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) December 9, 1997
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 (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
incorporation) 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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(Former Name or Former Address, If Changed Since Last Report.)
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ITEM 5 Other Events.
In order to assure that what the Company believes will be adequate
financial resources are available for continued marketing and development
efforts by the MTD, the Board of Directors authorized, and the Company
consummated on December 9, 1997, the first installment of the sale of up to $19
million of convertible preferred stock ("Preferred Stock") and Class A Stock
purchase warrants (the "Warrants"). A total of $9.375 million of Preferred Stock
and Warrants were sold and issued as of December 5, 1997, to several
institutional investors. The Company is obligated to sell and issue, and the
existing holders of the Preferred Stock are required to purchase, an additional
$9.675 million of Preferred Stock and Warrants, following shareholder approval,
which is required by NASDAQ rules. The $9.675 million of Preferred Stock and
Warrants not yet sold are expected to close by early January 1998.
Terms of the Financing
Holders of Preferred Stock have the following rights, privileges and
preferences:
Term; Dividends and Illiquidity Payments. The Preferred Stock has a term of
three years and pays a cumulative dividend of 8.0% per annum during any quarter
in which the closing bid price for the Class A Stock is less than $8.00 for any
10 consecutive trading days. An equivalent payment is payable to any holder of
Preferred Stock which is subject during any quarter to a standstill period (as
described below) following a Base Ten underwritten public offering or which is
non-convertible because of the limitations described below. Such dividends and
payments are payable only prior to conversion, and payable in cash or additional
Preferred Stock at Base Ten's option; however, if Base Ten elects to pay the
dividend in Preferred Stock, the amount of such payment will be 125% of the cash
amount due.
Liquidation Preference. The Preferred Stock has a liquidation preference as
to its principal amount and any accrued and unpaid dividends.
Conversion Rights. The Preferred Stock is convertible at any time or from
time to time into Class A Stock, at a conversion price equal to the lesser of
(i) $16.25 per share or (ii) the Weighted Average Price of the Class A Stock
prior to the conversion date. Weighted Average Price is defined as the volume
weighted average price of Class A Stock on Nasdaq (as reported at the close of
trading by Bloomberg Financial Markets) over any two trading days in the 20
trading day period ending on the day prior to the date the holder gives notice
of conversion (excluding the lowest closing bid price in that period). The
holder has the right to select such two days. In any event, no more than
3,040,000 shares of Class A Stock shall be issued upon conversion of all of the
Preferred Stock. Any Preferred Stock remaining outstanding because of this
limitation may be redeemed at the holder's option for a subordinated 8%
promissory note maturing when the Preferred would have matured.
Company Redemption Right. Base Ten has the right, at any time, to redeem
all or any part of the outstanding Preferred Stock or subordinated notes at 130%
of their original purchase price.
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Mandatory Redemption on Maturity. Any shares of Preferred Stock or
subordinated notes still outstanding three years after issuance must be redeemed
in either cash or at Base Ten's option, in Class A Stock. If Base Ten elects to
make the redemption in Class A Stock, the amount of such payment will be 125% of
the original purchase price.
Voting Rights. The holders of the Preferred Stock have the same voting
rights as the holders of Class A Stock, calculated as if all outstanding shares
of Preferred Stock had been converted into shares of Class A Stock on the record
date for determination of shareholders entitled to vote on the matter presented.
Warrants. For each $1 million of Preferred Stock purchased, purchasers
received five-year warrants to purchase 40,000 shares of Class A Stock
exercisable at $16.25 per share.
Right of First Refusal. So long as shares of the Preferred Stock remain
outstanding, each holder has the right (with certain exceptions) to purchase, on
five days notice, up to that portion of any future equity financing by Base Ten
which would be sufficient to enable the holder to maintain its percentage
interest in Base Ten equity on a fully diluted basis.
Registration. Base Ten is required to file a registration statement
("Registration Statement") with the Securities and Exchange Commission ("SEC")
registering for resale the Class A Stock underlying the Preferred Stock,
including any Preferred Stock which may be issued as a dividend, and the
Warrants, which must be effective no later than March 2, 1998. In the event the
Registration Statement is not declared effective by the SEC by such date, Base
Ten will be required to pay the holders of the Preferred an amount equal to
11/2% of the original purchase price for each month until the Registration
Statement has been declared effective. The holders have agreed, if requested by
a managing underwriter, to a maximum 90-day standstill period following any
underwritten Base Ten public offering, but not in excess of two such standstills
(or more than 90 days)in any 18-month period. In the event a standstill period
is effective, the maturity date of the Preferred Stock would be extended by the
duration of the standstill period.
Use of Proceeds
The proceeds of the sale of the Preferred are expected to be used for
continued development of the Company's PHARMASYST(R) family of products,
increased marketing activities, working capital, and acquisition financing.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99.1 Securities Purchase Agreement
99.2 Registration Rights Agreement
99.3 Certificate of Amendment of Restated Certificate of
Incorporation Providing for Designation, Preferences
and Rights of the Convertible Preferred Shares, Series A
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99.4 Common Stock Purchase Warrant Certificate
99.5 Press Release, dated as of December 9, 1997
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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.
Date: December 18, 1997 By:/s/ Thomas E. Gardner
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Name: Thomas E. Gardner
Title: President and Chief
Executive Officer
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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.
Date: December 18, 1997 By: ___________________________________
Name: Thomas E. Gardner
Title: President and Chief
Executive Officer
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Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
December 4, 1997, by and between BASE TEN SYSTEMS, INC., a New Jersey
corporation (the "Company"), with headquarters located at One Electronics Drive,
Trenton, New Jersey, 08619 and the purchasers ("Purchasers") set forth on the
execution pages hereof.
RECITALS
A. The Company and Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act").
B. Purchasers desire (a) to purchase, upon the terms and conditions
stated in this Agreement, in the aggregate at the First Closing and the Second
Closing, Nineteen Million U.S. Dollars ($19,000,000) face amount of the
Company's Convertible Preferred Shares (the "Preferred Shares"), in the form
attached hereto as Exhibit A, convertible into shares of the Company's Class A
Common Shares, par value $1.00 per share (the "Common Stock") and (b) to
receive, in consideration for such purchase, Stock Purchase Warrants (the
"Warrants"), in the form attached hereto as Exhibit B, to acquire shares of
Common Stock. The shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants are referred to herein as "Warrant Shares". The shares
of Common Stock to be issued to the Purchasers upon conversion of the Preferred
Shares are referred to herein as the "Common Shares." The Preferred Shares may
be exchanged for senior subordinated notes (the "Notes") by the Purchasers under
the terms and conditions specified in the Certificate of Amendment. The
Preferred Shares, the Common Shares, the Warrants, the Warrant Shares and the
Notes are collectively referred to herein as the "Securities."
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and each Purchaser hereby agree as
follows:
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ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase of Preferred Shares. Subject to the terms and conditions
of this Agreement, the issuance, sale and purchase Nine Million Three Hundred
Seventy Five Thousand U.S. Dollars ($9,375,000) face amount of the Preferred
Shares shall be consummated in an initial closing (the "First Closing"). On the
date of the First Closing, subject to the satisfaction or waiver of the
conditions set forth in Article VI and Section 7.1, the Company shall issue and
sell to the Purchasers, and the Purchasers severally and not jointly agree to
purchase from the Company, the Preferred Shares specified below the signature
for each such Purchaser on this agreement for an aggregate purchase price of
Nine Million Three Hundred Seventy Five Thousand U.S. Dollars ($9,375,000) (the
"Initial Purchase Price"). Subject to the terms and conditions of this
Agreement, the issuance, sale and purchase of Nine Million Six Hundred Twenty
Five Thousand U.S. Dollars ($9,625,000) face amount of the Preferred Shares
shall be consummated in a second closing (the "Second Closing," the first
Closing and the Second Closing are collectively referred to as the "Closing").
On the date of the Second Closing, subject to the satisfaction or waiver of the
conditions set forth in Section 7.2, the Company shall issue and sell to the
Purchasers, and the Purchasers severally and not jointly agree to purchase from
the Company, the Preferred Shares specified below the signature for each such
Purchaser on this agreement for an aggregate purchase price of Nine Million Six
Hundred Twenty Five Thousand U.S. Dollars (the "Additional Purchase Price," and,
together with the Initial Purchase Price, the "Purchase Price").
1.2 Form of Payment. The Purchasers shall pay the Initial Purchase
Price and the Additional Purchase Price for the Preferred Shares by wire
transfer to the account designated pursuant to the Escrow Agreement by and among
the Company, the Purchasers and the escrow agent ("Escrow Agent") designated
therein in the form attached hereto as Exhibit D ("Escrow Agreement") upon
delivery to the Escrow Agent of the Preferred Shares and, at the First Closing,
the Warrants, all in accordance with the terms of the Escrow Agreement, and upon
satisfaction of the other Closing conditions.
1.3 First Closing Date. Subject to the satisfaction (or waiver) of the
conditions set forth in Article VI and Section 7.1 below, and further subject to
the terms and conditions of the Escrow Agreement, the date and time of First
Closing shall be at 10:00 a.m. California time, on December 4, 1997 (the "First
Closing").
1.4 Second Closing Date. Subject to the satisfaction (or waiver) of the
conditions set forth in Section 7.2 below, and further subject to the terms and
conditions of the Escrow Agreement, the date and time of Second Closing shall be
at 10:00 a.m. California time, on December 30, 1997, or such other date upon
which the conditions set forth in Section 7.2 have been satisfied.
1.5 Warrants. In consideration of the purchase by Purchasers of the
Preferred Shares, the Company shall at the First Closing and at the Second
Closing, as applicable, issue Warrants
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to the Purchasers to acquire an aggregate of 40,000 Common Shares for each
$1,000,000 face amount of Preferred Shares purchased.
ARTICLE II
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants to the Company as of the date
hereof and as of the Closing, severally and solely with respect to itself and
its purchase hereunder and not with respect to any other Purchaser, as set forth
in this Article II. Each Purchaser makes no other representations or warranties,
express or implied, to the Company in connection with the transactions
contemplated hereby and any and all prior representations and warranties, if
any, which may have been made by the Purchaser to the Company in connection with
the transactions contemplated hereby shall be deemed to have been merged in this
Agreement and any such prior representations and warranties, if any, shall not
survive the execution and delivery of this Agreement.
2.1 Investment Purpose. Purchaser is purchasing the Preferred Shares
and the Warrants for Purchaser's own account for investment only and not with a
present view toward or in connection with the public sale or distribution
thereof in violation of the applicable securities laws. Purchaser will not,
directly or indirectly, offer, sell, pledge or otherwise transfer the Securities
or any interest therein except pursuant to transactions that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act, the rules and regulations promulgated pursuant thereto and
applicable state securities laws. Purchaser understands that Purchaser must bear
the economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities
laws or an exemption from such registration is available, and that the Company
has no present intention of registering any such Securities other than as
contemplated by the Registration Rights Agreement. By making the representations
in this Section 2.1, the Purchaser does not agree to hold the Securities for any
minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption from registration under the Securities Act and any
applicable state securities laws.
2.2 Accredited Investor Status. Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D and Purchaser has
indicated on a duly executed Investor Questionnaire and Representation Agreement
in the form attached hereto as Exhibit E in which capacity that it so qualifies
as an "accredited investor."
2.3 Reliance on Exemptions. Purchaser understands that the Preferred
Shares, Notes and Warrants are being offered and sold to Purchaser in reliance
upon specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the truth
and accuracy of, and Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of Purchaser to acquire the Preferred Shares, Notes and Warrants.
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2.4 Information. Purchaser has been furnished all materials relating to
the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been specifically requested by
Purchaser, including without limitation the Company's Annual Report on Form
10-K/A for the Year ended October 31, 1996; Quarterly Report on Form 10-Q for
the period ended January 31, 1997, as amended by Forms 10-Q/A filed with the
Securities and Exchange Commission ("SEC") on April 3, 1997, May 28, 1997, and
June 11, 1997, respectively; Quarterly Report on Form 10-Q for the period ended
April 30, 1997; Quarterly Report on Form 10-Q for the period ended July 31, 1997
(the "Current Quarterly Report"); Current Reports on Form 8-K filed with the SEC
on June 13, 1997, June 9, 1997 and November 11, 1997; Preliminary Proxy
Statement filed with the SEC on October 29, 1997; and Proxy Statement filed with
the SEC on February 7, 1997 (such documents collectively, the "SEC Documents").
Purchaser has been afforded the opportunity to ask questions of the Company and
has received what Purchaser believes to be complete and satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its representatives nor any other
disclosures or documents (including without limitation the SEC Documents) shall
modify, amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in this Agreement or in any Exhibit
hereto or in any certificate issued in connection herewith or therewith.
Purchaser understands that Purchaser's investment in the Securities involves a
high degree of risk, including without limitation the risks and uncertainties
disclosed in the SEC Documents and the Prospectus (as defined below). Subject to
the foregoing, Purchaser acknowledges the disclosures presented under the
caption "Risk Factors" in the Prospectus dated August 22, 1997 included in the
Company's Form S-3 Registration Statement filed with the SEC, and the
incorporation of those disclosures by reference herein.
2.5 Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
2.6 Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be offered, sold, pledged or otherwise transferred unless
subsequently registered thereunder or an exemption from such registration is
available (which exemption the Company expressly agrees may be established as
contemplated in clauses (b) and (c) of Section 5.1 hereof); (ii) any sale of
such Securities made in reliance on Rule 144 under the Securities Act (or a
successor rule) ("Rule 144") may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of such
Securities without registration under the Securities Act under circumstances in
which the seller may be deemed to be an underwriter (as that term is defined in
the Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder, and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to this Agreement or the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained
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herein to the contrary, the Securities may be pledged as collateral in
connection with any margin account or other lending arrangement.
2.7 Legends. Purchaser understands that, subject to Article V hereof,
the certificates for the Preferred Shares and Warrants, the Notes and, until
such time as the Common Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser pursuant to Rule 144 (subject to and in accordance with
the procedures specified in Article V hereof), the certificates for the Common
Shares and Warrant Shares, will bear a restrictive legend (the "Legend") in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
2.8 Authorization: Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their respective terms, except (i) to the extent
that such validity or enforceability may be subject to or affected by any
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights or
remedies of creditors generally, or by other equitable principles of general
application, and (ii) as rights to indemnity and contribution under the
Registration Rights Agreement may be limited by Federal or state securities
laws.
2.9 Residency. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the signature page hereto executed by Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the date hereof and
as of each Closing as set forth in this Article III. The Company makes no other
representations or warranties, express or implied, to the Purchasers in
connection with the transactions contemplated hereby and any and all prior
representations and warranties, if any, which may have been made by the Company
to the Purchasers in connection with the transactions contemplated hereby shall
be deemed to have been merged in this Agreement and any such prior
representations and warranties, if any, shall not survive the execution and
delivery of this Agreement.
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3.1 Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
where the failure so to qualify or be in good standing would have a Material
Adverse Effect. "Material Adverse Effect" means any effect which, individually
or in the aggregate with all other effects, is or could reasonably be expected
to be materially adverse to the business, operations, properties, financial
condition, operating results or prospects of the Company and its subsidiaries,
taken as a whole on a consolidated basis or on the transactions contemplated
hereby or on any of the Securities.
3.2 Authorization: Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue, sell and perform its obligations
with respect to the Preferred Shares, Warrants and Notes in accordance with the
terms hereof and the terms of the Preferred Shares, Warrants and Notes, to issue
the Common Shares and Warrant Shares upon conversion of the Preferred Shares and
exercise of the Warrants, respectively, in accordance with the terms and
conditions of the Preferred Shares and Warrants, respectively, and subject to
the limitations set forth in Sections 14A:7-14.1 and 14A:7-16 of the New Jersey
Business Corporation Act (the "Corporate Law Restrictions") to issue the Notes
in accordance with the terms and conditions of the Preferred Shares; (b) the
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the issuance of
the Preferred Shares, the Notes and the Warrants, and the issuance and
reservation for issuance of the Common Shares and the Warrant Shares) have been
duly authorized by all necessary corporate action and, except as set forth on
Schedule 3.2 hereof and except as contemplated by Section 4.8 hereof, no further
consent or authorization of the Company, its board of directors, or its
stockholders or any other person, body or agency, and no filing with any person,
body or agency, is required with respect to any of the transactions contemplated
hereby or thereby (whether under rules of the National Association of Securities
Dealers ("NASD") or otherwise); (c) this Agreement, the Registration Rights
Agreement, certificates for the Preferred Shares, the Warrants and the Notes
have been (or, in the case of the Notes, will be upon issuance) duly executed
and delivered by the Company; and (d) this Agreement, the Registration Rights
Agreement, the Preferred Shares, and the Warrants constitute, and the Notes,
when issued, will constitute, legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except (i) to the extent that such validity or enforceability may be
subject to or affected by any bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights or remedies of creditors generally, or by
other equitable principles of general application, and (ii) as rights to
indemnity and contribution under the Registration Rights Agreement may be
limited by Federal or state securities laws, and (iii) as to the Notes, to the
Corporate Law Restrictions.
3.3 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares
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reserved for issuance pursuant to the Company's stock option plans, the number
of shares reserved for issuance pursuant to securities (other than the Preferred
Shares or the Warrants) exercisable for, or convertible into or exchangeable for
any shares of Common Stock and the number of shares to be reserved for issuance
upon conversion of the Preferred Shares and exercise of the Warrants is set
forth in the Current Quarterly Report, as the same may be modified or
supplemented by Schedule 3.3. All of such outstanding shares of capital stock
have been, or upon issuance will be, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company (including the Common
Shares and the Warrant Shares) are subject to preemptive rights or any other
similar rights of the stockholders of the Company or of any other person or
entity which have not been satisfied or waived, or any liens or encumbrances.
Except as disclosed in Schedule 3.3, as of the date of this Agreement and as of
each Closing Date, (i) there are no outstanding options, warrants, scrip, rights
to subscribe for, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, and (ii) issuance of the Securities
will not trigger antidilution or similar rights for any other present or future
outstanding or authorized securities of the Company, and (iii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement). The Company has
furnished to Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("Certificate of Incorporation"),
and the Company's By-laws as in effect on the date hereof (the "By-laws"). The
Company has set forth on Schedule 3.3 all instruments and agreements (other than
the Certificate of Incorporation and By-laws) governing or concerning securities
convertible into or exercisable or exchangeable for Common Shares of the Company
(and the Company shall provide to Purchaser copies thereof upon the request of
Purchaser).
3.4 Issuance of Shares. The Common Shares and Warrant Shares are duly
authorized and (except for the issuance of shares of Common Stock in excess of
twenty percent (20%) of the Common Stock outstanding at the First Closing Date,
which is subject to the completion of the actions to be taken by the Company and
its stockholders after the First Closing pursuant to Section 4.8) reserved for
issuance, and, upon conversion of the Preferred Shares and exercise of the
Warrants in accordance with the terms thereof, as applicable, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances directly or indirectly imposed or suffered by the Company or
any of its subsidiaries, will be entitled to all rights and preferences accorded
to a holder of Common Stock, shall be entitled to be traded on the same markets
and exchanges as the other shares of Common Stock of the Company are traded, and
will not be subject to preemptive rights or other similar rights of stockholders
of the Company or of any other person or entity. The Preferred Shares and
Warrants are duly authorized and validly issued, fully paid and nonassessable,
and free from all liens, claims and encumbrances directly or indirectly imposed
or suffered by the Company or any of its subsidiaries or affiliates and will not
be subject to preemptive rights or other similar rights of stockholders of the
Company or of any other person or entity.
