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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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) May 30, 1997
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Base Ten Systems, Inc.
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(Exact of Registrant as Specified in Charter)
New Jersey 07100 22-1804206
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(State of Other Jurisdiction (Commission (I.R.S. Employer
Of Incorporation) File Number) Identification No.)
One Electronics Drive, Trenton, New Jersey 08619
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(Address of Principal Executive Offices) (Zip Code)
(609)586-7010
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Registrant's telephone number, including area code
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Inapplicable
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(Former Name of Former Address, if Changed Since Last Report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events
On May 30, 1997, Base Ten Systems, Inc. (the "Company") sold 55 units
("Units") at $100,000 per Unit, for an aggregate of $5,500,000, 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 adddition, 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.
Attached to this Report are the forms of Securities Purchase Agreement,
Convertible Term Debenture, Stock Purchase Warrant and Registration Rights
Agreement, as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively, executed in
connection with this Offering.
Item 7. Exhibits
99.1 Securities Purchase Agreement
99.2 Convertible Term Debenture
99.3 Stock Purchase Warrant
99.4 Registration Rights Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: June 9, 1997
BASE TEN SYSTEMS, INC.
By: /S/ MYLES M. KRANZLER
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Myles M. Kranzler
Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS
99.1 Securities Purchase Agreement
99.2 Convertible Term Debenture
99.3 Stock Purchase Warrant
99.4 Registration Rights Agreement
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 30,
1997, by and among BASE TEN SYSTEMS, INC., a New Jersey corporation, with
headquarters located at One Electronics Drive, P.O. Box 3151, Trenton, New
Jersey 08619 (the "Company"), and the purchaser or the purchasers (collectively,
the "Purchasers") set forth on the execution page(s) hereof.
WHEREAS:
A. The Company and each Purchaser 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. Each Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, a unit (each, a "Unit") consisting of (i) a
convertible debenture in the principal amount of $100,000 of the Company, in the
form attached hereto as Exhibit A (the "Debenture"), convertible into shares of
the Company's Class A common stock, par value $1.00 per share (the "Class A
Common Stock") and (ii) a warrant (the "Warrant"), in the form attached hereto
as Exhibit B, to acquire 1,800 shares of Common Stock. The shares of Class A
Common Stock issuable upon conversion of or otherwise pursuant to the Debentures
are referred to herein as the "Conversion Shares" and the shares of Class A
Common Stock issuable upon exercise of or otherwise pursuant to the Warrants are
referred to herein as the "Warrant Shares." The Debentures, Warrants, Conversion
Shares and Warrant Shares are collectively referred to herein as the
"Securities"; and
C. Contemporaneous 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 and the rules and regulations promulgated thereunder,
and applicable state securities laws.
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS
a. Purchase Price. The purchase price (the "Purchase Price") per Unit
shall be equal to $100,000.
b. Form of Payment. At the Closing (as defined below), each Purchaser
shall pay the aggregate Purchase Price for the number of Units being purchased
by such Purchaser at the Closing (as set forth on the signature page hereto) by
wire transfer to the Company, in accordance with the Company's written wiring
instructions, against delivery of the duly executed Debentures and Warrants
being purchased by such Purchaser hereunder and the Company shall deliver such
Debentures and Warrants against receipt of such aggregate Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units pursuant to this Agreement (the "Closing")
shall be 12:00 noon Eastern Time on May 30, 1997, or such other time, as may be
mutually agreed upon by the Company and the Purchasers (the "Closing Date"). The
Closing shall occur at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers, 1401 Walnut Street, Philadelphia, Pennsylvania 19102.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company that:
a. Investment Purpose. Purchaser is purchasing the Units for
Purchaser's own account for investment only and not with a present view towards
the public sale or distribution thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. 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 or blue sky 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. Notwithstanding
anything in this Section 2(a) to the contrary, by making the representations
herein, 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
under the Securities Act.
b. Accredited Investor Status. Purchaser is an "Accredited Investor" as
that term is defined in Rule 501(a)(3) of Regulation D. Purchaser was not formed
for the specific purpose of purchasing the Units.
c. Reliance on Exemptions. Purchaser understands that the Units 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 the rules, regulations and policies governing registration and resale
thereof 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 Units.
d. Information. Purchaser and its advisors, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Units which have been
requested by Purchaser or its counsel. Purchaser and its counsel, if any, have
been afforded the opportunity to ask questions of the Company and have received
what Purchaser believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
Purchaser or its counsel or any of its representatives shall modify, amend or
affect Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below. PURCHASER UNDERSTANDS THAT PURCHASER'S INVESTMENT
IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
e. 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.
f. Transfer or Resale. Purchaser understands that (i) the Securities
have not been and except as provided in the Registration Rights Agreement, are
not being registered under the Securities Act or any state securities laws, and
may not be transferred unless (a) subsequently registered thereunder, or (b)
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope reasonably satisfactory to the
Company, the cost of which shall be borne by the Purchaser) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration or (c) sold pursuant to Rule 144 promulgated
under the Securities Act (or a successor rule) ("Rule 144"); (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any resale
of such Securities under circumstances in which the seller (or the person
through whom the sale is made) 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, and in accordance with the
terms and conditions of, the Registration Rights Agreement).
g. Legends. Purchaser understands that the Debentures, Warrants and,
until such time as the Conversion Shares and the 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 without any
restriction as to the public resale thereof, the certificates for the Conversion
Shares and the Warrant Shares will bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
the certificates for such Securities):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under the Act, or an opinion of counsel,
in form, substance and scope reasonably satisfactory to the Company,
that registration is not required under the Act or unless sold pursuant
to Rule 144(k) under the Act.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Sec urity is registered under the Securities Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
reasonably satisfactory to the Company (the cost of which shall be borne by such
holder), to the effect that a public sale or transfer of such Security may be
made without registration under the Securities Act or (c) such holder provides
the Company with reasonable assurances that such Security can be sold pursuant
to Rule 144 without any restriction as to the number of Securities acquired as
of a particular date that can then be immediately sold. Purchaser agrees to
comply with all applicable prospectus delivery requirements, if any. In the
event the above legend is removed from any Security and thereafter the
effectiveness of a registration statement covering 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 the
Company may require that the above legend be placed on any such Security that
cannot then be sold pursuant to an effective registration statement or Rule 144
without any restriction as to the number of Securities acquired as of a
particular date that can then be immediately sold, which legend shall be removed
when such Security may be sold pursuant to an effective registration statement
or Rule 144 without any restriction as to the number of Securities acquired as
of a particular date that can then be immediately sold. Purchaser agrees to take
all actions reasonably necessary to comply with the provisions of this
paragraph, including, without limitation, submitting the Security to the Company
or its transfer agent for the purpose of affixing or removing such legend.
h. 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 terms.
i. Residency. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the signature page hereto executed by such
Purchaser.
j. No Brokers. Other than dealings with The Tail Wind Fund, the
Purchasers have taken no action which would give rise to any claim by any person
for brokerage commissions, finder fees or similar payments by the Company
relating to this Agreement or the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. Organization and Qualification. The Company and each of 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 would have a Material Adverse Effect. "Material
Adverse Effect" means any material adverse effect on the operations, properties,
financial condition or prospects of the Company and its subsidiaries on a
consolidated basis or on the transactions contemplated hereby.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Debentures, the Warrants and the Registration Rights Agreement, to issue and
sell the Debentures and Warrants in accordance with the terms hereof, to issue
the Conversion Shares upon conversion of the Debentures and to issue the Warrant
Shares upon exercise of the Warrants, in accordance with the terms thereof; (ii)
the execution, delivery and performance of this Agreement, the Debentures, the
Warrants 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 Debentures, the issuance and
reservation for issuance of the Conversion Shares issuable upon conversion
thereof and the reservation for issuance and the issuance of the Warrant Shares
issuable upon exercise of the Warrants) have been duly authorized by the
Company's Board of Directors and, except as set forth on Schedule 3(b) hereof,
no further consent or authorization of the Company, its Board or Directors, and
its shareholders is required (under Rule 4460(i) promulgated by the National
Association of Securities Dealers, Inc. ("NASD") or otherwise); (iii) this
Agreement has been duly executed and delivered by the Company; and (iv) this
Agreement constitutes, and, upon execution and delivery by the Company of the
Registration Rights Agreement, the Debentures and the Warrants, such agreements
will constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their terms.
c. 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 reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Debentures and the Warrants) exercisable
for, or convertible into or exchangeable for any shares of capital stock and the
number of shares to be reserved for issuance upon conversion of the Debentures
and exercise of the Warrants is set forth on Schedule 3(c). 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 Conversion Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except as disclosed in Schedule 3(c) or as
contemplated herein, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, 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 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) 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 each Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws as in effect on the date hereof (the
"By-laws"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company. The Company shall provide each Purchaser with a written update of this
representation signed by the Company's Chief Executive Officer or Chief
Financial Officer on behalf of the Company as of the Closing Date.
