<PAGE>
As Filed with the Securities and Exchange Commission on July 15, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BASE TEN SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW JERSEY 22-1804206
(STATE OR OTHER JURISDICTION OR (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE ELECTRONICS DRIVE 08619
TRENTON, NEW JERSEY (ZIP CODE)
(Address of registrant's
principal executive offices)
</TABLE>
MYLES M. KRANZLER
BASE TEN SYSTEMS, INC.
ONE ELECTRONICS DRIVE
TRENTON, NJ 08619
(609-586-7010)
(Name and address of agent for service)
Approximate Date of Commencement of Proposed Sale to the Public: From time
to time following the effective date of this Registration Statement
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans please check the following
box: / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /x/
<TABLE>
<CAPTION>
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Unit Offering Price Fee
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Class A Common Stock, 99,000(1) $12.26(2) $ 1,213,740(2) $ 367.80
$1.00 par value 1,170,773(1)(3) $10.00(4) $11,707,730(4) $3,547.80
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Total Fee $3,915.60
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</TABLE>
(1) Pursuant to Rule 416 this Registration Statement also relates to an
indeterminate number of additional shares of Common Stock issuable upon
exercise of 99,000 Warrants underlying the Common Stock and conversion of
Convertible Debentures in the aggregate principal amount of $5,500,000
pursuant to anti-dilution provision contained in such Warrants and Convertible
Debentures, including without limitation the floating rate conversion
provisions of the Convertible Debentures, which shares of Common Stock are
registered hereunder.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee and, pursuant to Rule 457(g), based on the exercise price of
the underlying Warrants.
(3) Includes 143,479 shares of Common Stock issuable as payment of interest
due on the Convertible Debentures from the date hereof through May 20, 2000.
(4) Estimated solely for the purpose of calculating the amount of the
registration fee and, pursuant to Rule 457(c), based on the average of the
high and low sales prices of the Common Stock, as reported on the Nasdaq
National Market on July 11, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED _____________, 1997
PROSPECTUS
1,269,773 Shares
BASE TEN SYSTEMS, INC.
CLASS A COMMON STOCK
All 1,269,773 shares (the "Shares") of Class A Common Stock ("Class A
Common Stock"), of Base Ten Systems, Inc., a New Jersey corporation (the
"Company" or "Base Ten"), offered hereby are being offered by certain
stockholders of the Company (the "Selling Stockholders"). The Shares may be
offered by the Selling Stockholders or by pledgees, donees, transferees or
other successors in interest from time to time in open market transactions,
negotiated transactions, principal transactions or by a combination of these
methods of sale. See "Plan of Distribution."
99,000 of the Shares offered for sale hereby are issuable to the Selling
Stockholders upon exercise of outstanding warrants at an average exercise
price of $12.26 per share (the "Warrants"). 1,170,773 of the Shares offered
for sale hereby are issuable to the Selling Stockholders upon conversion of
convertible debentures (the "Convertible Debentures") at an average
conversion price of $10.00, which price assumes that all of the Convertible
Debentures were converted on July 11, 1997, using the market price of the
Common Stock on such date. In the event that the market price increases after
such date, the number of shares issuable upon conversion of the Convertible
Debentures will decrease, and in the event that the market price decreases
after such date, the number of shares issuable upon conversion of the
Convertible Debentures will increase. The Registration Statement of which this
Prospectus is a part covers such indeterminate number of shares pursuant to
Rule 416. The Company has agreed to provide certain registration rights to the
Selling Stockholders. See "Selling Stockholders."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company will, however,
receive the exercise price upon exercise of the Warrants and the Company's
debt will be reduced upon conversion of the Convertible Debentures in an
amount equal to the amount which is converted. Base Ten has agreed to bear
all expenses in connection with the registration and sales of the Shares,
other than underwriting discounts and selling commissions. The Company has
also agreed to indemnify the Selling Stockholders against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
On July 11, 1997, the last reported sale price of the Class A Common Stock
on the Nasdaq National Market was $10.00. The Class A Common Stock is traded
under the Nasdaq symbol "BASEA."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. (SEE "RISK
FACTORS" BEGINNING ON PAGE 3.)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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July __, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy material and other information filed by
the Company can be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at 450 5th Street, N.W. Judiciary
Plaza, Washington, D.C. 20549 and the following Regional Offices of the SEC: 7
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661-2511. Copies of these material can
also be obtained from the Public Reference Section of the SEC at 450 5th Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. Such material may be accessed
electronically by means of the SEC's World Wide Web site at
http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the SEC under the Exchange
Act are incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended October 31, 1996
(Commission File No. 0-7100 filed on January 28, 1997.).
2. Annual Report on Form 10-K/A for the fiscal year ended October 31, 1996
(Commission File No. 0-7100 filed on May 28, 1997).
3. Proxy Statement dated February 16, 1997 for the Company's Annual Meeting
of Stockholders (Commission File No. 0-7100, Schedule 14A filed on February 16,
1997.).
4. Quarterly Report on Form 10-Q for the quarter ended January 31, 1997
(Commission File No. 0-7100 filed on March 17, 1997.).
5. Quarterly Report on Form 10-Q/A for the quarter ended January 31, 1997
(Commission File No. 0-7100 filed on May 28, 1997).
6. Quarterly Report on Form 10-Q for the quarter ended April 30, 1997
(Commission File No. 0-7100 filed on June 16, 1997).
7. Current Report on Form 8-K dated May 30, 1997 (Commission File No.
0-7100 filed June 9, 1997) reporting the Company's recent private placement or
convertible debentures.
8. Current Report on Form 8-K dated May 1, 1997 (Commission File No.
0-7100 filed June 13, 1997) reporting the Company's recent transaction where by
it entered into an agreement becomming a minority owner of a limited liability
company the name of which is "UPACS LLC".
9. Registration Statement on Form S-3 (Commission File No. 333-21923
declared effective by the Commission on June 23, 1997).
10. All documents filed by the Company after the date of
this Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act, prior to the filing of a post-effective amendment which indicates that all
Shares offered hereby have been sold or which deregisters any Shares then
remaining unsold. All of these documents will be deemed to be incorporated
herein by reference and to be a part hereof from their respective filing dates.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
Supplement is delivered, upon request, a copy of the documents incorporated by
reference in this Prospectus. Requests should be directed to Base Ten Systems,
Inc., One Electronics Drive, Trenton, New Jersey 08169, Attention: Edward J.
Klinsport (609) 586-7010. Additional copies of the Prospectus are also available
from the Company or the Transfer Agent upon request.
1
<PAGE>
SUMMARY INFORMATION
The following summary is qualified in its entirety by the detailed
information and consolidated financial statements included elsewhere or
incorporated by reference in this Prospectus.