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3.5 No Conflicts. Except for the issuance of shares of Common Stock in
excess of twenty percent (20%) of the outstanding Common Stock, which is subject
to the completion of the actions to be taken by the Company and its stockholders
after the First Closing pursuant to Section 4.8, the execution, delivery and
performance of this Agreement, the Preferred Shares, the Warrants, the Notes and
the Registration Rights Agreement by the Company, and the consummation by the
Company of transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Preferred Shares, Common Shares, Warrants, Warrant Shares and, subject to the
Corporate Law Restrictions, Notes) will not (a) result in a violation of the
Certificate of Incorporation or By-laws or (b) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, including without limitation
that certain Securities Purchase Agreement dated as of May 30, 1997 and the
documents related thereto, or (c) result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations and the rules and regulations of the NASD or
Nasdaq) applicable to the Company or any of its subsidiaries, or by which any
property or asset of the Company or any of its subsidiaries, is bound or
affected. Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or other organizational documents, and neither the
Company nor any of its subsidiaries is in default (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would put
the Company or any of its subsidiaries in default) under, nor has there occurred
any event giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, except for possible violations, defaults or rights as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its subsidiaries are not being conducted, and shall not be
conducted so long as Purchaser (or any direct or indirect transferee, assignee
or participant of Purchaser or of such transferee, assignee or participant in a
transaction of the type referred to in Section 5.1(b) below ("Purchaser
Transferee")) owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as set forth on Schedule 3.5, or except (A) such
as may be required under the Securities Act in connection with the performance
of the Company's obligations under the Registration Rights Agreement, (B) filing
of a Form D with the SEC, and (C) compliance with the state securities or Blue
Sky laws of applicable jurisdictions, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, the Preferred Shares, the Warrants, the Notes or the Registration
Rights Agreement or to perform its obligations in accordance with the terms
hereof or thereof. The Company is not in violation of the listing requirements
of Nasdaq, does not know of or anticipate any event which could be grounds for
such delisting and does not reasonably anticipate that the Common Shares will be
delisted by Nasdaq during the foreseeable future.
666427.1
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3.6 SEC Documents. Except as disclosed in Schedule 3.6, since October
31, 1996, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company has delivered to each Purchaser true and complete
copies of the SEC Documents, except for exhibits, schedules and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents which is
required to be updated or amended under applicable law has not been so updated
or amended. The financial statements of the Company included in the SEC
Documents have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, and the rules and regulations of
the SEC during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they do not include footnotes or are condensed
or summary statements) and, fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, immaterial year-end audit adjustments). Except as set
forth in the financial statements or the notes thereto of the Company included
in the SEC Documents, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
consistent with past practice subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business consistent with past practice and (iii) liabilities
not required under generally accepted accounting principles to be reflected in
such financial statements, in each case of clause (i), (ii) and (iii) next above
which, individually or in the aggregate, are not material to the financial
condition, business, operations, properties, operating results or prospects of
the Company and its subsidiaries or to the transactions contemplated hereby or
to the Securities. To the extent required by the rules of the SEC applicable
thereto, the SEC Documents contain a complete and accurate list of all material
undischarged written or oral contracts, agreements, leases or other instruments
existing as of the respective date of each such SEC Document (or such other date
required by the rules of the SEC) to which the Company or any subsidiary is a
party or by which the Company or any subsidiary is bound or to which any of the
properties or assets of the Company or any subsidiary is subject (each a
"Contract"). Except as set forth in Schedule 3.6, none of the Company, its
subsidiaries or, to the best knowledge of the Company, any of the other parties
thereto, is in breach or violation of any Contract, which breach or violation
could reasonably be expected to have a Material Adverse Effect. No event,
occurrence or condition exists which, with the lapse of time, the giving of
notice, or both, would become a default by the Company or its subsidiaries
thereunder which could reasonably be expected to have a Material Adverse Effect.
The Company has not provided and will not provide to any Purchaser any material
non-public information or any other information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed as of the date of this Agreement and the date of
the First Closing.
666427.1
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3.7 Absence of Certain Changes. Since October 31, 1996 and to the First
Closing (or, at the Second Closing, since the First Closing to the Second
Closing) there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition,
results of operations or prospects of the Company, except as disclosed in
Schedule 3.7 or in the SEC Documents. The sale of the assets of the Government
Technology Division of the Company is, as of the date hereof, proceeding in
accordance with the previous public announcements of the Company regarding such
sale.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8 or in
the SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency, or
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company, any of
its subsidiaries, or any of their respective directors or officers in their
capacities as such, which could reasonably be expected to result in an
unfavorable decision, ruling or finding which would have a Material Adverse
Effect or would adversely affect the transactions contemplated by this Agreement
or any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
There are no facts known to the Company which, if known by a potential claimant
or governmental authority, could reasonably be expected to give rise to a claim
or proceeding which, if asserted or conducted with results unfavorable to the
Company or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect.
3.9 Disclosure. No information, statement or representation relating to
or concerning the Company or any of its subsidiaries set forth in this Agreement
contains an untrue statement of a material fact. No information relating to or
concerning the Company or any of its subsidiaries set forth in any of the SEC
Documents contains a statement of material fact that was untrue as of the date
such SEC Document was filed with the SEC. The Company has not herein or in the
SEC Documents omitted to state a material fact necessary in order to make the
statements and representations made herein or therein, in light of the
circumstances under which they were made, not misleading.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or fiduciary of the Company or any of its subsidiaries (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, that this Agreement and the transaction contemplated
hereby, and the relationship between the Purchaser and the Company, are
"arms-length", and that any statement made by Purchaser (except as set forth in
Article II) or any of its representatives or agents, in connection with this
Agreement, and the transactions contemplated hereby is not advice or a
recommendation, is merely incidental to Purchaser's purchase of the Securities
and (except as set forth in Article II) has not been relied upon as such in any
way by the Company, its officers or directors. The Company further represents to
Purchaser that the Company's decision to enter into this Agreement and the
transactions contemplated hereby have been based solely on an independent
evaluation by the Company and its representatives.
666427.1
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3.11 S-3 Registration. The Company is currently eligible to register
the resale of the Common Shares on a registration statement on Form S-3 under
the Securities Act.
3.12 No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as described in Rule 502(c) under
Regulation D, with respect to any of the Securities being offered hereby.
3.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would either require registration of
any of the Securities under the Act or prevent the parties hereto from
consummating, or delay or interfere with the consummation of, the transactions
contemplated hereby pursuant to an exemption from the registration under the
Securities Act pursuant to the provisions of Regulation D. The transactions
contemplated hereby are exempt from the registration requirements of the
Securities Act, assuming the accuracy of the relevant representations and
warranties herein contained of the Purchaser and of Cowen & Company ("Cowen")
and Shoreline Pacific Institutional Finance, the Institutional Division of
Financial West Group ("Shoreline") in their letters to the Company dated as of
December 2, 1997 (copies of which are attached as Schedule 3.13 hereto) to the
extent relevant for such determination. To the Company's knowledge, such
representations and warranties of Cowen and Shoreline are accurate. The issuance
of the Securities to the purchasers will not be integrated with any other
issuance of the Company's securities (past, present or future) which require
stockholder approval under the rules of Nasdaq.
3.14 No Brokers. The Company has taken no action, directly or
indirectly, which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by Purchaser relating to this
Agreement or the transactions contemplated hereby, except for dealings with
Cowen and Shoreline the fees of which shall be paid in full by the Company out
of escrow at the First Closing. The Company will indemnify the Purchaser from
and against any fees and expenses (including without limitation reasonable
attorneys fees and expenses) sought or other claims made by Cowen or Shoreline.
3.15 Intellectual Property. Except as disclosed in the SEC Documents,
each of the Company and its subsidiaries owns, is licensed to use, or possesses
adequate and enforceable rights to use all material patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") used or necessary for the conduct of its
business as now being conducted and as described in the Company's Annual Report
on Form 10-K/A for its most recently ended fiscal year. To the Company's best
knowledge, except as disclosed in the SEC Documents, neither the Company nor any
subsidiary of the Company infringes on or is in conflict with any right of any
other person with respect to any Intangibles nor is there any claim of
infringement made by a third party against or involving the Company or any of
its subsidiaries, which infringement, conflict or claim,
666427.1
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<PAGE>
individually or in the aggregate, could reasonably be expected to result in an
unfavorable decision, ruling or finding which would have a Material Adverse
Effect.
3.16 Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in Schedule 3.16. No Key Employee,
to the best of the knowledge of the Company and its subsidiaries, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best of the knowledge of the
Company and its subsidiaries, any intention to terminate his employment with, or
services to, the Company or any of its subsidiaries. "Key Employee" means Mr. T.
Gardner.
3.17 No "Poison Pill". The Company does not have in effect a
shareholders rights plan or similar plan in the nature of a "poison pill." If
the Company adopts such a plan, none of the Purchaser's Preferred Shares,
Warrants, Common Shares and Warrant Shares will be deemed to trigger such plan.
3.18 Dilution. The Company acknowledges that the number of Common
Shares and Warrant Shares may increase substantially in certain circumstances
(subject to the limitation on issuance of Common Shares set forth in Section
(d)(H)(i) of the Certificate of Amendment), including the circumstances where
the trading price of the Company's Common Stock declines. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Common Shares and the Warrant Shares upon conversion or
exercise of the Preferred Shares or Warrants. The Company further acknowledges
that its obligation to issue Common Shares and Warrant Shares upon conversion of
the Preferred Shares or exercise of the Warrants in accordance with this
Agreement, the Certificate of Amendment and the Warrants is absolute and
unconditional regardless of the dilutive effect such issuance has on the
ownership interests of other stockholders of the Company.
3.19 Certain Transactions. Except as disclosed in the SEC Documents and
except for arm's length transactions pursuant to which the Company or any of its
direct or indirect subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its direct or
indirect subsidiaries could obtain from third parties, none of the officers,
directors, or employees of the company is presently a party to any transaction
with the Company or any of its direct or indirect subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
666427.1
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3.20 Permits; Compliance. The Company and each of its direct and
indirect subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits"), and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits except for such Company Permits the failure of which to
possess, or the cancellation or suspension of which, would not, individually or
in the aggregate, have a Material Adverse Effect. Neither the Company nor any of
its direct or indirect subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Since October 31,
1996, neither the Company nor any of its direct or indirect Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations could
not reasonably be expected to have a Material Adverse Effect.
3.21 Insurance. The Company and each of its direct and indirect
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company and
its direct and indirect subsidiaries are engaged. Neither the Company nor any
such direct or indirect subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The parties shall use their reasonable best efforts
to timely satisfy each of the conditions described in Articles VI and VII of
this Agreement.
4.2 Securities Laws. The Company agrees to timely file a Form D with
respect to the Securities with the SEC as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing. The Company
agrees to file a Form 8-K disclosing this Agreement and the transactions
contemplated hereby with the SEC within five (5) business days following the
date of the First Closing. The Company shall, on or prior to the date of First
Closing or the Second Closing, as applicable, take such action as is necessary
to qualify the Securities for sale to the Purchaser at such Closing in
compliance with applicable securities laws of the states of the United States or
obtain exemption therefrom, and shall provide evidence of any such action so
taken to the Purchaser on or prior to the date of such Closing.
4.3 Reporting Status. So long as the Purchaser or a Purchaser
Transferee beneficially owns any unconverted Preferred Shares or unexercised
Warrants, (a) the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company
666427.1
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<PAGE>
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination, and (b) the Company will use its best efforts to
maintain its ability and eligibility to register its Common Shares and Warrant
Shares on Form S-3.
4.4 Information. The Company agrees to send the following reports to
the Purchaser and Purchaser's Transferee until each Purchaser and Purchaser's
Transferee has converted all of its Preferred Shares and exercised all Warrants:
(a) within three (3) business days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, any proxy
statements and any Current Reports on Form 8-K; and (b) within one (1) business
day after release, copies of all press releases issued by the Company or any of
its subsidiaries. The Company further agrees to promptly provide to the
Purchaser and Purchaser's Transferee any information with respect to the
Company, its properties, or its business or Purchaser's investment as the
Purchaser and Purchaser's Transferee may reasonably request; provided, however,
that the Company shall not be required to give the Purchaser any material
nonpublic information. If any information requested by the Purchaser from the
Company contains material nonpublic information, the Company shall inform the
Purchaser in writing that the information requested contains material nonpublic
information and shall in no event provide such information to Purchaser without
the express written consent of the Purchaser after being so informed.
4.5 Listing. The Company shall use its best efforts to continue the
uninterrupted listing and trading of its Common Stock and, upon registration,
the Common Shares and Warrant Shares on the AMEX, the Nasdaq National Market or
the New York Stock Exchange; and comply in all material respects with the
Company's reporting, filing and other obligations under the By-laws and rules of
such exchange or Nasdaq, as applicable. If and so long as the Common Stock and,
following registration, the Common Shares and Warrant Shares are not listed on
one of such Exchanges or Nasdaq, as partial compensation for the added liquidity
risk of such delisting the Company shall be obligated to make the following
additional cash payments (the "Delisting Payments"). The Delisting Payments will
be equal to one-half of one percent (1/2%) of the Purchase Price of any
outstanding Preferred Shares for each month (or part thereof, pro-rated)
following the date the Common Stock is delisted (the "Delisting Date")
continuing through the date the Common Stock is listed on one of such Exchanges
or Nasdaq (the "New Listing"). The Delisting Payments will be paid to the holder
of the Preferred Shares in cash within five (5) business days following the
earlier of (i) the end of each month following the Delisting Date, or (ii) the
effective date of the New Listing. Nothing herein shall limit the Preferred
Share holder's right to pursue actual damages for the Company's failure to
maintain its listing on such exchange or Nasdaq.
4.6 Prospectus Delivery Requirement. The Purchaser understands that the
Securities Act may require delivery of a prospectus relating to the Common
Shares in connection with any sale thereof pursuant to a registration statement
under the Securities Act covering the resale by the Purchaser of the Common
Shares being sold, and the Purchaser shall comply with the applicable prospectus
delivery requirements of the Securities Act, if any, in connection with any such
sale.
666427.1
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4.7 Share Authorization. The Company covenants and agrees that it
shall (i) use its best efforts to solicit by proxy the authorization (the
"Shareholder Approval") of the issuance of shares of Common Stock in excess of
twenty (20) percent of the outstanding shares of Common Stock by the
stockholders of the Company not later than 60 days following the date of the
First Closing, and (ii) use its best efforts to obtain the Shareholder Approval
not later than 120 days following the date of the First Closing.
4.8 Pre-emptive Right to Participate in Future Private Equity
Financings.
(a) The Company shall not, prior to the later of (i) the Second
Closing or (ii) the date of effectiveness of a registration statement with
respect to the resale of the Common Shares and Warrant Shares (such earlier
date, the "Release Date"), issue Class A Common Shares or securities which are
convertible into or exercisable for Class A Common Shares or any other classes
of common shares of the Company (a "Private Equity Financing"), except for
Permitted Issuances (as defined below). If at any time after the Release Date
and prior to conversion or redemption of all of the Preferred Shares, the
Company proposes a Private Equity Financing, other than a Permitted Issuance,
the Company shall give each Purchaser the opportunity to purchase its pro rata
share (as calculated below) of such Private Equity Financing on the same terms
as offered to other persons, on the terms described below. For purposes of this
Section 4.9(a), "Permitted Issuance" means any issuance(i) pursuant to any
currently outstanding convertible debentures, warrants or options (including
shares issued in lieu of cash interest payments), (ii) pursuant to options
either already granted or which may be granted to employees or consultants
pursuant to the Company's existing employee stock option plans or any successor
plan approved by the Company's board of directors, (iii) pursuant to the
conversion of the Preferred Shares or exercise of the Warrants, (iv) pursuant to
any stock dividend upon, or upon any subdivision or combination of shares of the
Class A Common Shares, (v) pursuant to a firm commitment underwritten public
offering, (vi) in connection with an acquisition or merger of another company by
or with the Company or (vii) in connection with any future equity financing
whereby Class A Common Shares, or warrants or options to purchase Class A Common
Shares, are issued to a Strategic Investor (as defined in Section 4.9(d)
hereof).
(b) Each Purchaser shall have the right to purchase its pro rata share
of such Private Equity Financing based on the ratio which (x) the Class A Common
Shares issuable on conversion or exercise of Preferred Shares or Warrants
purchased by such Purchaser on the Closing Date to (y) all of the then issued
and outstanding Class A Common Shares of the Company plus the Class A Common
Shares then issuable upon conversion or exercise of any preferred stock, any
warrants and any convertible debentures, options and other warrants then
outstanding, before giving effect to the proposed Private Equity Financing.
(c) The Company shall deliver to each Purchaser, at least five (5)
business days prior to the closing of such Private Equity Financing, written
notice describing the terms and conditions of the proposed Private Equity
Financing, and providing each Purchaser the opportunity to purchase its pro rata
share (as calculated above) of the Private Equity Financing. Any portion of the
Private Equity Financing required to be so offered and so offered which is not
purchased (or irrevocably committed to be purchased) by a Purchaser within five
(5) business days following the
666427.1
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<PAGE>
receipt by the Purchasers of such offer may be sold by the Company at any time
thereafter on the same terms set forth in the offer, provided, however, that if
the Company does not consummate such Private Equity Financing within twenty (20)
business days after receipt by the Purchasers of the written notice noted in
this Section 4.9(c), the rights of the Purchasers under this Section 4.9 shall
again apply to such Private Equity Financing.
(d) For the purposes of this Section 4.9, "Strategic Investor" shall
mean any person or entity which has or is proposed to have a material business,
technology or commercial relationship with the Company in addition to any equity
financing provided by such person or entity.
(e) So long as any of the Preferred Shares are outstanding the Company
shall not issue any additional shares of Class B Common Stock, other than upon
exercise of existing options to purchase Class B Common Stock.
4.9 Sale of Division. Each Purchaser covenants and agrees that it shall
vote all Preferred Shares or Common Shares which it owns or subsequently
acquires in favor of the proposed sale by the Company, described in the SEC
Documents, of substantially all of the assets of the Government Technology
Division of the Company to Strategic Technology Systems, Inc., a Nevada
corporation.
ARTICLE V
LEGEND REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
5.1 Removal of Legend. The Legend shall be removed and the Company
shall issue, or shall cause to be issued, a certificate without such Legend to
the holder of any Security upon which it is stamped, and a certificate for a
security shall be originally issued without the Legend, if: (a) the resale of
such Security is registered under the Securities Act; or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
satisfactory to the Company and its counsel (the reasonable cost of which shall
be borne by the Company if neither an effective registration statement under the
Securities Act or Rule 144 is available in connection with such sale) to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act pursuant to an exemption from such
registration requirements; or (c) such Security can be sold pursuant to Rule
144, the Holder provides the Company with reasonable assurances that the
Security can be so sold without restriction, and a registered broker dealer
provides to the Company's transfer agent and counsel copies of (i) a "will sell"
letter satisfying the guidelines established by the SEC and its staff from time
to time and (ii) a customary seller's representation letter with respect to such
a sale to be made pursuant to Rule 144 and (iii) a Form 144 in respect of such
Security executed by such holder and filed (or mailed for filing) with the SEC;
or (d) such Security can be sold pursuant to Rule 144(k). Each Purchaser agrees
to sell all registered Securities, including those represented by a
certificate(s) from which the Legend has been removed, or which were originally
issued without the Legend, pursuant to an effective registration statement, in
accordance with the manner of distribution described in such registration
statement and, if required by the Securities Act, to deliver a prospectus in
connection with such
666427.1
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<PAGE>
sale or in compliance with an exemption from the registration requirements of
the Securities Act. In the event the Legend is removed from any Security or any
Security is issued without the Legend and the Security is to be disposed of
other than pursuant to the registration statement or pursuant to Rule 144, then
prior to, and as a condition to, such disposition such Security shall be
relegended as provided herein in connection with any disposition if the
subsequent transfer thereof would be restricted under the Securities Act. Also,
in the event the Legend is removed from any Security or any Security is issued
without the Legend and thereafter the effectiveness of a registration statement
covering the resale of such Security is suspended or the Company determines that
a supplement or amendment thereto is required by applicable securities laws,
then upon reasonable advance notice to Purchaser holding such Security, the
Company may require that the Legend be placed on any such Security that cannot
then be sold pursuant to an effective registration statement or Rule 144 or with
respect to which the opinion referred to in clause (b) next above has not been
rendered, which Legend shall be removed when such Security may be sold pursuant
to an effective registration statement or Rule 144 or such holder provides the
opinion with respect thereto described in clause (b) next above.