d. Issuance of Shares. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance, and, upon conversion of the
Debentures and exercise of the Warrants in accordance with the terms thereof,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights of stockholders of the Company.
e. No Conflicts. Except as disclosed in Schedule 3(e), the execution,
delivery and performance of this Agreement, the Registration Rights Agreement,
the Debentures and the Warrants by the Company, and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Debentures, Warrants, Conversion Shares and Warrant Shares) will not (i) result
in a violation of the Certificate of Incorporation or By-laws or (ii) 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, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations) 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 (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its subsidiaries is in default (and no event
has occurred 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 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 a
Purchaser 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 singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws, 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 Registration Rights
Agreement, the Debentures or the Warrants, in each case in accordance with the
terms hereof or thereof. Except as disclosed in Schedule 3(e), the Company is
not in violation of the listing requirements of the NASDAQ National Market
("NASDAQ") and does not reasonably anticipate that the Class A Common Stock will
be delisted by NASDAQ in the foreseeable future.
f. SEC Documents, Financial Statements. Except as disclosed in Schedule
3(f), since April 30, 1994, 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") (all of the foregoing filed prior to the date
hereof and after April 30, 1994, and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). The Company has delivered to each Purchaser true and complete
copies of the SEC Documents, except for such 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, as amended or supplemented, 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. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, 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
may include footnotes or may be 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 year-end audit
adjustments). Except as set forth in the financial statements 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 subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
g. Absence of Certain Changes. Since October 31, 1996, 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(g) or in the SEC Documents.
h. Absence of Litigation. Except as disclosed in the SEC Documents or
Schedule 3(h), there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, 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 would have a Material Adverse Effect.
i. Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof and otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
j. Acknowledgment Regarding Purchasers' Purchase of Units. The Company
acknowledges and agrees that none of the Purchasers or their affiliates are
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the transactions contemplated
hereby, and any advice given by any Purchaser, or any of their representatives,
affiliates or agents, in connection with this Agreement and the transactions
contemplated hereby is merely incidental to each Purchaser's purchase of Units.
The Company further represents to each Purchaser that the Company's decision to
enter into this Agreement has been based solely on an independent evaluation by
the Company and its representatives.
k. Current Registration Form. The Company is currently eligible to
register the resale of its Class A Common Stock on a registration statement on
Form S-3 under the Securities Act.
l. 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 such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
m. No Integrated Offering. Neither the Company, nor, to the Company's
best knowledge, any of its affiliates, or any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offerers to buy any security under circumstances that would
require registration of the Securities being offered hereby under the Securities
Act.
n. No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with Tail Wind Inc. whose commissions
and fees in the aggregate amount of the product of (i) .05 and (ii) the
aggregate Purchase Price for the number of Units purchased pursuant to this
Agreement will be paid by the Company at the Closing.
o. Acknowledgment of Dilution. The number of Conversion Shares issuable
upon conversion of the Debentures may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the Class
A Common Stock declines. The Company acknowledges that its obligation to issue
Conversion Shares upon conversion of the Debentures in accordance with the
Debentures is absolute and unconditional, regardless of the dilution that such
issuance may have on the ownership interests of other stockholders.
p. Intellectual Property. Except for information which is in the public
domain, each of the Company and its subsidiaries owns or possesses adequate and
enforceable rights to use all 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") necessary for the conduct of its business as now being conducted
and as described in the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1996. Neither the Company nor any subsidiary of the Company
infringes or is in conflict with any right of any other person with respect to
any Intangibles which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
q. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
4. COVENANTS.
a. Commercially Reasonable Efforts. The parties shall use all
commercially reasonable efforts timely to satisfy each of the conditions
described in Sections 6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Purchasers promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
c. Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company 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.
d. Use of Proceeds. The Company shall use the proceeds from the sale of
the Units as set forth on Schedule 4(d); provided, however, that the Company
shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person
(except in connection with its direct subsidiaries).
e. Additional Equity Capital; Right of First Offer. The Company agrees
that, so long as any Debentures or Warrants are outstanding, without the prior
written consent of the Purchasers, it will not consummate any additional equity
financing (including debt financing with an equity component) in any form having
Class A Common Stock registration rights and/or public resale rights, which
rights are effective within 270 days after the Closing Date. Notwithstanding
anything to the contrary in the immediately preceding sentence, the limitations
contained therein shall not restrict the Company's ability to satisfy any
contractual obligations existing as of the date hereof as such are disclosed on
Schedule 3(c) hereto. In addition, during the 360 day period beginning on the
Closing Date, the Company will not conduct any offering or sale or enter into an
agreement to conduct a sale (a "Floating Discount Offering") of any of its Class
A Common Stock or securities which are convertible into or exchangeable or
exercisable for Class A Common Stock based on a sales, conversion, exchange or
exercise price calculated as a discount to the trading price of the Class A
Common Stock during a specified period unless it shall have first delivered to
each Purchaser, at least five (5) business days prior to the closing of such
Floating Discount Offering, written notice describing the proposed Floating
Discount Offering, including the terms and conditions thereof, and providing
each Purchaser and its affiliates, an option during the five (5) business day
period following receipt of such notice by the Purchasers to purchase all or any
portion of such Purchaser's Applicable Percentage (as defined below) of the
securities being offered in the Floating Discount Offering on the same terms as
contemplated by such Floating Discount Offering (the limitations referred to in
this sentence are collectively referred to as the "Floating Discount
Limitations"). The Floating Discount Limitations shall not apply to (i) the
issuance of securities in connection with a strategic merger, consolidation,
acquisition or sale of assets, or in connection with any strategic partnership
or joint venture, or in connection with the disposition or acquisition of a
business, product or license by the Company or exercise of options by employees,
consultants or directors, (ii) the issuance of securities pursuant to an
underwritten public offering with the financial institution or its affiliates as
has been disclosed to the Purchasers in writing as of the date hereof or (iii)
any public offering to effect a Prepayment at Borrower's Election (as defined in
the Debenture). For purposes of this Section 4(e), "Applicable Percentage" at
any time with respect to any Purchaser shall mean the percentage obtained by
dividing (x) the aggregate number of Conversion Shares then owned by, or
issuable upon conversion of Debentures to, such Purchaser by (y) the aggregate
number of Conversion Shares then outstanding or issuable to all Purchasers
(determined as set forth in clause (x) of this sentence).
Notwithstanding any Purchaser's exercise or failure to
exercise all or a portion of their rights granted pursuant to this Section 4(e),
if the Company, at any time during the 360 day period beginning on the Closing
Date, consummates or enters into an agreement to consummate any additional
equity financing (including debt financing with an equity component) with any
third party on terms which vary from the terms of the transactions contemplated
hereby or which grants rights to the purchasers therein which vary from the
rights granted to the Purchasers in connection with the transactions
contemplated hereby (collectively, the "Subsequent Benefits"), each Purchaser
shall have the right, exercisable in its sole discretion, by providing the
Company with written notice not later than forty five (45) days of the receipt
by such Purchaser of all applicable documentation governing such equity
financing ("Applicable Documentation"), to amend the Securities, this Agreement
and/or any other agreements entered into in connection herewith in such a manner
so as to afford such Purchaser with any or all such Subsequent Benefits. The
Company shall send to each Purchaser who, at the time of consummation of such
equity financing owns any Debentures or Warrants, copies of such Applicable
Documentation as soon as practicable following consummation of such equity
financing. The Company agrees that it shall execute and deliver any and all
documents, take all actions and do, or cause to be done, all other things
necessary to afford the Purchasers with the Subsequent Benefits.
f. Expenses. At the Closing, the Company shall pay Eighteen Thousand
Dollars ($18,000) to Tail Wind Inc. in consideration of the expenses incurred by
Tail Wind Inc. in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement.
g. Financial Information. The Company agrees to send the following
reports to each Purchaser until such Purchaser transfers, assigns or sells all
of its Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its
proxy statements and any Current Reports on Form 8-K; and (ii) within three (3)
days after release, copies of all press releases issued by the Company or any of
its subsidiaries.
h. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Class A Common Stock to provide for the full conversion of the
outstanding Debentures and issuance of the Conversion Shares in connection
therewith and the full exercise of the Warrants and the issuance of the Warrant
Shares in connection therewith and as otherwise required by the Debentures and
the Warrants. In that regard, a "sufficient number of shares" with respect to
the Debentures shall be deemed to be equal to the number of shares of Class A
Common Stock required to be reserved for issuance by the Company pursuant to
Article V of the Debentures. The Company shall not reduce the number of shares
reserved for issuance upon conversion of the Debentures and the full exercise of
the Warrants without the consent of the Purchasers holding a majority of the
principal amount of the Debentures then held by all Purchasers.
i. Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Class A Common Stock
are then listed (subject to official notice of issuance) and shall maintain, so
long as any other shares of Class A Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable upon conversion of
the Debentures and Warrant Shares from time to time issuable upon exercise of
the Warrants. The Company will take all action necessary to continue the listing
and trading of its Class A Common Stock on the NASDAQ, the New York Stock
Exchange ("NYSE") or the American Stock Exchange ("AMEX") and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASD and such exchanges, as applicable.
j. Corporate Existence. So long as a Purchaser beneficially owns any
Debentures or Warrants, the Company shall maintain its corporate existence,
except in the event of a merger, consolidation or sale of all or substantially
all of the Company's assets, as long as the surviving or successor entity in
such transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of Class
A Common Stock authorized and available for issuance in order to effect the
conversion of all Debentures and exercise in full of all Warrants outstanding as
of the date of such transaction, (ii) has no legal, contractual or other
restrictions on its ability to perform the obligations of the Company hereunder
and under the agreements and instruments entered into in connection herewith and
(iii) is a publicly traded corporation whose common stock and the shares of
capital stock issuable upon conversion of the Debentures and exercise of the
Warrant are (or would be upon issuance thereof) listed for trading on the
NASDAQ, NYSE or AMEX.
k. No Dividends, Etc. So long as a Purchaser beneficially owns at least
ten percent (10%) of the original aggregate principal amount or face amount, as
applicable, of the Debentures, the Company shall not redeem, or declare or pay
any cash distribution or dividend on, any capital stock of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to time by such
Purchaser to the Company upon conversion of the Debentures or exercise of the
Warrants. Prior to registration of the Conversion Shares and Warrant Shares
under the Securities Act or resale of such Securities under Rule 144, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than such instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof in the case of the Conversion Shares and Warrant Shares
prior to registration of the Conversion Shares and Warrant Shares under the
Securities Act, will be given by the Company to its transfer agent with respect
to the Conversion Shares or the Warrant Shares and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way each Purchaser's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any. If a Purchaser provides the Company
with an opinion of counsel, which opinion of counsel shall be in form, substance
and scope reasonably satisfactory to the Company (the cost of which shall be
borne by the Purchaser), to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from
registration, the Company shall permit the transfer, and, in the case of the
Conversion Shares and Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by a Purchaser. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Purchaser by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that a
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell Units to a
Purchaser at the Closing is subject to the satisfaction, at or before the
Closing, of each of the following conditions thereto, 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. The obligation of the Company to issue and
sell the Units to any Purchaser hereunder is distinct and separate from its
obligation to issue and sell Units to any other Purchaser hereunder and any
failure by one or more Purchasers to fulfill the conditions set forth herein or
to consummate the purchase of Units hereunder will not relieve the Company of
its obligations with respect to any other Purchaser.
a. The applicable Purchaser shall have executed the signature page to
this Agreement and the Registration Rights Agreement, and delivered the same to
the Company.
b. The applicable Purchaser shall have paid the Purchase Price for the
Units purchased in accordance with Section 1(b) above.
c. The representations and warranties of the applicable Purchaser shall
be true and correct in all material respects as of the date when made and as of
the date and time of the 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 applicable 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 applicable
Purchaser at or prior to the Closing.
d. 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.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase Units at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
following conditions, provided that these conditions are for such Purchaser's
sole benefit and may be waived by such Purchaser at any time in the Purchaser's
sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to such Purchaser.
b. The Company shall have delivered duly executed Debentures and
Warrants (in such denominations as such Purchaser shall request) to such
Purchaser in accordance with Section 1(b) above.
c. The Class A Common Stock shall be authorized for quotation on NASDAQ
and trading in the Class A Common Stock (or NASDAQ generally) shall not have
been suspended by the SEC or NASDAQ.
d. 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 date of
the Closing as though made at that time (except for representations and
warranties that speak as of a specific 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 date of the Closing. Such
Purchaser shall have received a certificate, executed by the chief executive
officer of the Company, dated as of the date of the Closing, to the foregoing
effect and as to such other matters as may be reasonably requested by such
Purchaser.
e. 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.
f. Such Purchaser shall have received the officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
g. Such Purchaser shall have received an opinion of the Company's
counsel, dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to such Purchaser and in substantially the form of
Exhibit D attached hereto.
h. The Company shall have delivered evidence reasonably satisfactory to
the Purchasers that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as Exhibit E.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
contracts made and to be performed in the State of New Jersey. The Company and
each Purchaser irrevocably consent to the jurisdiction of the United States
federal courts located in the State of New Jersey in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company and each Purchaser irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company and each
Purchaser further agree that service of process upon the Company mailed by first
class mail shall be deemed in every respect effective service of process upon
the Company in any suit or proceeding based on or arising under this Agreement.
Nothing herein shall affect any party's right to serve process in any other
manner permitted by law. The Company agrees 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.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which 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.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. 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.
e. 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 Purchasers make 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 the Purchasers.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
P.O. Box 3151
Trenton, NJ 08619
Telecopy: (609) 586-1593
Attention: Chief Executive Officer
with a copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
P.O. Box 1945
Morristown, NJ 07962-1945
Attention: Warren J. Casey
If to any other Purchaser, to such address set forth under such
Purchaser's name on the signature page hereto executed by such Purchaser
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esquire
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns; provided,
however, that the Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 2, 3, 4, 5 and 8 shall survive
the closings hereunder notwithstanding any due diligence investigation conducted
by or on behalf of any Purchasers. The Company agrees to indemnify and hold
harmless each Purchaser and each of such Purchaser's officers, directors,
employees, partners, agents and affiliates for loss or damage arising as a
result of or related to any breach by the Company of any of its representations
or covenants set forth herein, including advancement of expenses as they are
incurred.
j. Publicity. Prior to the dissemination of any of the following, the
Company shall use all commercially reasonable efforts to give each of the two
Purchasers who purchase the greatest number of Units hereunder at least one
business day to review and provide comments on the applicable portion of any
press releases, SEC, NASDAQ or NASD filings, or any other public statements
which relate to the transactions contemplated by this Agreement. All Purchasers
shall be provided with a copy of any and all documents disseminated pursuant to
this paragraph.
k. 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.
l. Termination. In the event that the Closing shall not have occurred
on or before May 30, 1997, unless the parties agree otherwise, this Agreement
shall terminate at the close of business on such date.
m. Force Majeure. Neither the Company nor the Purchasers shall be
responsible for any delay or failure to perform any part of this Agreement to
the extent that such delay or failure is solely caused by fire, flood,
earthquake, explosion, war, labor strike, riot, or act of governmental, civil or
military authority which imposes a moratorium on the performance of the specific
obligation in question. Notice with full details of any such event shall be
given to the other party as promptly as practicable after its occurrence. The
affected party shall use its reasonably best efforts to minimize the effects of
or end any such event so as to facilitate the resumption of full performance
hereunder.
n. Business Day. For purposes of this Agreement the term "business day"
means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York or the State of New Jersey are authorized
or obligated by law, regulation or executive order to close.
o. Joint Participation in Drafting. Each party to this Agreement
participated in the drafting of this Agreement, the Debentures, the Warrants and
the Registration Rights Agreement. As such, the language used herein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
- -------------------
By:
Name:
Title:
RESIDENCE:
ADDRESS:
Telecopy:
Attention:
AGGREGATE SUBSCRIPTION AMOUNT
Number of Units:
Purchase Price:
BASE TEN SYSTEMS, INC.
- ----------------------
By:
Name:
Title:
EXHIBIT A
to
Securities
Purchase
Agreement
THIS CONVERTIBLE TERM DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR ANY SUCH OFFER, SALE OR TRANSFER IS MADE PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
CONVERTIBLE TERM DEBENTURE
May 30, 1997 $____________
FOR VALUE RECEIVED, BASE TEN SYSTEMS, INC., a New Jersey
corporation (hereinafter called the "Borrower," the "Corporation" or the
"Company") hereby promises to pay to the order of _____________ or registered
assigns (the "Holder") the sum of ____________ Dollars ($___________) on May 30,
2000 (the "Scheduled Maturity Date"), and to pay interest on the unpaid
principal balance hereof at the rate of eight percent (8%) per annum from the
date hereof (the "Issue Date") until the same becomes due and payable (which
interest shall accrue on a daily basis), whether at maturity or upon
acceleration or otherwise. Any amount of principal of or interest on this
Debenture which is not paid when due shall bear interest at the rate of fifteen
percent (15%) per annum from the due date thereof until the same is paid.
