pay all
broker's and finder's fees incurred by the Company in connection with the sale
of the Convertible Debentures.
4.6 Commission Filings and Financial Statements. The Company
has heretofore made available to the Purchaser true and complete copies of all
reports, registration statements, definitive proxy statements and other
documents (in each case together with all amendments and supplements thereto)
filed by the Company with the Commission since April 30, 1996 (such reports,
registration statements, definitive proxy statements and other documents,
together with any amendments and supplements thereto, are sometimes collectively
referred to as the "Company Commission Filings"). The Company Commission Filings
constitute all of the documents (other than preliminary materials) that the
Company was required to file with the Commission since such date. As of their
respective dates, each of the Company Commission Filings complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as applicable, and the rules and regulations under each such Act,
and none of the Company Commission Filings contained as of such date and untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When filed with the
Commission the financial statements included in the Company Commission Filings
complied as to form in all material respects with the applicable rules and
regulations of the Commission and were prepared in accordance with generally
accepted accounting principles (as in effect from time to time) applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto), and such financial statements fairly present in accordance
with generally accepted accounting principles in all material respects the
financial position of the Company as at the dates thereof and the results of its
operations and its cash flows for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments and the absence of footnotes. Since April 30, 1996, except as
disclosed in the Company Commission Filings filed with the Commission prior to
the date hereof, the Company has not incurred any liability or obligation of any
kind outside of the ordinary course of business, and no other event has
occurred, which in the ordinary course of business, and no other event has
occurred, which in any case or in the aggregate, would have a material adverse
effect on the business, assets, results of operations or financial condition of
the Company.
4.7 Tax Returns and Payments. The Company has filed all tax
returns required by law to be filed by it and has paid all material taxes,
assessments and other governmental charges levied upon the Company and any of
its properties, assets, income or franchises which are due and payable, other
than those presently payable without penalty or interest or those that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established on
the books of the Company in accordance with generally accepted accounting
principles. The charges, accruals and reserves on the books of the Company in
respect of Federal, state and foreign income taxes for all fiscal periods are
adequate in the opinion of the Company, and the Company has not been notified of
any material unpaid assessment for additional Federal, state or foreign income
taxes for any period or any basis for any such assessment for which adequate
provision has not been made in its accounts in accordance with generally
accepted accounting principles.
4.8 Indebtedness. The Company Commission Filings correctly
describe all material secured and unsecured Indebtedness of the Company
outstanding, or for which the Company has commitments, on the date of this
Agreement, and identify in all material respects the collateral securing any
such secured Indebtedness. The Company is not in material default with respect
to the payment of any material Indebtedness or with respect to any instrument or
agreement relating thereto.
4.9 Title to Properties. The Company has good and sufficient
title to its material properties and assets, including the properties and assets
reflected in the financial statements as of and for the period ended April 30,
1996 (except properties and assets disposed of since such date in the ordinary
course of business and properties and assets held under Capital Leases). The
Company enjoys peaceful and undisturbed possession under all material leases
necessary in any material respect for the operation of its material properties
and assets, and all such leases are valid and subsisting and are in full force
and effect.
4.10 Compliance with Other Instruments. The Company is not in
violation of any term of its certificate or articles of incorporation or
by-laws, and the Company is not in material violation of any material term of
any material agreement or instrument to which it is a party or by which it is
bound or any material term of any applicable law, ordinance, rule or regulation
of any governmental authority or any material term of any applicable order,
judgment or decree of any court, arbitrator or governmental authority, the
consequences of which violation might have a materially adverse effect on the
business, condition (financial or other), operations, assets or properties of
the Company; the execution, delivery and performance of this Agreement and the
Convertible Debentures will not result in any material violation of or be in
material conflict with or constitute a material default under any such term; and
there is no such term which materially adversely affects the business, condition
(financial or other), operations, assets, or properties of the Company, taken as
a whole.
4.11 Governmental Consent. No material consent, approval or
authorization of, or declaration or filing with, any governmental authority on
the part of the Company or any of its Subsidiaries is required for the valid
execution and delivery of this Agreement or the valid offer, issue, sale and
delivery of the Convertible Debentures pursuant to this Agreement, except where
the failure to obtain such consent or make such filing would not have a material
adverse effect on the business, operations or assets of the Company, and except
for appropriate filings (i) NASDAQ National Market System of an additional
listing application for the Shares, and (ii) with such state securities
commissions in respect of "blue sky" laws as may be appropriate.
4.12 Use of Proceeds. The Company will apply the net proceeds
of the sale of the Convertible Debentures principally for funding the Company's
continued development of PHARMASYST and PHARM2 and new versions and upgrades of
its manufacturing execution systems, its development of a new image archiving
system to be marketed under the uPACS name, for additional sales marketing and
support activities, and for general corporate purposes.
4.13 Solvency. On the Closing date and after giving effect to
the application of the proceeds of the Convertible Debentures as specified in
Section 4.12, the Company will be Solvent.
4.14 Disclosure. To the best of the Company's knowledge, there
is no fact (other than matters of a general economic or political nature which
does not affect the Company uniquely) known to the Company which materially
adversely affects the business, condition (financial or other), operations,
assets or properties of the Company which has not been set forth either in the
Company Commission Filings or in this Agreement or in the other documents,
certificates and instruments delivered to the Purchaser by or on behalf of the
Company specifically for use in connection with the transactions contemplated by
this Agreement.
5. SUBORDINATION.
5.1 Agreement to be Bound. The Company covenants and agrees,
and the Purchaser and any subsequent holder of Convertible Debentures by his
(its) acceptance thereof, likewise covenants and agrees, that the Convertible
Debentures shall be issued subject to the provisions contained in this Article
5; and each person holding any Convertible Debentures, whether upon original
issue or upon transfer or assignment thereof, accepts and agrees to be bound by
such provisions.
All Convertible Debentures shall, to the extent and in the
manner hereinafter set forth, be subordinated and subject in right of payment to
the prior payment in full of all Senior Indebtedness (as defined herein).
5.2 Priority of Senior Indebtedness. (a) No payment on account
of principal or interest on the Convertible Debentures shall be made, nor shall
any assets be applied to the purchase or other acquisition or retirement of the
Convertible Debentures, if, at the time of such payment or application or
immediately after giving effect thereto, there shall exist a default in the
payment of any amount due on any Senior Indebtedness. Within ten (10) Business
Days after knowledge of any such default referred to in this Section 5.2(a), the
Company shall furnish a copy thereof to the holder of the Convertible
Debentures, in the manner and at the address specified pursuant to Article 17
hereof.
(b) If there shall have occurred an event of default (other
than a default in the payment of any amount due) with respect to any issue of
Senior Indebtedness, as defined herein, or in the instrument under which the
same has been issued, permitting the holders thereof, after notice or lapse of
time, or both, to accelerate the maturity thereof, then, unless and until such
event of default shall have been cured or waived or shall have ceased to exist,
no payment on account of principal or interest on the Convertible Debentures
shall be made, nor shall any assets be applied to the conversion, redemption or
other acquisition or retirement of the Convertible Debentures until the earliest
to occur of (i) 30 days after the date that notice of such default is given to
the holders of Convertible Debentures pursuant to the last sentence of this
Section 5.2(b), or (ii) the date on which the Senior Indebtedness to which such
event of default related is discharged in accordance with its terms, or (iii)
the date such event of default is waived by the holders of such Senior
Indebtedness or otherwise cured. Within ten (10) Business Days after knowledge
of any such default referred to in this Section 5.2(b), the Company shall
furnish a copy thereof to each holder of the Convertible Debentures, in the
manner and at the address specified pursuant to Article 17 hereof.
(c) Upon the occurrence and during the continuance of any
Event of Default under this Agreement or the Convertible Debentures, or upon the
occurrence of an event described in Section 5.2(a) or (b) which gives rise to
the non-payment of principal or interest due on the Convertible Debentures, and
notwithstanding any other provision contained herein or in the Convertible
Debentures to the contrary, each Purchaser hereby agrees, for the benefit of the
holders of Senior Indebtedness, not to ask for, demand, sue for, take or receive
any amount owing under the Convertible Debentures of exercise any remedy
(whether pursuant hereto, including, without limitation, acceleration of the
Convertible Debentures at law, in equity or otherwise) with respect thereto
until the earliest of (i) 30 days after (x) the occurrence of such Event of
Default or (y) the date that notice of such default is given to the holders of
Convertible Debentures pursuant to Sections 5.2(a) or (b), (ii) the date on
which all Senior Indebtedness is accelerated, (iii) if applicable, the date on
which the Senior Indebtedness to which such event of default related is
discharged in accordance with its terms or such event of default is waived by
the holders of such Senior Indebtedness or otherwise cured or (iv) any voluntary
or involuntary petition in bankruptcy filed by or against the Company. Within
ten (10) Business Days after knowledge of any Event of Default under this
Agreement or the Convertible Debentures, the Company shall furnish a copy
thereof to the holders of Senior Indebtedness in the manner and at the addresses
specified in the documents and/or agreements evidencing the applicable Senior
Indebtedness.