Base Ten is engaged in the design and manufacture of electronic systems
employing safety critical software for defense markets and the development of
commercial applications focused on batch processing control, medical screening
and image processing software. The Company also manufactures defense products to
specifications for prime government contractors and designs and builds
proprietary electronic systems for use in secure communications by various U.S.
government agencies.
Specialization in extreme reliability defense products has enabled the
Company to develop expertise in the field of safety critical technology
dedicated to the prevention of performance errors. Operations in this
environment during the last two decades have also provided experience in
developing advanced quality control procedures for products meeting stringent
government standards as well as familiarity with complex government regulations
and agency procedures. Over the last several years, Base Ten has redirected
resources to decrease its historical dependence on defense contracting and has
concentrated on commercial products for highly regulated industries, relying on
the same safety critical techniques developed in its traditional businesses.
While the Company's nondefense programs involve major potential markets, the
resulting products are still primarily developmental and may not succeed in
reaching their potential.
DESCRIPTION OF CAPITAL STOCK
General.
The authorized capital stock of Base Ten consists of 22,000,000 shares of
Class A Common Stock, 2,000,000 shares of Class B Common Stock and 1,000,000
shares of Preferred Stock, all of which have a par value of $1.00 per share.
COMMON STOCK
DIVIDENDS. Both classes of Base Ten's Common Stock have identical cash
and property dividend rights except that no cash or property dividend may be
paid on the Class B Common Stock unless a dividend at least equal in amount
is paid concurrently on the Class A Common Stock. Cash or property dividends
can be declared and paid on the Class A Common Stock without being declared
and paid on the Class B Common Stock.
If a distribution is paid in shares of Class A Common Stock or Class B
Common Stock, the distribution may be paid only as follows: (i) shares of Class
A Common Stock may be paid to holders of shares of Class A Common Stock and
shares of Class B Common Stock may be paid to holders of shares of Class B
Common Stock, and (ii) the same number of shares shall be paid in respect of
each outstanding share of Class A Common Stock or Class B Common Stock. Base Ten
may not subdivide or combine shares of either class without at the same time
proportionately subdividing or combining shares of the other class.
VOTING RIGHTS. Holders of Class A Common Stock are entitled to elect 25% of
the members of the Board of Directors (rounded to the next highest whole number)
so long as the number of outstanding shares of Class A Common Stock is at least
10% of the number of outstanding shares of both classes. Currently, the holders
of Class A Common Stock are entitled, as a class, to elect two directors of Base
Ten, and the holders of the Class B Common Stock are entitled, as a class, to
elect the remaining four directors. As a result of this provision, the holders
of a majority of the Class B Common Stock can and will continue to be able to
elect a majority of the directors and thereby control Base Ten, regardless of
the number of shares of Class B Common Stock outstanding from time to time.
Directors may be removed, only for cause, by the holders of the class of common
stock which elected them.
Except for the election or removal of directors as described above and
except for class votes as required by law or Base Ten's Restated Certificate of
Incorporation, holders of both classes of common stock vote or consent as a
single class on all matters, with each share of Class A Common Stock having
one-tenth vote per share and each share of Class B Common Stock having one vote
per share.
2
<PAGE>
The outstanding shares of the Class A Common Stock currently represents
approximately 94% of the total number of shares of both classes outstanding. If
the number of outstanding shares of Class A Common Stock should becomes less
than 10% of the total number of shares of both classes of common stock
outstanding, the holders of Class A Common Stock would not have the right to
elect 25% of the Board of Directors, but would have one-tenth vote per share for
all directors, and the holders of Class B Common Stock would have one vote per
share for all directors.
CONVERSION. At the option of the holder of record, each share of Class B
Common Stock is convertible at any time into one share of Class A Common Stock.
Conversion of a significant number of shares of Class B Common Stock into Class
A Common Stock could put control of the Board of Directors into the hands of the
holders of a relatively small equity interest in Base Ten who would continue to
hold the Class B Common Stock. The Class A Common Stock is not convertible.
OTHER RIGHTS. Shareholders of the Base Ten have no preemptive or other
rights to subscribe for additional shares. On liquidation, dissolution or
winding up of Base Ten, all shareholders, regardless of class, are entitled
to share ratably in any assets available for distribution. No shares of
either class are subject to redemption. All outstanding shares are fully paid
and non-assessable.
TRANSFER AGENT. The transfer agent and registrar for shares of the Class A
Common Stock and Class B Common Stock is American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York 10005.
PREFERRED STOCK
No shares of preferred stock have been issued. Base Ten's Board of
Directors is empowered to fix the designations, powers, preferences and
relative, participating, optional or other special rights of the Preferred
Stock and the qualifications, limitations or restrictions of those
preferences or rights. The voting rights of the Class B Common Stock
described above are subject to voting rights that may be granted in
connection with the creation of any series of Preferred Stock. However, no
issue of Preferred Stock may change the ratio of one-tenth of a vote for each
share of Class A Common Stock to one vote for each share of Class B Common
Stock described above.
RISK FACTORS
In addition to the other information included and incorporated by reference
in this Prospectus, the following factors should be carefully considered in
evaluating the Company and an investment in the Common Stock.
*FORWARD LOOKING INFORMATION
This Risk Factor section contains forward looking information within the
meaning of The Private Securities Litigation Reform Act of 1995. These
statements appear in a number of places and can be identified by an "asterisk"
reference to a particular section of the foregoing or by the use of such
forward-looking terminology such as "believe", "expect", "may", "will", "should"
or the negative thereof or variations thereof. Such forward looking statements
involve certain risks and uncertainties, including the particular factors
described in this Risk Factors section. In each case actual results may differ
materially from such forward looking statements. The Company does not undertake
to publicly update or revise its forward looking statements even if experience
or future changes make it clear that any projected results (expressed or
implied) will not be realized.
RECURRING LOSSES
The Company experienced net losses of $9.0 million in the year ended October
31, 1996 and $4.4 million in the six months ended April 30, 1997. These
losses resulted primarily from reductions of defense-related revenues,
write-offs and amortization of software development expenditures incurred in
prior periods and expenses relating to marketing and sales of commercial
products. The Company anticipates incurring an additional loss in the third
fiscal quarter of 1997 and could continue to incur losses in subsequent periods.
The Company's ability to achieve profitable operations is dependent upon, among
other things, successful marketing of its manufacturing execution system
products and defense-related design and manufacturing services, cost-effective
development and manufacture of defense-related products, and successful
competition in the markets in which the Company participates. There can be no
assurance that the Company will be able to attain or maintain profitability.*
3
<PAGE>
LIQUIDITY
During the second quarter ending April 30, 1997, the Company used $4.1
million of cash in its operations. The use of cash for operations was due
primarily to the Company's expenditure of approximately $2.9 million for the
development of its PHARMASYST products and the Company's net loss of $2.4
million for the quarter which was partially offset by increases in Accounts
Receivable. Cash used in investing activities during the second quarter of
$.2 million was due primarily to the purchase of property, plant and
equipment. Net cash provided from financing activities was attributable to
the exercise of options and warrants for the purchase of the Company's common
stock. The combined use of cash from all activities during the quarter was
$4.8 million for the reasons stated above. At April 30, 1997 the Company's
cash and other liquid assets were $2.6 million.