Interest shall commence accruing on the Issue Date and, to the extent not
converted in accordance with the provisions of Article IV below, shall be
payable in arrears quarterly on August 30, November 30, March 1 and May 30 of
each year in which this Debenture is outstanding, commencing August 30, 1997.
All payments of interest (to the extent not converted in accordance with the
terms hereof) shall, at the Company's election, be made in (i) a number of
shares of the Company's Class A common stock, $1.00 par value per share ("Class
A Common Stock"), equal to the quotient of the amount of such interest payable
on such date divided by the Conversion Price (as defined in Article III) or (ii)
lawful money of the United States of America; provided, however, Borrower shall
be permitted to make such interest payments in shares of Class A Common Stock
(i) only at such times as which the resale of such shares is registered with the
Securities and Exchange Commission (the "SEC") pursuant to an effective
registration statement and (ii) only to the extent Borrower has notified Holder
in writing not less than three (3) days prior to the date of such payment of its
intention to make such interest payments in shares of Class A Common Stock. All
payments of principal (to the extent not converted in accordance with the terms
hereof) shall be made in lawful money of the United States of America. All
payments shall be made at such address as the Holder shall hereafter give to the
Borrower by written notice made in accordance with the provisions of this
Debenture.
This Debenture is being issued by the Borrower along with similar
convertible term debentures (the "Other Debentures" and together with this
Debenture, the "Debentures") delivered to other holders (together with the
Holder referred to herein, the "Holders") pursuant to that certain Securities
Purchase Agreement, dated as of the date hereof, by and among the Borrower and
the Holders (the "Securities Purchase Agreement").
ARTICLE I
PREPAYMENT
A. Limited Right to Prepay. Except as provided in Paragraph B of this
Article I, upon the occurrence of an Event of Default (as defined herein), this
Debenture shall be prepaid by the Borrower in accordance with the provisions of
Article VIII hereof. Other than pursuant to Article I.B. below, this Debenture
may not be prepaid without the prior written consent of the Holder.
B. Prepayment at Borrower's Option.
(i) So long as no Event of Default shall have occurred and the
Borrower is not in material violation of any of its obligations under the
Securities Purchase Agreement or that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Borrower and the Holders (the
"Registration Rights Agreement"), if Borrower (a) enters into a binding
underwriting agreement with a reputable underwriter of regional or national
recognition for a firm commitment United States underwritten public offering of
its securities with net proceeds to Borrower of not less than $7.5 million or
(b) consummates a United States private offering of its securities to not more
than three (3) investors only with net proceeds to Borrower of not less than
$17.5 million, then the Borrower shall have the right to prepay ("Prepayment at
Borrower's Election") all or any portion of the then outstanding Debentures
(other than Debentures which are the subject of a Notice of Conversion delivered
prior to the Effective Date of Prepayment (as defined below)) in accordance with
the prepayment procedures set forth below. Notwithstanding anything to the
contrary contained in the immediately preceding sentence, the Prepayment at
Borrower's Election shall not apply to continuous offerings consummated pursuant
to Rule 415 ("Rule 415") promulgated under the Securities Act of 1933, as
amended (the "Securities Act") unless Borrower enters into a binding
underwriting agreement with a reputable underwriter of regional or national
recognition for a firm commitment United States underwritten public offering of
its securities with net proceeds to Borrower within no more than one week of the
effectiveness of the Registration Statement filed pursuant to Rule 415 of not
less than $7.5 million. Any optional prepayment pursuant to this Paragraph B
shall be made ratably among the holders of Debentures in proportion to the
principal amount of Debentures then outstanding. Holders of Debentures may
convert all or any part of their Debentures selected for prepayment hereunder
into Class A Common Stock in accordance with the terms hereof by delivering a
Notice of Conversion (each as defined in Article III below) to the Borrower at
any time prior to the Effective Date of Prepayment (as defined below). The
"Optional Prepayment Amount" with respect to each Debenture means 110%
multiplied by the principal amount thereof plus all accrued and unpaid interest
and Conversion Default Payments (if any) thereon through the date of prepayment.
(ii) The Borrower may not deliver an Optional Prepayment
Notice to a Holder unless on or prior to the date of delivery of such Optional
Prepayment Notice, the Borrower shall have deposited with its transfer agent in
the United States or another escrow agent reasonably satisfactory to the Holder,
as a trust fund, cash sufficient in amount to pay all amounts to which the
holders of Debentures are entitled upon such prepayment pursuant to subparagraph
(i) of this Paragraph B, with irrevocable instructions and authority to such
transfer agent or escrow agent to complete the prepayment thereof in accordance
with this Paragraph B. Any Optional Prepayment Notice delivered in accordance
with the immediately preceding sentence shall be accompanied by a statement
executed by a duly authorized officer of its transfer agent or escrow agent,
certifying the amount of funds which have been deposited with such transfer
agent or escrow agent and that the transfer agent or escrow agent has been
instructed and agrees to act as prepayment agent hereunder.
(iii) The Borrower shall effect each prepayment under this
Article I.B by giving at least thirty (30) business days prior written notice
(the "Optional Prepayment Notice") of the date which such prepayment is to
become effective (the "Effective Date of Prepayment"), the total principal
amount of Debentures to be prepaid and the Optional Prepayment Amount to (i) the
holders of Debentures at the address and facsimile number of such holder
appearing in the Borrower's register for the Debentures and (ii) the transfer
agent for the Class A Common Stock, which Optional Prepayment Notice shall be
deemed to have been delivered on the business day after the Borrower's fax (with
a copy sent by overnight courier to the holders of Debentures) of such notice to
the holders of Debentures.
(iv) The Optional Prepayment Amount shall be paid to the
holder of the Debentures being prepaid within three (3) business days after the
Effective Date of Prepayment; provided, however, that the Borrower shall not be
obligated to deliver any portion of the Optional Prepayment Amount until (a) in
the event all outstanding Debentures are being prepaid, either the Debentures
being prepaid are delivered to the office of the Borrower or the transfer agent,
or the holder notifies the Borrower or the transfer agent that such Debentures
have been lost, stolen or destroyed and delivers the documentation in accordance
with Article X.H hereof or (b) in the event less than all outstanding Debentures
are being prepaid, a countersigned Optional Prepayment Notice evidencing the
holders acknowledgment that the principal amount of Debentures to be prepaid, as
set forth in such Optional Prepayment Notice, are the subject of prepayment.
Notwithstanding anything herein to the contrary, in the event that the
Debentures being prepaid or a countersigned Optional Prepayment Notice, as the
case may be, are not delivered to the Borrower or the transfer agent within
three business days after the Effective Date of Prepayment, the prepayment of
the Debentures pursuant to this Article I.B shall still be deemed effective,
interest on such Debentures shall cease to accrue and all rights of the holders
of such Debentures as creditors of the Company shall cease as of the Effective
Date of Prepayment (other than the right to receive the Optional Prepayment
Amount (without additional interest after the Effective Date) in accordance with
the terms hereof) and the Optional Prepayment Amount shall be paid to the holder
of Debentures being prepaid or a countersigned Optional Prepayment Notice, as
the case may be, within three (3) business days of the date the Debentures being
prepaid are actually delivered to the Borrower or the transfer agent.
ARTICLE II
[INTENTIONALLY OMITTED]
ARTICLE III
CERTAIN DEFINITIONS
The following terms shall have the following meanings:
A. "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 by Bloomberg
Financial Markets (or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the aggregate principal amount represented by the then outstanding Debentures
("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 for 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 all 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.
B. "Conversion Amount" means the portion of the principal amount of
this Debenture being converted plus any accrued and unpaid interest thereon
through the Conversion Date being converted and any Conversion Default Payments
payable with respect thereto, each as specified in the notice of conversion in
the form attached hereto (the "Notice of Conversion").
C. "Conversion Date" means, for any Optional Conversion (as defined
below), the date specified in the Notice of Conversion so long as the copy of
the Notice of Conversion is faxed (or delivered by other means resulting in
notice) to the Corporation at or before 11:59 p.m., New York City time, on the
Conversion Date indicated in the Notice of Conversion. If the Notice of
Conversion is not so faxed or otherwise delivered before such time, then the
Conversion Date shall be the date the holder faxes or otherwise delivers the
Notice of Conversion to the Corporation.
D. "Conversion Percentage" shall have the following meaning and shall
be subject to adjustment as provided herein:
If the Conversion Date is: Then the Conversion Percentage is:
Prior to February 24, 1998 95%
On or after February 24, 1998 92%
E. "Conversion Price" means as of any date of determination, 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 such
date of determination (subject to equitable adjustment for any stock splits,
stock dividends, reclassifications or similar events during such applicable
period) (the "Average Price") by (y) the Conversion Percentage and (ii) (x)
$13.50, with respect to any Conversion Date occurring prior to May 30, 1998 or
(y) $14.00 with respect to any Conversion Date occurring on or after May 30,
1998.