5.3 Acceleration of Convertible Debentures; Insolvency. Upon
(i) any acceleration of the principal amount due on the Convertible Debentures
or Senior Indebtedness or (ii) any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, or payment
thereof duly provided for, to the full satisfaction of the holders of Senior
Indebtedness before the holders of the Convertible Debentures shall be entitled
to receive or retain any assets so paid or distributed in respect thereof; and
upon any such dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Convertible
Debentures would be entitled, except for these provisions, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by the holders of the
Convertible Debentures if received by them or it, as the case may be, directly
to the holders of Senior Indebtedness, to the extent necessary to pay all such
Senior Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness before any payment or
distribution is made to the holders of the Convertible Debentures, except that
the holders of Senior Indebtedness of the type described in clause (i) of the
definition of Senior Indebtedness shall be entitled to receive payment in full
of such Senior Indebtedness (or provisions satisfactory to the holders of such
Senior Indebtedness shall be made for such payment) before the holders of other
types of Senior Indebtedness shall be entitled to receive payment on such other
Senior Indebtedness.
In the event that, notwithstanding the provisions of the
preceding paragraph or of Section 5.2 hereof, any payment or distribution of
assets of the Company prohibited by the preceding paragraph or by Section 5.2
hereof shall be received by the holders of the Convertible Debentures before all
Senior Indebtedness is paid in full, or provision made for such payment, to the
full satisfaction of the holders of Senior Indebtedness, in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of,
and shall be paid over or delivered to, the holders of Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness. All payments applied to Senior Indebtedness
pursuant to this paragraph of Section 5.3 shall be allocated among the holders
of Senior Indebtedness in accordance with the provisions of the preceding
paragraph of this Section 5.3.
5.4 Subrogation, Etc. Upon payment in full of all Senior
Indebtedness, the holders of Convertible Debentures shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company pro rata in proportion to the respective
amounts then owing to the holders of Convertible Debentures; and for purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the holders of
Convertible Debentures would be entitled except for the provisions of this
Section 5, and no payment over pursuant to such provisions to the holders of
Senior Indebtedness, shall, as between the Company and its creditors (other than
the holders of Convertible Debentures and the holders of the Senior
Indebtedness), be deemed to be a payment by the Company to or on account of
Senior Indebtedness, it being understood that the provisions of this Section 5
are intended solely for the purpose of defining the relative rights of the
holders of Convertible Debentures on the one hand and the holders of Senior
Indebtedness on the other hand. The holders of Senior Indebtedness may amend,
modify and otherwise deal with Senior Indebtedness without any notice to or
approval of any holder of Indebtedness ranking junior to Senior Indebtedness.
5.5 Enforcement. The foregoing subordination provisions shall
be for the benefit of the holders of Senior Indebtedness and may be enforced
directly by such holders against the holders of the Convertible Debentures. Each
holder of Convertible Debentures by his (or its) acceptance thereof shall be
deemed to acknowledge and agree that the subordination provisions of this
Article 5 are, and are intended to be, an inducement and a consideration to each
holder of any Senior Indebtedness, whether such Senior Indebtedness was created
or acquired before or after the issuance of the Convertible Debentures, to
acquire and continue to hold, or to continue to hold, such Senior Indebtedness
and each holder of Senior Indebtedness shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Indebtedness.
Upon any payment or distribution of assets of the Company,
the holders of the Convertible Debentures shall be entitled to rely upon a
certificate of the receiver, trustee in bankruptcy, liquidation trustee,
Company, agent or other person making such payment or distribution, delivered to
the holders of the Convertible Debentures, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount paid or distributed thereon and all other facts
pertaining thereto or to the provisions of this Article 5.
5.6 Obligations Unimpaired. Nothing in this Article 5, or
elsewhere in this Agreement, or in the Convertible Debentures, is intended to or
shall impair as between the Company, its creditors other than the holders of
Senior Indebtedness, and the holders of the Convertible Debentures, the
obligation of the Company, which shall be absolute and unconditional, to pay the
holders of the Convertible Debentures the principal of and interest on the
Convertible Debentures as and when the same shall become due and payable in
accordance with the terms thereof, or affect the relative rights of the holders
of the Convertible Debentures and other creditors of the Company other than the
holders of Senior Indebtedness, nor shall anything herein or therein prevent the
holder of any Convertible Debentures from exercising all remedies otherwise
permitted by applicable law upon default under this Agreement, subject to the
rights, if any, under this Article 5 of the holders of Senior Indebtedness in
respect to cash, property or securities of the Company received upon the
exercise of any such remedy. Nothing contained in this Article 5 or elsewhere in
this Agreement, or in any of the Convertible Debentures, shall prevent the
Company from making payment of the principal of or interest on the Convertible
Debentures at any time except under the conditions described in Section 5.2 or
5.3 or during the pendency of any dissolution, winding up, liquidation or
reorganization of the Company.
5.7 Definition of Senior Indebtedness. The term "Senior
Indebtedness" shall mean the principal and interest on (i) all Indebtedness of
the Company and its Subsidiaries for money borrowed from time to time, including
that owing to banks or other financial institutions, an agency or agencies of
the federal government or other institutions engaged in the business of lending
money, (ii) all Capital Leases of the Company and its Subsidiaries, (iii)
obligations of the Company for the reimbursement of any obligor on any Letter of
Credit, banker's acceptance or similar credit transaction, and (iv) any
deferrals, renewals and extensions of any indebtedness described in clauses (i)
through (iii) above, unless under the express provisions of the instrument
creating or evidencing any such indebtedness, or pursuant to which the same is
outstanding, such indebtedness is not superior in right of payment to the
Convertible Debentures; provided, however, that Senior Indebtedness shall not
include Indebtedness owed or owed or owing to any Subsidiary.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 Representations. (a) The Purchaser hereby represents that
the Purchaser is capable of evaluating the risk of its investment in the
Convertible Debentures and is able to bear the economic risk of such investment,
that it is purchasing the Convertible Debenture for its own account and that the
Convertible Debentures are being purchased by the Purchaser for investment and
not with a view to any resale or distribution thereof or of the Shares issuable
upon conversion thereof. If the Purchaser should in the future decide to dispose
of the Convertible Debenture or the Shares (which it does not now contemplate),
it is understood that the Purchaser may do so only in complete compliance with
the Securities Act and any applicable state Blue Sky or securities laws.
(b) The Purchaser hereby represents that the Purchaser is an
"accredited investor" within the meaning of Regulation D of the General Rules
and Regulations promulgated under the Securities Act ("Regulation D"). In
connection therewith, the Purchaser represents and warrants to the Company that
the Purchaser meets either of the following standards for determination of
"accredited investor" status of Regulation D set forth below:
1. A natural person whose individual net worth,
or joint net worth with that person's spouse,
at the time of his purchase exceeds
$1,000,000; or
2. A natural person who had an individual income
in excess of $200,000 in each of the two most
recent years or joint income with that
person's spouse in excess of $300,000 in each
of those years and has a reasonable
expectation of reaching the same income level
in the current year.
(c) The Purchaser hereby represents that the Purchaser (i)
has received and carefully reviewed the Company Commission Filings, and (ii) has
had the opportunity to ask questions and receive answers from the Company
concerning the Company Commission Filings and the terms and conditions of the
offering of the Convertible Debentures and to obtain any documents relating to
the Company which are publicly available and any additional information or
documents relating to the Company which the Company possesses or can acquire
without unreasonable effort or expense.
(d) The Purchaser acknowledges that the Purchaser is aware
of the risks inherent in an investment in the Company and specifically the risks
of an investment in Convertible Debentures, and that the Purchaser is capable of
bearing a complete loss of such investment.
(e) The Purchaser hereby represents that the execution,
delivery and performance by it of this Agreement and the purchase by it of the
Convertible Debentures does not violate any material term of any law, rule,
regulation, court order, judgment or contractual or other obligation applicable
to the Purchaser, the consequences of which violation might have a materially
adverse effect on the business, condition (financial or other), operations,
assets or properties of such Purchaser.
(f) The Purchaser's Schedule 13D and Forms 3, 4 and 5
filings with the Commission for the periods since April 30, 1996 are all
accurate and complete and have been timely filed with the Commission.
(g) The Purchaser owns as of the date of this Agreement less
than 10% of the voting power of the Company, whether directly, indirectly or
beneficially.
7. CONDITIONS TO OBLIGATIONS.
The Purchaser's obligation to purchase the Convertible
Debentures hereunder is subject to satisfaction of the following conditions at
the Closing:
7.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company herein or in any certificate or
document delivered pursuant hereto shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing Date.