The Company recently obtained a $1 million line of credit facility with a
local bank, which expires in February 1998. Interest is 1% above the bank's
prime lending rate and the credit line is collateralized by accounts receivable.
There currently are no amounts outstanding under the credit line.
On May 1, 1997 the Company entered into an agreement whereby it became a
minority owner of a limited liability company (the "LLC"). Under the terms of
the agreement, the Company made a capital contribution to the LLC of its rights
to its uPACS technology which is a system for archiving ultrasound images
with networking, communciation and off-line measurement capabilities. In
exchange for such capital contribution, the Company received a 9% interest in
the LLC. An outside investor made a capital contribution of $2 million and
agreed to make a further capital contribution of $1 million on or before
December 1, 1997, in return for a 91% interest in the LLC. The Company
believes that the funds available under the LLC will be sufficient to fund
operations in connection with uPACS for approximately eighteen months.* In
connection with the formation of the LLC, the Company entered into a Services
and License Agreement whereby the Company has agreed to complete the
development of the uPACS technology and undertake to market, sell and
distribute systems using the uPACS technology. The LLC will pay the Company
its expenses in connection with such services and remit to the LLC royalties
in connection with the sale of systems using the uPACS technology. At such
time as the LLC has distributed to the outside investor an aggregate amount
equal to $4.5 million of its net cash flow, the Company would become a 63%
owner of the LLC and the outside investor will own a 37% interest in the LLC.
There can be no assurance that uPACS will be sucessful or that the LLC will
be profitable or that the funds under the LLC will be sufficient for further
development and marketing of uPACS.
On May 30, 1997, the Company sold 55 units ("Units") at $100,000 per
Unit, for an aggregate of $5,000,000, to 2 accredited purchasers
("Purchasers") in a private offering (the "Offering"). Each Unit consisted of
(i) a convertible debenture ("Convertible Debenture") in the principal amount
of $100,000 convertible into shares of the Company's Class A Common Stock,
$1.00 par value ("Class A Common Stock"), and (ii) a warrant ("Warrant') to
acquire 1,800 shares of Class A Common Stock. The number of shares of Class A
Common Stock issuable upon conversion of the Convertible Debentures is
variable. The number of shares will be calculated at the time of conversion
and will be the lesser of (i) the product obtained by multiplying (x) the
lesser of the average of the closing bid prices for the Class A Common Stock
for the (A) five or (B) thirty consecutive trading days ending on the trading
day immediately preceding the date of determination by (y) a conversion
percentage equal to 95% with respect to any conversions occurring prior to
February 24, 1998 and 92% with respect to any conversions occurring on or
after February 24, 1998 and (ii) $13.50 with respect to any conversions
occurring prior to May 30, 1998 or (y) $14.00 with respect to any conversions
occurring on or after May 30, 1998. The Convertible Debentures are not
convertible prior to December 16, 1997. From December 16, 1997 until February
23, 1998, one-half of the Convertible Debentures may be converted and after
February 23, 1998, the Convertible Debentures are fully convertible. The
Warrants may be exercised at any time through May 30, 2002 at an exercise
price of $12.26 per share.
The Company received net proceeds of approximately $4,950,000 from the
sale of the Units after deduction of fees and expenses related to the
Offering. In connection with the Offering, transaction fees aggregating
$293,000 were paid to Tail Wind Inc., the manager of one of the Purchasers,
for services rendered in its capacity as representative of the Purchasers,
and advisory fees aggregating $165,000 were paid to Strategic Growth
International, Inc., the Company's financial consultant. In addition,
Alexander M. Adelson, a director of the Company, received warrants to
purchase 27,500 shares of Class A Common Stock at an exercise price of
$10.125 per share and $55,000 for advisory services rendered in connection
with the Offering.
The Company believes that cash generated by operations and existing
capital resources in combination with such credit facility, the funds
available from the L.L.C., and the net proceeds from the sale of the
convertible debentures will be sufficient to fund its operations through
fiscal year end 1997. In addition, the Company is relying on the
continued successful development of its Medical Technology Division
leading product, PHARM2, during the third quarter of calendar 1997
to stimulate new orders and permit the delivery of existing orders.
If the Company should not receive the currently anticipated orders in time and
in the amounts planned during fiscal 1997 the Company may need to reduce its
operating costs. The effect of these reductions could have an adverse effect
in the Company's ability to market, develop, and implement its products with
the result that the Company may continue to incur losses.*
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
For the quarters ended July 31, 1996, October 31, 1996, January 31, 1997 and
April 30, 1997, the Company's revenues were $3.0 million, $4.4 million, $3.3
million and $3.0 million, respectively, and the Company's operating results
were $(2.4) million, $(1.8) million, $(1.6) million and $(2.4)
million, respectively. Revenues and operating results are subject to
significant quarterly fluctuations. If, as a result of such fluctuations, the
Company's operating results in a quarter are below the expectations of public
market analysts and investors, the price of the Company's Common Stock could
be materially and adversely affected. Factors that could cause such
fluctuations include changes in customer capital and resource commitment;
changes in product mix; the introduction of new products or product
improvements by the Company or its competitors; FDA regulatory requirements;
and changes in operating expenses. The timing of revenues from defense-related
programs can be significantly affected by government procurement processes and
disruptions due to political and other events over which the Company has no
control. The timing of revenues from manufacturing execution systems can be
affected by such factors as long sales cycles and delays in customer
authorization procedures. In the second quarter of fiscal 1996, the Company
determined that its PHARM2 product had recently become standardized. Since
most orders for this product did not meet the criteria for long-term contract
accounting, the Company determined that it should recognize revenues from
product orders on delivery.*
4
<PAGE>
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
The Company has restated its consolidated financial statements for the years
ended October 31, 1996 and 1995. Subsequent to the issuance of the Company's
1996 consolidated financial statements, the Company's management determined that
certain temporary salary reductions for certain officers of the Company during
fiscal 1995, and loans made to such officers to be repaid by future bonuses,
should have been recorded as an increase to compensation expense with a
corresponding increase to additional paid-in-capital in the Company's 1995
consolidated financial statements. As a result, the Company's 1996 and 1995
consolidated financial statements have been restated from the amounts previously
reported to record these loans as a charge to operations and as an increase to
additional paid-in-capital in fiscal 1995. The impact of these adjustments was
to increase the previously reported 1995 net loss by $502,000 and net loss per
common share by $.07. The restatement had no effect on the Company's cash
position.