5.2 Transfer Agent Instructions. The Company shall instruct its
transfer agent, in a form satisfactory to the Purchasers, to issue certificates,
registered in the name of the Purchaser or its nominee, for the Common Shares
and the Warrant Shares in such amounts specified from time to time by the
Purchaser upon conversion or exercise of the Preferred Shares and the Warrants,
respectively. Such certificates shall bear the Legend only to the extent
provided by Section 5.1 above. The Company covenants that no instruction other
than such instructions referred to in this Article V, and stop transfer
instructions to give effect to Section 2.6 hereof in the case of the Common
Shares and Warrant Shares prior to registration of the Common Shares and Warrant
Shares under the Securities Act or "black-out" periods as provided in the
Registrations Rights Agreement between the Company and the Purchaser, dated of
such date herewith, will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company. Nothing in this Section shall affect in any way the Purchaser's
obligations and agreement set forth in Section 5.1 hereof to resell the
Securities pursuant to an effective registration statement and to deliver a
prospectus as required in Section 5.1 in connection with such sale or in
compliance with an exemption from the registration requirements of applicable
securities laws. If (a) the Purchaser provides the Company with an opinion of
counsel, which opinion of counsel shall be in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
satisfactory to the Company and its counsel (the reasonable cost of which shall
be borne by the Company if neither an effective registration statement under the
Securities Act nor Rule 144 is available in connection with such sale), to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration or (b) the Purchaser transfers
Securities to an affiliate which is an accredited investor (within the meaning
of Regulation D under the Securities Act) and which delivers to the Company in
written form the same representations, warranties and covenants made by
Purchaser hereunder or pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Common Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denomination as specified by the Purchaser.
666427.1
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<PAGE>
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 The obligation of the Company hereunder to issue and sell the
Preferred Shares and Warrants to the Purchaser at the First Closing and the
Second Closing is subject to the satisfaction, as of the date of each such
Closing, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion:
(i) The Purchaser shall have executed the signature page to this
Agreement, the Registration Rights Agreement and the Escrow Agreement and
delivered the same to the Company and Shoreline. The Purchaser shall have
completed and executed the Investor Questionnaire and Representation
Agreement and delivered the same to the Company and Shoreline.
(ii) The Purchaser shall have wired to the account of the Escrow Agent
pursuant to the Escrow Agreement the Initial Purchase Price, in the case of
the First Closing, and the Additional Purchase Price, in the case of the
Second Closing.
(iii) The representations and warranties of the Purchaser shall be
true and correct in all material respects as of the date when made and as
of such Closing as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the Purchaser
shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Purchaser at or prior to such
Closing.
(iv) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which restricts or prohibits the consummation of any of the
transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE
7.1 The obligation of the Purchaser hereunder to purchase the
Preferred Shares and Warrants to be purchased by it on the date of the First
Closing is subject to the satisfaction as of the date of the First Closing, of
each of the following conditions, provided that these conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in the
Purchaser's sole discretion:
(i) The Company shall have executed the signature page to this
Agreement, the Registration Rights Agreement and the Escrow Agreement and
delivered the same to Purchaser and Shoreline.
666427.1
19
<PAGE>
(ii) The Company shall have delivered to the Escrow Agent duly issued
Preferred Shares being so purchased by each Purchaser at the First Closing
and certificates for the appropriate number of Warrants in such
denominations as are reasonably requested by Purchaser.
(iii) The Common Shares shall be listed on the Nasdaq National Market
and trading in the Common Shares shall not have been suspended or limited
by the NASD, Nasdaq or the SEC or other regulatory authority, and no such
proceeding seeking suspension shall be pending.
(iv) The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
First Closing as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the Company
shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
First Closing. Purchaser shall have received a certificate, executed by the
Chief Executive Officer or Chief Financial Officer of the Company, dated as
of the First Closing to the foregoing effect.
(v) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(vi) Purchaser shall have received an opinion of (i) Pitney Hardin,
special New Jersey counsel to the Company, and (ii) Battle Fowler, special
securities counsel to the Company, dated as of the First Closing, in the
forms attached hereto as Exhibits F-1 and F-2, respectively.
(vii) The Transfer Agent Instructions set forth in Section 5.2 shall
have been delivered to the Company's transfer agent.
(viii) The Certificate of Amendment shall have been filed with the
Secretary of State of New Jersey.
(ix) The Common Shares required to be authorized and reserved pursuant
to Section (d)H(8) of the Certificate of Amendment shall have been duly
authorized and reserved by the Company.
7.2 The obligation of the Purchaser hereunder to purchase the
Preferred Shares to be purchased by it on the date of the Second Closing is
subject to the satisfaction as of the date of the Second Closing, of each
of the following conditions, provided that these conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in
the Purchaser's sole discretion:
(i) The First Closing shall have occurred, and no more than 120 days
shall have passed since the date of the First Closing.
666427.1
20
<PAGE>
(ii) The Shareholder Approval shall have been duly obtained; and a
copy of the minutes of the meeting of the stockholders of the Company,
certified by the Secretary of the Company as being true and correct,
reflecting such approval shall have been provided to each Purchaser.
(iii) The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Second Closing as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the Company
shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Second Closing. Purchaser shall have received a certificate, executed by
the Chief Executive Officer or Chief Financial Officer of the Company,
dated as of the Second Closing to the foregoing effect.
(iv) The Company shall have delivered to the Escrow Agent duly issued
Preferred Shares being so purchased by each Purchaser at the Second Closing
and certificates for the appropriate number of Warrants in such
denominations as are reasonably requested by Purchaser.
(v) The Common Shares shall be listed on the Nasdaq National Market
and trading in the Common Shares shall not have been then suspended or
limited by the NASD, Nasdaq or the SEC or other regulatory authority, and
no such proceeding seeking suspension shall be pending.
(vi) Purchaser shall have received a bring-down opinion of (i) Pitney
Hardin, special New Jersey counsel to the Company, and (ii) Battle Fowler,
special securities counsel to the Company, dated as of the Second Closing,
addressing the matters referred to in the forms attached hereto as Exhibits
F-1 and F-2, respectively .
(vii) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement following the Second Closing.
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law: Jurisdiction. This Agreement shall be governed by
and construed in accordance with the corporate law of the Company's Jurisdiction
of incorporation (in respect of matters of corporation law) and the laws of the
State of New York (in respect of all other matters) applicable to contracts made
and to be performed in the State of New York. The parties hereto irrevocably
consent to the jurisdiction of the United States federal courts and state courts
located in the Borough of Manhattan in the State of New York in any suit or
proceeding based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that
666427.1
21
<PAGE>
all claims in respect of such suit or proceeding may be determined in such
courts. The Company and each Purchaser irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in such forum.
The Company and each Purchaser further agrees that service of process upon the
Company or such Purchaser, as applicable, mailed by the first class mail in
accordance with Section 8.6 shall be deemed in every respect effective service
of process upon the Company or such Purchaser in any suit or proceeding arising
hereunder. Nothing herein shall affect any Purchaser's or the Company's right to
serve process in any other manner permitted by law. The parties hereto agree
that a final judgment in any such suit or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner. The parties hereto irrevocably waive any right to trial by jury
under applicable law.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall promptly cause
additional original executed signature pages to be delivered to the other
parties.
8.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4 Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
8.5 Entire Agreement: Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and each Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by nationally-recognized
overnight courier or by facsimile machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission). The addresses for such communications shall be:
666427.1
22
<PAGE>
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
Trenton, NJ 08619
Telephone: (609) 586-7010
Telecopy: (609) 586-1593
Attention: Mr. Alexander M. Adelson
with a copy to:
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, NY 10022
Telephone: (212) 856-7000
Telecopy: (212) 856-7822
Attention: David M. Warburg, Esq.
If to JMG Capital Partners, L.P.
JMG Capital Partners, L.P.
1999 Avenue of the Stars, Suite 1950
Los Angeles, CA 90067
Telephone: (310) 201-2619
Telecopy: (310) 201-2759
Attention: Mr. Jonathan Glaser
If to Triton Capital Investments, Ltd.:
Triton Capital Investments, Ltd.
c/o JMG Capital Partners, L.P.
1999 Avenue of the Stars, Suite 1950
Los Angeles, CA 90067
Telephone: (310) 201-2619
Telecopy: (310) 201-2759
Attention: Mr. Jonathan Glaser
If to RGC International Investors, LDC:
RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P.
RGC General Partner Corp
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Telephone: (610) 617-5900
Telecopy: (610) 617-0570
Attention: Mr. Gary S. Kaminsky
666427.1
23
<PAGE>
and with a copy to:
Ballard, Spahr, Andrew Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103-7599
Telephone: (215) 864-8123
Telecopy: (215) 864-8999
Attention: Mr. Keith S. Marlowe, Esq.
If to Shepherd Investments International, Ltd.:
Shepherd Investments International, Ltd.
c/o Staro Asset Management
1500 West Market Street, Suite 200
Mequon, WI 53092
Telephone: (414) 241-1810
Telecopy: (414) 241-7704
Attention: Mr. Joe Lucas
and with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Telephone: (212) 756-2376
Telecopy: (212) 593-5955
Attention: Mr. Eleazer Klein, Esq.
If to Stark International:
Stark International
c/o Staro Asset Management
1500 West Market Street, Suite 200
Mequon, WI 53092
Telephone: (414) 241-1810
Telecopy: (414) 241-7704
Attention: Mr. Joe Lucas
and with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Telephone: (212) 756-2376
Telecopy: (212) 593-5955
Attention: Mr. Eleazer Klein, Esq.
666427.1
24
<PAGE>
If to Societe Generale:
Societe Generale
1221 Avenue of the Americas
6th Floor
New York, NY 10020
Telephone: (212) 278-5260
Telecopy: (212) 278-5467
Attention: Mr. Guillaume Pollet
with a copy to:
Dorsey & Whitney LLP
250 Park Avenue
New York, NY 10177
Telephone: (212) 415-9263
Telecopy: (212) 888-0018
Attention: Mr. Eric Maki, Esq.
If to Elara Ltd.:
Elara Ltd.
c/o Talisman Capital
PO Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortolla
British Virgin Islands
Telephone: (809) 494-2616
Telecopy: (809) 494-2794
Attention: Mr. Geoffrey Tirman
If to Midland Walwyn Capital, Inc. Keyway Investments:
Keyway InvesmentsMidland Walwyn Capital, Inc.
c/o Midland Walwyn Capital, Inc.
BCE Place-181 Bay Street
Suite 500
Toronto, Ontario M5J2V8
Canada
666427.1
25
<PAGE>
Telephone: (416) 369-8738
Telecopy: (416) 369-8726
Attention: Mr. Gregory W. Murphy
with a copy to:
Kaufman Malchman Kirby & Squier
919 3rd Avenue
11th Floor
New York, NY 10022
Telephone: (212) 371-6600
Telecopy: (212) 751-2540
Attention: Mr. Rick Stone, Esq.
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
and:
Cowen & Co.
1 Financial Square
New York, NY 10005
Telephone: (212) 495-3950
Telecopy: (212) 495-8305
Attention: Mr. Bill Smith
Each party shall provide notice to the other party of any change in address.
8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor the Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other except,
with respect to the Company, in accordance with Section (d)G of the Certificate
of Amendment. Notwithstanding the foregoing, the Purchaser may subject to and in
666427.1
26
<PAGE>
compliance with Section 5.2 hereof, assign all or part of its rights and
obligations hereunder to any of its "affiliates," as that term is defined under
the Securities Act, without the consent of the Company so long as such affiliate
is an accredited investor (within the meaning of Regulation D under the
Securities Act) and agrees in writing to be bound by this Agreement.
8.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns (including transferees permitted in accordance with Section 8.7) and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
8.9 Survival; Indemnity. The representations and warranties of the
Company and the Purchaser and the agreements and covenants set forth herein
shall survive each Closing hereunder through the date three months following the
fifth anniversary of this Agreement notwithstanding any due diligence
investigation conducted by or on behalf of the Company or any Purchaser as the
case may be. The Company agrees to indemnify and hold harmless each Purchaser
and each of such Purchaser's respective officers, directors, employees,
partners, agents and affiliates for loss or damage or expenses (including
reasonable attorneys fees) arising as a result of or related to any breach or
alleged breach by the Company of any of its respective representations or
covenants set forth herein, in the Certificate of Amendment or in the
Registration Rights Agreement, including advancement of expenses as they are
incurred.
8.10 Public Filings: Publicity. As soon as practicable following the
First Closing, the Company shall issue a press release with respect to the
transactions contemplated hereby. The Company and each Purchaser shall have the
right to review before issuance any press releases, SEC or Nasdaq or other
exchange filings, or any other public statements with respect to the
transactions contemplated hereby (which review shall not be unreasonably
delayed); provided, however, that the Company shall be entitled, without the
prior review of the Purchasers, to make any press release or SEC, AMEX, Nasdaq
or other exchange filings with respect to such transactions as is required by
applicable law and regulations (although the Company shall make all reasonable
efforts to consult with the Purchasers in connection with any such press release
prior to its release and shall provide the Purchasers with a copy thereof as
provided in Section 4.4 hereof). Except to the extent required by law or with
the prior written consent of the affected Purchaser, the Company shall not use
the names of the Purchasers in press releases and public communications. Each of
the Purchasers hereby consents to its identification as a Purchaser in any proxy
solicitation seeking the Shareholder Approval.
8.11 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.12 Remedies. No provision of this Agreement providing for any remedy
to a Purchaser or the Company shall limit any remedy which would otherwise be
available to such Purchaser or the Company at law or in equity. Nothing in this
Agreement shall limit any rights
666427.1
27
<PAGE>
a Purchaser may have under any applicable federal or state securities laws with
respect to the investment contemplated hereby. The Company and each Purchaser
acknowledges that a breach by it of its respective obligations hereunder will
cause irreparable harm to each Purchaser, in the case of the Company, and the
Company, in the case of a Purchaser. Accordingly, the Company and each Purchaser
acknowledges that the remedy at law for a material breach of its respective
obligations under this Agreement will be inadequate and agrees, in the event of
a breach or threatened breach by the Company or a Purchaser, as the case may be,
of the provisions of this Agreement, that a Purchaser or the Company, as the
case may be, shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate compliance, without
the necessity of showing economic loss and without any bond or other security
being required.
8.13 Acknowledgment By Purchasers Who Are Also Holders Of The Company's
Convertible Term Debentures. Any Purchaser under this Agreement who is also a
holder ("Holder") of Convertible Term Debentures of the Company hereby
acknowledges and agrees, solely with respect to the transactions contemplated by
this Agreement and no other transaction, that any purchases made by Holder under
this Agreement shall be in lieu of and in full and complete satisfaction of any
right of first offer ("First Offer") with respect to the Securities such Holder
may be entitled to under the first paragraph of Section 4(e) of that certain
Securities Purchase Agreement, dated as of May 30, 1997, by and between the
Company and each of The Tail Wind Fund, Ltd. and RGC International Investors,
LDC. The Company hereby represents and warrants to the Purchasers that the
Company has complied with and satisfied in full the First Offer to the extent
not otherwise waived by a Holder with regard to the transactions contemplated by
this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.
666427.1
28
<PAGE>
BASE TEN SYSTEMS, INC.
By: ___________________________________
Name:
Title:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS:
JMG CAPITAL PARTNERS, L.P.
By: ___________________________________
Name: Jonathan Glaser
Title: President, JMG Capital
Management, Inc.
General Partner,
JMG Capital Partners, L.P.
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 246.711
Warrants Purchased at First Closing: 9,868
Preferred Shares Purchased at Second Closing: 253.289
Warrants Purchased at Second Closing: 10,132
TRITON CAPITAL INVESTMENTS, LTD
By: __________________________________
Jonathan Glaser
Vice President, Triton Capital
Investments, Ltd.
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 246.711
Warrants Purchased at First Closing: 9,868
666427.1
29
<PAGE>
Preferred Shares Purchased at Second Closing: 253.289
Warrants Purchased at Second Closing: 10,132
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, LP/RGC
General Partner Corporation
By: ___________________________________
Gary S. Kaminsky
Managing Director
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 1,973.684
Warrants Purchased at First Closing: 78,947
Preferred Shares Purchased at Second Closing: 2,026.316
Warrants Purchased at Second Closing: 81,053
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
SHEPHERD INVESTMENTS INTERNATIONAL,
LTD.
By: __________________________________
Name:
Managing Member, Staro Asset Management,
LLC
Investment Manager, Shepherd Investments
International, Ltd.
DATE:
Aggregate Subscription Amount
666427.1
30
<PAGE>
Preferred Shares Purchased at First Closing: 1,726.974
Warrants Purchased at First Closing: 69,079
Preferred Shares Purchased at Second Closing: 1,773.026
Warrants Purchased at Second Closing: 70,921
STARK INTERNATIONAL
By:
Name: __________________________________
Managing Member, Staro Asset
Management, LLC
Investment Manager, Stark International
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 1,726.974
Warrants Purchased at First Closing: 69,079
Preferred Shares Purchased at Second Closing: 1,773.026
Warrants Purchased at Second Closing: 70,921
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
SOCIETE GENERALE
By: __________________________________
Name:
Title:
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 2,467.105
Warrants Purchased at First Closing: 98,684
Preferred Shares Purchased at Second Closing: 2,532.895
Warrants Purchased at Second Closing: 101,316
666427.1
31
<PAGE>
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
ELARA LTD.
By: __________________________________
Geoffrey Tirman, Talisman Capital
President, Elara Ltd.
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 493.421
Warrants Purchased at First Closing: 19,737
Preferred Shares Purchased at Second Closing: 506.579
Warrants Purchased at Second Closing: 20,263
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
KEYWAY INVESTMENTS
By: __________________________________
Gregory W. Murphy
Title:
DATE:
666427.1
32
<PAGE>
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 493.421
Warrants Purchased at First Closing: 19,737
Preferred Shares Purchased at Second Closing: 506.579
Warrants Purchased at Second Closing: 20,263
666427.1
33
Exhibit 99.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 4, 1997 (the
"Agreement"), is made by and between BASE TEN SYSTEMS, INC., a New Jersey
corporation (the "Company"), and the Investors set forth on the signature pages
hereto (the "Initial Investors").
W I T N E S S E T H :
WHEREAS, in connection with the Securities Purchase Agreement dated
December 4, 1997 between the Initial Investors and the Company (the "Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of said Purchase Agreement, to issue and sell to the Initial
Investors (the "Offering") Nineteen Million U.S. Dollars face amount of the
Company's Convertible Preferred Shares (the "Preferred Shares"), convertible
into shares of the Company's Class A Common Shares, par value $1.00 per share
(the "Common Stock"), together with Stock Purchase Warrants (the "Warrants") to
purchase additional shares of Common Stock. The shares of common stock of the
Company into which the Preferred Shares are convertible and the Warrants are
exercisable for are collectively referred to herein as the "Common Shares."
WHEREAS, to induce the Initial Investors to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Common Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
(a) "Holders" are stockholders of the Company who, by virtue of
agreements with the Company, are entitled to include their securities in certain
Registration Statements filed by the Company.
(b) "Investors" means the Initial Investors and any transferee or
assignee of the Initial Investors who agrees to become bound by the provisions
of this Agreement in accordance with Section 9 hereof.
(c) "Registrable Securities" means the Common Shares, together with
any shares of Common Stock which may be issued as a dividend or other
distribution and any
666427.1
34
<PAGE>
additional shares of Common Stock which may be issued due to anti-dilution
adjustments with respect to the Preferred Shares or Common Shares, which are
required to be included in a Registration Statement pursuant to Section 2(a)
below.