7.2 Performance; No Default. The Company shall have performed
and complied, in each case in all material respects, with all material
agreements and conditions contained in this Agreement required to be performed
or complied with by it prior to or at the Closing and at the time performed or
complied with by it prior to or at the Closing and at the time of the Closing,
no Event of Default shall have occurred and be continuing.
7.3 Officers' Certificate. The Purchaser shall have received a
certificate dated the Closing Date and signed by the President, a Vice President
or Chairman or Vice Chairman of the Company and by the Secretary, the Treasurer,
an Assistant Secretary or an Assistant Treasurer of the Company, to the effect
that the conditions of Sections 7.1 and 7.2 hereof have been satisfied.
7.4 Proceedings. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be in form and substance reasonably
satisfactory to the Purchaser, and the Purchaser's counsel, who shall have
received all such originals or certified or other copies of such documents as
they may reasonably request.
7.5 No Litigation. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced and
still be pending, and no investigation by any governmental or regulatory
authority shall have been commenced and still be pending, against the Company
seeking to restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such transactions.
7.6 Purchase Permitted by Applicable Laws. The offering,
issuance, purchase and sale of, and payment for, the Convertible Debentures to
be purchased by the Purchasers on the Closing date on the terms and conditions
herein provided (including the use of the proceeds of such Convertible
Debentures by the Company) shall not violate any law or governmental regulation
applicable to the Purchaser.
7.7 Compliance with Securities Laws. The offering and sale of
the Convertible Debentures at or prior to the Closing under this Agreement shall
have compiled in all material respects with all applicable requirements of
federal and state securities laws.
8. AFFIRMATIVE COVENANTS.
8.1 Office for Payment, Exchange and Registration. So long as
any of the Convertible Debentures are outstanding, the Company will maintain an
office or agency in the United States where the Convertible Debentures may be
presented for payment, conversion, exchange or registration of transfer as
provided in this Agreement. Such office or agency initially shall be the office
of the Company set forth in Article 17 hereof, which place may thereafter from
time to time be changed by notice to the holder or holders of the Convertible
Debenture then outstanding.
8.2 Notices. The Company will give notice to all holders of
Convertible Debentures within 3 Business Days after it learns of the existence
of any Event of Default or any event which, with giving of notice or the lapse
of time or both, would become an Event of Default, describing the same and the
period of existence thereof, and what action the Company has taken is taking or
proposes to take with respect thereto.
8.3 Corporate Existence, Etc. The Company will at all times
preserve and keep in full force and effect its corporate existence, and rights
and franchises deemed material to and those of each of its material
Subsidiaries, except as otherwise specifically permitted by Section 9.1 and
except that the corporate existence of any Subsidiary of the Company may be
terminated if, in the good faith judgment of the Board of Directors, such
termination is in the best interest of the Company.
8.4 Payment of Taxes. The Company will, cause each of its
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits before any penalty or interest accrues
thereon, provided that no such tax, assessment, charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required by generally accepted accounting principles shall have been
made therefor.
8.5 Maintenance of Properties; Insurance. The Company will
maintain or cause to be reasonably good repair, working order and condition,
normal wear and tear excepted, all material properties used in the business of
the Company and its Subsidiaries. The Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Subsidiaries against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar business
and similarly situated, of such types and in such amounts as are customarily
carried under similar circumstances by such other corporations.
8.6 Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
except where (i) noncompliance could not reasonably be expected to have a
material adverse effect on the business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) the
necessity of compliance therewith is contested in good faith by appropriate
proceedings.
9. NEGATIVE COVENANTS.
9.1 Consolidation, Merger and Sale. The Company will not,
directly or indirectly, sell, lease, transfer or otherwise dispose of all or
substantially all of its assets or business to any other corporation, or
consolidate with or merge into any other corporation, unless if such surviving
or transferee corporation is a corporation other than the Company, (i) such
surviving or transferee corporation is a corporation organized under the laws of
the United States or of any State of the United States, (ii) all liabilities and
obligations (including registration obligations under Article 13) of the Company
under this Agreement and the Convertible Debentures shall have been expressly
assumed by such surviving or transferee corporation under terms which have no
adverse effect on the rights of the holders of the Convertible Debentures, and
(iii) there shall exist no Event of Default, and no such event which, with
notice, the lapse of time, or both, would constitute an Event of Default, both
immediately before such transaction, and immediately after such transaction upon
giving effect on a pro forma basis to such transaction.
9.2 Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, engage in
any transaction, including, without limitation, the purchase, sale or exchange
of assets or the rendering of any service, with any Affiliate of the Company,
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Subsidiary's business and upon fair and reasonable terms
that are no less favorable to the Company or such Subsidiary, as the case may
be, than those which might be obtained in an arm's length transaction at the
time from persons which are not Affiliates, provided that the foregoing
restrictions shall not apply to any transaction between the Company and a
wholly-owned Subsidiary of the Company or between one wholly-owned Subsidiary of
the Company and another wholly-owned Subsidiary of the Company. The Company
shall not permit any Affiliate of the Company to become the holder of any Senior
Indebtedness.
9.3 Restricted Indebtedness. The Company will not, directly or
indirectly, incur any Indebtedness the proceeds of which will be used to pay
dividends upon shares of the Company's Common Stock or any other capital stock
of the Company that may from time to time be outstanding.
10. DEFAULTS.
If any of the following events (herein called an "Event of
Default") shall occur and be continuing:
(a) If the Company shall default in the payment (whether or
not such payment is prohibited under Article 5 hereof) of (i) any part of the
principal on any of the Convertible Debentures, when the same shall become due
and payable, whether at maturity or by acceleration or otherwise, or (ii) the
interest on any of the Convertible Debentures, when the same shall become due
and payable, and such default in the payment of interest shall have continued
for fifteen (15) days;
(b) If the Company shall default in the performance of any
agreement or covenant contained in this Agreement or the Convertible Debentures
and such default shall continue for thirty (30) days; or
(c) If any representation or warranty by the Company herein
or any certificate delivered by the Company pursuant hereto shall prove to have
been incorrect in any material respect when made; or
(d) If (i) the Company shall fail to make any payment in
respect of any Indebtedness when due or within any applicable grace period; or
(ii) any other event of default, as defined in any material indenture or
material instrument evidencing or under which there is at the time outstanding
any Indebtedness of the Company, shall occur which (1) results in the
acceleration of the maturity of such Indebtedness or (2) enables (or, with the
giving of notice, would enable) the holder of such Indebtedness or any person
acting on such holder's behalf to accelerate the maturity thereof if, in the
case of subclause (2) hereof, such event or condition has been in existence for
180 days without being cured or waived; provided, that, the aggregate principal
amount of the Indebtedness referred to Indebtedness clause (i) or (ii) (together
with any other defaulted Indebtedness) exceeds $2,000,000; or
(e) If a final judgment which, either alone or together with
other outstanding final judgments against the Company and its Subsidiaries,
exceeds an aggregate of $2,000,000 shall be rendered against the Company or any
Subsidiary and such judgment shall have continued undischarged or unstayed for
sixty (60) days after entry thereof; or
(f) If the Company or any Subsidiary shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts; or if the Company or any Subsidiary shall suffer the
appointment of a receiver or trustee for it or substantially all of its assets
and, if appointed without its consent, not to be discharged or stayed within
sixty (60) days; or if the Company or any Subsidiary shall suffer proceedings
under any law relating to bankruptcy, insolvency or the reorganization or relief
of debtors to be instituted by or against it, and, if contested by it, not to be
dismissed or stayed within sixty (60) days; or if the Company or any Subsidiary
shall fail generally to pay its debts as they become due; or if the Company or
any Subsidiary shall suffer any writ of attachment or execution or any similar
process to be issued or levied against it or any significant part of its
property with respect to claims in excess of $2,000,000, which is not released,
stayed, bonded or vacated within sixty (60) days after its issue or levy; or if
the Company or any Subsidiary takes corporate action in furtherance of any of
the aforesaid purposes or conditions; then and in each such event the holders of
forty percent (40%) or more in aggregate principal amount of the Convertible
Debentures then outstanding may at any time and unless all defaults shall
theretofore have been remedied) at its or their option, by written notice or
notices to the Company, declare all the Convertible Debentures to be due and
payable, whereupon the same shall forthwith mature and become due and payable,
together with all interest accrued thereon, without presentment, demand, protest
or notice, all of which are hereby waived; provided, however, that this
provision is subject to the condition that if, at any time after the principal
of the Convertible Debentures shall so become due and payable, any arrears of
principal and interest on the Convertible Debentures (with interest at the rate
specified in the Convertible Debentures on any overdue principal and, to the
extent legally enforceable, on any interest overdue) shall be paid by, or for
the account of the Company, then the holder or holders of at least fifty-one
percent (51%) in aggregate principal amount of the Convertible Debentures then
outstanding, by written notice or notices to the Company, may waive such Event
of Default and its consequences and rescind or annul such declaration, but no
such waiver shall extend to or affect any subsequent Event of Default or impair
any right resulting therefrom; provided, further, that notwithstanding the
foregoing, if there shall occur an Event of Default under clause (f) above, then
the Convertible Debentures, together with all interest accrued thereon, shall
immediately mature and become due and payable, without the necessity of any
action by the Purchasers or notice to the Company. If any holder of a
Convertible Debenture shall give any notice or take any other action with
respect to a claimed default, the Company, forthwith upon receipt of such notice
or obtaining knowledge of such other action, will give written notice thereof to
all other holders of the Convertible Debentures then outstanding, describing
such notice or other action and the nature of the claimed default.