DEPENDENCE ON PHARMASYST PRODUCTS
The Company believes its potential for long-term growth will depend
significantly on the success of its PHARMASYST products. The Company has
devoted substantial resources to the development of PHARMASYST products,
including $1.5 million that was capitalized and will be amortized over 4
years commencing in fiscal 1995. The Company has delivered only a limited
number of PHARMASYST applications. The installation of a manufacturing
execution system in a manufacturing facility is a complex process involving
integration with existing hardware platforms, operating systems and other
existing systems. Once a system is installed, it must undergo testing to
ensure it operates and performs as defined and required and can undergo
extended periods of modifications and corrections to meet customer
requirements, some of which may be at Company expense. The manufacturing
process, of which a computerized manufacturing execution system (MES) is a
component, must undergo further testing for validation in accordance with
defined procedures. Two of the Company's PHARMASYST installations have now
been validated by the Company's customers. The success of PHARMASYST products
will depend on the Company's ability to integrate PHARMASYST into other
manufacturing facilities and the customer's ability to validate its
manufacturing process. The Company's success will also depend on its ability
to establish strategic relationships with leading systems integrators and
other marketing efforts. There can be no assurance that PHARMASYST will
achieve market acceptance. Failure of PHARMASYST to achieve market acceptance
would have a material adverse effect on the Company's business, results of
operations and financial condition.*
The Company is focusing its PHARMASYST-related efforts on developing and
marketing PHARM2. Since the third quarter of 1995, the Company has capitalized
$6.2 million through April 30, 1997. While the first release of PHARM2 has
been effected, additional testing is required to make further releases to
complete the desired functionality. The Company is late on several
installation contracts, and, with the passage of time, may become late on
additional contracts. The Company's customers have the right to cancel
contracts in the event the Company fails to perform. Should the Company be
unable to successfully complete the testing of PHARM2, or if existing or
future customers cancel outstanding contracts, the Company's business,
results of operations and financial condition would be adversely affected.*
DEPENDENCE ON DEFENSE CONTRACTING; CONCENTRATION OF CUSTOMERS
The Company is highly dependent upon its defense-related business. In
fiscal 1996, and in the first six months of fiscal 1997, 89.5% and 88.9%,
respectively, of the Company's total revenues was derived from such business.
Defense-related contracts are subject to inherent risks relating to
governmental procurement processes and political developments, including
reductions in defense spending of both the U.S. or foreign governments to
which the Company sells, reductions in funds for particular projects, and the
ability of government agencies to terminate contracts or funding. Most of the
Company's defense-related activities are conducted pursuant to subcontracts
with prime defense contractors to government agencies. Profit margins on
contracts involving the U.S. government are subject to restrictions. The
termination or modification of any project in which the Company participates
could have an adverse effect on the Company. A substantial portion of the
Company's defense business has been with two customers, Daimler-Benz AG,
Aerospace ("DASA") and McDonnell Douglas Corporation. For the year ended
October 31, 1996 and the six months ended April 30, 1997, these two customers
collectively accounted for 46.1% and 56.7%, respectively, of the Company's
total revenues. Reductions in defense spending, adverse developments in the
Company's relationship with one or more significant prime contractors, or
loss of one or more significant contracts would have a material adverse
effect on the Company's results of operations and financial condition. *
5
<PAGE>
The Company relies on McDonnell Douglas and Deutsche Aerospace (DASA) as its
two main customers McDonnell Douglas has placed three development contracts with
the Company for electronic systems. The first is for an Interference Blanker
Unit used aboard the F/A-18E/F with potential production contracts over the next
ten to twenty years. The second contract is for the development of a Maintenance
Data Recorder which, in production, is intended to be used aboard the Apache
helicopter for up to 800 aircraft. The third contract involves the development
of an Automatic Target Recognition system to be used aboard the SLAM-ER missile
with potential production of up to 700 missiles. Although the Company believes
it is in a favorable position to receive production contracts related to the
SLAM-ER because of its experience in the development process, there can be no
assurance that the Company will receive any of the above contracts and some or
all of such contracts could be publicly bid.*
The Company has been a supplier to Deutsche Aerospace since 1969 and relies
on this customer for significant business. Deutsche Aerospace is under budget
pressure from the German government and the business has declined significantly
over the past seven years. While there can be no assurance given, the Company is
hoping to receive a contract in the order of $8 million to be placed within
approximately the next twelve months. The failure to secure that contract, in
the absence of equivalent orders from other customers, could adversely affect
the Company's ability to meet its business plan and result in staff reductions
and losses. *
Limited Commercial Marketing Experience; Reliance on Third-Party Distribution
Assistance
The Company has limited experience selling products in commercial markets
and intends to rely on an internal sales force and strategic marketing
relationships. The Company has a limited number of sales people and is in the
process of expanding its sales force. There can be no assurance that the Company
will be able to identify and hire additional qualified sales people. The Company
also intends to rely substantially on strategic relationships with system
integrators and suppliers of manufacturing automation systems and equipment. The
Company has entered into a limited number of such relationships. To date, no
revenues have been generated from these relationships. Many of these strategic
partners have similar relationships with certain competitors of the Company or
may offer competing products. There can be no assurance that the Company will be
successful in establishing an internal sales force or such relationships, that
any of these third parties will not give higher priority to competing products
or that any such third parties will be successful in selling the Company's
products.*
Technological Obsolescence; Changing Requirements for Manufacturing Execution
Software
The markets in which the Company competes are characterized by rapid
technological change. Competitors may develop and market products embodying new
technologies that can render the Company's existing products obsolete and
unmarketable. The market for manufacturing execution software is subject to
changes in customer requirements arising out of, among other things, changes in
manufacturing processes, management information systems, manufacturing resource
planning systems and regulatory requirements. The Company's ability to market
PHARMASYST and any similar future products successfully will depend in part on
its ability to update and improve those products to address technological and
regulatory developments. Any failure by the Company to anticipate or respond
adequately to such developments, or any significant delays in product
improvements or introductions could result in a loss of competitiveness and
could have a material adverse effect on the Company's business results of
operations and financial condition. There can be no assurance that the
Company will be successful in developing such improvements.*
COMPETITION
The markets in which the company competes are intensely competitive. The
Company believes competition in the manufacturing execution system
software market is likely to increase substantially for a number of reasons.
A number of companies offering products for discrete manufacturers have
announced plans to introduce products designed for process manufacturers.