(d) "Registration Period" means the period between the date of this
Agreement and the earlier of (i) the date on which all of the Registrable
Securities have been sold, or (ii) the date on which the Registrable Securities
(in the opinion of Investors' counsel) may be immediately sold without
registration pursuant to Rule 144(k) under the Securities Act.
(e) "Registration Statement" means a registration statement filed with
the Securities and Exchange Commission (the "SEC") under the Securities Act and
any subsequent Registration Statement filed to register additional Registrable
Securities.
(f) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
2. Registration.
(a) Mandatory Registration. The Company will file a Registration
Statement on Form S-3 with the SEC registering the Registrable Securities in
respect of the First Closing and the Second Closing for resale within
twenty-five (25) business days of the initial closing of the purchase of the
Preferred Shares (the "Closing Date"). To the extent allowable under the
Securities Act (including Rule 416), the Registration Statement shall include
the Common Shares and such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Shares and
exercise of the Warrants (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions, or (ii) by reason of changes in the
conversion price of the Preferred Shares or the exercise price of the Warrants
in accordance with the terms thereof. The number of shares of Common Stock
initially included in such Registration Statement shall be no less than
4,250,000 Common Shares. The Registration Statement (and each amendment or
supplement thereto) shall be provided to, and subject to the approval of, the
Initial Investors and their counsel, such approval not to be unreasonably
withheld or delayed. The Company shall use its best efforts to cause such
Registration Statement to be declared effective by the SEC no earlier than
February 25, 1998 and no later than March 2, 1998 (the "Required Effective
Date"). Such best efforts shall include, but not be limited to, promptly
responding to all comments received from the staff of the SEC. The Initial
Investors shall use reasonable efforts to cause their counsel to provide any
comments or approve of any amendment to the Registration Statement within two
business days of receipt. Once declared effective by the SEC, the Company shall
cause such Registration Statement to remain effective throughout the
Registration Period, and any amendment of such Registration Statement necessary
to reflect the Second Closing shall not relieve the Company of its obligation to
cause the Registration Statement to remain effective under this Agreement.
666427.1
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(b) Late Registration Payments. If the Registration Statement required
pursuant to Section 2(a) above has not been declared effective by the Required
Effective Date the Company will make cash payments to the Investors as partial
compensation for such delay (the "Late Registration Payments"). The Late
Registration Payments will be equal to one and one-half percent (1.5%) of the
purchase price paid for the Preferred Shares for each month following the
Required Effective Date, continuing through the date the Registration Statement
is declared effective by the SEC. The Late Registration Payments will be
prorated on a daily basis for partial months and will be paid to the Initial
Investors in cash within five (5) business days following the earlier of: (i)
the end of each month following the Required Effective Date, or (ii) the
effective date of the Registration Statement. Nothing herein shall limit any
Investor's right to pursue actual damages for the Company's failure to file a
Registration Statement or to have it declared effective by the SEC on or prior
to the Required Effective Date in accordance with the terms of this Agreement.
(c) Piggyback Registrations. If, at any time prior to the expiration
of the Registration Period, the Company decides to register any of its
securities for its own account or for the account of others (excluding
registrations relating to equity securities to be issued solely in connection
with an acquisition of any entity or business or in connection with stock option
or other employee benefit plans), the Company will promptly give the Investors
written notice thereof, and will use its best efforts to include in such
registration all or any part of the Registrable Securities so requested by such
Investors (excluding any Registrable Securities previously included in a
Registration Statement). Each Investor's request for registration must be given
to the Company in writing within ten (10) days after receipt of the notice from
the Company. If the registration for which the Company gives notice is a public
offering involving an underwriting, the Company will so advise the Investors as
part of the above-described written notice. In such event, if the managing
underwriter(s) of the public offering impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)' judgment, such limitation would be necessary to
effect an orderly public distribution, then the Company will be obligated to
include only such limited portion, if any, of the Registrable Securities with
respect to which such Investors have requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro-rata among all Holders of
the Company's securities seeking to include shares of Common Stock (including,
for purposes of this Section 2(c) holders of securities of the Company other
than the Registrable Securities who hold and are attempting to exercise
registration rights) in proportion to the number of shares of Common Stock
sought to be included by such Holders; provided, however, that the Company will
not exclude any Registrable Securities unless the Company has first excluded all
outstanding securities the Holders of which are not entitled by right to
inclusion of securities in such Registration Statement. No right to registration
of Registrable Securities under this Section 2(c) shall be construed to limit in
any way the registration required under Section 2(a) above. The obligations of
the Company under this Section 2(c) will expire upon the earlier of: (i) after
the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(c) for two registrations; provided,
however, that any Investor who shall have had any Registrable Securities
excluded from any Registration Statement in accordance with this Section 2(c)
shall be entitled to include in any additional Registration Statement filed by
the Company the Registrable Securities so excluded; or (ii) when all of the
Registrable Securities held by any
666427.1
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<PAGE>
Investor may be sold by such Investor under Rule 144(k) under the 1933 Act
without being subject to any volume restrictions.
(d) Underwriter's Lock-Up. The underwriters in connection with any
firm commitment public offering of the Company's common stock resulting in
proceeds of at least $10,000,000 to the Company shall have the right to require
that the Investors enter into an agreement restricting the Investors from
selling Common Shares held by such Investors in any public sale for a period not
to exceed 90 days following the closing of such underwriting, if they deem this
to be reasonably necessary to effect such underwritten public offering; provided
that all executive officers, directors and persons holding 5% or more of the
Company's common equity securities shall have also agreed to identical (or more
restrictive) restrictions. The Investors shall be subject to no more than two
such restrictions during each 18 month period, and the aggregate number of days
in all such restrictions during any 18 month period shall not exceed 90 days.
(e) Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors of the Registrable Securities, and the Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to maintain such eligibility for the use of Form S-3.
3. Additional Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall have the following
additional obligations:
(a) The Company shall keep each Registration Statement required by
Section 2(a) hereof effective pursuant to Rule 415 under the Securities Act at
all times during the Registration Period as defined in Section 1(d) above.
(b) The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) filed by the Company
shall not contain any 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, in light of the circumstances in which they were made, not misleading.
The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, shall comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the sellers thereof as set forth in the
Registration Statement. In the event the number of shares of Common Stock
included in a Registration Statement filed pursuant to this Agreement (excluding
piggyback registrations as provided for in Section 2(c) above) is insufficient
to cover all of the Registrable Securities, the Company shall amend the
Registration Statement and/or file a new Registration Statement so as to cover
all of the Registrable Securities as soon as practicable, but in no event more
than twenty (20) business days after the Company first determines (or reasonably
should have determined) the need therefor. The Company shall use its
666427.1
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<PAGE>
best efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. The Late
Registration Payment provisions of Section 2(b) above shall become applicable
with respect to the effectiveness of such amendment and/or new Registration
Statement on the sixtieth (60th) day following the date the Company first
determines (or reasonably should have determined) the need for the amendment
and/or new Registration Statement.
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement (i) promptly after the
same is prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto; each
preliminary prospectus and final prospectus and each amendment or supplement
thereto; and, in the case of the Registration Statement required under Section
2(a) above, each letter written by or on behalf of the Company to the SEC and
each item of correspondence from the SEC, in each case relating to such
Registration Statement (other than any portion of any item thereof which
contains information for which the Company has sought confidential treatment);
and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto, and such other documents
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor.
(d) The Company shall use its best efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the Investors
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations as
may be necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions.
Notwithstanding the foregoing provision, the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (ii) subject itself to general taxation in any such
jurisdiction, (iii) file a general consent to service of process in any such
jurisdiction, (iv) provide any undertakings that cause more than nominal expense
or burden to the Company, or (v) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders.
(e) In the event Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for such
offering, the Company shall enter into and perform its obligations under an
underwriting agreement in usual and customary form including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering. If the Registration Statement required
pursuant to Section 2(a) is not then effective, the Company shall be responsible
for payment of the reasonable attorney fees and costs incurred by one law firm
selected by such Investors to represent their interests in the underwritten
offering.
666427.1
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<PAGE>
(f) The Company shall notify each Investor who holds Registrable
Securities being sold pursuant to a Registration Statement of the happening of
any event of which the Company has knowledge as a result of which (i) the
prospectus included in the Registration Statement as then in effect includes an
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 light of
the circumstances under which they were made, not misleading, or (ii) sales
cannot be made pursuant to such Registration Statement in compliance with the
securities laws for any other reason (a "Suspension Event"). The Company shall
make such notification as promptly as practicable after the Company becomes
aware of such Suspension Event, shall promptly use its best efforts to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and shall deliver a number of copies of such supplement
or amendment to each Investor as such Investor may reasonably request. If an
Investor reasonably believes that a Suspension Event is in effect, but has not
received notice thereof from the Company, such Investor may deliver a written
request, setting forth in reasonable detail the basis and source (including any
individual) for such belief, that the Company confirm that no Suspension Event
is in effect. The Company shall respond to any such request with a letter
executed by an executive officer of the Company stating that, in consultation
with its counsel, the Company has determined that a Suspension Event is or is
not in effect, on or before the third business day following receipt of such
request. If the Company fails to respond within such time period, a Suspension
Event shall be deemed to be in effect commencing retroactively as of the day
that the Investor delivered its request to the Company, and shall continue until
the Investor is otherwise notified by the Company. Notwithstanding the foregoing
provision, the Company shall not be required to maintain the effectiveness of
the Registration Statement or to amend or supplement the Registration Statement
for a period (a "Delay Period") beginning on the date of occurrence of the
Suspension Event and expiring upon the earlier to occur of (i) the date on which
such material information is disclosed to the public or ceases to be material,
(ii) the date on which the Company is able to comply with its disclosure
obligations and SEC requirements related thereto, or (iii) thirty (30) days
after the occurrence of the Suspension Event; provided, however, that there
shall not be more than two Delay Periods in any twelve (12) month period. In the
event that the total number of days in any Delay Period(s) within a twelve-month
period exceeds thirty (30) days, the Company shall extend the automatic
conversion date of the Preferred Shares for a number of days equal to the total
number of days in such Delay Period(s). In the event that the number of days in
all Delay Period(s) taken together within a twelve-month period exceeds sixty
(60) days, or in the event that there are more than two Delay Periods in any
twelve-month period, regardless of the duration, the Company shall compensate
the Investors for such delay by making monthly cash payments, prorated on a
daily basis, to each such Investor of one and one-half percent (1.5%) of the
purchase price paid for the Registrable Shares still held by such Investor at
such time for each month, continuing through the date the Delay Period ceases
(the "Delay Compensation"). The Delay Compensation will begin to accrue on the
sixty-first (61st) day falling within one or more Suspension Events in any
twelve-month period (or on the first day of any Delay Period in excess of the
first two Delay Periods) and will be payable thirty days from that date and each
thirty days thereafter until the Registration Statement is brought effective.
(g) The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement
and, if such an order is
666427.1
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<PAGE>
issued, shall use its best efforts to obtain the withdrawal of such order at the
earliest possible time and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
(h) The Company shall permit counsel designated by the Investors who
hold Registrable Securities being sold pursuant to such registration to review
the Registration Statement and all amendments and supplements thereto (as well
as all requests for acceleration or effectiveness thereof) a reasonable period
of time prior to their filing with the SEC, and shall not file any document in a
form to which such counsel reasonably objects.
(i) The Company shall make generally available to its security Holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in a form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter following
the effective date of the Registration Statement.
(j) At the request of any Investor who holds Registrable Securities
being sold pursuant to such registration, the Company shall furnish on the date
that Registrable Securities are delivered to an underwriter for sale in
connection with the Registration Statement (i) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the Investors; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and Investors.
(k) The Company shall make available for inspection by any Investor
whose Registrable Securities are being sold pursuant to such registration, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction, or is reasonably necessary in connection with litigation or other
legal process, or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall
666427.1
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<PAGE>
have entered into confidentiality agreements (in form and substance satisfactory
to the Company) with the Company with respect thereto, substantially in the form
of this Section 3(k). Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at the Company's expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. Nothing herein shall be deemed to limit any Investor's
ability to sell Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations.
(l) The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant hereto unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or is reasonably necessary in connection with litigation or other
legal process, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information.
(m) The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on
Nasdaq (as defined below), the AMEX or the NYSE and on each additional national
securities exchange on which similar securities issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) secure designation of all the
Registrable Securities covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System ("Nasdaq")
"national market system security" within the meaning of Rule 11Aa2-1 of the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the quotation of the Registrable Securities on the Nasdaq National Market System
or, if, despite the Company's best efforts to satisfy the preceding clause (i)
or (ii), the Company is unsuccessful in satisfying the preceding clause (i) or
(ii), to secure listing on a national securities exchange or Nasdaq
authorization and quotation for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
(n) The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
Closing Date.
(o) The Company shall cooperate with the Investors who hold
Registrable Securities being sold and the managing underwriter or underwriters,
if any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing
666427.1
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<PAGE>
Registrable Securities to be sold pursuant to the Registration Statement and
enable certificates to be in such denominations or amounts as the case may be,
and registered in such names as the managing underwriter or underwriters, if
any, or the Investors may reasonably request; and, within five business days
after a Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) instructions to the transfer agent to
issue new stock certificates without a legend and an opinion of such counsel
that the Common Shares have been registered.
(p) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of the Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the number of Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required by the rules of the SEC to effect the registration of the
Registrable Securities. At least ten (10) business days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
(the "Requested Information") if such Investor elects to have any of such
Investor's Registrable Securities included in the Registration Statement. If
within five (5) business days of such notice the Company has not received the
Requested Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
666427.1
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<PAGE>
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriter applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company, and the reasonable fees and disbursements of one counsel selected
by the Initial Investors pursuant to Section 3(e) hereof, shall be borne by the
Company.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively "Claims") to
which any of them become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged
666427.1
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<PAGE>
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or any state
securities law or any rule or regulation (the matters in the foregoing clauses
(i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (A) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (B) with respect to any preliminary prospectus
shall not inure to the benefit of any such person from whom the person asserting
any such Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented, if a
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; and (C) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Persons and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to indemnify and hold harmless, to
the same extent and in the same manner set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement, and such Investor will promptly
reimburse any legal or other expenses reasonably incurred by them in connection
with
666427.1
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investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided further, however, that the Investors shall be liable under this Section
6(b) for only that amount of a Claim as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof and this indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel for the
Investors; such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification provided for herein
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation, and (iii)
666427.1
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<PAGE>
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under the Exchange Act, with a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) File with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Exchange Act
so long as the Company remains subject to such requirements and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
(b) Furnish to each Investor so long as such Investor holds
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. Assignment of Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to transferees or assignees of all or
any portion of such securities only if (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being transferred or assigned, (iii) following such transfer or assignment the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company received the written notice contemplated by
clause (ii) of this sentence, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement, and (vi) such transferee shall be an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act.
10. Amendment of Registration Rights. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. Third Party Beneficiary. The parties acknowledge and agree that
Shoreline Pacific Institutional Finance, the Institutional Division of Financial
West Group ("Shoreline"), shall be deemed a third party beneficiary of the
Company's agreements and representations set forth in this
666427.1
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<PAGE>
Agreement, entitled to enforce the terms thereof, and to indemnification for any
damages resulting to Shoreline from any actual or threatened breach thereof by
the Company, both in Shoreline's personal capacity and, should Shoreline so
elect, and provided that Shoreline has obtained the prior written consent of the
Investor, on behalf of the Investor.
12. Miscellaneous.
(a) Conflicting Instructions. A person or entity is deemed to be a
holder of Registrable Securities whenever such person or entity owns of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (with
return receipt requested) or delivered personally or by courier (including
a nationally recognized overnight delivery service) or by facsimile
transmission. Any notice so given shall be deemed effective three days after
being deposited in the U.S. Mail, or upon receipt if delivered personally or by
courier or facsimile transmission, in each case addressed to a party at the
following address or such other address as each such party furnishes to the
other in accordance with this Section 12(b):
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
Trenton, NJ 08619
Telephone: (609) 586-7010
Telecopy: (609) 586-1593
Attention: Mr. Alexander M. Adelson
with a copy to:
Battle, Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, NY 10022
Telephone: (212) 856-7000
Telecopy: (212) 856-7822
Attention: David Warburg, Esq.
666427.1
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<PAGE>
If to JMG Capital Partners, L.P.
JMG Capital Partners, L.P.
1999 Avenue of the Stars, Suite 1950
Los Angeles, CA 90067
Telephone: (310) 201-2619
Telecopy: (310) 201-2759
Attention: Mr. Jonathan Glaser
If to Triton Capital Investments, Ltd.:
Triton Capital Investments, Ltd.
c/o JMG Capital Partners, L.P.
1999 Avenue of the Stars, Suite 1950
Los Angeles, CA 90067
Telephone: (310) 201-2619
Telecopy: (310) 201-2759
Attention: Mr. Jonathan Glaser
If to RGC International Investors, LDC:
RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P.
RGC General Partner Corp
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Telephone: (610) 617-5900
Telecopy: (610) 617-0570
Attention: Mr. Gary S. Kaminsky
and with a copy to:
Ballard, Spahr, Andrew Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103-7599
Telephone: (215) 864-8123
Telecopy: (215) 864-8999
Attention: Mr. Keith S. Marlowe, Esq.
If to Shepherd Investments International, Ltd.:
Shepherd Investments International, Ltd.
c/o Staro Asset Management
1500 West Market Street, Suite 200
Mequon, WI 53092
Telephone: (414) 241-1810
666427.1
48
<PAGE>
Telecopy: (414) 241-7704
Attention: Mr. Joe Lucas
and with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Telephone: (212) 756-2376
Telecopy: (212) 593-5955
Attention: Mr. Eleazer Klein, Esq.
If to Stark International:
Stark International
c/o Staro Asset Management
1500 West Market Street, Suite 200
Mequon, WI 53092
Telephone: (414) 241-1810
Telecopy: (414) 241-7704
Attention: Mr. Joe Lucas
and with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Telephone: (212) 756-2376
Telecopy: (212) 593-5955
Attention: Mr. Eleazer Klein, Esq.
If to Societe Generale:
Societe Generale
1221 Avenue of the Americas
6th Floor
New York, NY 10020
Telephone: (212) 278-5260
Telecopy: (212) 278-5467
Attention: Mr. Guillaume Pollet
with a copy to:
Dorsey & Whitney LLP
250 Park Avenue
666427.1
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<PAGE>
New York, NY 10177
Telephone: (212) 415-9263
Telecopy: (212) 888-0018
Attention: Mr. Eric Maki, Esq.
If to Elara Ltd.:
Elara Ltd.
c/o Talisman Capital
PO Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortolla
British Virgin Islands
Telephone: (809) 494-2616
Telecopy: (809) 494-2794
Attention: Geoffrey Tirman
If to Keyway Investments:
Keyway Invesments
c/o Midland Walwyn Capital, Inc.
BCE Place-181 Bay Street, Suite 500
Toronto, Ontario M5J2V8
Canada
Telephone: (416) 369-8738
Telecopy: (416) 369-8726
Attention: Mr. Gregory W. Murphy
If to Midland Walwyn Capital, Inc.:
Midland Walwyn Capital, Inc.
with a copy to:
Kaufman Malchman Kirby & Squier
919 3rd Avenue, 11th Floor
New York, NY 10022
Telephone: (212) 371-6600
Telecopy: (212) 751-2540
Attention: Mr. Rick Stone, Esq.
in each case with a copy to:
666427.1
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<PAGE>
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
and:
Cowen & Co.