10A. BOARD REPRESENTATION.
The Purchaser shall have the right, provided the Purchaser
continues to hold not less than eighty percent (80%) of the aggregate principal
amount of Convertible Debentures issued hereunder to nominate two directors to
the Board of Directors of the Company by giving written notice to the Company of
such nominations together with the written consents of such nominees to serve as
directors not less than 120 days prior to the date that the Company's proxy
statement in connection with its annual meeting of shareholders for the election
of directors is to be mailed to shareholders of record. The Company shall
include such nominees in the slate of directors recommended by the management of
the Company in the proxy statement for the next held annual meeting for the
election of directors.
11. CONVERSION.
11.1 Conversion. Prior to the maturity of the Convertible
Debentures, the holder of the Convertible Debenture shall have the right, at the
option of such holder (whether or not payment upon the Convertible Debentures is
prohibited by the subordination provisions of Article 5) to convert, subject to
the terms and provisions of this Article 11, all or, subject to the proviso
contained in this Section 11.1, any portion of the Convertible Debenture held by
such holder into the number of fully paid and nonassessable Shares as shall be
equal to the aggregate principal amount of Convertible Debenture then being
converted divided by the Conversion Price then in effect, by delivery of the
Convertible Debentures to the Company at the office of the Company provided for
in Section 8.2 herein; provided, however, that no holder of the Convertible
Debenture shall be permitted to exercise its rights with respect to partial
conversions as herein described unless each such holder of the Convertible
Debenture elects to convert a minimum of at least $500,000 principal amount of
its Convertible Debenture or any additional amounts in multiples of $250,000
principal amount of Convertible Debenture; provided, further, that the Company
shall not be required to issue any fractional shares in connection with any
conversion pursuant to this Article 11. In the event that a holder shall
exercise the Convertible Debentures with respect to less than the entire
aggregate principal amount outstanding of such Convertible Debenture, the
Company shall, or shall direct its transfer agent to, issue to the Purchaser
certificates for the Shares of Common Stock for which the Convertible Debenture
is being exercised in such denominations as are required for delivery to the
Purchaser, and the Company shall, or shall direct its transfer agent to,
thereupon deliver such certificates to or in accordance with the instructions of
the Purchaser, and the Company shall issue to the Purchaser a new Convertible
Debenture, duly executed by the Company, in form and substance identical to the
Convertible Debenture surrendered by the Purchaser, for the balance of the
aggregate principal amount of Convertible Debentures that have not been so
converted.
11.2 Delivery of Stock Certificates; Time Conversion
Effective; No Adjustment for Interest or Dividends. As promptly as practicable
after the surrender (as herein provided of a Convertible Debenture for
conversion, the Company shall deliver or cause to be delivered to or upon the
written order of the holder of the Convertible Debenture so surrendered,
certificates representing the number of fully paid and nonassessable Shares into
which the Convertible Debenture may be converted. Subject to the following
provisions of this Section 11.2, such conversion shall be deemed to have been
made at the close of business on the date that such Convertible Debenture shall
have been surrendered for conversion at the office of the Company provided for
in Section 8.2 (the "Conversion Date"), so that the rights of the holder of such
Convertible Debenture as a holder thereof, shall cease at such time and the
person or persons entitled to receive any of the Shares upon conversion of the
Convertible Debentures shall be treated for all purposes as having become the
record holder or holders of such Shares at such time; provided, however, that no
such surrender or any date when the stock transfer books of the Company shall be
closed, shall be effective to constitute the person or persons entitled to
receive Shares upon such conversion as the record holder or holders of such
Shares on such date, but such surrender shall be effective to constitute the
person or persons entitled to receive such Shares as the record holder or
holders thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open or the Company is required to
convert Convertible Debentures. The Company will, at the time of such
conversion, upon request of the holder of the Convertible Debenture, acknowledge
in writing its continuing obligation to such holder in respect of any rights
(including, without limitation, any right of registration of the Shares issued
upon such conversion) to which such holder shall continue to be entitled under
this Agreement after such conversion, provided, that, the failure of such holder
to make any such requests shall not affect the continuing obligation of the
Company to such holder in respect of such rights.
If the day for the exercise of the conversion right shall
not be a Business Day, then such conversion right will automatically be deemed
to be exercised on the next succeeding day which is a Business Day.
No adjustments in respect of interest or cash dividends
shall be made upon conversion of any Convertible Debenture. The Company shall
pay all unpaid interest on any Convertible Debenture so converted which has
accrued to (but not including) the date upon which such conversion is deemed to
have been effected in accordance with this Section 11.2.
11.3 Notice to Holders of Election. Upon receipt of an
election to convert by a holder of Convertible Debentures pursuant to this
Article 11, the Company shall, as soon as practicable, notify the holders of the
remaining Convertible Debentures of such election.
11.4 Adjustment of Conversion Price. The Conversion Price shall be
subject to adjustment as of the Closing Date as follows:
(a) In case the Company shall, after the date hereof, (i)
pay a stock dividend or make a distribution in shares of its capital stock
(whether shares of its Common Stock or of capital stock of any other class),
(ii) subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock any shares of capital
stock of the Company, the Base Price in effect immediately prior to such action
shall be adjusted so that the holder of a Convertible Debenture thereafter
surrendered for conversion shall be entitled to receive an equivalent number of
shares of capital stock of the Company which he would have owned immediately
following such action had such Convertible Debenture been converted immediately
prior thereto. Any adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
(b) In case the Company, after the date of this Agreement,
shall distribute to all holders of its outstanding Common Stock any shares of
capital stock (other than Common Stock), evidences of its Indebtedness or assets
(including securities and cash, but excluding any cash dividend paid out of
current or retained earnings of the Company and dividends or distributions
payable in stock for which adjustment is made pursuant to subsection (a) of this
Section 11.4) or rights, warrants or options to subscribe for or purchase
securities of the Company, then in each such case the Base Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Base Price in effect immediately prior to the record date of such distribution
by a fraction of which the numerator shall be the Base Price then in effect less
the fair market value on such record date (as determined in good faith by the
Board of Directors of the Company which determination shall be conclusive) of
the portion of the capital stock or the evidences of Indebtedness or the assets
so distributed to the holder of one share of Common Stock or of such
subscription rights, warrants or options applicable to one share of Common Stock
and of which the denominator shall be the Base Price then in effect. Such
adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution. If at the
end of the period during which warrants, rights or options described in this
subsection (b) are exercisable not all such warrants, rights or options shall
have been exercised, the adjusted Base Price shall be immediately readjusted to
what it would have been based on the number of warrants, rights or options
actually exercised.
(c) Notwithstanding anything in subsection (b) of this
Section 11.4 to the contrary, with respect to any rights, warrants or options
covered by subsection (b) of this Section 11.4, if such rights, warrants or
options are only exercisable upon the occurrence of certain triggering events,
then for purposes of this Section 11.4 such rights, warrants or options shall
not be deemed issued or distributed, and any adjustment to the Conversion Price
required by subsection (b) of this Section 11.4 shall not be made until such
triggering events occur and such rights, warrants or options become exercisable.
(e) In any case in which this Section 11.4 shall require
that an adjustment be made immediately following a record date or an effective
date, the Company may elect to defer (but only until five Business Days
following the mailing by the Company to the holders of Convertible Debentures of
the certificate required by subsection (g) of this Section 11.4) issuing to the
holder of any Convertible Debenture converted after such record date or
effective date the shares of Common Stock issuable upon such conversion over and
above the shares of Common Stock issuable upon such conversion on the basis of
the Conversion Price prior to adjustment, and paying to such holder any amount
of cash in lieu of a fractional share.
(f) No adjustment in the Conversion Price shall be required
to be made unless such adjustment would require an increase or decrease of at
least one percent (1%) in such price; provided, however, that any adjustments
which by reason of this subsection (f) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 11.4 shall be made to the nearest cent.
(g) Whenever the Base Price is adjusted as provided in
Section 11.4(a) herein, the Company will promptly mail to the holders of the
Convertible Debentures, a certificate of the Company's Treasurer or Chief
Financial Officer setting forth the Base Price as so adjusted and a brief
statement of facts accounting for such adjustment.
(i) Irrespective of any adjustment or change in the
Conversion Price and the number of Shares actually purchasable under the
Convertible Debentures, the Convertible Debentures theretofore and thereafter
issued may continue to express the Conversion Price per Share and the number of
Shares purchasable thereunder as the Conversion Price per Share and the number
of Shares purchasable as expressed upon the Convertible Debentures when
initially issued.