Some companies that offer host-based systems have begun to offer or have
announced plans to introduce client/ server-based systems for process
manufacturers and to increase the number of hardware platforms on which their
software operates. Companies addressing complementary customer needs may
develop or acquire technology to compete. Competitors may merge or establish
cooperative relationships with each other or with third parties to increase
their ability to address the needs of the Company's prospective customers. In
the market for defense-related products, the Company competes with many
well-established U.S. and foreign manufacturers of weapons control and
similar equipment, many of whom offer a broader product line to government
customers and who have established extensive relationships with contracting
agencies. Many of the Company's competitors are larger and more established
and may be able to respond more quickly than the Company to new or emerging
technologies, changes in customer requirements, or regulatory changes, or to
devote greater resources to developing, promoting and marketing their
products than can the Company. Increased competition could result in
6
<PAGE>
price reductions, reductions in gross margins and loss of market share, any
of which could materially and adversely affect the Company's business,
results of operations and financial condition. There can be no assurance that
the Company will compete successfully with existing or new competitors or
that competitive pressures will not materially and adversely affect the
Company's business, results of operations, and financial condition.*
MANAGEMENT OF CHANGING BUSINESS
The Company has recently experienced significant changes in its business,
including increased emphasis on developing, producing, marketing and selling
commercial software products. This shift involves the establishment of strategic
marketing relationships and the addition of marketing and technological
personnel for its commercial software products. These changes may place a
significant strain on the Company's management and operations. If the Company
experiences significant growth, it may be required to hire, train and manage
additional, qualified personnel in areas in which the Company does not have
significant experience and may be required to implement improvements to its
operations, financial and management information systems. If the Company is
unable to attract and manage such additional personnel or to implement such
improvements, its business, results of operations and financial condition could
be adversely affected.*
PRODUCT DEFECTS; PRODUCT LIABILITY
The Company's products are designed for use in applications in which
errors or failures could have catastrophic results. The Company's
defense-related products include weapons control systems intended, among
other things, to prevent unintended deployment of weapons and disruption of
combat aircraft performance during weapons deployment. Pharmaceutical
manufacturing customers will rely on PHARMASYST products for, among other
things, quality control and compliance with current Good Manufacturing
Practice (cGMP) and other regulatory requirements. A claim may be made that a
defect in a PHARMASYST product failed to prevent defects in pharmaceutical
products, which injured consumers. Certain other products of the Company are
involved in critical healthcare decision making processes. The Company
maintains product liability insurance of $5.0 million for commercial products
and $30.0 million for defense-related products, subject to certain
deductibles and exclusions. There can be no assurance that the Company's
existing insurance would be adequate to cover any claims arising out of
alleged defects or that the Company will be able to obtain and maintain
adequate insurance coverage in the future.*
RELIANCE ON SINGLE SOURCE OF SUPPLY
The Company's manufacturing operations involve the assembly of final
products from components and subassemblies supplied by other manufacturers.
The Company relies on single sources of supply for certain components and
subassemblies that are manufactured to its specifications. There can be no
assurance that the Company would be able to locate acceptable alternative
sources of supply on favorable terms or on a timely basis, if any of such
single sources were to become unable to support the Company's requirements.
The Company could experience production delays and increased costs if any
such single sources were to fail to satisfy the Company's requirements and
the Company were unable to make acceptable alternative arrangements on a
timely basis. Such delays could have a material adverse effect on the
Company's business, results of operations and financial condition. *
The Company does not now have any long term contracts with sole suppliers.
The Company relies on VSLI Technology for the supply of Application Specific
Integrated Circuits (ASICs) used in parts to be supplied to Deutsche Aerospace.
The Company also relies on National Hybrid, Intel, White Electronics and Xilinx
for supplying four (4) different integrated circuits that are a part of the
Interference Blanker Unit supplied by the Company to McDonnell Douglas
Aerospace.
PROPRIETARY RIGHTS
The Company attempts to protect its proprietary technology with a
combination of copyrights, trademarks, patents, and reliance on trade secret law
and contractual arrangements. Existing copyright and trade secret laws afford
only limited practical protection and customer access to source codes may
increase the possibility of misappropriation or other misuse of the Company's
software. The laws of some foreign countries do not protect proprietary rights
to the same extent as do the laws of the U.S. There can be no assurance that the
Company's precautions will be adequate to prevent others from obtaining
information the Company considers proprietary and important to its competitive
position or that others will not independently develop similar technologies.
While the Company does not believe any of its products infringe the rights of
any third parties, there can be no assurance that third parties will not assert
claims of infringement against the Company, that
7
<PAGE>
any such assertion will not result in costly litigation or require the
Company to obtain licenses to intellectual property rights, or that such
licenses will be available on reasonable terms, if at all.*
DEPENDENCE ON KEY PERSONNEL
The Company believes its success will depend in large part upon its ability
to attract and retain highly skilled technical, managerial and sales and
marketing personnel, and to retain its personnel with process manufacturing
expertise. Competition for such personnel is intense, and the services of
qualified personnel are difficult to obtain or replace. The Company has from
time to time experienced difficulty in locating candidates with appropriate
qualifications. In particular, the Company has encountered difficulties in
hiring sufficient numbers of technical service personnel. There can be no
assurance that the Company will be successful in attracting and retaining the
personnel required to develop, market, service and support its products and
conduct its operations successfully. *
The Company also relies upon its Chairman and CEO, Myles M. Kranzler, the
President of the Government Technology Division, Edward J. Klinsport, the
President of the Medical Technology Division, Alan J. Eisenberg, and the Vice
Presidents of both divisions, the loss of any of whom in the absence of a
suitable replacement, could have a material adverse affect on the Company.
FOREIGN TRADE AND CURRENCY EXCHANGE RELATED RISKS
A portion of the Company's revenues is derived from foreign customers and is
subject to disruption by political and economic conditions abroad. Currency
exchange fluctuations could increase the price of the Company's products to
foreign customers or decrease the price of competing foreign products to U.S.
customers. *
The Company has a facility in the United Kingdom which relies on stable
values of the pound sterling. Variations in the value of the pound could affect
the Company's costs either positively or negatively. The Company spends
approximately $1.5 million, or L900,000, annually at the current exchange rate.
The Company has contracts in the United Kingdom in the order of $1.5 million
annually which, except for ancillary services, are denominated in U.S. dollars
and are unaffected by the exchange rates. All other Company contracts are
denominated in U.S. dollars. The Company does not currently engage in any
hedging transactions.