1 Financial Square
New York, NY 10005
Telephone: (212) 495-3950
Telecopy: (212) 495-8305
Attention: Mr. Bill Smith
(c) Waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) Governing Law: Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the Company's jurisdiction of
incorporation (in respect of matters of corporation law) and the laws of the
State of New York (in respect of all other matters) applicable to contracts made
and to be performed in the State of New York. The parties hereto irrevocably
consent to the jurisdiction of the United States federal courts and state courts
located in the Borough of Manhattan in the State of New York in any suit or
proceeding based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that all claims in respect of such
suit or proceeding may be determined in such courts. The Company and each
Investor irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding in such forum. The Company and each
Investor further agrees that service of process upon the Company or such
Investor, as applicable, mailed by the first class mail in accordance with
Section 12(b) shall be deemed in every respect effective service of process upon
the Company or such Investor in any suit or proceeding arising hereunder.
Nothing herein shall affect any Investor's right to serve process in any other
manner permitted by law. The parties hereto agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
The parties hereto irrevocably waive any right to trial by jury under applicable
law.
(e) Severability. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
666427.1
51
<PAGE>
(f) Entire Agreement. This Agreement and the Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof.
(g) Successors and Assigns. Subject to the requirements of Section 9
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
(h) Use of Pronouns. All pronouns and any variations thereof refer to
the masculine, feminine or neuter, singular or plural, as the context may
require.
(i) Headings. The headings and subheadings in the Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission, and
facsimile signatures shall be binding on the parties hereto.
(k) Further Acts. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(l) Remedies. No provision of this Agreement providing for any remedy
to any party shall limit any remedy which would otherwise be available to such
Investor at law or in equity. Nothing in this Agreement shall limit any rights
an Investor may have with any applicable federal or state securities laws with
respect to the investment contemplated hereby. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to an
Investor. Accordingly, the Company and the Investors acknowledge that the remedy
at law for a breach of their respective obligations under this Agreement will be
inadequate and that, in the event of a breach or threatened breach by the
Company or the Investors, respectively, of the provisions of this Agreement,
that an Investors or Company, respectively, shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach and
requiring immediate compliance, without the necessity of showing economic loss
and without any bond or other security being required.
(m) Consents. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by Investors holding a
majority of the Registrable
666427.1
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<PAGE>
Securities, determined as if all shares of preferred stock of the Company issued
in the Offering and all Warrants then outstanding had been converted into or
exercised for Registrable Securities.
666427.1
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
COMPANY:
BASE TEN SYSTEMS, INC.
By: __________________________________
Name:
Title:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS:
JMG CAPITAL PARTNERS, L.P.
By: __________________________________
Jonathan Glaser
President, JMG Capital Management,
Inc.
General Partner, JMG Capital
Partners, LP
DATE:
TRITON CAPITAL INVESTMENTS, LTD
By: __________________________________
Jonathan Glaser
Vice President, Triton Capital
Investments, Ltd.
DATE:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED
666427.1
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<PAGE>
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, LP
RGC General Partner Corporation
By: ___________________________________
Gary S. Kaminsky
Managing Director
DATE:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED
SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
By: __________________________________
Name:
Managing Member, Staro Asset
Management, LLC
Investment Manager, Shepherd
Investments International, Ltd.
DATE:
STARK INTERNATIONAL
By: __________________________________
Name:
Managing Member, Staro Asset
Management, LLC Investment
Manager, Stark International
DATE:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED
666427.1
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<PAGE>
SOCIETE GENERALE
By: ____________________________________
Name:
Title:
DATE:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
ELARA LTD.
By: __________________________________
Geoffrey Tirman, Talisman Capital
President, Elara Ltd.
DATE:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
KEYWAY INVESTMENTS
By: __________________________________
Gregory W. Murphy
Title:
DATE:
666427.1
56
Exhibit 99.3
BASE TEN SYSTEMS, INC.
CERTIFICATE OF AMENDMENT
OF
RESTATED
CERTIFICATE OF INCORPORATION
PROVIDING FOR DESIGNATION,
PREFERENCES AND RIGHTS
OF THE
CONVERTIBLE PREFERRED SHARES, SERIES A
(Par Value $1.00 Per Share)
of
BASE TEN SYSTEMS, INC.
Base Ten Systems, Inc., a corporation (the "Corporation") organized
under the laws of the State of New Jersey, to amend its Restated Certificate of
Incorporation in accordance with Chapter 9 of the New Jersey Business
Corporation Act, hereby certifies:
FIRST: The name of the Corporation is Base Ten Systems, Inc.
SECOND: The Board of Directors of the Corporation, at a meeting held
on December 2, 1997, pursuant to Section 14A:7-2 of the New Jersey Business
Corporation Act and the authority vested in the Board of Directors by the
Restated Certificate of Incorporation, as amended, adopted the following
resolution providing for the issuance of a new series of the Corporation's
Preferred Shares, par value $1.00
666427.1
57
<PAGE>
per share, consisting of up to 19,000 shares of Convertible Preferred Shares,
Series A:
RESOLVED, that pursuant to the authority vested in
this Board of Directors in accordance with the provisions of
the Corporation's certificate of incorporation, as amended, a
new series of Preferred Shares of the Corporation known as
Convertible Preferred Shares, Series A, be, and hereby is,
created, classified, authorized and the issuance thereof
provided for, and that the designation and number of shares,
and relative rights, preferences and limitations thereof are
hereby fixed, and Article 6 of the Certificate of
Incorporation of the Corporation, as amended, is hereby
amended by adding Article 6(d) thereto, to read, in its
entirety, as follows:
(d) A. Designation and Amount. The shares of the new series of
Preferred Shares shall be designated as "Convertible Preferred Shares, Series A"
and the number of shares constituting such series shall initially be 19,000,
with a par value of $1.00 per share. Fractional Preferred Shares shall be
permitted. The relative rights, preferences, restrictions and other matters
relating to the Preferred Shares are contained in this Certificate of Amendment.
The number of Preferred Shares may be increased, subject to and in accordance
with the New Jersey Business Corporation Act, without approval of the existing
holders of Preferred Shares, solely for the purpose of issuance pursuant to
Section C(1) hereof.
B. Definitions. As used in this Certificate of Amendment, the
following terms shall have the following meanings:
"Board of Directors" means the board of directors of the Corporation.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of New York, New York are authorized
or obligated by law or executive order to close.
"Capital Stock" means any and all shares, rights to purchase,
warrants, options, convertible securities, participation or other equivalents of
or interests (other than security interests) in (however designated and whether
voting or nonvoting) corporate stock.
"Certificate of Amendment" means this Certificate of Amendment,
establishing the Preferred Shares pursuant to Chapter 9 of the New Jersey
Business Corporation
666427.1
58
<PAGE>
Act, as the same may be amended, supplemented or modified from time to time in
accordance with the terms hereof and pursuant to applicable law.
"Conversion Default Payments" has the meaning set forth in Section
H(2) hereof.
"Closing Bid Price" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded, as reported at the close
of normal trading hours, New York time, by Bloomberg Financial Markets or a
comparable reporting service of national reputation selected by the Corporation
and reasonably acceptable to holders of the Preferred Shares then holding a
majority of the then outstanding Preferred Shares ("Majority Holders") if
Bloomberg Financial Markets is not then reporting closing bid prices of such
security (collectively, "Bloomberg"), or if the foregoing does not apply, the
last reported sale price of such security in the over-the-counter market on the
electronic bulletin board of such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as reasonably determined by an investment banking firm selected by the
Corporation and reasonably acceptable to the Majority Holders, with the costs of
such appraisal to be borne by the Corporation.
"Closing Date" means the date on which Preferred Shares are initially
issued.
"Common Shares" means the Class A Common Shares, par value $1.00 per
share, of the Corporation and all shares hereafter authorized of any class of
Common Shares of the Corporation, and, in the case of a reclassification,
recapitalization or other similar change in such Common Shares or in the case of
a consolidation or merger of the Corporation with or into another Person, such
consideration to which a holder of a share of Common Shares would have been
entitled upon the occurrence of such event. Common Shares shall not include the
Corporation's Class B Common Shares, par value $1.00 per share.
"Conversion Date" has the meaning set forth in Section H(2) hereof.
"Conversion Notice" has the meaning set forth in Section H(2) hereof.
"Conversion Price" has the meaning set forth in Section H(1) hereof.
"Default Redemption Amount" has the meaning set forth in Section F(4)
hereof.
"Default Redemption Notice" has the meaning set forth in Section F(4)
hereof.
666427.1
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<PAGE>
"Delay Compensation" has the meaning set forth in Section 3(f) of the
Registration Rights Agreement.
"Delisting Payments" has the meaning set forth in Section 4.5 of the
Securities Purchase Agreement.
"Dividend Payment Date" has the meaning set forth in Section C(1)
hereof.
"DTC" has the meaning set forth in Section H(11) hereof.
"Fiscal Quarter" means a calendar quarter ended on March 31, June 30,
September 30 or December 31, as the case may be.
"Five Percent Limitation" has the meaning set forth in Section H(1)
hereof.
"Illiquidity Payment" has the meaning set forth in Section C(1)
hereof.
"Initial Closing Cap Amount" has the meaning set forth in Section H(1)
hereof.
"Initial Conversion Price" means $12.50 (subject to adjustment
pursuant to Section H(4) hereof).
"Late Registration Payments" has the meaning set forth in Section 2(b)
of the Registration Rights Agreement.
"Junior Stock" means Common Shares and any other class or series of
Capital Stock of the Corporation now or hereafter issued and outstanding that
ranks junior as to dividends and/or liquidation to the Preferred Shares.
"Mandatory Redemption Price" has the meaning set forth in Section F(2)
hereof.
"Market Value" as of any date means the average Closing Bid Price of
Common Shares for the ten consecutive Trading Days ending on the date prior to
such date.
"Maturity Date" means the third anniversary date of the Closing Date,
provided, however, that such original Maturity Date shall be extended by a
number of Trading Days equal to the aggregate number of Trading Days during the
period from March 1, 1998 to and including the original Maturity Date during
which the holders of Preferred Stock are restricted from selling Common Shares
by reason of (x) Section 2(d) of the Registration Rights Agreement, (y) any
Delay Period(s) (as defined in Section 3(f) of the Registration Rights
Agreement), but only if the total number of days in any Delay Period(s) within a
twelve-month period exceed thirty (30) days, or (z) any Redemption Event.
666427.1
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<PAGE>
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Permanent Cap Amount" has the meaning set forth in Section H hereof.
"Person" means an individual, a corporation, a partnership, a joint
venture, an association, a joint-stock company, a trust, a business trust, a
government or any agency or any political subdivision, any unincorporated
organization, or any other entity.
"Preferred Shares" means the Convertible Preferred Shares, Series A.
"Purchase Price" shall mean $1,000 per Preferred Share.
"Redemption Date" means any date on which shares of Preferred Shares
are to be redeemed pursuant to Section F hereof.
"Redemption Event" means any one of the following:
(i) the Common Shares (including any of the Common Shares issuable
upon conversion of the Preferred Shares or required from time to time to be
reserved pursuant to this Certificate of Amendment) are suspended from
trading on, or are not listed (and authorized) for trading on, the NASDAQ
Small Cap Market, the NASDAQ National Market System, the American Stock
Exchange, or the New York Stock Exchange for an aggregate of thirty (30)
Trading Days in any eighteen (18) month period;
(ii) the Company fails: (x) to cause the registration statement
required pursuant to Section 2(a) of the Registration Rights Agreement to
be declared effective on or before the one hundred eightieth (180th) day
following Closing in a manner which would allow the sale of all Registrable
Securities (as defined in the Registration Rights Agreement) to the fullest
extent permitted under Section 2(a) of the Registration Rights Agreement;
or (y) to cause the holders of Preferred Shares to be able to utilize such
registration statement for the resale of all of their Registrable
Securities (as defined in the Registration Rights Agreement), unless the
Company is using its best efforts to remedy such inability to utilize such
registration statement, subject to the Company's Board of Directors having
determined in their good faith business judgment by resolution that the
continued effectiveness of such registration statement would have a
material adverse effect on the Company's ability to consummate a financing,
acquisition, merger or joint venture, the failure of which to consummate
would have a material adverse effect on the Company's financial condition,
results of operations or future prospects; provided that in no event shall
such failure described in this clause (y) exist for a total of more than
thirty (30) Trading Days in any eighteen (18) month period;
666427.1
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<PAGE>
(iii) The Company fails to (x) issue Common Shares to a holder of the
Preferred Shares upon exercise by the holder of its conversion rights in
accordance with the terms of this Certificate of Amendment; (y) transfer or
to cause its transfer agent to transfer any certificate for Common Shares
issued to a holder upon conversion of the Preferred Shares as and when
required by this Certificate of Amendment or the Registration Rights
Agreement; or (z) remove any restrictive legend on any certificate for any
Common Shares issued to a holder of the Preferred Shares upon conversion of
the Preferred Shares as and when required by this Certificate of Amendment,
the Securities Purchase Agreement or the Registration Rights Agreement; and
any such failure described above shall continue uncured for ten (10)
Business Days; or
(iv) The Corporation fails to pay to a holder of Preferred Shares any
amounts due hereunder or pursuant to the Securities Purchase Agreement or
Registration Rights Agreement (including but not limited to dividends and
Illiquidity Payments, Conversion Default Payments, Late Registration
Payments and Delay Compensation thereon) when due and any such failure
shall continue uncured (after written notice and demand to cure from the
holder of Preferred Shares) for ten (10) Business Days.
"Redemption Price" means the Optional Redemption Price, the Mandatory
Redemption Price or the Default Redemption Price, as the case may be, each of
which terms shall have the respective meanings set forth in Section F hereof.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date between the Corporation and the initial purchasers
of the Preferred Shares, a copy of which will be on file in the offices of the
Corporation and available for inspection by shareholders of the Corporation.
"Rule 4460 Amount" has the meaning set forth in Section H(1) hereof.
"Second Closing" has the meaning set forth in Section 1.1 of the
Securities Purchase Agreement.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of the Closing Date between the Corporation and the initial
purchasers of the Preferred Shares, a copy of which will be on file in the
offices of the Corporation and available for inspection by shareholders of the
Corporation.
"Shareholder Approval" has the meaning set forth in Section 4.8 of the
Securities Purchase Agreement.
"Trading Day" means, with respect to the Common Shares: (i) if any
series of Common Shares is quoted on the NASDAQ National Market System, any
similar system of automated dissemination of quotations of securities prices, or
the National
666427.1
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Quotation Bureau Incorporated, each day on which quotations may be made on such
system; or (ii) if any series of Common Shares is listed or admitted for trading
on any national securities exchange, days on which such national securities
exchange is open for business; or (iii) if the Corporation's Common Shares are
not quoted on any system or listed or admitted for trading on any securities
exchange, a Business Day.
"Underwriter's Lock-Up" has the meaning set forth in Section 2(d) of
the Registration Rights Agreement.
"Variable Conversion Price" means the Weighted Average Price of Common
Shares for any two Trading Days selected by a holder in the twenty (20)
consecutive Trading Day period ending on the day prior to the day a holder of
Preferred Shares delivers a Conversion Notice or Default Redemption Notice
(subject to equitable adjustment for events during such Trading Day period of
the nature described in Section H(4)), provided, however, that a holder may not
select the Trading Day on which the lowest Weighted Average Price of the Common
Shares in the twenty (20) consecutive Trading Day period was reported.
"Weighted Average Price" means for any security for any date or dates,
the volume weighted average price of such security on the principal securities
exchange or trading market where such security is listed or traded, as reported
at the close of normal trading hours, New York time, by Bloomberg Financial
Markets or a comparable reporting service of national reputation selected by the
Corporation and reasonably acceptable to holders of the Preferred Shares then
holding a majority of the then outstanding Preferred Shares ("Majority Holders")
if Bloomberg Financial Markets is not then reporting volume weighted average
prices of such security (collectively, "Bloomberg"), or if the foregoing does
not apply, the last reported sale price of such security in the over-the-counter
market on the electronic bulletin board of such security as reported by
Bloomberg, or, if no sale price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted Average
Price cannot be calculated for such security for such date or dates on any of
the foregoing bases, the Weighted Average Price of such security for such date
or dates shall be the fair market value as reasonably determined by an
investment banking firm selected by the Corporation and reasonably acceptable to
the Majority Holders, with the costs of such appraisal to be borne by the
Corporation.
C. Dividends and Certain Other Payments. The holders of the Preferred
Shares shall be entitled to receive, when and as declared by the Board of
Directors, out of funds legally available therefor, dividends and certain other
payments as set forth in this Section C.
(1) If (i) the Closing Bid Price of the Corporation's Common Shares is
less than $8.00 per share (adjusted for events of the nature described in
Section H(4)(i)) for ten (10) consecutive Trading Days during any Fiscal
Quarter, the holders
666427.1
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of the Preferred Shares shall be entitled to receive dividends at a rate of
$20.00 per share for such entire Fiscal Quarter, or (ii) the number of Common
Shares issued upon conversion of Preferred Shares by a holder equals, prior to
the Second Closing, the Initial Closing Cap Amount with respect to that holder
and, after the Second Closing, the Permanent Cap Amount with respect to that
holder, or a holder of Preferred Shares is subject to an Underwriter's Lock-Up,
that holder (but not any other holder) shall be entitled to receive a payment
(an "Illiquidity Payment") at the rate of $20.00 per Preferred Share for each
Fiscal Quarter in which such event occurs or is continuing. Dividends and
Illiquidity Payments shall be payable at the option of the Board of Directors
(x) in cash, or (y) provided Shareholder Approval has been obtained, and further
provided that this Certificate of Amendment or the Corporation's Certificate of
Incorporation shall have been appropriately amended, solely to the extent
necessary to increase the number of Preferred Shares authorized so as to make
sufficient Preferred Shares available for issuance pursuant to this Section
C(1), in a number of Preferred Shares (which may include fractional Preferred
Shares) equal to the product of (A) the cash amount of such quarterly dividend
or Illiquidity Payment, as the case may be, multiplied by (B) 1.25, divided by
(C) the Purchase Price per Preferred Share.
(2) The holders of Preferred Shares shall be entitled to participate
with the holders of Common Shares in any dividends paid or set aside for payment
with respect to the Common Shares so that the holders of Preferred Shares shall
receive with respect to each Preferred Share an amount equal to (x) the dividend
payable with respect to each Common Share multiplied by (y) the number of Common
Shares (and fraction of a Common Share, if any) into which such Preferred Share
is convertible as of the record date for such dividend.
(3) Dividends and Illiquidity Payments shall accrue (whether or not
declared) from and including the first day of the relevant Fiscal Quarter to and
including the date on which the Redemption Price is paid on such shares or on
which such shares are converted or redeemed and, to the extent not paid for any
relevant Fiscal Quarter, will be cumulative. Dividends and Illiquidity Payments
on the Preferred Shares, to the extent payable, shall be payable quarterly, in
arrears, on the last day of each relevant Fiscal Quarter (each such date, a
"Dividend Payment Date"), except that if any such date is not a Business Day,
then such dividend or Illiquidity Payment shall be paid on the next succeeding
Business Day. Each such dividend or Illiquidity Payment shall be payable to
holders of Preferred Shares at the close of business on the Dividend Payment
Date. Dividends on the Preferred Shares shall accrue on a daily basis during the
relevant quarterly period whether or not the Corporation shall have earnings or
surplus at the time.
D. Voting Rights. The holders of Preferred Shares shall have the
following voting rights:
(1) Each holder of Preferred Shares shall be entitled to such number
of votes for the Preferred Shares held by him on all matters submitted to a
666427.1
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vote of the Corporation's shareholders as shall be equal to the largest number
of whole Common Shares into which all of his Preferred Shares are then
convertible (after giving effect, and subject to, the Five Percent Limitation,
the Permanent Cap Amount, and any other then applicable limitations set forth in
Section (H)(1));
(2) Except as otherwise provided herein or by law, the holders of
Preferred Shares and the holders of Common Shares shall vote together as one
class on all matters submitted to a vote of the Corporation's shareholders.