11.5 Company's Consolidation or Merger. Except as otherwise
provided in Section 9.1 hereof, if the Company shall at any time consolidate or
merge into another corporation, (a) the Company shall give at least five (5)
days prior written notice to the holders of the Convertible Debentures of such
consolidation or merger and the terms thereof, and (b) the holder of a
Convertible Debenture shall thereafter be entitled to receive, upon the
conversion thereof, the securities or property to which a holder of the number
of Shares then deliverable upon the conversion thereof would have been entitled
upon such consolidation or merger, and the Company shall take such steps in
connection with such consolidation or merger as may be necessary to assure such
holder that the provisions of this Agreement shall thereafter be applicable, as
nearly as reasonably may be in relation to any securities or property thereafter
deliverable upon the conversion of the Convertible Debenture including, but not
limited to, obtaining a written acknowledgment from the continuing corporation
or other appropriate corporation of its obligation to supply such securities or
property upon such conversion. Except as otherwise provided in Section 9.1
hereof, a sale of all or substantially all the assets of the Company shall be
deemed a consolidation or merger for the foregoing purposes.
11.6 Reserve of Sufficient Shares. The Company will reserve
and keep available a sufficient number of shares of its Common Stock to satisfy
the conversion requirements of all outstanding Convertible Debentures. The
Company will take all such action as may be necessary to insure that all Shares
issued upon conversion of the Convertible Debentures will be duly and validly
authorized and issued and fully paid and nonassessable.
11.7 Taxes on Conversion. The issuance of certificates for
Shares upon the conversion of Convertible Debentures shall be made without
charge to the holders of Convertible Debentures converting such Convertible
Debentures for any issue or stamp tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective names of,
or in such names as may be directed by, the holders of the Convertible
Debentures converted; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the Convertible Debenture converted, and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance 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.
11.8 Cancellation of Converted Convertible Debentures. All
Convertible Debentures which have been converted shall be canceled by the
Company and no Convertible Debentures shall be issued in lieu thereof.
11.9 Notice to Holders of Convertible Debentures. In case at
any time:
(a) the Company shall take any action which would require an
adjustment in the Conversion Price pursuant to Section 11.4(a); or
(b) there shall be any capital reorganization or
reclassification of the Common Stock (other than a change in par value or from
par value to no par value or from no par value to par value of the Common
Stock), whether or not such reorganization or reclassification results in an
adjustment in the Conversion Price, or any consolidation or merger to which the
Company and its Subsidiaries is a party and for which approval of any
Stockholders of the Company is required, or any sale or transfer of all or
substantially all of the assets of the Company and its Subsidiaries; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice to
the holders of the Convertible Debentures, not less than thirty (30) days before
any record date or other date set for definitive action, of the date on which
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up shall take place,
as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the current Conversion Price and the kind and amount
of the Shares and other securities and property deliverable upon conversion of
the Convertible Debentures. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such adjustment,
distribution, reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be (on which date, in
the event of voluntary or involuntary dissolution, liquidation or winding up of
the Company, the right to convert the Convertible Debentures into Shares shall
terminate).
Without limiting the obligation of the Company to provide
notice to the holders of Convertible Debentures or Shares of corporate action
hereunder, it is agreed that failure of the Company to give such notice shall
not invalidate such corporate action of the Company.
12. CALL OF CONVERTIBLE DEBENTURES BY THE COMPANY.
The Company shall not directly or indirectly, call, prepay,
redeem, repurchase, convert or otherwise acquire any Convertible Debentures or
any portion thereof, except as set forth in this Article 12.
12.1 Optional Conversion or Redemption Upon Call by the Company.
The Company may, at its option, call the Convertible Debentures, either in whole
or in part on a pro-rata basis:
(i) at any time on or after February 28,
1998 and prior August 31, 1998 if
the average of the Closing Prices of
the Company's Common Stock for at
least 15 consecutive trading days
prior to the Call Date shall be
equal to or in excess of 150% of the
Base Price per share;
(ii) at any time on or after August 31,
1998 and prior August 31, 1999 if
the average of the Closing Prices of
the Company's Common Stock for at
least 15 consecutive trading days
prior to the Call Date shall be
equal to or in excess of 160% of the
Base Price per share; or
(iii) at any time on or after August 31,
1999 if the average of the Closing
Prices of the Company's Common Stock
for at least 15 consecutive trading
days prior to the Call Date shall be
equal to or in excess of 175% of the
Base Price per share .
In the event of a call by the Company pursuant to this Section
12.1, the holders, at their option, may require the Company to convert their
Convertible Debentures (into fully paid and nonassessable shares of the
Company's Common Stock) at the Conversion Price (the "Holder's Option").
12.2 Notice of Call. The right of the Company to call any
Convertible Debentures pursuant to Section 12.1 shall be conditioned upon its
giving notice of such call (the "Call Notice"), by personal delivery, overnight
courier, certified mail or by facsimile, signed by an authorized officer, to the
holders of Convertible Debentures, not less than fifteen (15) Business Days
prior to the date upon which the call is to be made (the "Call Date"). The Call
Notice shall specify (i) the aggregate principal amount of the Convertible
Debentures to be called, (ii) the date of such call, and (iii) the accrued and
unpaid interest thereon (to, but not including, the Call Date). Within ten (10)
Business Days after receipt of the Call Notice by the holder of a Convertible
Debenture, such holder shall notify the Company, by personal delivery, overnight
courier, certified mail or by facsimile, signed by the holder, of the Holder's
Option, pursuant to which the holder shall direct whether the holder wishes the
Convertible Debentures to be converted or redeemed pursuant to Section 12.1
hereof (in the event that a holder fails to respond to the Call Notice or fails
to respond within the time period or via the means set forth herein, the Holders
Option shall become void and of no further effect and the Company shall be
entitled to redeem the Convertible Debentures as provided in Section 12.1 or
12.2, as the case may be).
12.3 Partial Call. In the event of a partial call by the
Company pursuant to this Article 12, the aggregate principal amount of each call
of Convertible Debentures pursuant to Section 12.1 hereof, shall be allocated
among the Convertible Debentures at the time outstanding, in proportion, as
nearly as practicable, to the respective unpaid principal amounts of such
Convertible Debentures.
12.4 Surrender of Convertible Debentures Upon Call. In the
event that any Convertible Debentures shall be surrendered to the Company upon
conversion as provided in this Article 12, interest shall cease to accrue upon
such Convertible Debentures so surrendered.
12.5 Section 11 Applicable. For purposes of conversion of the
Convertible Debentures by the Company pursuant to this Article 12, the
provisions of Section 11.1 through 11.4 herein, shall be controlling, as if the
same shall have been contained in this Article 12 (except that with respect to
Section 11.2, in the event that a holder shall choose redemption as the Holders
Option (pursuant to Section 12.2 herein), the Company shall make payment to the
holder as soon as practicable after the Conversion Date, by bank or certified
check or by wire transfer).
13. REGISTRATION RIGHTS; RESTRICTIONS ON TRANSFER.
13.1 Notification of Proposed Sale. (a) Unless paragraph (b)
of this Section 13.1 is applicable, each holder of a Convertible Debenture by
acceptance thereof agrees that it will notify the Company in writing before
offering for sale or selling or otherwise disposing (provided, that, conversion
will not be deemed to be a disposition) of any Convertible Debenture or the
Shares, describing briefly the nature of such sale or other disposition, and no
such sale or other disposition shall be made unless and until (i) the holder has
supplied to the Company, if requested by the Company within five (5) Business
Days after receipt of such notice, an opinion of counsel for the holder which
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration under the Securities Act is required with respect to such sale or
other disposition (which opinion may be conditioned upon the transferee's
assuming the obligations of a holder of Convertible Debentures or Shares under
this Section 13.1) or (ii) an appropriate registration statement with respect to
such sale or other disposition of such Convertible Debentures or Shares shall
have been filed by the Company with the Commission and declared effective by the
Commission.
(b) If the holder of Convertible Debentures or Shares has
obtained an opinion of its own counsel that the sale of such Convertible
Debentures or Shares may be made without registration under the Securities Act
pursuant to Rule 144, the notification provided in paragraph (a) need not be
given to the Company prior to the proposed sale, provided, that, the Company
shall not be obliged to register on its registry or transfer books any transfer
pursuant to this subsection (b) unless it is satisfied that the requirements of
Rule 144 or any successor thereto have been satisfied.