DEPENDENCE ON CONTINUATION OF SECURITY CLEARANCES
The Company relies on the continuance of its security clearances and
clearances of certain of its employees from agencies of the United States and
NATO member governments for its defense products. Loss of security clearances by
the Company or certain key personnel could have an immediate and adverse affect
on the Company's business.*
DEPENDENCE ON APPROVAL OF PRODUCT EXPORT
The export of certain technology included in the Company's software products
requires advance approval by the Department of Defense. Although the Company has
secured the approvals necessary to export its current products, a change in
government policy or a change in applicable law could prevent marketing of the
Company's products outside of the United States. Similarly, to export certain
medical devices, certain statutory export requirements must be met. For devices
that are lawfully marketed in the United States, export requirements are less
stringent than for devices that are not permissable for marketing in the United
States. Failure to meet statutory export requirements or a change in the law
preventing foreign sales could limit or preclude the ability of the Company to
market its products outside the United States.*
CONTROL BY HOLDERS OF CLASS B COMMON STOCK
Holders of the Company's Class B common stock ("Class B Common Stock"),
of which approximately 38% is owned by officers and directors of the Company,
are entitled to elect 75% of the members of the Company's Board of Directors.
In addition, holders of Class B Common Stock are entitled to cast one vote
per share of such stock, compared to one-tenth of one vote per share of
Common Stock, on all matters submitted to the Company's stockholders other
than the election of directors. This would entitle holders of Class B Common
Stock to 38% of the Company's outstanding combined voting power as of January
8
<PAGE>
2, 1997 on those matters. Holders of Class B Common Stock will continue to be
entitled to elect 75% of the members of the Board. See "Description of
Capital Stock."
ABSENCE OF DIVIDENDS
The Company has not paid dividends on its Common Stock or its Class B
Common Stock since 1985 and presently intends to retain any future earnings
for reinvestment in its businesses. In addition, the Company has agreed with
the holders of Convertible Debentures issued in connection with the Company's
May 1997 private offering not to redeem, or declare or pay any cash
distribution or dividend on, any capital stock so long as any holder
beneficially owns at least 10% of the original aggregate principal amount or
face amount of the Convertible Debentures. Accordingly, the Company does not
anticipate paying any dividends in the foreseeable future.*
SELLING STOCKHOLDERS
The following table sets forth (i) the name of each Selling Stockholder,
(ii) to the best of the Company's knowledge, the total number of shares of Class
A Common Stock owned beneficially by each Selling Stockholder as of the date of
this Prospectus assuming the exercise of the Warrants and that the Convertible
Debentures were converted on July 11, 1997 at a conversion price of $10.00,
(iii) the number of Shares to be offered for the account of each Selling
Stockholder in this offering and (iv) to the best of the Company's knowledge,
the number of shares of Class A Common Stock to be owned by each Selling
Stockholder after giving effect to this offering.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NUMBER OF STOCK TO BE
NUMBER OF SHARES TO OWNED AFTER
SHARES OF BE THE
NAME STOCK OWNED(1) OFFERED OFFERING
- ------------------------------------------------------------------------ -------------- ----------- -----------
<S> <C> <C> <C>
The Tail Wind Fund Ltd.................................................. 463,467 463,467 0
------------ ----------- -----------
RGC International Investors, LDC........................................ 806,306 806,306 0
------------ ----------- -----------
TOTAL................................................................... 1,269,773 1,269,773 0
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
(1) Assumes that the Convertible Debentures were converted on July 11, 1997 at
a conversion price of $10.00, the market price on that date. In the event
that the market price increases after such date, the number of shares
issuable will decrease, and in the event that the market price decreases
after such date, the number of shares issuable shall increase.
The information set forth in the foregoing table was provided to the
Company by the Selling Stockholders. None of the Selling Stockholders has had
any position or other material relationship with the Company or its
affiliates during the past three years.
All of the Shares being offered hereunder by the Selling Stockholders are
issuable upon exercise of Warrants or Convertible Debentures issued by Base
Ten to the Selling Stockholders. The Company agreed to register the Shares
for the accounts of the Selling Stockholders and has filed with the
Securities and Exchange Commission under the Securities Act a Registration
Statement on Form S-3 of which this Prospectus is a part, covering the resale
of the Shares from time to time.
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company will, however,
receive the exercise price upon exercise of the Warrants and the Company's
debt will be reduced upon conversion of the Convertible Debentures in an
amount equal to the amount which is converted.
PLAN OF DISTRIBUTION
The Shares being offered hereunder by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest, will be
offered from time to time in open market transactions, negotiated
transactions, principal transactions or by a combination of these methods of
sale. The Selling Stockholders may effect these transactions by selling
Shares in ordinary brokerage transactions, which may include long or short
sales, in transactions which involve cross or block trades or any other
transactions permitted by NASDAQ-NMS, through sales to one or more dealers
for resale of the Shares as principals, in privately negotiated transactions,
through the writing or exercise of options on the Shares (whether such
options are listed on an exchange or otherwise) or by a combination of such
methods of sale, at fixed prices that may be changed, at market prices or at
negotiated prices. The Shares may also be sold pursuant to Rule 144 under the
1933 Act. Broker-dealers may receive compensation in the form of discounts,
concessions or commissions from Selling Stockholders or purchasers for whom
the broker-dealers may act as agent or to whom they sell as principal or
both. Compensation paid to a particular broker-dealer might be in excess of
customary commissions. Selling Stockholders and broker-dealers participating
in the sale of Shares may be deemed to be underwriters, and any profit on the
sale of Shares or compensation received by them may be deemed to be
underwriting compensation under the Securities Act.
9
<PAGE>
The Company has agreed with the Selling Stockholders, among other things,
(i) to bear all expenses (other than underwriting discounts and selling
commissions, and fees and expenses of counsel and other advisers to the Selling
Stockholders) in connection with the registration and sale of the Shares being
offered by them and (ii) to indemnify the Selling Stockholders against certain
liabilities, including liabilities under the Securities Act, as underwriters or
otherwise.
OTHER EVENTS
The Annual Meeting of Shareholders was held on March 20, 1997. At the
meeting all the director nominees were elected and all the individuals who were
directors continued thereafter, except that on April 2, 1997, Bruce Cowen
resigned from the Board of Directors and his office as Vice Chairman. His
resignation was for personal reasons unrelated to the Company.
In addition, the amendments of the Company's Discretionary Deferred
Compensation Plan were approved.