(3) So long as any Preferred Shares are outstanding, the Corporation
shall not, without first obtaining the approval of the holders of two-thirds of
the Preferred Shares:
(i) alter or change the rights, preferences or privileges of the
Preferred Shares;
(ii) issue any other class or series of Capital Stock having rights
upon liquidation or rights as to dividends which are senior to or pari
passu with the rights of the holders of Preferred Shares; or
(iii) issue any additional Preferred Shares in excess of the 19,000
Preferred Shares authorized hereunder, other than any additional Preferred
Shares which may be issued pursuant to Section C(1) hereof.
E. Liquidation Preference. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
after the payment or the setting apart of payment to the holders of any class or
series of Capital Stock of the Corporation hereafter issued and outstanding that
ranks senior as to dividends and/or liquidation to the Preferred Shares, the
holders of Preferred Shares shall be entitled to receive out of assets of the
Corporation available for distribution to shareholders, an amount equal to the
Mandatory Redemption Price of such shares, before any payment shall be made or
any assets distributed to the holders of Junior Stock. If the assets and funds
to be distributed to the holders of the Preferred Shares, and the holders of any
other Capital Stock ranking pari passu with the Preferred Shares, shall be
insufficient to permit the payment to all such holders of their full
preferential amount, the assets and funds legally available shall be distributed
ratably, among the holders of such other Capital Stock ranking pari pasu with
the Preferred Shares, in proportion to the full preferential amount each such
holder is otherwise entitled to receive. Neither the consolidation or merger of
the Corporation with or into any other entity nor the sale or transfer by the
Corporation of all or substantially all of its assets shall, for the purposes
hereof, be deemed to be a liquidation, dissolution or winding up of the
Corporation.
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F. Redemption.
(1) Optional Redemption by the Company. While a Registration Statement
(as defined in the Registration Rights Agreement) is effective with respect to
the Common Shares issuable on conversion of the Preferred Shares and so long as
no Redemption Event has occurred and is continuing, the Corporation may, at its
option at (i) any time within 45 days prior to or 15 days after the commencement
of a firm commitment public offering of its equity securities, or (ii) at any
time or from time to time after the first anniversary date of the Closing Date,
redeem for cash, out of funds legally available therefor, all or any part of
(but not less than 1,900 Preferred Shares in any single redemption) of the
outstanding Preferred Shares at a price per Preferred Share equal to the greater
of (x) 130% of the then applicable Mandatory Redemption Price per Preferred
Share or (y) the sum of (A) the then applicable Mandatory Redemption Price per
Preferred Share, plus (B) the difference between (I) the Market Value of the
Common Shares into which each Preferred Share is convertible on the Redemption
Date and (II) the Closing Bid Price of the Common Shares into which each
Preferred Share is convertible on the Redemption Date (the "Optional Redemption
Price").
(2) Mandatory Redemption by the Company. The Corporation shall redeem
all outstanding Preferred Shares on the Maturity Date at a price per share equal
to the sum of (x) the Purchase Price, (y) any accrued and unpaid dividends
thereon through the date of final distribution to shareholders, whether or not
declared, and any Illiquidity Payments and Conversion Default Payments thereon,
and (z) any Late Registration Payments, Delay Compensation and Delisting
Payments thereon (collectively, the "Mandatory Redemption Price"). All
Conversion Default Payments, Late Registration Payments, Delay Compensation and
Conversion Default Payments shall be payable on the Maturity Date in cash, out
of funds legally available therefor. The balance of the Mandatory Redemption
Price (the "Remaining Redemption Amount") shall be payable on the Maturity Date
at the option of the Board of Directors (x) in cash, out of funds legally
available therefor; or (y) while a Registration Statement (as defined in the
Registration Rights Agreement) is effective with respect to the Common Shares
issuable on redemption of the Preferred Shares, in Common Shares having an
aggregate Market Value on the Maturity Date equal to (A) the Remaining
Redemption Amount multiplied by (B) 1.25.
(3) Procedures for Redemption by the Company.
(i) At least 30 days (45 days if the Redemption Price is to be paid in
Common Shares) but not more than 60 days before the applicable Redemption
Date, the Corporation or its transfer agent shall mail a notice of
redemption by first-class mail postage prepaid to each holder of Preferred
Shares, addressed to such holders at their last addresses shown on the
stock transfer books of the Corporation. Such notice shall indicate that
Preferred Shares are to be redeemed and shall, among other things, state:
666427.1
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(a) the Redemption Date;
(b) the number of Preferred Shares being redeemed;
(c) the Optional Redemption Price or Mandatory Redemption Price, as
the case may be, including the amount of unpaid dividends, Illiquidity Payments,
Conversion Default Payments, Late Registration Payments, Delay Compensation and
Delisting Payments with respect to such shares;
(d) that the Preferred Shares called for redemption must be
surrendered to the Corporation to collect the Redemption Price;
(e) that Preferred Shares called for redemption may be converted at
any time before the close of business on the first Business Day preceding the
Redemption Date.
Failure to give notice or any defect in the notice to any holder shall
not affect the validity of the notice given to any other holder.
(ii) As long as the Corporation has complied with the requirements set
forth in this Section F, from and after the applicable Redemption Date,
dividends on, and Illiquidity Payments, Conversion Default Payments, Late
Registration Payments, Delay Compensation and Delisting Payments with
respect to the shares of Preferred Shares so called for redemption shall
cease to accrue as of the applicable Redemption Date, such shares shall be
canceled and shall no longer be deemed to be outstanding, and all rights of
the holders thereof as shareholders of the Corporation (except the right to
receive from the Corporation the Redemption Price) shall cease.
(4) Optional Redemption By Holder. (i) Upon the occurrence of a
Redemption Event, each holder of Preferred Shares shall have the right to elect
at any time and from time to time by delivery of a Default Redemption Notice (as
defined herein) to the Corporation while such Redemption Event continues, to
require the Corporation to purchase for cash, out of funds legally available
therefor, for an amount per share equal to the Default Redemption Amount (as
defined herein), any or all of the then outstanding shares of Preferred Shares
held by such Holder. The "Default Redemption Amount" with respect to each
Preferred Share means an amount equal to the greater of (i) 1.25 times the then
effective Mandatory Redemption Price per share of each Preferred Share for which
a demand for redemption is being made or (ii) (x) the then effective Mandatory
Redemption Price of each Preferred Share for which a demand for redemption is
being made, divided by (y) the then effective Conversion Price, multiplied by
(z) the Market Value of the Common Shares.
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(ii) If the Corporation fails to pay any holder the Default Redemption
Amount with respect to any Preferred Shares within five (5) Business Days
of its receipt of a notice requiring such redemption (a "Default Redemption
Notice"), then the holder delivering such Default Redemption Notice shall
be entitled to interest on the Default Redemption Amount at a per annum
rate equal to the lower of (x) the sum of prime rate published from time to
time by the Wall Street Journal plus five percent (5%) and (y) the highest
interest rate permitted by applicable law from the date of the Default
Redemption Notice until the date of redemption hereunder. In the event the
Corporation is not able to redeem all of the shares of Preferred Shares
subject to Default Redemption Notices because of insufficient shareholders
equity, restrictions under applicable law or pursuant to agreements, or
lack of cash, the Corporation shall redeem shares of Preferred Shares from
each holder, to the maximum extent, pro rata, based on the total number of
shares of Preferred Shares included by such holder in the Default
Redemption Notice relative to the total number of shares of Preferred
Shares in all of the Default Redemption Notices.
G. Consolidation, Merger and Sale of Assets, etc. The Corporation
shall not consolidate with or merge into, or transfer all or substantially all
of its assets to, another Person unless (i) in the case of a merger or
consolidation, the Corporation is the surviving entity and the rights and
preferences of the Preferred Shares are not modified, or (ii) (A) the surviving,
resulting or acquiring Person is a Person organized under the laws of the United
States, any state thereof or the District of Columbia, or a Person organized
under the laws of a foreign jurisdiction whose equity securities are listed on a
national securities exchange in the United States or authorized for quotation on
NASDAQ, and (B) the Corporation shall make effective provision such that, upon
consummation of such transaction, the holders of Preferred Shares shall receive
preferred stock of the surviving entity having substantially identical terms and
registration rights as the Preferred Shares.
H. Conversion of Preferred Shares.
(1) Right of Conversion of Preferred Shares. Each Preferred Share
shall be convertible at the option of the holder thereof, at any time or from
time to time after the Closing Date, into a number of fully paid and
nonassessable Common Shares equal to (x) the then applicable Mandatory
Redemption Price of such Preferred Share, divided by (y) the lesser of (A) the
Variable Conversion Price as of the Conversion Date or (B) 130% of the Initial
Conversion Price (the "Conversion Price"); provided, however, that:
(I) in no event shall the aggregate number of Common Shares issuable upon
conversion of all of the Preferred Shares exceed (except at the option of the
Company by reason of a Mandatory Redemption by the Company on the Maturity Date
or at the option of the Company by reason of the issuance of Common Shares upon
conversion
666427.1
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of Preferred Shares issued at any time or from time to time in payment of
accrued and unpaid dividends or Illiquidity Payments):
(x) prior to the Second Closing, 1,500,000 Common Shares (the "Initial
Closing Cap Amount"), and
(y) after the Second Closing, 3,040,000 Common Shares (the "Permanent
Cap Amount");
(II) in no event shall any issuance by the Company of Common Shares in payment
of dividends, Illiquidity Payments or any other amounts payable pursuant to this
Certificate of Amendment reduce the aggregate number of Common Shares issuable
upon conversion of the Preferred Shares to less than:
(x) prior to the Second Closing, the Initial Closing Cap Amount, and
(y) after the Second Closing, the Permanent Cap Amount;
(III) for so long as the Common Shares are listed on NASDAQ, the American Stock
Exchange or the New York Stock Exchange (or any other exchange or quotation
system with a rule in effect similar to NASDAQ Rule 4460(i)(D) as in effect on
the Closing Date), prior to obtaining Shareholder Approval, in no event shall
the aggregate number of Common Shares issued upon conversion of the Preferred
Shares or otherwise issued by the Company pursuant to this Certificate of
Amendment exceed 1,528,789 Common Shares (the "Rule 4460 Amount"); and
(IV) in no event shall any holder of Preferred Shares be entitled to receive
Common Shares upon a conversion to the extent that the sum of (x) the number of
Common Shares beneficially owned by that holder and its affiliates (exclusive of
shares issuable upon conversion of the unconverted portion of any Preferred
Shares or the unexercised or unconverted portion of any other securities of the
Corporation subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (y) the number of Common Shares issuable upon
the conversion of the Preferred Shares with respect to which the determination
of this subclause is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.9% of the outstanding Common Shares
(the "Five Percent Limitation"), and for purposes of this subclause, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13 D-G thereunder, except as
otherwise provided in clause (x) above. To the extent the Five Percent
Limitation applies, the determination of whether Preferred Shares shall be
convertible (vis-a-vis other securities owned by a holder) shall be in the sole
discretion of the holder and submission of a Conversion Notice shall be deemed
to be the holder's determination of whether the Preferred Shares are convertible
in whole or in part, subject to such aggregate Five Percent Limitation. No prior
inability to convert the
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Preferred Shares pursuant to this clause shall have any effect on the
applicability of the provisions of this clause with respect to any subsequent
determination of ability to convert. The provisions of this clause may be
amended and/or implemented in a manner otherwise than in strict conformity with
the terms of this clause with the approval of the Board of Directors of the
Company and the affected Holder; the provisions of this clause may be waived by
the affected holder upon ninety (90) days prior written notice from such holder
to the Company. The limitations contained in this clause shall apply to a
successor holder concurrently with its acquisition of such Preferred Shares,
such election to be promptly confirmed in writing to the Company (provided no
transfers to a successor holder or holders shall be used by a holder to evade
the limitations contained herein).
The Initial Closing Cap Amount or if applicable, the Permanent Cap
Amount, shall be allocated among the holders of Preferred Shares in the same
proportion as the number of Preferred Shares initially held by each holder bears
to the aggregate number of outstanding Preferred Shares. Each increase to the
Initial Closing Cap Amount or Permanent Cap Amount shall be allocated pro rata
among the holders based on the number of Preferred Shares held by each holder at
the time of the increase in the Initial Closing Cap Amount or Permanent Cap
Amount. In the event a holder shall sell or otherwise transfer any of such
holder's Preferred Shares, each transferee shall be allocated a pro rata portion
of such transferor's Initial Closing Cap Amount or Permanent Cap Amount. Any
portion of the Initial Closing Cap Amount or Permanent Cap Amount which remains
allocated to any Person which does not hold any Preferred Shares shall be
allocated among the remaining holders, pro rata based on the number of Preferred
Shares then held by such holders.
(2) Conversion Procedures. In order to exercise the conversion
privilege, the holder of any Preferred Shares to be converted in whole or in
part shall give written notice to the Corporation ("Conversion Notice") by
confirmed facsimile, courier delivery (with receipt acknowledged), personal
delivery, or registered or certified mail (with receipt acknowledged) that the
holder elects to convert such shares or the portion thereof specified in said
notice into shares of Common Shares and shall, within five (5) Business Days
thereafter, surrender the certificate or certificates evidencing such shares to
the Corporation. The Conversion Notice shall specify the effective date of such
conversion, which shall be no earlier than the date of receipt and no later than
30 days following receipt, and shall also state the name or names (with address)
in which the certificates for Common Shares which shall be issuable upon such
conversion shall be issued. Each certificate evidencing Preferred Shares
surrendered for conversion shall, unless the shares issuable on conversion are
to be issued in the same name as the registration of such Preferred Shares, be
duly endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Corporation duly executed by, such holder or its duly
authorized attorney.
Within three (3) Business Days after receipt of a Conversion Notice,
but not prior to the specified effective date of conversion, and following (and
in no event
666427.1
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prior to) surrender of the certificate or certificates evidencing the Preferred
Shares relating thereto, the Corporation shall issue and deliver to such holder
(or upon the written order of such holder) a certificate or certificates for the
number of full Common Shares issuable upon the conversion of such Preferred
Shares or portion thereof in accordance with the provisions of this Section H,
and a check or cash in respect of any fractional Common Shares issuable upon
such conversion, as provided in Section H(3). If the Corporation fails to issue
certificates upon any such conversion of Preferred Shares, the Corporation shall
pay to any holders of such converted Preferred Shares an amount equal to (i) 1%
of the Conversion Price per day multiplied by the number of Common Shares
issuable upon conversion of the Preferred Shares subject to the applicable
Conversion Notice for the first 30 days after the scheduled delivery date of
such certificates, and (ii) thereafter, 2% of the Conversion Price per day
multiplied by the number of Common Shares issuable upon conversion of the
Preferred Shares subject to the applicable Conversion Notice ("Conversion
Default Payments"). Notwithstanding the foregoing, if the Corporation's failure
to issue such certificates is a result of an error made by its transfer agent,
such amount shall not accrue until after the third day following the scheduled
delivery date of such certificate. In the event that less than all the Preferred
Shares represented by a certificate are to be converted, the Corporation shall
issue and deliver or cause to be issued and delivered to (or upon the written
order of) the holder of the Preferred Shares so surrendered, without charge to
such holder, a new certificate or certificates representing a number of
Preferred Shares equal to the unconverted portion of the surrendered
certificate.
Each conversion shall be deemed to have been effected as of the date
(the "Conversion Date") specified in the applicable Conversion Notice, or if no
date is specified, as of the date on which a Conversion Notice with respect to
Preferred Shares shall have been received by the Corporation by facsimile or
otherwise, as described above, but only if the certificate or certificates
evidencing Preferred Shares shall have been surrendered to the Corporation or
its transfer agent within five (5) Business Days after receipt of the Conversion
Notice relating thereto and, if such certificate or certificates shall not have
been surrendered within such time period, such Conversion Notice shall be
ineffective and void ab initio. Any Person in whose name any certificate or
certificates for Common Shares shall be issuable upon conversion shall be deemed
to have become the holder of record of the shares represented thereby on the
Conversion Date; provided, however, that the receipt of a Conversion Notice on
any date when the share transfer books of the Corporation shall be closed shall
constitute the Person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day on which such
share transfer books are open, but such conversion shall be at the Conversion
Rate in effect on the Conversion Date.
Except as otherwise provided in this Section H, no payment or
adjustment will be made for dividends or other distributions with respect to any
Common Shares issuable upon conversion of Preferred Shares as provided herein.
Full payment shall be made by the Corporation to any holder of Preferred Shares
surrendered for
666427.1
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conversion in respect of dividends accrued since the last preceding Dividend
Payment Date on the Preferred Shares surrendered for conversion; the dividend
due on such Dividend Payment Date shall be payable with respect to such
Preferred Shares notwithstanding such conversion, and such dividend (whether or
not punctually paid or duly provided for) shall be paid to the holder of such
shares as of the close of business on such record date.
(3) Cash Payments in Lieu of Fractional Shares. No fractional Common
Shares or scrip representing fractional shares shall be issued upon conversion
of Preferred Shares. If any fractional Common Share would, but for this Section
H, be issuable upon the conversion of any Preferred Shares, the Corporation
shall make a payment therefor in cash on the third Business Day immediately
following the Conversion Date equal to the Conversion Price of such fractional
share.
(4) Adjustment of Conversion Privileges. The Initial Conversion Price
and, if any such event shall take place during a twenty (20) consecutive Trading
Day calculation period, the Variable Conversion Price, shall be adjusted from
time to time by the Corporation as follows:
(i) In case the Corporation shall (A) declare a dividend, or make a
distribution, in shares of any series of its Common Shares, on any series
of its Common Shares, (B) subdivide or reclassify any series of its
outstanding Common Shares into a greater number of shares, (C) combine any
series of its outstanding Common Shares into a smaller number of shares,
(D) pay a dividend or make a distribution on any series of its Common
Shares in shares of any series of its Capital Stock other than Common
Shares, or (E) issue by reclassification of any series of its Common Shares
of any series of its Capital Stock, the conversion privilege and the
Conversion Price in effect immediately prior thereto shall be adjusted so
that the holder of any shares of Preferred Shares thereafter surrendered
for conversion shall be entitled to receive the number of Common Shares or
other Capital Stock of the Corporation which such holder would have owned
or have been entitled to receive after the happening of any of the events
described above had such Preferred Shares been converted immediately prior
to the happening of such event. An adjustment made pursuant to this Section
H(4) 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 subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any
event referred to above shall occur. In the event such dividend,
distribution, subdivision, reclassification or combination is not so made,
the conversion privilege then in effect shall be readjusted to the
conversion privilege which would then be in effect if such dividend,
distribution, subdivision, reclassification or combination had not been
declared or made, but such readjustment shall not affect the number of
Common Shares or other Capital
666427.1
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Stock delivered upon any conversion prior to the date such readjustment
is made.
(ii) In case the Corporation shall distribute to all holders of any
series of its Common Shares any of its assets or debt securities, or
rights, options, warrants or convertible or exchangeable securities of the
Corporation (including securities for cash, but excluding distributions of
Capital Stock referred to in Section H(4)(i) above, if the adjustment to
the Conversion Price under that Section would be greater than an adjustment
under this Section), then in each such case, the Conversion Price shall be
adjusted to equal the Conversion Price in effect immediately prior to such
distribution less an amount equal to the then fair market value (as
reasonably determined by the Board of Directors, in good faith and as
described in a resolution of the Board of Directors) of the portion of the
assets or debt securities of the Corporation so distributed or of such
rights, options, warrants or convertible or exchangeable securities
applicable to one share of Common Shares. Such adjustment shall become
effective immediately after the record date for the determination of shares
entitled to receive such distribution. Notwithstanding the foregoing, no
adjustment of the Conversion Price shall be made upon the distribution to
holders of any series of Common Shares of such rights, options, warrants,
convertible securities, assets or debt securities if the plan or
arrangement under which such rights, options, warrants, convertible
securities, assets or debt securities are issued provides for their
issuance to holders of shares of Preferred Shares in the same pro rata
amounts upon conversion thereof. Such adjustment shall be made successively
whenever any event listed above shall occur.