(c) The Company may endorse on all Convertible Debentures
and on all certificates evidencing Shares (issued upon conversion of the
Convertible notes) an appropriate legend restricting their transfer except upon
compliance with the provisions of paragraph (a) above, which in the case of the
Convertible Debentures shall be in the terms set out in Exhibit A hereto and in
the case of the Shares shall read as follows - "THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE ACT OR AN
OPINION, IF REQUESTED, OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACT"; provided, that, no such legend shall be endorsed
on any Convertible Debenture or Share certificates which, when issued, are no
longer subject to the restrictions of this Section 13.1, and provided, further,
that if an opinion of satisfactory counsel which opinion shall be reasonably
satisfactory to counsel for the Company concludes that the legend is no longer
necessary, the Company will deliver upon transfer or exchange Convertible
Debentures or Share certificates without such legends.
13.2 Obligation to Register. At any time after February 28,
1996, the holders of not less than sixty-six and two thirds percent (66 2/3%) of
the aggregate principal amount of the Convertible Debentures (we are including
for this purpose and for this purpose only, holders of Convertible Debentures
that have already been converted) shall be entitled to make one demand
registration (the "Demand") and the Company agrees to use its best efforts to
file with the Commission as soon as practicable after the Demand registration
statement for the offering made on a continuous or delayed basis pursuant to
Rule 415 under the Securities Act covering all of the Shares. Such registration
statement shall be on Form S-3 under the Securities Act, if such form is then
available for use by the Company, or if such Form is not then available for use
by the Company, another form that is available to the Company permitting the
registration of the Shares for resale by the holders of the Convertible
Debentures or the Shares ("Holders") in the manner or manners reasonably
designated by them (including, without limitation, one or more underwritten
offerings). The Company shall use its best efforts to cause such registration
statement to be declared effective pursuant to the Securities Act as promptly as
possible following the filing thereof, and subject to applicable rules and
orders, to keep such registration statement continuously effective under the
Securities Act for two years after the effectiveness of such registration
statement, or such shorter period ending on the earlier of (i) the date that
there are less than 300,000 Shares held by persons who were holders of the
Convertible Debentures, or (ii) August 31, 2003.
13.3 "Piggyback Registration Rights." At any time prior to the
maturity of the Convertible Debentures, the Company shall, at least thirty (30)
days prior to the filing of any registration statement under the Securities Act
(other than a registration statement on Form S-8 or Form S-4 or any successor
forms) relating to the public offering of its Common Stock by the Company or any
of its security holders, give written notice of such proposed filing and of the
proposed date thereof to the Holders, and if, on or before the twentieth (20th)
day following the date on which such notice is given, the Company shall receive
a written request from the Holders requesting that the Company include among the
securities covered by such registration statement some or all of the Shares held
by or to be held after conversion by such Holder or Holders, the Company shall
include such Shares in such registration statement, if filed, so as to permit
such Shares to be sold or disposed of in the manner and on the terms of the
offering thereof set forth in such request.
13.4 Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any registration statement filed pursuant to
Sections 13.2 or 13.3 herein, the following provisions shall apply:
(i) If such registration statement shall be filed
pursuant to Section 13.3 hereof and if the managing underwriter advises the
Company in writing that the inclusion in such registration of some or all of the
Shares sought to be registered by the Holder(s) creates a substantial risk that
the proceeds or price per share that will be derived from such registration will
be reduced or that the number of shares to be registered at the insistence of
the Holder(s), plus the number of shares of Common Stock sought to be registered
by the Company and any other stockholders of the Company is too large a number
to be reasonably sold, then, in such event, the number of shares sought to be
registered for the stockholders of the Company shall be reduced, pro rata in
proportion to the number of shares sought to be registered to the number of
shares recommended be sold by the managing underwriter.
(ii) If requested by the Holder(s) in connection
with a registration statement filed pursuant to Section 13.2, the Company will
enter into an underwriting agreement with the underwriters for such offering,
such agreement to be reasonably satisfactory in form and substance to the
Company, the holder(s) and the underwriters, and to contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in such agreements used by the managing underwriter,
including, without limitation, restrictions of sales of Common Stock or other
securities by the Company as may be reasonably agreed to between the Company and
such underwriters, and indemnities and rights to contributions to the effect and
to the extent provided in Sections 13.5 and 13.6 hereof. The Holders shall be a
party to any underwriting agreement relating to an underwritten sale of their
Shares and may, at their option, require that any or all of the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters, shall also be made to and for the benefit of the Holders. All
representations and warranties of the Holders shall be made to or for the
benefit of the Company.
(iii) The Company shall provide a transfer agent and
registrar (which may be the same entity) for the Shares, not later than the
effective date of such registration.
(iv) All expenses in connection with the preparation
and filing of a registration statement filed pursuant to Sections 13.2 or 13.3
shall be borne solely by the Company, except for any transfer taxes payable with
respect to the disposition of such Shares, and any underwriting discounts and
selling commissions applicable solely to such sales of Shares, which shall be
paid by the Holders of the Shares being registered.
(v) The Company shall use its best efforts to cause
all of the shares covered by such registration statement to be quoted on the
NASDAQ National Market System, if the quoting or listing of such registered
shares is permitted by such exchange.
(vi) Following the effective date of such
registration statement, the Company shall, upon the request of the Holders,
forthwith supply such number of prospectuses (including exhibits thereof and
preliminary prospectuses and amendments and supplements thereto) meeting the
requirements of the Securities Act and such other documents as are referred to
in the prospectus as shall be reasonably requested by the Holders to permit the
Holders to make a public distribution of their Shares.
(vii) The Company shall prepare, if necessary, and
file such amendments and supplements to such registration statement filed
pursuant tot Section 13.2 hereof, as may be necessary to keep such registration
statement effective, subject to applicable laws, rules and orders, for a period
of five years after the Closing date, or such shorter period ending when there
cease to be outstanding any Shares or Convertible Debentures held by the
Holders, and to comply with the provisions of the Securities Act with respect to
the offer and sale or other disposition of the Shares covered by such
registration statement during the period required for distribution of the
Shares.
(viii) The Holders may select the underwriter or
underwriters (which shall be of nationally recognized standing), if any, who are
to undertake any offering and distribution of the Shares to be included in a
registration statement filed under the provisions of Subsection 13.2 hereof,
subject to the Company's prior approval of the underwriter, which approval shall
not be unreasonably withheld.
(ix) The Company shall use its best efforts to
register the Shares covered by any such registration statements filed pursuant
to Section 13.2 under such securities or Blue Sky laws in addition to those in
which the Company would otherwise sell shares, as the Holders reasonably
request, except that neither the Company nor the Holders shall for any such
purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction where it is
not so qualified. The fees and expenses incurred in connection with such
registration shall be borne by the Company.
(x) The Holders shall cooperate fully with the
Company and provide the Company with all information reasonably requested by the
Company for inclusion in the registration statement or as necessary to comply
with the Securities Act. The Company shall cooperate fully with any underwriters
selected by the Holders and counsel to such underwriters, and shall provide
reasonable and customary access to the Company's books and records (upon receipt
from such underwriters of customary confidentiality agreements) in order to
facilitate such underwriters' review and examination of the Company in
connection with such underwriting.
(xi) The Company shall notify the Holders, at any
time after effectiveness when a prospectus relating thereto is required to be
delivered under the Securities Act within the period mentioned in subdivision
(vii) of this Section 13.4, of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Holders shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Holders prepare
and furnish the Holders promptly a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances than existing.
(xii) The Company shall furnish to the Holders at
the time of the disposition of the Shares, a signed copy of an opinion of the
Company's regular in-house or outside general counsel, or other counsel of the
Company's selection reasonably acceptable to, and which opinion shall be
reasonably satisfactory in form and substance to, the Holders to the effect
that: (a) a registration statement covering such Shares has been filed with the
Commission under the Securities Act and has been made effective by order of the
Commission, (b) said registration statement and prospectus contained therein
comply as to form in all material respects with the requirements of the
Securities Act, and nothing has come to such counsel's attention (after due
inquiry) which would cause such counsel to believe that either said registration
statement or such prospectus contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of such prospectus, in light of the
circumstances under which they were made) not misleading, (c) after due inquiry
such counsel knows of no legal or governmental proceedings required to be
described in such registration statement or prospectus which are not described
as required, or of any contracts or documents of a character required to be
described in such registration statement or such prospectus to be filed as an
exhibit to such registration statement or to be incorporated by reference
therein which are not described and filed as required and (d) to such counsel's
knowledge, no stop order has been issued by the Commission suspending the
effectiveness of such registration statement; it being understood that such
opinion may contain such qualifications and assumptions as are customary in the
rendering of similar opinions, and that such counsel may rely, as to all factual
matters treated therein, on certificates of the Company (copies of which shall
be delivered to the Holders).
(xiii) The Company will use its best efforts to
comply with the reporting requirements of Sections 13 and 15(d) of the Exchange
Act, to the extent it shall be required to do so pursuant to such sections, and
at all times while so required shall use its best efforts to comply with all
other public information reporting requirements of the Commission of Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any of the Company's Common Stock held by the Holders. The
Company will also cooperate with the Holders in supplying such information and
documentation as may be necessary for the Holders to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Company Common Stock held by the Holders.