10
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 3,915.60
Blue sky fees and expenses....................................... 5,000.00*
Transfer Agent's fees............................................ 1,000.00*
Printing and engraving costs..................................... 3,000.00*
Legal fees....................................................... 5,000.00*
Accounting fees.................................................. 3,000.00*
Miscellaneous.................................................... 5,000.00*
----------
Total....................................................... $25,915.60*
----------
----------
--------------------
* Estimated
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 9 of Base Ten's Restated Certificate of Incorporation, as amended,
provides as follows:
Any present or future Director or Officer of the Corporation, and any
present or future director or officer of any other corporation serving as
such at the request of the Corporation, or the legal representative of any
such Director or Officer, shall be indemnified by the Corporation against
reasonable costs, expenses (exclusive of any amount paid to the Corporation
in settlement) and counsel fees paid or incurred in connection with any
action, suit or proceeding to which any such Director or Officer or his legal
representative may be made a party by reason of his being or having been such
Director or Officer; provided that, (1) said action, suit or proceeding shall
be prosecuted against such Director or Officer or against his legal
representative to final determination, and it shall not be finally adjudged
in said action, suit or proceeding that he had been derelict in the
performance of his duties as such Director or Officer, or (2) said action,
suit or proceeding shall be settled or otherwise terminated as against such
Director or Officer or his legal representative without a final determination
on the merits and it shall be determined by a majority of the members of the
Board of Directors who are not parties to said action, suit or proceeding, or
by a person or persons specially appointed by the Board of Directors to
determine the same that said Director or Officer has not in any substantial
way been derelict in the performance of his duties as charged in such action,
suit or proceeding. The foregoing right of indemnification shall not be
exclusive of other rights to which such Director or Officer or legal
representative may be entitled by law, and shall inure to the benefit of the
heirs, executors or administrators of such Director or Officer.
Article 10 of Base Ten's Restated Certificate of Incorporation, as amended,
provides as follows:
No director or officer of the corporation shall be personally liable to
the corporation or its shareholders for damages for breach of any duty owed
to the corporation or its shareholders, except for liability for any breach
of duty based upon an act or omission (a) in breach of such director's or
officer's duty of loyalty to the corporation or its shareholders, (b) not in
good faith or involving a knowing violation of law, or (c) resulting in
receipt by such director or officer of an improper personal benefit. As used
in this Article, an act or omission in breach of a director's or officer's
duty of loyalty means an act or omission which such director or officer knows
or believes to be contrary to the best interests of the corporation or its
shareholders in connection with a matter in which such director or officer
has a material conflict of interest.
The provisions of this Article shall be effective as and to the fullest
extent that, in whole or in part, they shall be authorized or permitted by the
laws of the State of New Jersey. No repeal or modification of the provisions of
this Article nor, to the fullest extent permitted by law, any modification of
law shall adversely affect any right or protection of a director or officer of
the corporation which exists at the time of such repeal or modification.
II-1
<PAGE>
Article X of Base Ten's By-Laws, as amended, entitled "Indemnification:
Insurance," provides as follows:
Section 1. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement to the maximum extent, according to the standards and in the
manner provided by applicable law.
Section 2. To the extent, according to standards and in such manner as the
Board of Directors may direct pursuant to and in accordance with applicable law
in the particular case, the Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) by
reason of the fact that he is or was an employee or agent of the Corporation, or
is or was serving at the request of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement.
Section 3. The indemnification provided by this Article X shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office and shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 4. The Corporation, acting by its Board of Directors, shall have
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article X. Nothing in this Section 4 shall obligate the
Corporation to indemnify any person to any extent other than as provided in
Sections 1, 2, 3 and 4 of this Article X.
Statutory authority for indemnification of and insurance for Base Ten's
directors and officers is contained in the New Jersey Business Corporation Act
("the Act"), in particular, Section 14A:3-5 of the Act, the material provisions
of which may be summarized as follows:
Directors and officers may be indemnified in non-derivative proceedings
against settlements, judgments, fines and penalties and against reasonable
expenses (including counsel fees) where the person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and also, in a criminal proceeding, he must have had no
reasonable cause to believe that his conduct was unlawful. In derivative
proceedings such persons may be indemnified against reasonable expenses
(including counsel fees) where the person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, but not against settlements, judgments, fines or penalties
except that, without a court determination as to entitlement to indemnity, no
indemnity may be provided to a person who has been adjudged liable to the
corporation. In all cases, the Act provides that indemnification may only be
made by the corporation (unless ordered by a court) only as authorized in a
specific case upon a determination that indemnification is proper in the
circumstances because the person has met the applicable standard of conduct
required of the person, requires a person to be indemnified for reasonable
expenses (including counsel fees) to the extent he has been successful in any
proceeding and permits a corporation to advance expenses upon an undertaking
for repayment if it shall be ultimately determined that the director or
officer is not entitled to indemnification. The indemnification and
advancement of expenses provided by or granted pursuant to the Act is not
exclusive of other rights of indemnification to which a corporate agent may
be entitled under a certificate of incorporation, by-law, agreement, vote of
shareholders or otherwise. However, no indemnification may be made to or on
behalf of a director or officer if a final adjudication adverse to the
director or officer establishes that the director's or officer's acts or
omissions were in breach of his duty of loyalty to the corporation or its
shareholders, were not in good faith or involved a knowing violation of law,
or resulted in receipt by the director or officer of an improper personal
benefit. A corporation may purchase and maintain insurance on behalf of any
directors and officers against expenses incurred in any proceeding and
liabilities asserted against
II-2
<PAGE>
them by reason of being or having been a director of officer, whether or not
the corporation would have the power to indemnify the directors or officers
against such expenses and liabilities under the statute.
Each of the officers and directors of Base Ten is insured against certain
liabilities which he might incur in his capacity as an officer or director of
Base Ten or its subsidiaries pursuant to a Directors and Officers Insurance
and Company Reimbursement Policy issued by National Union Fire Insurance
Company of Pittsburgh, PA., and Zurich Insurance Company of Philadelphia, PA.
The general effect of the policy is that if any claims are made against
officers or directors of Base Ten or its subsidiaries or any of them for a
Wrongful Act (as defined in the policy) while acting in their individual or
collective capacities as directors or officers, to the extent Base Ten or its
subsidiary has properly indemnified such officers and directors, the insurer
will, subject to the retention amount, reimburse Base Ten or its subsidiary
for 100% of any Loss (as defined in the policy). In addition, to the extent
that Base Ten or its subsidiary has not indemnified an officer or director,
the insurer will, subject to the retention amount, pay on behalf of such
officer or director 100% of the Loss. Defense Costs (as defined in the
Policy) are part of Loss and are subject to the limits of the policy.
The retention amount under the policy is $250,000. The retention amount
is first applied to Base Ten or its subsidiary. The retention amount is not
applicable to officers or directors if Base Ten or its subsidiary is not
permitted or required to indemnify the officers or directors. If, however,
Base Ten or its subsidiary is permitted or required to indemnify the officers
or directors, then the retention amount does apply to them.
Under the policy, the term "Wrongful Act" means any actual or alleged
error, or misstatement, or misleading statement, or act, or omission, or
neglect or breach of duty by the directors or officers in their capacities as
such, individually or collectively, or any matter claimed against them solely
by reason of their being directors or officers of Base Ten or its
subsidiaries, except that certain claims are excluded by the terms and
conditions of the policy. The term "Loss" means damages, judgments,
settlements and Defense Costs. The term "Defense Costs" means reasonable and
necessary fees, costs and expenses consented to by the insurer resulting
solely from the investigation, adjustment, defense and appeal of any claim
against any director or officer, but excluding salaries of officers or
employees of Base Ten or its subsidiaries.