(iii) Anything in this Section H(4) to the contrary notwithstanding,
the Corporation shall be entitled to make such reductions in the Conversion
Price, in addition to those required by this Section H(4), as it in its
reasonable discretion shall determine to be advisable in order that any
stock dividends, subdivision of shares, distribution of rights to purchase
stock or securities, or distribution of securities convertible into or
exchangeable for stock hereafter made by the Corporation to its
shareholders, shall not be taxable.
(iv) Whenever the Conversion Price is adjusted as provided in this
Section H(4), or the Preferred Shares becomes convertible into shares of
stock, securities, property or assets pursuant to Section H(5) below, or
the Corporation reduces the Conversion Price pursuant to Section H(6)
below, the Corporation shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date
on which such adjustment becomes effective, and setting forth in reasonable
detail the facts requiring such adjustment and the calculation of such
adjustment, and shall mail such notice of adjustment to all holders of
Preferred Shares at their last addresses appearing on the share transfer
books of the Corporation.
666427.1
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(v) In any case in which this Section H(4) provides that an adjustment
shall become effective immediately after a record date for an event, the
Corporation may defer until the occurrence of such event (i) issuing to the
holder of any Preferred Shares converted after such record date and before
the occurrence of such event the additional Common Shares issuable upon
such conversion by reason of the adjustment required by such event over and
above the Common Shares issuable upon such conversion before giving effect
to such adjustment, and (ii) paying to such holder any amount in cash in
lieu of any fractional Common Share pursuant to Section H(3).
(vi) For purposes of any computations pursuant to this Section H(4),
respecting consideration received, the following shall apply:
(a) in the case of the issuance of shares of Capital Stock for cash,
the consideration shall be the amount of such cash, provided that in no case
shall any deduction be made for any commissions, discounts or other expenses
incurred by the Corporation for any underwriting of the issue or otherwise in
connection therewith;
(b) in the case of the issuance of shares of Capital Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as reasonably
determined in good faith by the Board of Directors or a duly authorized
committee thereof (irrespective of the accounting treatment thereof), and
described in a resolution of the Board of Directors or such committee; and
(c) in the case of the issuance of securities convertible into or
exchangeable or exercisable for shares of Capital Stock, the aggregate
consideration received therefor shall be deemed to be the consideration received
by the Corporation for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Corporation upon the
conversion or exchange thereof (the consideration in each case to be determined
in the same manner as provided in clauses (a) and (b) of this Section).
(vii) If after an adjustment a holder of Preferred Shares may, upon
conversion of such security, receive shares of two or more classes of
Capital Stock of the Corporation, the Corporation shall determine on a fair
basis the allocation of the adjusted Conversion Price between the classes
of Capital Stock. After such allocation, the conversion privilege and the
Conversion Price of each class of Capital Stock shall thereafter be subject
to adjustment on terms comparable to those applicable to Common Shares in
this Section H.
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(viii) In no event shall an adjustment pursuant to this Section H(4)
or any other provision of this Certificate of Amendment reduce the
Conversion Price below the then par value, if any, of the Common Shares
issuable upon conversion of Preferred Shares.
(5) Effect of Reclassification, Consolidation, Merger or Sale. If any
of the following events occur, namely (i) any reclassification or change of
outstanding Common Shares issuable upon conversion of Preferred Shares (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), (ii) any
consolidation or merger of the Corporation with another Person shall be effected
as a result of which holders of Common Shares issuable upon conversion of
Preferred Shares shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Shares, or (iii) any sale or conveyance of the properties and assets of
the Corporation as, or substantially as, an entirety to any other Person, but in
no event including a sale of the Company's Government Technology Division, then
the Corporation or such successor or purchasing Person, as the case may be,
shall make provisions in its certificate or articles of incorporation or other
constituent documents to establish that each Preferred Share then outstanding
shall be convertible into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of Common Shares issuable upon conversion of such Preferred Shares
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Such provisions shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section H.
If this Section H(5) applies with respect to a transaction, Section
H(4) shall not apply with respect to that transaction. The above provisions of
this Section H(5) shall similarly apply to successive reclassifications,
consolidations, mergers and sales.
(6) Voluntary Adjustment. Subject to the Ownership Limitation, the
Corporation at any time may reduce the Initial Conversion Price by any amount
and for any period of time, provided that such period is not less than twenty
(20) Business Days. Whenever the Initial Conversion Price is reduced pursuant to
this Section 8(f), the Corporation shall mail to the Holders, a notice of the
reduction at least 15 days before the date the reduced Initial Conversion Price
takes effect and such notice shall state the reduced Initial Conversion Price
and the period it will be in effect.
(7) Taxes on Shares Issued. The issuance of share certificates upon
conversion or transfer of Preferred Shares shall be made without charge to the
converting holder for any tax in respect of the issuance thereof.
666427.1
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<PAGE>
(8) Reservation of Shares; Shares to be Fully Paid; Compliance with
Governmental Requirements. The Corporation shall reserve, free from preemptive
rights, out of its authorized but unissued shares, or out of shares held in its
treasury, sufficient Common Shares to provide for the conversion at any time or
from time to time, and/or redemption at the Maturity Date at the then applicable
Mandatory Redemption Price, of all Preferred Shares from time to time
outstanding. The Corporation covenants that all Common Shares which may be
issued upon conversion of Preferred Shares will upon issuance be fully paid and
nonassessable by the Corporation and free from all taxes, liens and charges with
respect to the issuance thereof.
(9) Notice to Holders Prior to Certain Actions. In the event:
(i) that the Corporation shall take any action that would require an
adjustment in the Conversion Price pursuant to clauses (i), (ii) or (iii)
of Section H(4) above; or
(ii) that any event described in Section H(5) above shall occur; or
(iii) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
the Corporation shall cause notice of such proposed action or event to be mailed
to each holder of record of Preferred Shares at its address appearing on the
stock transfer books of the Corporation, as promptly as possible but in any
event at least thirty (30) days prior to the record date for such proposed
action or the effective date of such event; provided, however, that in the event
that the Corporation provides public notice of such proposed action or event
specifying the information set forth below at least ten (10) days prior to the
proposed record date or effective date, the Corporation shall be deemed to have
satisfied its obligation to provide notice pursuant to this Section H(9). In any
event, such notice shall specify (A) the date on which a record is to be taken
for the purpose of such action, or, if a record is not to be taken, the date as
of which the holders of record of Common Shares are to be determined, or (B) the
date on which such proposed event is expected to become effective, and the date
as of which it is expected that holders of record of Common Shares shall be
entitled to exchange their Common Shares for securities or other property
deliverable upon such event. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such action or event.
(10) Conversion Disputes. In the case of any dispute with respect to a
conversion, the Corporation shall promptly issue such number of Common Shares as
are not disputed in accordance with Section H hereof. If such dispute involves
the calculation of the Conversion Price, the Corporation shall submit the
disputed calculations, and shall permit any holder to simultaneously submit its
data and views, to a "Big Six" independent accounting firm selected by the
Corporation via facsimile
666427.1
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within two (2) business days of receipt of the Conversion Notice. The accounting
firm shall audit the calculations and notify the Corporation and the holder of
the results no later than two (2) business days from the date it receives the
disputed calculations. The accounting firm's calculation shall be deemed
conclusive, absent manifest error. The Company shall then issue the appropriate
number of Common Shares in accordance with Section H(2) hereof.
(11) Electronic Transmission. In lieu of delivering physical
certificates representing the Common Shares issuable upon the conversion of
Preferred Shares, provided the Corporation's transfer agent is participating in
the Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon the written request of a holder who shall have previously instructed such
holder's prime broker to confirm such request to the Corporation's transfer
agent, the Corporation shall use its commercially reasonable efforts to cause
its transfer agent to electronically transmit the Common Shares issuable upon
conversion to the holder by crediting the account of holder's prime broker with
DTC through its Deposit Withdrawal Agent Commission (" DWAC") system.
I. Transfers; Replacement of Certificates.
(1) Transfers. Subject to any restrictions on transfer under
applicable securities or other laws, Preferred Shares may be transferred on the
books of the Corporation by the surrender to the Corporation of the certificate
therefor properly endorsed or accompanied by a written assignment and power of
attorney properly executed, with transfer stamps (if necessary) affixed, and
such proof of the authenticity of signature as the Corporation or its transfer
agent may reasonably require.
(2) Replacement of Certificates. If any mutilated certificate
representing Preferred Shares is surrendered to the Corporation, or if a holder
claims the certificate representing Preferred Shares has been lost, destroyed or
willfully taken, the Corporation shall issue a replacement certificate of like
tenor and date if (i) the holder provides an indemnity bond or other security
sufficient, in the reasonable judgment of the Corporation, to protect the
Corporation and any authenticating agent and any of their officers, directors,
employees or representatives from any loss which any of them may suffer if a
certificate representing Preferred Shares is replaced, and (ii) the holder
satisfies any other reasonable requirements of the Corporation.
J. Reacquired Shares. Any Preferred Shares which are converted,
purchased, redeemed or otherwise acquired by the Corporation, shall be retired
and canceled by the Corporation promptly thereafter. No such shares shall upon
their cancellation be reissued.
K. Substitution of Senior Subordinated Notes for Non-Convertible
Preferred Shares. From and after the issuance to a holder of Preferred Shares
upon
666427.1
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conversion of Preferred Shares of a number of Common Shares equal to (1) prior
to the Second Closing, the Initial Closing Cap Amount with respect to that
holder, and (2) after the Second Closing, the Permanent Cap Amount with respect
to that holder, that holder shall have right, from and after that date, and
exercisable upon 90 days prior written notice to the Corporation, to require the
Corporation to purchase all of the then outstanding shares of Preferred Stock
held by such holder for an amount per share equal to the Mandatory Redemption
Price, payable at the option of the Board of Directors (x) in cash, or (y) by
delivery of a senior subordinated promissory note of the Corporation in the
principal amount of the Mandatory Redemption Price in the form attached hereto
as Exhibit A. In the event the Corporation is not able to purchase all of the
Preferred Shares subject to such notices because of insufficient shareholders
equity, restrictions under applicable law or pursuant to agreements, the
Corporation shall purchase Preferred Shares from each holder who has given such
notice, to the maximum extent, pro rata, based on the total number of Preferred
Shares held by each holder who has given such notice relative to the total
number of Preferred Shares held by all holders who have given such notices.
THIRD: That the Corporation's Restated Certificate of Incorporation is
amended so that the designation and number of shares of the Preferred Shares
acted upon in the foregoing resolution, and the relative rights, preferences and
limitations of such series, are as stated in the foregoing resolution.
FOURTH: This Certificate of Amendment shall become effective upon
filing.
666427.1
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<PAGE>
IN WITNESS WHEREOF, Base Ten Systems, Inc. has caused its duly
authorized officer to execute this Certificate on this 4th day of December,
1997.
BASE TEN SYSTEMS, INC.
By: __________________________________
Name: Thomas E. Gardner
Title: President and
Chief Executive Officer
Attest:
By: _______________________________
Name: Edward J. Klinsport
Title: Secretary
666427.1
79
Exhibit 99.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR
UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: [ISSUANCE DATE] December 4, 1997
to Purchase 98,684 Shares of Common Stock of
BASE TEN SYSTEMS, INC.
BASE TEN SYSTEMS, INC., a New Jersey corporation (the "Company"),
hereby certifies that [NAME OF HOLDER]SOCIETE GENERALE, its permissible
transferees, designees, successors and assigns (collectively, the "Holder"), for
value received, is entitled to purchase from the Company at any time commencing
on December 4[ISSUANCE DATE], 1997 and terminating on March 1, 2001 up to Ninety
Eight Thousand Six Hundred Eighty Four (#98,684) shares (each a "Share" and
collectively the "Shares") of the Company's common stock (the "Common Stock"),
at an exercise price of [130% CLOSING PRICE]$16.25 per Share (the "Exercise
Price"). The number of Shares purchasable hereunder and the Exercise Price are
subject to adjustment as provided in Section 4 hereof.
1. Exercise of Warrants.
(a) Upon presentation and surrender of this Common Stock Purchase
Warrant Certificate ("Warrant Certificate" or "Certificate"), or Lost
Certificate Affidavit, accompanied by a completed Election to Purchase in the
form attached hereto as Exhibit A (the "Election to Purchase") duly executed, at
the principal office of the Company at One Electronics Drive, Trenton, NJ 08619,
Attn: [NAME] Mr. Alexander M. Adelson, together with a check payable to the
Company in the amount of the Exercise Price multiplied by the number of Shares
being purchased, the Company or the Company's Transfer Agent as the case may be,
shall, within two (2) trading days of receipt of the foregoing, deliver to the
Holder hereof, certificates of fully paid and non-assessable Common Stock which
in the aggregate represent the number of Shares being purchased; provided,
however, that the Holder may elect, with the written consent of the Company
which may be granted or withheld in the Company's sole discretion (except that
such consent may not be withheld if the Shares being purchased are not then
registered for resale pursuant to an effective registration statement), to
utilize the cashless exercise provisions set forth below in lieu
666427.1
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<PAGE>
of tendering the Exercise Price in cash. The certificates so delivered shall be
in such denominations as may be reasonably requested by the Holder and shall be
registered in the name of the Holder or such other name as shall be designated
by the Holder. All or less than all of the Warrants represented by this
Certificate may be exercised and, in case of the exercise of less than all, the
Company, upon surrender hereof, will at the Company's expense deliver to the
Holder a new Warrant Certificate or Certificates (in such denominations as may
be requested by the Holder) of like tenor and dated the date hereof entitling
said holder to purchase the number of Shares represented by this Certificate
which have not been exercised and to receive Registration Rights with respect to
such Shares, and all other rights with respect to the shares which the Holder
has on the date hereof.
(b) Cashless Exercise. Notwithstanding the foregoing provision
regarding payment of the Exercise Price in cash, the Holder may elect, subject
to the provisions of Section 1(a), to receive a reduced number of Shares in lieu
of tendering the Exercise Price in cash. In such case, the number of Shares to
be issued to the Holder shall be computed using the following formula:
X = Y(A-B)
A
where: X = the number of Shares to be issued to the Holder;
Y = the number of Shares to be exercised under this Warrant
Certificate;
A = the Market Value (defined below) of one share of Common Stock;
and B = the Exercise Price.
As used in this Section 1, "Market Value" refers to the Curent Market Value of
the Common Stock on the day before the Election to Purchase and this Warrant
Certificate are duly surrendered to the Company for a full or partial exercise
hereof.
2. Exchange, Transfer and Replacement. (a) At any time prior to the
exercise hereof, this Certificate may be exchanged upon presentation and
surrender to the Company, alone or with other Certificates of like tenor of
different denominations registered in the name of the same Holder, for another
Certificate or Certificates of like tenor in the name of such Holder exercisable
for the aggregate number of Shares as the Certificate or Certificates
surrendered.
(b) Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant Certificate and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company (collectively, a "Lost Certificate
Affidavit"), or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver in lieu thereof, a new Warrant Certificate of like tenor.
(c) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant Certificate in connection with any transfer, exchange or replacement as
provided in this Section
666427.1
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<PAGE>
2, this Warrant Certificate shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution
and delivery of Warrant Certificates pursuant to this Section 2.
(d) Warrant Register. The Company shall maintain, at its principal
executive offices (or at the offices of the transfer agent for the Warrant
Certificate or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant Certificate (the
"Warrant Register"), in which the Company shall record the name and address of
the person in whose name this Warrant Certificate has been issued, as well as
the name and address of each permitted transferee and each prior owner of this
Warrant Certificate.
3. Rights and Obligations of Holders of this Certificate. The Holder
of this Certificate shall not, by virtue hereof, be entitled to any rights of a
stockholder in the Company, either at law or in equity; provided, however, that
in the event any certificate representing shares of Common Stock or other
securities is issued to the holder hereof upon exercise of some or all of the
Warrants, such holder shall, for all purposes, be deemed to have become the
holder of record of such Common Stock on the date on which this Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
aggregate Exercise Price was made, irrespective of the date of delivery of such
share certificate.
4. Adjustments.
(a) Stock Dividends, Reclassifications, Recapitalizations, Etc. In the
event the Company: (i) pays a dividend in Common Stock or makes a distribution
in Common Stock, (ii) subdivides its outstanding Common Stock into a greater
number of shares, (iii) combines its outstanding Common Stock into a smaller
number of shares or (iv) increases or decreases the number of shares of Common
Stock outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (1) the Exercise Price on the
record date of such division or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (2) the
number of shares of Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
(b) Cash Dividends and Other Distributions. In the event that at any
time or from time to time the Company shall distribute to all holders of Common
Stock (i) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other properties or securities
or (ii) any options, warrants or other rights to subscribe for or purchase any
of the foregoing (other than in each case, (w) the issuance of any rights under
a shareholder rights plan, (x) any dividend or distribution described in Section
4(a), (y) any rights, options,
666427.1
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<PAGE>
warrants or securities described in Section 4(c) and (z) any cash dividends or
other cash distributions from current earnings), then the number of shares of
Common Stock issuable upon the exercise of each Warrant Certificate shall be
increased to a number determined by multiplying the number of shares of Common
Stock issuable upon the exercise of such Warrant Certificate immediately prior
to the record date for any such dividend or distribution by a fraction, the
numerator of which shall be such Current Market Value (as hereinafter defined)
per share of Common Stock on the record date for such dividend or distribution,
and the denominator of which shall be such Current Market Value per share of
Common Stock on the record date for such dividend or distribution less the sum
of (x) the amount of cash, if any, distributed per share of Common Stock and (y)
the fair value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be evidenced by a board resolution, a copy of
which will be sent to the Holders upon request) of the portion, if any, of the
distribution applicable to one share of Common Stock consisting of evidences of
indebtedness, shares of stock, securities, other property, warrants, options or
subscription or purchase rights; and the Exercise Price shall be adjusted to a
number determined by dividing the Exercise Price immediately prior to such
record date by the above fraction. Such adjustments shall be made whenever any
distribution is made and shall become effective as of the date of distribution,
retroactive to the record date for any such distribution. No adjustment shall be
made pursuant to this Section 4(b) which shall have the effect of decreasing the
number of shares of Common Stock issuable upon exercise of each Warrant
Certificate or increasing the Exercise Price.
(c) Rights Issue. In the event that at any time or from time to time
the Company shall issue rights, options or warrants entitling the holders
thereof to subscribe for shares of Common Stock, or securities convertible into
or exchangeable or exercisable for Common Stock to all holders of Common Stock
(other than in connection with the adoption of a shareholder rights plan by the
Company) without any charge, entitling such holders to subscribe for or purchase
shares of Common Stock at a price per share that as of the record date for such
issuance is less than the then Current Market Value per share of Common Stock,
the number of shares of Common Stock issuable upon the exercise of each Warrant
Certificate shall be increased to a number determined by multiplying the number
of shares of Common Stock theretofore issuable upon exercise of each Warrant
Certificate by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights, options,
warrant or securities plus the number of additional shares of Common Stock
offered for subscription or purchase or into or for which such securities that
are issued are convertible, exchangeable or exercisable, and the denominator of
which shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, option, warrants or securities plus the total number of
shares of Common Stock which the aggregate consideration expected to be received
by the Company (assuming the exercise or conversion of all such rights, options,
warrants or securities) would purchase at the then Current Market Value per
share of Common Stock. In the event of any such adjustment, the Exercise Price
shall be adjusted to a number determined by dividing the Exercise price
immediately prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be made immediately after such rights, options or warrants are
issued and shall become effective, retroactive to the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities. No adjustment shall be made pursuant to this Section 4(c) which
shall have the effect of decreasing
666427.1
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<PAGE>
the number of shares of Common Stock purchasable upon exercise or each Warrant
Certificate or of increasing the Exercise Price.