13.5 Indemnification.
(i) In the event of the registration of the
registration of any shares of the Company under the Securities Act pursuant to
the provisions of Sections 13.2 or 13.3, the Company agrees to indemnify and
hold harmless the Holders, each underwriter, broker or dealer, if any, and their
directors, officers and employees, of such Shares, and each other person, if
any, who controls the holders of the Convertible Debentures or the Shares (or a
permitted assignee thereof), such underwriter, broker or dealer within the
meaning of the Securities Act, from and against any and all losses, claims,
damages for liabilities (or actions in respect thereof), joint or several, to
which the Holders (and as applicable) its directors, officers or employees, or
such underwriter, broker or dealer or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities for actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such shares were registered under the
Securities Act, any preliminary prospectus or final prospectus relating to such
Shares, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation under the Securities
Act applicable to the Company or relating to any action or inaction required by
the Company in connection with any such registration and will reimburse the
Holders, each such underwriter, broker or dealer and controlling person, and
their directors, officers or employees, for any legal or other expenses
reasonably incurred by the Holders or such underwriter, broker or dealer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary prospectus, such final prospectus or such amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by the Holders and as applicable, such Holders'
directors, officers or employees, or such underwriter, broker, dealer or
controlling person for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(ii) In the event of the registration of any Shares
of the Holders under the Securities Act for sale pursuant to the provisions of
this Agreement, the Holders agree to indemnify and hold harmless the Company,
its directors, officers and employees, from and against any losses, claims,
damages or liabilities, joint or several, to which the Company, its directors,
officers or employees, may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus relating to such Shares, or any amendment or
supplement thereof, or arise out of or are based upon omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the
Company by the Holders for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 13.4 (for purposes of this Section 13.4, an
"Indemnified Party") of notice of the commencement of any action or claim
relating to any registration statement filed under Sections 13.2 or 13.3 or as
to which indemnity may be sought hereunder, such Indemnified Party will, if a
claim for indemnification hereunder in respect thereof is to be made against any
other party hereto (for purposes of this Section 13.4, an "Indemnifying Party"),
give written notice to such Indemnifying Party of the commencement of such
action or claim, but the failure to so notify the Indemnifying Party will not
relieve it from any liability which it may have to any Indemnified Party
otherwise than pursuant to the provisions of this Section 13.4 and shall also
not relieve the Indemnifying Party of its obligations under this Section 13.4,
except to the extent that the Indemnified Party is damaged solely as a result of
the failure to give timely notice. In case any such action is brought against an
Indemnified Party, and it notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled (at its own expense) to
participate in and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense with counsel
satisfactory to such Indemnified Party, of such action and/or to settle such
action and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; provided, however,
that no Indemnifying Party and no Indemnified Party shall enter into any
settlement agreement which would impose any liability on such other party or
parties without the prior written consent of such other party or parties.
13.6 Contribution. If the indemnification provided for in
Section 13.5 hereof is unavailable to the Indemnified Party in respect of any
losses, claims, damages or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) as between the Company and
the Holders on the one hand and the underwriters on the other, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Holders on the one hand and the underwriters on the other from
the offering of the Shares, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the Holders on the one
hand and of the underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations and (ii) as between the Company
on the one hand and each Holder on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each Holder in
connection with such statements or omissions, as well as any other relevant
equitable considerations.
In no event shall the obligation of any Indemnifying Party
to contribute under this Section 13.6 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 13.5 hereof had been available under
the circumstances.
The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the next
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 13.6, no Holder or underwriter
shall be required to contribute any amount in excess of the amount by which (i)
in the case of a Holder, the net proceeds received by such Holder from the sale
of Shares or (ii) in the case of an underwriter, the total price at which the
Shares purchased by it and distributed to the public were offered to the public
exceeds, in any case, the amount of any damages that such Holder or underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
13.7 Survival. The indemnity and contribution agreements
contained in this Section 13 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified Party
or by or on behalf of the Company and (iii) the consummation of the sale or
successive resales of the Shares.
14. REPLACEMENT OF CONVERTIBLE DEBENTURES.
Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Convertible Debenture and, in the
case of any such loss, theft, or destruction, upon delivery of a bond of
indemnity satisfactory to the Company or in the case of any such mutilation,
upon surrender and cancellation of such Convertible Debenture, the Company will
issue a new Convertible Debenture of like tenor as if the lost, stolen,
destroyed or mutilated Convertible Debenture were then surrendered for exchange
in lieu of such lost, stolen, destroyed or mutilated Convertible Debenture.
15. AMENDMENT AND WAIVER.
Except as set forth in Article 5, this Agreement may be
amended (or any provision thereof waived) with the consent of the Company and
the Holders of at least sixty-six and two-thirds percent (66 2/3%) in aggregate
principal amount of the Convertible Debentures then outstanding; provided,
however, that no such amendment or waiver shall (i) change the fixed maturity of
any Convertible Debenture, the rate or the time of payment of interest thereon,
the principal amount thereof or the circumstances under which such Convertible
Debentures may be called, converted to redeemed without the consent of the
holders of all the Convertible Debentures then outstanding, (ii) reduce the
aforesaid percentage of Convertible Debentures, the holders of which are
required to consent to any amendment or waiver, without the consent of the
holders of all the Convertible Debentures then outstanding or (iii) increase the
percentage of the aggregate principal amount of the Convertible Debentures that
the holders of which may declare the Convertible Debentures to be due and
payable under Article 10 herein, without the consent of the holders of all of
the Convertible Debentures then outstanding or (iv) modify the conversion rights
or the Conversion Price and adjustments thereto (as outlined in Articles 11 and
12 herein) in any material respect, without the consent of the holders of all of
the Convertible notes then outstanding or (v) alter the registration rights
under Article 13 herein in any material respect, without the consent of the
holders of all of the Convertible Debentures then outstanding and all of the
Shares outstanding other than Shares which have been sold in registered public
offerings; and provided, further, that no amendment or waiver of any provision
of Article 5 shall be effective against any holder of Senior Indebtedness who
has not consented thereto. The Company and each holder of a Convertible
Debenture then or thereafter outstanding shall be bound by any amendment or
waiver effected in accordance with the provisions of this Article, whether or
not such Convertible Debenture shall have been marked to indicate such
modification but any Convertible Debenture issued thereafter shall bear a
notation as to any such modification. Promptly after obtaining the written
consent of the holders herein provided, the Company shall transmit a copy of
such modification to all of the holders of the Convertible Debentures then
outstanding.
16. HOME OFFICE PAYMENT.
The Company will make payments of principal and interest by
check payable to the order of the Holder duly mailed or delivered to the Holder
at the address of the Holder, or at such other address as the Holder may
designate in writing, or, if requested by the Holder, by wire transfer to its
(or its nominee's) account at any bank or trust company in the United States of
America, notwithstanding any contrary provisions herein or in the Convertible
Debenture with respect to the place of payment. All such payments shall be made
in immediately available funds. The Purchaser agrees that, before the
Convertible Debenture is assigned or transferred, the Purchaser will make or
cause to be made a notation thereof of principal payments previously made
thereon and of the date to which interest thereon has been paid and will notify
the Company of the name and address of the transferee of such Convertible
Debenture if such name and address are known to the Purchaser.
17. NOTICES.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered by courier or mailed express mail or transmitted by telex, facsimile,
or other means of electronic transmission:
(a) if to the Purchaser, at such Purchaser's address as set
forth in the preamble, or at such other address as may have been furnished to
the Company by the Purchaser in writing; or
(b) if to any other holder of a Convertible Debenture, at
such address as the payee thereof shall have designated to the Company by a
written notice stating that such holder has acquired such Convertible Debenture
and designating such an address, or at such other address as may have been
furnished to the Company by such holder in writing; or
(c) if to the Company, at One Electronic Drive, Trenton, New
Jersey 08619; Attention: Myles M. Kranzler, Chief Executive officer, or at such
other address as may have been furnished to the Purchaser or other holders of
Convertible Debentures in writing by the Company.
18. ENTIRE AGREEMENT.
This Agreement and the Convertible Debentures embody the
entire agreement and understanding between the Purchasers and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
19. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by
or on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not.
20. HEADINGS.
The headings of the articles and sections of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof.
21. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of New Jersey, without giving effect
to its conflict of laws rules.
22. COUNTERPARTS.
This Agreement may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument. Facsimile signatures shall be deemed acceptable and binding.
23. SEVERABILITY.
Any provision hereof or of the Convertible Debentures which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
24. DEFINITIONS.
The following terms, when used in this Agreement, shall have the
following meanings:
"Affiliate" shall mean any person that controls, is controlled by or is
under common control with the person in question. For purposes hereof, "control"
and the correlative definitions "controlled by" and "under common control with"
shall mean the power and ability to direct the management and affairs of the
person in question, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" has the meaning set forth in the preamble.
"Base Price" means the Closing Price of the Common Stock on the
Business Day immediately prior to the Closing Date.