II-3
<PAGE>
ITEM 16. EXHIBITS.
The following documents are filed as Exhibits to this Registration
Statement:
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
- ------------- ------------- ----
<S> <C> <C>
3. (a) Restated Certificate of Incorporation, as amended, of Registrant *
(incorporated by reference to Exhibit 4(a) to Amendment No. 1 to
Registrant's Registration Statement on Form S-8 (File No. 2-84451)
filed on July 31, 1990).
(b) Certificate of Amendment of the Restated Certificate of Incorporation *
dated September 1, 1992 (incorporated by reference to Exhibit 4(b)(2)
to Amendment No. 3 to Registrant's Registration Statement on Form S-1
(File No. 33-48404) filed on September 3, 1992).
(c) Amended By-Laws of the Registrant (incorporated by reference to *
Exhibit 4(d)(2) to Registrant's Registration Statement on Form S-8
(File No. 33-60454) filed on April 1, 1993).
4. (a) Forms of Securities Purchase Agreement, Convertible Term *
Debenture, Stock Purchase Warrant and Registration Rights
Agreement incorporated by reference to Exhibits 99.1, 99.2,
99.3 and 99.4, respectively, to Registrant's Current Report
on Form 8-K dated May 30, 1997.
5. Opinion of Pitney, Hardin, Kipp and Szuch.
II-4
<PAGE>
EXHIBIT
NUMBER EXHIBIT PAGE
- ------------- ------------- ----
<S> <C> <C>
23. (a) Consent of Deloitte & Touche LLP
24. Power of Attorney (contained on the signature page of this
Registration Statement).
</TABLE>
- ------------------------
* Incorporated by reference.
ITEM 17. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
Provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions discussed in Item 6 of this
Registration Statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or a controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in such Act and will be governed by the final adjudication of such
issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Trenton, State of New
Jersey, on the 14th day of July, 1997.
BASE TEN SYSTEMS, INC.
<TABLE>
<S> <C> <C>
By: /s/ Myles M. Kranzler By: /s/ Edward J. Klinsport By: /s/ Susan M. Klinsport
----------------------- ------------------------ -----------------------
Myles M. Kranzler Edward J. Klinsport Susan M. Klinsport
Chief Executive Officer Chief Financial Officer Principal
Accounting Officer
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Myles M. Kranzler and Edward J.
Klinsport, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution for him and in his name, place and
stead in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments), and to file the
same with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming what said
attorneys-in-fact and agents or their substitutes may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
TITLE DATE
----- ----
By: /s/ Myles M. Kranzler President, Chief Executive July 14, 1997
------------------------- Officer and Chairman
Myles M. Kranzler
By: /s/ Edward J. Klinsport Chief Financial Officer, July 14, 1997
------------------------- Executive Vice President,
Edward J. Klinsport Secretary and Director
By: /s/ Alan J. Eisenberg Senior Vice President July 14, 1997
------------------------- and Director
Alan J. Eisenberg
By: /s/ Alexander M. Adelson Director July 14, 1997
-------------------------
Alexander M. Adelson
By: /s/ Alan S. Poole Director July 14, 1997
-------------------------
Alan S. Poole
By: Director July 14, 1997
-------------------------
David Batten
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
- ------------- ------------- ----
<S> <C> <C>
3. (a) Restated Certificate of Incorporation, as amended, of Registrant *
(incorporated by reference to Exhibit 4(a) to Amendment No. 1 to
Registrant's Registration Statement on Form S-8 (File No. 2-84451)
filed on July 31, 1990).
(b) Certificate of Amendment of the Restated Certificate of Incorporation *
dated September 1, 1992 (incorporated by reference to Exhibit 4(b)(2)
to Amendment No. 3 to Registrant's Registration Statement on Form S-1
(File No. 33-48404) filed on September 3, 1992).
(c) Amended By-Laws of the Registrant (incorporated by reference to *
Exhibit 4(d)(2) to Registrant's Registration Statement on Form S-8
(File No. 33-60454) filed on April 1, 1993).
4. (a) Forms of Securities Purchase Agreement, Convertible Term Debenture, *
Stock Purchase Warrant, Registration Rights Agreement (incorporated
by reference to Exhibits 99.1, 99.2, 99.3 and 99.4, respectively, to
Registrant's Current Report on Form 8-K dated May 30, 1997).
5. Opinion of Pitney, Hardin, Kipp and Szuch.
23.(a) Independent Auditors' Consent.
24. Power of Attorney (contained on the signature page of this
Registration Statement).
</TABLE>
- ------------------------
* Incorporated by reference.
<PAGE>
EXHIBIT 5
PITNEY, HARDIN, KIPP & SZUCH
MAIL P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
July 14, 1997
Base Ten Systems, Inc.
One Electronics Drive
Trenton, New Jersey 08619
We have acted as counsel to Base Ten Systems, Inc. (the Company) in connection
with the registration by the Company under the Securities Act of 1933, as
amended (the Act) of 1,269,773 shares of Class A Common Stock of the Company
(the Shares).
We have examined the Registration Statement on Form S-3 (the Registration
Statement), dated July 14, 1997 to be filed by the Company with the Securities
and Exchange Commission in connection with the registration of the Shares.
We have also examined originals, or copies certified or otherwise identified
to our satisfaction, of the Restated Certificate of Incorporation and By-Laws
of the Company, as currently in effect, and relevant resolutions of the Board
of Directors of the Company; and we have examined such other documents as we
deemed necessary in order to express the opinion hereinafter set forth. In
our examination of such documents and records, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, and conformity with the originals of all documents submitted
to us as copies.
Based on the foregoing, it is our opinion that when, as and if the
Registration Statement shall have become effective pursuant to the provisions
of the Act, and the Shares shall have been duly issued and delivered in the
manner contemplated by the Registration Statement, including the Prospectus
therein, the Shares will be legally issued, fully paid and non-assessable.
The foregoing opinion is limited to the laws of the State of New Jersey, and
we are expressing no opinion as to the effect of the laws of any other
jurisdiction.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm under the heading
Legal Opinion in the Prospectus. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Act, or the Rules and Regulations of the Securities
and Exchange Commission thereunder.
VERY TRULY YOURS,
/s/ PITNEY, HARDIN, KIPP & SZUCH
- --------------------------------
Pitney, Hardin, Kipp & Szuch
<PAGE>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Base Ten Systems, Inc. on Form S-3 of our report dated
December 23, 1996 (May 16, 1997 as to Note M), appearing in the Annual Report
on Form 10-K/A of Base Ten Systems, Inc. for the year ended October 31, 1996.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
July 15, 1997