The Conversion Price shall be subject to adjustment as provided herein.
F. "N" means the number of days from, but excluding, the Issue Date
through and including the Conversion Date.
G. "business day" means any day, other than a Saturday or Sunday or a
day on which banking institutions in the State of New York or the State of New
Jersey are authorized or obligated by law, regulation or executive order to
close.
IV CONVERSION
A. Conversion at the Option of the Holder. Subject to the limitations
on conversions contained in Paragraph C of this Article IV, the Holder may, at
any time and from time to time, convert (an "Optional Conversion") all or any
part of the outstanding principal amount of this Debenture, plus all accrued
interest thereon through the Conversion Date, into a number of fully paid and
nonassessable shares of Class A Common Stock determined in accordance with the
following formula:
Conversion Amount
------------------
Conversion Price
B. Mechanics of Conversion. In order to effect an Optional Conversion,
Holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice
of Conversion to the Corporation or the transfer agent for the Class A Common
Stock and (y) surrender or cause to be surrendered, this Debenture duly
endorsed, along with a copy of the Notice of Conversion as soon as practicable
thereafter to the Corporation or the transfer agent. Upon receipt by the
Corporation of a facsimile copy of a Notice of Conversion from Holder, the
Corporation shall immediately send, via facsimile, a confirmation to Holder
stating that the Notice of Conversion has been received, the date upon which the
Corporation expects to deliver the Class A Common Stock upon a conversion and
the name and telephone number of a contact person at the Corporation regarding
the conversion. The Corporation shall not be obligated to issue shares of Class
A Common Stock upon a conversion unless either this Debenture is delivered to
the Corporation or the transfer agent as provided above, or the holder notifies
the Corporation or the transfer agent that this Debenture has been lost, stolen
or destroyed (subject to the requirements of Article X.H).
(i) Delivery of Class A Common Stock Upon Conversion. Upon
receipt of a Notice of Conversion, the Corporation shall, no later than the
later of the (a) third business day following the Conversion Date and (b) the
date of such receipt (the "Delivery Period"), issue and deliver to the Holder
(x) that number of shares of Class A Common Stock issuable upon conversion of
the portion of this Debenture being converted. In lieu of delivering physical
certificates representing the Class A Common Stock issuable upon conversion,
provided the Borrower's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, upon request of the
Holder and its compliance with the provisions contained in this paragraph, so
long as the certificates therefor do not bear a legend and the holder thereof is
not obligated to return such certificate for the placement of a legend thereon,
the Borrower shall use its best efforts to cause its transfer agent to
electronically transmit the Class A Common Stock issuable upon conversion to the
Holder by crediting the account of Holder's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission system.
(ii) Taxes. The Corporation shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of the shares
of Class A Common Stock upon the conversion of this Debenture.
(iii) No Fractional Shares. If any conversion of this
Debenture would result in the issuance of either a fractional share of Class A
Common Stock, such fractional share shall be disregarded and the number of
shares of Class A Common Stock issuable upon conversion of this Debenture shall
be the next higher whole number of shares.
(iv) Conversion Disputes. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Class A Common Stock as are not disputed in accordance with
subparagraph (i) above. If such dispute only involves the calculation of the
Conversion Price, the Corporation shall submit the disputed calculations to its
outside accountant via facsimile within two (2) business days of receipt of the
Notice of Conversion. The accountant 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 accountant's
calculation shall be deemed conclusive, absent manifest error. The Corporation
shall then issue the appropriate number of shares of Class A Common Stock in
accordance with subparagraph (i) above.
C. Limitations on Conversions. The Conversions of this Debenture shall
be subject to the following limitations (each of which limitations shall be
applied independently):
(i) Volume Limitations. During the period beginning on the
Issue Date (except in accordance with Paragraph B of Article I or upon the
occurrence of an Event of Default (as defined below) or upon the merger,
consolidation or other business combination of the Company (a "Merger"), except
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Corporation) and ending on December 15,
1997, no portion of this Debenture shall be convertible. During the period
commencing on December 16, 1997 and ending on the 270th day following the Issue
Date (except in accordance with Paragraph B of Article I or upon the occurrence
of an Event of Default or a Merger), Holder may not convert more than fifty
percent (50%) of the original principal amount of this Debenture. Thereafter,
this Debenture shall be fully convertible (subject to any further restrictions
set forth in this paragraph). For the avoidance of doubt, the conversion of any
portion of this Debenture subject to an Optional Prepayment Notice shall not be
counted as a conversion for purposes of this subparagraph (i).
(ii) Cap Amount. Unless permitted by the applicable rules and
regulations of the principal securities market on which the Class A Common Stock
is listed or traded, in no event shall the total number of shares of Class A
Common Stock issued upon conversion of this Debenture and the Other Debentures
exceed the maximum number of shares of Class A Common Stock that the Corporation
can so issue pursuant to Rule 4460(i) of the Nasdaq National Market ("Nasdaq")
(or any successor rule) (the "Cap Amount") which, as of the Issue Date is
1,480,242 shares. The portion of the Cap Amount allocable to this Debenture
shall be _____ shares and shall be subject to adjustment as provided in Article
X.D. In the event the Corporation is prohibited from issuing shares of Class A
Common Stock as a result of the operation of this subparagraph (ii), the
Corporation shall comply with Article VII.
(iii) No Five Percent Holders. In no event shall Holder be
entitled to receive shares of Class A Common Stock upon a conversion to the
extent that the sum of (x) the number of shares of Class A Common Stock
beneficially owned by Holder and its affiliates (exclusive of shares issuable
upon conversion of the unconverted portion of any Debentures 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 shares of Class A Common Stock issuable upon the
conversion of the portion of this Debenture with respect to which the
determination of this subparagraph is being made, would result in beneficial
ownership by the holder and its affiliates of more than 4.9% of the outstanding
shares of Class A Common Stock. For purposes of this subparagraph, 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. The restriction contained in this
subparagraph (iii) shall not be altered, amended, deleted or changed in any
manner whatsoever unless the holders of a majority of the Class A Common Stock
and the Holder shall approve such alteration, amendment, deletion or change.
(iv) Notwithstanding anything to the contrary contained in
this Article IV, if the Average Price as of the applicable Conversion Date is
less than or equal to $7.50, the Corporation may, at its option, elect to prepay
the portion of this Debenture submitted for conversion for the Floor Prepayment
Amount (as defined below) in lieu of converting such Debenture into Class A
Common Stock. The Holder shall have the right, by sending a written request to
the Corporation, to require the Corporation to provide advance written notice to
Holder stating whether the Corporation will elect to exercise its prepayment
rights pursuant to this subparagraph (iv). The Corporation shall have until the
end of the second business day following the day it receives such request to
reply in writing to Holder. In the event Corporation either fails to so reply or
replies that it will not elect to exercise such prepayment rights, the
Corporation shall forfeit its rights to prepay the portion of this Debenture
submitted for conversion pursuant to this subparagraph (iv) during the thirty
(30) day period immediately following the expiration of the Corporation's reply
period or receipt by the Holder of such election not to prepay, as the case may
be. In the event the Corporation notifies Holder of its intention to prepay this
Debenture pursuant to this subparagraph (iv) and Holder delivers a Notice of
Conversion at any time during which the Corporation has prepayment rights
pursuant to this subparagraph (iv) and the Corporation, prior to the date of
such Notice of Conversion, has not provided Holder with written notice that it
no longer intends to exercise its prepayment rights pursuant to this
subparagraph (iv), the Corporation shall, no later than five (5) business days
from the date of such Notice of Conversion, pay to Holder the Floor Prepayment
Amount for the portion of this Debenture submitted for conversion. The "Floor
Prepayment Amount" means an amount equal to 1.10 multiplied by the principal
amount thereof plus all accrued and unpaid interest and Conversion Default
Payments (if any) thereon through the date of prepayment.
If the Corporation fails to pay, when due and owing, any Floor
Prepayment Amount, then Holder shall have the right, at any time and from time
to time, to require the Corporation, upon written notice, to immediately convert
(in accordance with the terms of Paragraph A of this Article IV) the portion of
this Debenture submitted for conversion which is the subject of such prepayment,
into shares of Class A Common Stock at the lowest Conversion Price in effect
during the period beginning on the date the Corporation elected to prepay the
portion of this Debenture submitted for conversion and ending on the earlier of
the date the Corporation effects such prepayment and the twentieth trading day
following the Conversion Date which gave rise to the right of prepayment. In
addition, if the Corporation fails to pay a Floor Prepayment Amount when due and
owing, the Corporation shall thereafter forfeit its rights under this
subparagraph (iv) to effect any prepayment with respect to any or all
outstanding Debentures held by Holder.