(d) Combination: Liquidation. (i) Except as provided in Section
4(d)(ii) below, in the event of a Combination (as defined below), each Holder
shall have the right to receive upon exercise of the Warrant Certificates the
kind and amount of shares of capital stock or other securities or property which
such Holder would have been entitled to receive upon or as a result of such
Combination had such Warrant Certificate been exercised immediately prior to
such event (subject to further adjustment in accordance with the terms hereof).
Unless paragraph (ii) is applicable to a Combination, the Company shall provide
that the surviving or acquiring Person (the "Successor Company") in such
Combination will assume by written instrument the obligations under this Section
4 and the obligations to deliver to the Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the Holder may be
entitled to acquire. The provisions of this Section 4(d)(i) shall similarly
apply to successive Combinations involving any Successor Company. "Combination"
means an event in which the Company consolidates with, mergers with or into, or
sells all or substantially all of its assets to another Person, where "Person"
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity,
but shall not include the sale of substantially all of the assets of the
Government Technology Division of the Company.
(ii) In the event of (x) a Combination where consideration to the
holders of Common Stock in exchange for their shares is payable solely in cash
or (y) the dissolution, liquidation or winding-up of the Company, the Holders
shall be entitled to receive, upon surrender of their Warrant Certificates,
distributions on an equal basis with the holders of Common Stock or other
securities issuable upon exercise of the Warrant Certificates, as if the Warrant
Certificates had been exercised immediately prior to such event, less the
Exercise Price. In case of any Combination described in this Section 4(d)(ii),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
following the consummation of such combination or at the time of such
dissolution, liquidation or winding-up with an agent or trustee for the benefit
of the Holders of the funds, if any, necessary to pay to the Holders the amounts
to which they are entitled as described above. After such funds and the
surrendered Warrant Certificates are received, the Company is required to
deliver a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrant Certificates.
(e) Notice of Adjustment. Whenever the Exercise Price or the number of
shares of Common Stock and other property, if any, issuable upon exercise of the
Warrant Certificates is adjusted, as herein provided, the Company shall deliver
to the holders of the Warrant Certificates in accordance with Section 10 a
certificate of the Company's Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
(i) the Board of Directors determined the fair value of any evidences of
indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of
666427.1
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the common Stock was determined, if either of such determinations were
required), and specifying the Exercise Price and number of shares of Common
Stock issuable upon exercise of Warrant Certificates after giving effect to such
adjustment.
(f) Purchase Price Adjustment. In the event that the Company issues or
sells any Common Stock or securities which are convertible into or exchangeable
for its Common Stock or any convertible securities, or any warrants or other
rights to subscribe for or to purchase or any options for the purchase of its
Common Stock or any such convertible securities (other than shares or options
issued or which may be issued pursuant to the Company's employee or director
option plans or shares issued upon exercise of options, warrants or rights
outstanding on the date of the Agreement and listed in the Company's most recent
periodic report filed under the Exchange Act or disclosed in Schedule 3.3 to the
Purchase Agreement) and other than the Second Closing (as defined in the
Purchase Agreement) at an effective purchase price per share which is less than
the Current Market Value of the Common Stock on the trading day next preceding
such issue or sale, then in each such case, the Exercise Price in effect
immediately prior to such issue or sale shall be reduced effective concurrently
with such issue or sale to an amount determined by multiplying the Exercise
Price then in effect by a fraction, (x) the numerator of which shall be the sum
of (1) the number of shares of Common Stock outstanding immediately prior to
such issue or sale, plus (2) the number of shares of Common Stock which the
aggregate consideration received by the Company for such additional shares would
purchase at such Current Market Value then in effect; and (y) the denominator of
which shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the issuance of any
convertible securities, warrants, options or other rights to subscribe for or to
purchase or exchange for, shares of Common Stock ("Convertible Securities"), the
maximum number of shares of Common Stock issuable upon exercise, exchange or
conversion of such Convertible Securities shall be deemed to be outstanding,
provided that no further adjustment shall be made upon the actual issuance of
Common Stock upon exercise, exchange or conversion of such Convertible
Securities.
The number of shares which may be purchased hereunder shall be increased
proportionately to any reduction in Exercise Price pursuant to this paragraph
4(d), so that after such adjustments the aggregate Exercise Price payable
hereunder for the increased number of shares shall be the same as the aggregate
Exercise Price in effect just prior to such adjustment.
In the event of any such issuance for a consideration which is less than such
fair market value and also less than the Exercise Price then in effect, than
there shall be only one such adjustment by reason of such issuance, such
adjustment to be that which results in the greatest reduction of the Purchase
Price computer as aforesaid.
(g) Notice of Certain Transactions. In the event that the Company
shall propose (a) to pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common Stock, (b) to offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities,
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rights or options, (c) to effect any capital reorganization, reclassification,
consolidation or merger affecting the class of Common Stock, as a whole, or (d)
to effect the voluntary or involuntary dissolution, liquidation or winding-up of
the Company, the Company shall, within the time limits specified below, send to
each Holder a notice of such proposed action or offer. Such notice shall be
mailed to the Holders at their addresses as they appear in the Warrant Register
(as defined in Section 2(d)), which shall specify the record date for the
purposes of such dividend, distribution or rights, or the date such issuance or
event is to take place and the date of participation therein by the holders of
Common Stock, if any such date is to be fixed, and shall briefly indicate the
effect of such action on the number of shares of Common Stock and on the number
and kind of any other shares of stock and on other property, if any, and the
number of shares of Common Stock and other property, if any, issuable upon
exercise of each Warrant Certificate and the Exercise Price after giving effect
to any adjustment pursuant to Section 4 which will be required as a result of
such action. Such notice shall be given as promptly as possible and (x) in the
case of any action covered by clause (a) or (b) above, at least 10 days prior to
the record date for determining holders of the Common Stock for purposes of such
action or (y) in the case of any other such action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be the earlier.
(h) Current Market Value. "Current Market Value" per share of Common
Stock or any other security at any date means (i) if the security is not
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (a) the value of the security, determined in good faith by the Board of
Directors of the Company and certified in a board resolution, based on the most
recently completed arm's-length transaction between the Company and a Person
other than an affiliate of the Company or between any two such Persons and the
closing of which occurs on such date or shall have occurred within the six-month
period preceding such date, or (b) if no such transaction shall have occurred
within the six-month period, the value of the security as determined by an
independent financial expert or (ii) if the security is registered under the
Exchange Act, the average of the daily closing bid prices (or the equivalent in
an over-the-counter market) for each day on which the Common Stock is traded for
any period on the principal securities exchange or other securities market on
which the common Stock is being traded (each, a "Trading Day") during the period
commencing ten (10) Trading Days before such date and ending on the date one day
prior to such date, or if the security has been registered under the Exchange
Act for less than ten (10) consecutive Trading Days before such date, the
average of the daily closing bid prices (or such equivalent) for all of the
Trading Days before such date for which daily closing bid prices are available;
provided, however, that if the closing bid price is not determinable for at
least five (5) Trading Days in such period, the "Current Market Value" of the
security shall be determined as if the security were not registered under the
Exchange Act.
(i) Other Adjustments. If the event of any other transaction of the
type contemplated by this Section 4, but not expressly provided for by the
provisions hereof, the Board of Directors of the Company will make appropriate
adjustment in the Exercise Price so as to equitably protect the rights of the
Holder.
(j) No Impairment of Holder's Rights. The Company will not, by
amendment of its certificate of incorporation or bylaws or through any
reorganization, transfer of assets,
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consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, except as contemplated hereby, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant Certificate, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all action as may be necessary or appropriate in order to
protect the rights of the Holder against dilution or other impairment. Without
limiting the generality of the foregoing, the Company will not increase the par
value of any shares of Common Stock receivable upon exercise of this Warrant
above the Exercise Price then in effect.
5. Company's Representations. The representations, warranties and
agreements of the Company contained in Section 3 and 4 of the Securities
Purchase Agreement dated December 4,November __ 1997 ("Purchase Agreement")
among the Company, the initial Holder and the other parties thereto are
incorporated by reference herein.
6. Registration Rights. The initial Holder is entitled to the benefit
of such registration rights in respect of the Shares as are set forth in the
Registration Rights Agreement dated as of December 4, 1997November __, by and
between the Company, the Holder and the other parties thereto, including the
right to assign such rights to certain assignees as set forth therein.
7. Issuance of Certificates. Within two (2) trading days of receipt of
a duly completed Election to Purchase form, together with this Certificate and
payment of the Exercise Price, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder of this Warrant, a certificate
or certificates for the number of fully paid and non-assessable shares of Common
Stock to which that holder shall be entitled on such exercise. In the event the
shares of Common Stock are not timely delivered to the Holder, the Company
agrees to (a) indemnify Holder for all damages, including consequential and
special damages, lost profits and expenses, including legal fees, and (b)
beginning on the fifth (5th) day following the Company's receipt of a duly
completed Election to Purchase form, pay a default premium of 2% per day of the
value of underlying shares (based on the highest closing price during the two
(2) day period preceding the date of surrender of the Warrant Certificate). In
lieu of issuance of a fractional share upon any exercise hereunder, the Company
will pay the cash value of that fractional share, calculated on the basis of the
Exercise Price. Prior to registration of the resale of the shares of Common
Stock underlying this Warrant Certificate, all such certificates shall bear a
restrictive legend to the effect that the Shares represented by such certificate
have not been registered under the Securities Act, and that the Shares may not
be sold or transferred in the absence of such registration or an exemption
therefrom, such legend to be substantially in the form of the bold-face language
appearing at the top of Page 1 of this Warrant Certificate.
8. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any Shares,
by his or its acceptance thereof, agrees that no public distribution of Warrants
or Shares will be made in violation of the provisions of the Securities Act.
Furthermore, it shall be a condition to the transfer of the Warrants that any
transferee thereof deliver to the Company his or its written agreement to accept
and be bound by all of the relevant terms and conditions contained in this
Warrant Certificate.
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9. Merger or Consolidation. The Company will not merge or consolidate
with or into any other corporation, or sell or otherwise transfer its property,
assets and business substantially as an entirety to another corporation, unless
the corporation resulting from such merger or consolidation (if not the
Company), or such transferee corporation, as the case may be, shall expressly
assume, by supplemental agreement reasonably satisfactory in form and substance
to the Holder, the due and punctual performance and observance of each and every
covenant and condition of this Warrant Certificate to be performed and observed
by the Company.
10. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by certified or
registered U.S. mail with return receipt requested and postage prepaid; by
private overnight delivery service (e.g. Federal Express); by facsimile
transmission (if no original documents or instruments must accompany the
notice); or by personal delivery. Any such notice shall be deemed to have been
given (a) on the business day immediately following the mailing thereof, if
mailed by certified or registered U.S. mail as specified above; (b) on the
business day immediately following deposit with a private overnight delivery
service if sent by said service; (c) upon receipt of confirmation of
transmission if sent by facsimile transmission; or (d) upon personal delivery of
the notice. All such notices shall be sent to the following addresses (or to
such other address or addresses as a party may have advised the other in the
manner provided in this Section 10):
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
Trenton, NJ 08619
Telephone: (609) 586-7010
Telecopy: (609) 586-1593
Attention: Mr. Alexander M. Adelson
with a copy to:
Battle, Fowler LLP
75 East 55th Street
Park Avenue Tower
New York, NY 10022
Telephone: (212) 856-7000
Telecopy: (212) 856 7822
Attention: David Warburg, Esq.
If to Societe Generale:
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Societe Generale
1221 Avenue of the Americas
6th Floor
New York, NY 10020
Telephone: (212) 278-5260
Telecopy: (212) 278-5467
Attention: Mr. Guillaume Pollet
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
and:
Cowen & Co.
1 Financial Square
New York, NY 10005
Telephone: (212) 495-3950
Telecopy: (212) 495-8305
Attention: Mr. Bill Smith
Notwithstanding the time of effectiveness of notices set forth in this Section,
an Election to Purchase shall not be deemed effectively given until it has been
duly completed and submitted to the Company together with the original Warrant
Certificate to be exercised and payment of the Exercise Price in a manner set
forth in this Section.
11. Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the Company's jurisdiction of incorporation (in
respect of matters of corporation law) and the laws of the State of New York (in
respect of all other matters) applicable to contracts made and to be performed
in the State of New York. The parties hereto irrevocably consent to the
jurisdiction of the United States federal courts and state courts located in the
Borough of Manhattan in the State of New York in any suit or proceeding based on
or arising under this Agreement or the transactions contemplated hereby and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company and the Holder irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
in such forum. The Company and the Holder further agree that service of process
upon the Company or the Holder, as applicable, mailed by the first class mail in
accordance with Section 10 shall be deemed in every respect effective service of
process upon the Company or the Holder in any suit or proceeding arising
hereunder. Nothing herein shall affect the Holder's right to serve process in
any other manner permitted by law. The parties hereto agree that a final
666427.1
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non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner. The parties hereto irrevocably waive any right to trial by jury
under applicable law.
12. Limitations on Holdings. The Warrant shall not be exercisable by a
Holder to the extent (but only to the extent) that, if exercised by such Holder,
the Holder would beneficially own in excess of 4.9% (9.9% if the applicable box
on the signature page of the Securities Purchase Agreement for such Holder is
marked) (the "Applicable Percentage") of the shares of Common Stock. To the
extent the foregoing limitation applies, the determination of whether this
Warrant Certificate shall be exercisable (vis-a-vis other securities owned by
such Holder) shall be in the sole discretion of the Holder and submission of an
Election to Purchase shall be deemed to be the Holder's determination of whether
the Warrant Certificate is excercisable in whole or in part, subject to such
aggregate percentage limitation. No prior inability to exercise the Warrant
Certificate pursuant to this Section shall have any effect on the applicability
of the provisions of this Section with respect to any subsequent determination
of ability to exercise. For the purposes of this Section, beneficial ownership
and all calculations, including without limitation, with respect to calculations
of percentage ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder. The provisions of this Section may be amended and/or implemented in
a manner otherwise than in strict conformity with the terms of this Section with
the approval of the Board of Directors of the Company and the affected Holder:
(i) with respect to any matter to cure any ambiguity herein, to correct this
subsection (or any portion thereof) which may be defective or inconsistent with
the intended Applicable Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such Applicable Percentage limitation; and (ii) with respect to
any other matter, with the further consent of the holders of majority of the
then outstanding shares of Common Stock; the provisions of this Section may be
waived with the approval of the affected Holder upon ninety (90) days prior
written notice from such Holder to the Company and all other Holders. The
limitations contained in this Section shall apply to a successor Holder of
Preferred Stockthis Warrant if, and to the extent, elected by such successor
Holder concurrently with its acquisition of such Preferred Stockthis Warrant,
such election to be promptly confirmed in writing to the Company (provided no
transfer or series of transfers to a successor Holder or Holders shall be used
by a Holder to evade the limitations contained herein).
13. Successors and Assigns. This Warrant Certificate shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
14. Headings. The headings of various sections of this Warrant
Certificate have been inserted for reference only and shall not affect the
meaning or construction of any of the provisions hereof.
15. Severability. If any provision of this Warrant Certificate is held
to be unenforceable under applicable law, such provision shall be excluded from
this Warrant Certificate, and the balance hereof shall be interpreted as if such
provision were so excluded.
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16. Modification and Waiver. This Warrant Certificate and any
provision hereof may be amended, waived, discharged or terminated only by an
instrument in writing signed by the Company and the Holder.
17. Specific Enforcement. The Company and the Holder acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Warrant Certificate were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Warrant Certificate and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which either of them may be entitled by law or equity.
18. Assignment. This Warrant Certificate may be transferred or
assigned, in whole or in part, at any time and from time to time by the then
Holder by submitting this Warrant to the Company together with a duly executed
Assignment in substantially the form and substance of the Form of Assignment
which accompanies this Warrant Certificate and, upon the Company's receipt
hereof, and in any event, within three (3) business days thereafter, the Company
shall issue a Warrant Certificate to the Holder to evidence that portion of this
Warrant Certificate, if any as shall not have been so transferred or assigned.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or by facsimile, by one of its officers thereunto
duly authorized.
BASE TEN SYSTEMS, INC.
Date:_________________ By:_____________________________________
Name:
Title:
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby elects to exercise _______ of the Warrants
represented by the attached Common Stock Purchase Warrant Certificate, and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants,
and requests that certificates for securities be issued in the name of:
-------------------------------------------------
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(Please type or print name and address)
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
(Social Security or Tax Identification Number)
and delivered to:______________________________________________________________
_______________________________________________________________________________
(Please type or print name and address if different from above)
If such number of Warrants being exercised hereby shall not be all the Warrants
evidenced by the attached Common Stock Purchase Warrant Certificate, a new
Common Stock Purchase Warrant Certificate for the balance of such Warrants shall
be registered in the name of, and delivered to, the Holder at the address set
forth below.
[In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$__________ by check, money order or wire transfer payable in United States
currency to the order of BASE TEN SYSTEMS, INC.] or [The undersigned elects
cashless exercise in accordance with Sections 1(a) and 1(b) of the Common Stock
Purchase Warrant Certificate.]
HOLDER:
Dated:___________________ By:_______________________________________
Name:
Title:
Address:
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
_____________ the right represented by the within Warrant to purchase ______
shares of Common Stock of BASE TEN SYSTEMS, INC., a New Jersey corporation, to
which the within Warrant relates, and appoints ____________________ Attorney to
transfer such right on the books of BASE TEN SYSTEMS, INC., a New Jersey
corporation, with full power of substitution of premises.
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Dated: ________________ By: __________________________________
Name:
Title:
(signature must conform to name
of holder as specified on the fact
of the Warrant)
Address: ______________________________
Signed in the presence of:
BASE TEN SYSTEMS, INC.: Common Stock Purchase Warrant Certificate
Page
SHARED FILES: Legal:Transactions 1997:BASEA:Investor Warrant:BASEA/
RGC Warrant 12/2
BASE TEN SYSTEMS, INC.: Common Stock Purchase Warrant Certificate
BASE TEN SYSTEMS, INC.: Common Stock Purchase Warrant Certificate
666427.1
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Exhibit 99.5
BASE TEN SELLS $19 MILLION OF CONVERTIBLE PREFERRED IN PRIVATE PLACEMENT
TRENTON, N.J. --(BUSINESS WIRE)--Dec. 9, 1997--Base Ten Systems, Inc. (NASDAQ-
NMS:BASEA-news), announced today that it has completed the first installment of
the sale of $19 million of convertible preferred stock and common stock purchase
warrants.
A total of $9.375 million of convertible preferred stock and warrants has been
sold to institutional investors. The second and final installment of an
additional $9.625 million of preferred stock and warrants will be consummated
following approval at a special meeting of shareholders to be held at the end of
December or early January.
The company intends to use the proceeds for continued development of its
PHARMASYST(R) family of products, increased marketing activities, working
capital, and acquisition financing.
Cowen & Co., the company's investment banker, arranged the transaction in
conjunction with Shoreline Pacific Institutional Finance, Division of Financial
West Group.
Thomas E. Gardner, president and CEO, stated "This level of financing should
significantly assist Base Ten Systems in developing and furthering its presence
with major international pharmaceutical and healthcare device companies as the
leading supplier of Manufacturing Execution System (MES) software." Vice
chairman Alexander M. Adelson said, "We view this institutional investment as a
major endorsement of our growing PHARM2 business. The addition of Tom Gardner in
the leadership post, this financing, and the divestiture of the Government
Technology Division (as previously announced) are expected to firmly position
the company in the commercial software industry."(a)
(a) Forward Looking Information--except for historical information contained
herein, the foregoing contains forward looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements involve
known and unknown risks and uncertainties that may cause the company's actual
results or outcomes to be materially different from those anticipated and
discussed herein, important factors that the company believes might cause such
differences are the risk factors detailed in the company's previous filings with
the Securities and Exchange Commission which the readers are urged to read
carefully in assessing the forward contained.
Base Ten Systems Inc. is a diversified technology company concentrating on
safety critical products, such as Manufacturing Execution Systems for regulated
industries.
666427.1
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