"beneficial owner" has the meaning set forth in Rule 13d-3 promulgated
by the Commission under the Exchange Act.
"Board" or "Board of Directors" means, with respect to any person which
is a corporation, a joint stock company or a business trust, the board of
directors or other group, however designated, which is charged with legal
responsibility for the management of such person, or any committee of such board
of directors or group, however designated, which is authorized to exercise the
power of such board or group in respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in the State of New Jersey are legally authorized to close.
"Capital Lease" shall mean a lease of property which is capitalized on
the financial statements of the lessee in accordance with generally accepted
accounting principles.
"Closing" has the meaning set forth in Article 3.
"Closing Date" has the meaning set forth in Article 3.
"Closing Price" means (i) the last reported sale price as reported on
the composite tape of the NASDAQ National Market System (or, in case no such
sale takes place on such day, the average of the closing bid and asked prices on
the NASDAQ National Market System) or the successor market or exchange on which
the Common Stock is listed or admitted to trading, or (ii) if the Common Stock
is not listed or admitted to trading on any national securities exchange or on
the NASDAQ National Market System, the average of the highest reported bid and
lowest reported asked price as furnished by NASDAQ, the national Quotation
Bureau, Inc., or comparable system or organization, or (iii) in the absence of
any of the foregoing, the fair market value as determined in good faith by the
Board of Directors of the Company (which determination shall be conclusive).
"Commission" means the Securities and Exchange Commission and any other
similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Company" means Base Ten Systems, Inc., a New Jersey corporation, and
its successors and assigns, including any successor corporation by merger formed
for the purpose of reincorporating the Company in the State of Delaware.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement, means the aggregate for the Company and its
Subsidiaries of the amounts signified by such term, with intercompany items
eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital of
any such person, other than the parent of such group.
"Conversion Date" has the meaning set forth in Section 11.2
"Convertible Debentures" has the meaning set forth in Article 1.
"Conversion Price" means 125% of the Base Price, as the same may be
adjusted from time to time in accordance with the terms of this Agreement.
"Demand" has the meaning set forth in Section 13.2
"Event of Default" has the meaning set forth in Article 10.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"generally accepted accounting principles" means, unless otherwise
stated, generally accepted accounting principles in effect from time to time.
"Holders" has the meaning set forth in Section 13.2
"Holder's Option" has the meaning set forth in Section 12.1.
"Indebtedness" of any person means and includes, without duplication,
as of any date as of which the amount thereof is to be determined, (i) all
obligations of such person to repay money borrowed (including, without
limitation, all debentures payable and drafts accepted representing extensions
of credit, all obligations evidenced by bonds, debentures or other similar
instruments and all obligations upon which interest charges are customarily
paid), (ii) the value of all Capital Leases (as such term is defined in
accordance with generally accepted accounting principles in effect on the date
of this Agreement) in respect of which such person is liable as lessee or as the
guarantor of the lessee, (iii) the principal amount of all monetary obligations
which are secured by any lien or security interest existing on property owned by
such person whether or not the obligations secured thereby shall have been
assumed by such person, (iv) all guaranties of the Indebtedness of any other
person and (v) all amounts from time to time owing to trade creditors arising in
the ordinary course of such person's business.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Purchaser" has the meaning set forth in the preamble.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" has the meaning set forth in Section 5.7.
"Share" or "Shares" has the meaning set forth in Article 1.
"Solvent" shall mean when used with respect to any person that as of
the date as to which the person's solvency is to be measured:
(a) the fair saleable value of its assets is in excess of the
total amount of its liabilities (including contingent
liabilities as valued in accordance with applicable law) as
they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able to meet its debts as they mature.
<PAGE>
"Subsidiary" means any corporation organized under the laws of the
United States or of any state or of the District of Columbia or any foreign
jurisdiction of which (other than directors' qualifying shares required by law)
at least a majority of the shares of each class of the capital stock entitled to
vote at the time as of which any determination is being made, is owned,
beneficially and of record, by the Company or one or more of its Subsidiaries,
or both.
IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement of the date first written above.
BASE TEN SYSTEMS, INC.
By: /s/ MYLES M. KRANZLER
----------------------
Name: MYLES M. KRANZLER
Title: Chief Executive Officer
/s/ JESSE L. UPCHURCH
----------------------
JESSE L. UPCHURCH
<PAGE>
EXHIBIT A
THIS CONVERTIBLE SUBORDINATED DEBENTURE AND THE SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ARE NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN THE
PURCHASE AGREEMENT REFERRED TO HEREIN.
BASE TEN SYSTEMS, INC.
9.01% Convertible Subordinated Debenture
due August 31, 2003
Dated: August ___, 1996
Trenton, New Jersey
FOR VALUE RECEIVED, the undersigned, BASE TEN SYSTEMS, INC.
(the"Company"), a New Jersey corporation, hereby promises to pay to JESSE L.
UPCHURCH or his registered assigns, the principal sum of ----------($---- ) on
August 31, 2003, with interest (computed on the basis of a 360-day year of
twelve 30-day months) on the unpaid balance of such principal sum from the date
hereof at the interest rate of 9.01% per annum, payable semi-annually on the
last day of February and August in each year, commencing on February 28, 1997
(which first interest payment shall be for the period from the date hereof
through February 28, 1997), until the principal hereof shall have become due and
payable, whether at maturity or by acceleration or otherwise.
Payments of principal and interest shall be made in lawful money of the
United States of America at the principal office of the Company in Trenton, New
Jersey or at such other place as the Company shall have designated for such
purpose to the holder hereof in writing and may be paid by check mailed, or wire
transfer as provided in the Purchase Agreement referred to below, to the
registered address designated by the holder hereof for such purpose.
This Convertible Debenture is issued pursuant to a certain Purchase
Agreement (hereinafter called the "Purchase Agreement") dated as of August 8,
1996, between the Company and the Purchaser (capitalized terms not otherwise
defined herein shall have their respective meanings as set forth in the Purchase
Agreement).
This Convertible Debenture is subject to the provisions of and is
entitled to the benefits of the Purchase Agreement. In addition, the payment of
the principal and interest on this Convertible Debenture is subordinated in
right of payment to the prior payment in full of certain other obligations of
the Company to the extent and in the manner set forth in the Purchase Agreement.
Each holder of this Convertible Debenture, by accepting the same, agrees to and
shall be bound by the provisions of the Purchase Agreement.
This Convertible Debenture is transferable only upon the conditions
specified in the Purchase Agreement. Notwithstanding the foregoing, however,
this Debenture is registered with the Company as to both principal and interest
and transfer of this Convertible Debenture can be effected only by surrender of
this Convertible Debenture and either reissuance by the Company of this
Convertible Debenture or by issuance by the Company of a new Convertible
Debenture. The Company shall maintain a register for the registration and
transfer of this Convertible Debenture (the "Schedule"), containing the name and
address of any holder(s) of this Convertible Debenture. All transfers of this
Convertible Debenture and/or transferees of this Convertible Debenture shall be
registered in the Schedule. This Convertible Debenture may be assigned only upon
the surrender thereof at the address of the Company set forth in the Purchase
Agreement. Thereupon, the Company shall execute in the name of the assignee
either a reissued Convertible Debenture or a new Convertible Debenture, shall
register such transfer in the Schedule and shall deliver either a reissued
Convertible Debenture or a new Convertible Debenture to the holder. Upon
surrender or presentation of this Convertible Debenture to the Company for
transfer, this Convertible Debenture shall be duly endorsed and shall specify
the name and address of the transferee.
This Convertible Debenture is convertible into Common Stock of the
Company (as set forth in Articles 11 and 12 of the Purchase Agreement) in the
manner, and upon the terms and conditions, including without limitation, the
anti-dilution provisions, provided in the Purchase Agreement.
In case an Event of Default, as defined in the Purchase Agreement,
shall occur and be continuing, the principal of this Convertible Debenture may
be declared due and payable in the manner and with the effect provided in the
Purchase Agreement.
No reference herein to the Purchase Agreement and no provision hereof
or thereof shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal hereof and interest hereon at
the respective times and places set forth herein and in the Purchase Agreement.
This Convertible Debenture is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State of New Jersey,
without giving effect to its conflict of laws rules.
<PAGE>
Subject to the provisions of Article 19 of the Purchase Agreement, the
Company may treat the person in whose name this convertible Debenture is
registered as the owner and holder of this Convertible Debenture for the purpose
of receiving payment of principal and interest on this Convertible Debenture and
for all other purposes whatsoever and the Company shall not be affected by any
notice to the contrary.
IN WITNESS WHEREOF, BASE TEN SYSTEMS, INC. has caused this Convertible
Debenture to be dated, and to be executed on its behalf by its officer thereunto
duly authorized.
BASE TEN SYSTEMS, INC.
By:
-------------------
Name:
Title:
- --------------------------------------------------------------------------------
REGISTER FOR TRANSFERS
Name of Holder Address
-------------- -------