V RESERVATION OF SHARES OF COMMON STOCK
A. Reserved Amount. On the Issue Date, the Corporation shall have
reserved __________ [pro rata portion of ________ shares] authorized but
unissued shares of Class A Common Stock for issuance upon conversion of this
Debenture and thereafter the number of authorized but unissued shares of Class A
Common Stock so reserved (the "Reserved Amount") shall not be decreased and
shall at all times be sufficient to provide for the conversion of the
outstanding principal amount of this Debenture (and accrued interest thereon) at
the then current Conversion Price.
B. Increases to Reserved Amount. If the Reserved Amount for any three
(3) consecutive trading days (the last of such three (3) trading days being the
"Authorization Trigger Date") shall be less than 135% of the number of shares of
Class A Common Stock issuable upon conversion of this Debenture on such trading
days, the Corporation shall immediately notify Holder of such occurrence and
shall take immediate action (including, if necessary, seeking shareholder
approval to authorize the issuance of additional shares of Class A Common Stock)
to increase the Reserved Amount to 200% of the number of shares of Class A
Common Stock then issuable upon conversion of this Debenture. In the event the
Corporation fails to so increase the Reserved Amount within ninety (90) days
after an Authorization Trigger Date, Holder shall thereafter have the option,
exercisable in whole or in part at any time and from time to time by delivery of
a Default Notice (as defined in Article VIII.C) to the Corporation, to require
the Corporation to prepay for cash, at the Default Amount (as defined in Article
VIII.B), a portion of the principal amount of this Debenture (plus accrued
interest thereon) such that, after giving effect to such prepayment, the
Reserved Amount exceeds 135% of the total number of shares of Class A Common
Stock issuable to Holder upon conversion of this Debenture on the date of the
Default Notice. If the Corporation fails to pay such Default Amount within five
(5) business days after its receipt of a Default Notice, then Holder shall be
entitled to the remedies provided in Article VIII.C.
VI FAILURE TO SATISFY CONVERSIONS
A. Conversion Default Payments. If, at any time, (x) Holder submits a
Notice of Conversion and the Corporation fails for any reason (other than
because such issuance would exceed Holder's Reserved Amount or allocated portion
of the Cap Amount, for which failures the Holder shall have the remedies set
forth in Articles V and VII) to deliver, on or prior to the fourth business day
following the expiration of the Delivery Period for such conversion, such number
of freely tradeable shares of Class A Common Stock to which Holder is entitled
upon such conversion, or (y) the Corporation provides notice to any Holder at
any time of its intention not to issue freely tradeable shares of Class A Common
Stock upon exercise by any Holder of its conversion rights in accordance with
the terms of the Debentures (other than because such issuance would exceed such
Holder's Reserved Amount or allocated portion of the Cap Amount) (each of (x)
and (y) being a "Conversion Default"), then the Corporation shall pay to Holder,
payments for the first ten (10) business days following the expiration of the
Delivery Period, in the case of a Conversion Default described in clause (x),
and for the first ten (10) business days of a Conversion Default described in
clause (y), an amount equal to $1,000 per day. In the event any Conversion
Default continues beyond such ten (10) business day period, the Corporation
shall pay to Holder an additional amount equal to:
.24 x (D/365) x (the Payment Amount)
where:
"D" means the number of days after the expiration of the ten (10)
business day period described above through and including the Default Cure Date;
"Payment Amount" means the outstanding principal amount of all
Debentures held by Holder plus all accrued and unpaid interest thereon as of the
first day of the Conversion Default.
"Default Cure Date" means (i) with respect to a Conversion Default
described in clause (x) of its definition, the date the Corporation effects the
conversion of the portion of this Debenture submitted for conversion and (ii)
with respect to a Conversion Default described in clause (y) of its definition,
the date the Corporation begins to issue freely tradeable Class A Common Stock
in satisfaction of all conversions of Debentures in accordance with their terms.
The payments to which Holder shall be entitled pursuant to this
Paragraph A are referred to herein as "Conversion Default Payments." Holder may
elect to receive accrued Conversion Default Payments in cash or to convert all
or any portion of such accrued Conversion Default Payments, at any time, into
Class A Common Stock at the lowest Conversion Price in effect during the period
beginning on the date of the Conversion Default through the Conversion Date for
such conversion. In the event Holder elects to receive any Conversion Default
Payments in cash, it shall so notify the Corporation in writing. Such payment
shall be made in accordance with and be subject to the provisions of Article
X.J. In the event Holder elects to convert all or any portion of the Conversion
Default Payments, Holder shall indicate on a Notice of Conversion such portion
of the Conversion Default Payments which Holder elects to so convert and such
conversion shall otherwise be effected in accordance with the provisions of
Article IV.
B. Adjustment to Conversion Price. If Holder has not received
certificates for all shares of Class A Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of any portion of any of Holder's Debentures for any reason (other
than because such issuance would exceed Holder's Reserved Amount or allocated
portion of the Cap Amount, for which failures Holder shall have the remedies set
forth in Articles V and VII), then the Conversion Price shall thereafter be the
lesser of (i) the Conversion Price on the Conversion Date specified in the
Notice of Conversion which resulted in the Conversion Default and (ii) the
lowest Conversion Price in effect during the period beginning on, and including,
such Conversion Date through and including the day such shares of Class A Common
Stock are delivered to the Holder. If there shall occur a Conversion Default of
the type described in clause (y) of Article VI.A., then the Conversion Price
with respect to any conversion thereafter shall be the lowest Conversion Price
in effect at any time during the period beginning on, and including, the date of
the occurrence of such Conversion Default through and including the Default Cure
Date. The Conversion Price shall thereafter be subject to further adjustment for
any events described in Article IX.
C. Buy-In Cure. Unless the Corporation has notified the Holder in
writing that the Corporation is unable to honor conversions, if (i) the
Corporation fails for any reason to deliver during the Delivery Period shares of
Class A Common Stock to Holder upon a conversion of this Debenture and (ii)
after the applicable Delivery Period with respect to such conversion, Holder
purchases (in an open market transaction or otherwise) shares of Class A Common
Stock to make delivery upon a sale by Holder to persons other than affiliates of
such Holder of the shares of Class A Common Stock (the "Sold Shares") which
Holder anticipated receiving upon such conversion (a "Buy-In"), the Corporation
shall pay Holder (in addition to any other remedies available to Holder) the
amount by which (x) Holder's total purchase price (including brokerage
commissions, if any) for the shares of Class A Common Stock so purchased exceeds
(y) the net proceeds received by the Holder from the sale of the Sold Shares.
For example, if a holder purchases shares of Class A Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to shares of Class A
Common Stock sold for $10,000, the Corporation will be required to pay the
Holder $1,000. Holder shall provide the Corporation written notification
indicating any amounts payable to Holder pursuant to this Paragraph C. The
Corporation shall make any payments required pursuant to this Paragraph C in
accordance with and subject to the provisions of Article X.J.
D. Right to Require Prepayment. If the Corporation fails, and such
failure continues uncured for five (5) business days after the Corporation has
been notified thereof in writing by Holder, for any reason (other than because
such issuance would exceed Holder's Reserved Amount or its allocated portion of
the Cap Amount, for which failures Holder shall have the remedies set forth in
Articles V and VII) to issue shares of Class A Common Stock within ten (10)
business days after the expiration of the Delivery Period with respect to any
conversion of this Debenture, then Holder may elect at any time and from time to
time prior to the Default Cure Date for such Conversion Default, by delivery of
a Default Notice (as defined in Article VIII.C) to the Corporation, to have all
or any portion of Holder's outstanding Debentures prepaid by the Corporation for
cash at the Default Amount. If the Corporation fails to pay such Default Amount
within five (5) business days after its receipt of a Prepayment Notice, then
Holder shall be entitled to the remedies provided in Article VIII.C.
VII INABILITY TO CONVERT DUE TO CAP AMOUNT
A. Obligation to Cure. If at any time the then unissued portion of
Holder's Cap Amount is less than 135% of the number of shares of Class A Common
Stock then issuable upon conversion of this Debenture (a "Trading Market Trigger
Event"), the Corporation shall immediately notify the Holders of such occurrence
and shall take immediate action (including, if necessary, seeking the approval
of its shareholders to authorize the issuance of the full number of shares of
Class A Common Stock which would be issuable upon the conversion of this
Debenture but for the Cap Amount) to eliminate any prohibitions under applicable
law or the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the
Corporation or any of its securities on the Corporation's ability to issue
shares of Class A Common Stock in excess of the Cap Amount. In the event the
Corporation fails to eliminate all such prohibitions within one hundred twenty
(120) days after the Trading Market Trigger Event, Holder shall thereafter have
the option, exercisable in whole or in part at any time and from time to time by
delivery of a Default Notice (as defined in Article VIII.C) to the Corporation,
to require the Corporation to pay for cash, at the Default Amount, a portion of
the principal amount of this Debenture (and accrued and unpaid interest thereon)
such that, after giving effect to such prepayment, Holder's allocated portion of
the Cap Amount exceeds 135% of the total number of shares of Class A Common
Stock issuable to Holder upon conversion of this Debenture on the date of such
Default Notice. Additionally, if at any time and from time to time the then
unissued portion of Holder's Cap Amount is less than the number of shares of
Class A Common Stock then issuable upon conversion of this Debenture, Holder
shall thereafter have the option, exercisable in whole or in part at any time
and from time to time by delivery of a Default Notice (as defined in Article
VIII.C) to the Corporation, to require the Corporation to pay for cash, at the
Default Amount, a portion of the principal amount of this Debenture (and accrued
and unpaid interest thereon) such that, after giving effect to such prepayment,
Holder's allocated portion of the Cap Amount equals the total number of shares
of Class A Common Stock issuable to Holder upon conversion of this Debenture on
the date of such Default Notice. If the Corporation fails to pay the Default
Amount within five (5) business days after its receipt of a Default Notice, then
Holder shall be entitled to the remedies provided in Article VIII.C.
B. Remedies. If the Corporation fails to eliminate the applicable
prohibitions within the one hundred twenty (120) day cure period referred to in
Paragraph A of this Article VII and thereafter the Corporation is prohibited, at
any time, from issuing shares of Class A Common Stock upon conversion of this
Debenture because such issuance would exceed Holder's allocated portion of the
Cap Amount because of applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Corporation or its securities, Holder may elect any
or both of the following additional remedies:
(i) to require, with the consent of the Majority Holders, the
Corporation to terminate the listing of its Class A Common Stock on Nasdaq (or
any other stock exchange, interdealer quotation system or trading market) and to
cause its Class A Common Stock to be eligible for trading on the Nasdaq SmallCap
Market or on the over-the-counter electronic bulletin board, at the option of
the Holder; or
(ii) to require the Corporation to issue shares of Class A
Common Stock in accordance with Holder's Notice of Conversion at a conversion
price equal to the average of the Closing Bid Prices of the Class A Common Stock
for the five (5) consecutive trading days (subject to equitable adjustment for
any stock splits, stock dividends, reclassifications or similar events during
such five (5) trading day period) preceding the date of Holder's written notice
to the Corporation of its election to receive shares of Class A Common Stock
pursuant to this subparagraph (ii).
ARTICLE VIII
EVENTS OF DEFAULT
A. Events of Default. If any of the following events of default (each,
an "Event of Default") shall occur:
(i) the Corporation fails (i) to pay the principal hereof when
due, whether at maturity, upon acceleration or otherwise or (ii) to pay any
installment of interest hereon when due and such failure continues for a period
of five (5) business days after the due date thereof,
(ii) the Class A Common Stock (including any of the shares of
Class A Common Stock issuable upon conversion of this Debenture) is suspended
from trading on any of, or is not listed (and authorized) for trading on at
least one of, the New York Stock Exchange, the American Stock Exchange or Nasdaq
for an aggregate of ten (10) trading days in any nine (9) month period,
(iii) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement has
not been declared effective by March 1, 1998 or such Registration Statement,
after being declared effective, cannot be utilized by Holder for the resale of
all of its Registrable Securities (as defined in the Registration Rights
Agreement) for an aggregate of more than thirty (30) days,
(iv) the Corporation fails, and any such failure continues
uncured for five (5) business days after the Corporation has been notified
thereof in writing by the Holder, to remove any restrictive legend on any
certificate or any shares of Class A Common Stock issued to the Holder upon
conversion of any Debenture as and when required by the Debentures, the
Securities Purchase Agreement or the Registration Rights Agreement,
(v) the Corporation provides notice to any of the Holders,
including by way of public announcement, at any time, of its intention not to
issue shares of Class A Common Stock to any of the Holders upon conversion in
accordance with the terms of the Debentures (other than due to the circumstances
contemplated by Articles V or VII for which the Holders shall have the remedies
set forth in such Articles),
(vi) the Corporation shall:
(a) sell, convey or dispose of all or substantially
all of its assets; or
(b) merge, consolidate or engage in any other
business combination with any other entity (other than (i) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Corporation or (ii) except as expressly permitted pursuant
to Section 4(j) of the Securities Purchase Agreement); or
(c) have fifty percent (50%) or more of the voting
power of its capital stock owned beneficially by one person, entity or "group"
(as such term is used under Section 13(d) of the Securities Exchange Act of
1934, as amended);
(vii) the Corporation breaches any material covenant or other
material term or condition of this Debenture (other than as specifically
provided in subparagraphs (i)-(vi) of this Paragraph A), the Securities Purchase
Agreement or the Registration Rights Agreement and such breach continues for a
period of ten (10) business days after written notice thereof to the
Corporation's discovery of such breach;
(viii) any representation or warranty of the Corporation made
herein or in any agreement, statement or certificate given in writing pursuant
hereto or in connection herewith (including, without limitation, the Securities
Purchase Agreement and the Registration Rights Agreement), shall be false or
misleading in any material respect when made and the breach of which would have
a material adverse effect on the Corporation or the prospects of the Corporation
or a material adverse effect on the Corporation or the rights of the Corporation
with respect to any of the Debentures or the shares of Class A Common Stock
issuable upon conversion of the Debentures;
(ix) the Corporation or any subsidiary of the Corporation
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
its property or business; or such a receiver or trustee shall otherwise be
appointed,
(x) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any subsidiary of the Corporation, or
Then, upon the occurrence and during the continuation of any Event of Default
specified in subparagraphs (i)-(viii) of this Paragraph A, at the option of the
Holder hereof, and upon the occurrence of any Event of Default specified in
subparagraph (ix) or (x) of this Paragraph A, the Corporation shall pay to the
Holder, in satisfaction of its obligation to pay the outstanding principal
amount of this Debenture and accrued and unpaid interest thereon, an amount
equal to the Default Amount and such Default Amount, together with all other
ancillary amounts payable hereunder shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees and
expenses of collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity.
B. Definition of Default Amount. The "Default Amount" with respect to
any portion of this Debenture means an amount equal to the greater of (i):
M x A
----------
C P
where:
"A" means the principal amount of this Debenture being paid plus all
accrued and unpaid interest thereon through the payment date and any Conversion
Default Payment payable with respect thereto;
"CP" means the Conversion Price in effect on the date of the Default
Notice;
"M" means the highest Closing Bid Price of the Company's Class A Common
Stock during the period beginning on the date of the Default Notice and ending
on the payment date, as reported on the principal securities exchange or trading
market on which the Class A Common Stock is traded; and
(ii) the sum of 108.7% of the principal amount of this
Debenture being paid plus all accrued and unpaid interest thereon through the
payment date and any Conversion Default Payment payable with respect thereto.
C. Failure to Pay Default Amount. If the Corporation fails to pay the
Default Amount within five (5) business days of its receipt of a notice
requiring such payment (a "Default Notice"), then the Holder (i) shall be
entitled to interest on the Default Amount at a per annum rate equal to the
lower of twenty-four percent (24%) and the highest interest rate permitted by
applicable law from the date of the Default Notice until the date of payment
hereunder, and (ii) shall have the right, at any time and from time to time, to
require the Corporation, upon written notice, to immediately convert (in
accordance with the terms of Paragraph A of Article IV) all or any portion of
the Default Amount, plus interest as aforesaid, into shares of Class A Common
Stock at the lowest Conversion Price in effect during the period beginning on
the date of the Default Notice and ending on the Conversion Date with respect to
the conversion of such Default Amount. In the event the Corporation is not able
to pay all amounts due and payable with respect to all Debentures subject to
Default Notices, the Corporation shall pay the Holders such amounts pro rata,
based on the total amounts payable to such Holder relative to the total amounts
payable to all Holders.
ARTICLE IX
ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. Stock Splits, Stock Dividends, Etc. If at any time on or after the
date of issuance of this Debenture, the number of outstanding shares of Class A
Common Stock or Class B Common Stock, par value $1.00 per share, of the Company
("Class B Common Stock and collectively with Class A Common Stock, "Common
Stock") is increased by a stock split, stock dividend, combination,
reclassification or other similar event, the Conversion Price shall be
proportionately reduced, or if the number of outstanding shares of Common Stock
is decreased by a reverse stock split, combination or reclassification of
shares, or other similar event, the Conversion Price shall be proportionately
increased. In such event, the Corporation shall notify the Corporation's
transfer agent of such change on or before the effective date thereof.
B. Adjustment Due to Major Announcement. In the event the Corporation
(i) makes a public announcement that it intends to consolidate or merge with any
other entity (other than a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged) or to sell or transfer all
or substantially all of the assets of the Corporation or (ii) any person, group
or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of any class of the Corporation's capital stock (the date
of the announcement referred to in clause (i) or (ii) of this Paragraph B is
hereinafter referred to as the "Announcement Date"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the
Abandonment Date (as defined below), be equal to the lower of (x) the Conversion
Price which would have been applicable for an Optional Conversion occurring on
the Announcement Date and (y) the Conversion Price determined in accordance with
Article III.E on the Conversion Date set forth in the Notice of Conversion for
the Optional Conversion. From and after the Abandonment Date, the Conversion
Price shall be determined as set forth in Article III.E. "Abandonment Date"
means with respect to any proposed transaction or tender offer for which a
public announcement as contemplated by this Paragraph B has been made, the date
upon which the Corporation (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) publicly announces the
termination or abandonment of the proposed transaction or tender offer which
caused this Paragraph B to become operative.
C. Adjustment Due to Merger, Consolidation, Etc. If, at any time there
shall be (i) any reclassification or change of the outstanding shares of Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
(ii) any consolidation or merger of the Corporation with any other entity (other
than a merger in which the Corporation is the surviving or continuing entity and
its capital stock is unchanged), (iii) any sale or transfer of all or
substantially all of the assets of the Corporation or (iv) any share exchange
pursuant to which all of the outstanding shares of Class A Common Stock are
converted into other securities or property, then the Holder shall thereafter
have the right to receive upon conversion, in lieu of the shares of Class A
Common Stock immediately theretofore issuable, such shares of stock, securities
and/or other property as may be issued or payable with respect to or in exchange
for the number of shares of Class A Common Stock immediately theretofore
issuable upon conversion had such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event not taken place, and in
any such case, appropriate provisions shall be made with respect to the rights
and interests of the Holder to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Conversion Price and of the
number of shares of Class A Common Stock issuable upon conversion of this
Debenture) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon the
conversion thereof. The Corporation shall not effect any transaction described
in this Paragraph C unless (i) the Holder has received written notice of such
transaction at least thirty (30) days prior thereto, but in no event later than
ten (10) days prior to the record date for the determination of shareholders
entitled to vote with respect thereto, and (ii) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of this Debenture. The above provisions shall apply regardless of
whether or not there would have been a sufficient number of shares of Class A
Common Stock authorized and available for issuance upon conversion of the
Debentures outstanding as of the date of such transaction, and shall similarly
apply to successive reclassifications, consolidations, mergers, sales, transfers
or share exchanges.
D. Adjustment Due to Distribution. If the Corporation shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise (including any dividend or distribution to the Corporation's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (i.e. a spin-off)) (a "Distribution"), then the Holder shall be
entitled, upon any conversion of this Debenture after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Class A Common Stock issuable upon such conversion had Holder been the
holder of such shares of Class A Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
E. Issuance of Other Securities With Variable Conversion Price. If the
Corporation shall issue any securities which are convertible into or
exchangeable for Common Stock ("Convertible Securities") at a conversion or
exchange rate based on a discount to the market price of the Common Stock at the
time of conversion or exercise, then the Conversion Price in respect of any
conversion of any portion of this Debenture after such issuance shall be
calculated utilizing the greatest discount applicable to any such Convertible
Securities.
F. Purchase Rights. If the Corporation issues any Convertible
Securities or rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of Common Stock, then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
Holder had held the number of shares of Class A Common Stock acquirable upon
complete conversion of this Debenture immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Class A
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
G. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article IX, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of Holder, furnish to Holder a like certificate setting
forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time
in effect and (iii) the number of shares of Class A Common Stock and the amount,
if any, of other securities or property which at the time would be received upon
conversion of this Debenture.
ARTICLE X
MISCELLANEOUS
A. Failure or Indulgency Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
B. Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier and shall be
deemed to have been given upon receipt (which shall include telephone line
facsimile transmission). The addresses for such communications shall be:
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
P.O. Box 3151
Trenton, NJ 08619
Telecopy: (609) 586-1593
Attention: Chief Executive Officer
with a copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
P.O. Box 1945
Morristown, NJ 07962-1945
Attention: Warren J. Casey
If to the Holder, at such address as such Holder shall have provided in writing
to the Company, or at such other address as such Holder furnishes by notice
given in accordance with this Article X.B
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esquire
C. Amendment Provision. This Debenture and any provision hereof may
only be amended by an instrument in writing signed by the Corporation and the
holders of a majority of the Debentures outstanding at such time. The term
"Debenture" and all references thereto, as used throughout this instrument,
shall mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented.
D. Assignability. This Debenture shall be binding upon the Corporation
and its successors and assigns and shall inure to the benefit of the Holder and
its successors and assigns. In the event a Holder shall sell or otherwise
transfer any portion of this Debenture, each transferee shall be allocated a pro
rata portion of such transferor's Cap Amount and Reserved Amount. Any portion of
the Cap Amount or Reserved Amount which remains allocated to any person or
entity which does not hold any Debentures shall be allocated to the remaining
holders of Debentures, pro rata based on the total principal amount of
Debentures then held by such Holders.
E. Cost of Collection. If default is made in the payment of this
Debenture, the Corporation shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.
F. Governing Law. This Debenture shall be governed by and construed in
accordance with the laws of the State of New Jersey applicable to contracts made
and to be performed in the State of New Jersey. The Corporation irrevocably
consents to the jurisdiction of the United States federal courts located in the
State of New Jersey in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Corporation irrevocably waives
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Corporation further agrees that service of process upon the
Corporation, mailed by first class mail shall be deemed in every respect
effective service of process upon the Corporation in any such suit or
proceeding. Nothing herein shall affect the Holder's right to serve process in
any other manner permitted by law. The Corporation agrees 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.
G. Denominations. At the request of the Holder, upon surrender of this
Debenture, the Corporation shall promptly issue new Debentures in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $100,000 as the Holder shall request.
H. Lost or Stolen Debentures. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of this Debenture and
(ii) (y) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Corporation, or (z) in the case of mutilation, upon
surrender and cancellation of this Debenture, the Corporation shall execute and
deliver new Debentures, in the form hereof, in such denominations of at least
$100,000 as the Holder may request. However, the Corporation shall not be
obligated to reissue such lost or stolen Debentures if the Holder
contemporaneously requests the Corporation to convert this Debenture.
I. Quarterly Statements of Available Shares. For each of the Company's
fiscal quarters beginning in the quarter in which the registration statement
required to be filed pursuant to Section 2(a) of the Registration Rights
Agreement is declared effective and thereafter so long as this Debenture is
outstanding, the Corporation shall deliver to Holder a written report notifying
the Holder of any occurrence which prohibits the Corporation from issuing Class
A Common Stock upon any such conversion. The report shall also specify (i) the
total principal amount of all outstanding Debentures as of the end of such
quarter, (ii) the total number of shares of Class A Common Stock issued upon all
conversions of Debentures prior to the end of such quarter, (iii) the total
number of shares of Class A Common Stock which are reserved for issuance upon
conversion of Debentures as of the end of such quarter and (iv) the total number
of shares of Class A Common Stock which may thereafter be issued by the
Corporation upon conversion of Debentures before the Corporation would exceed
the Cap Amount and the Reserved Amount. The Corporation shall deliver the report
for each quarter to Holder by the 45th day following the quarter to which such
report relates. In addition, the Corporation shall provide, within fifteen (15)
days after delivery to the Corporation of a written request by Holder, any of
the information enumerated in clauses (i) - (iv) of this Paragraph I as of the
fiscal quarter immediately preceding the date of such request.
J. Payment of Cash; Defaults. Whenever the Corporation is required to
make any cash payment to Holder under this Debenture (as a Conversion Default
Payment, as a prepayment or otherwise), such cash payment shall be made to the
Holder within five (5) business days after delivery by Holder of a notice
specifying that the Holder elects to receive such payment in cash and the method
(e.g., by check, wire transfer) in which such payment should be made. If such
payment is not delivered within such five (5) business day period, Holder shall
thereafter be entitled to interest on the unpaid amount at a per annum rate
equal to the lower of twenty-four percent (24%) and the highest interest rate
permitted by applicable law until such amount is paid in full to the Holder.
K. Restrictions on Shares. The shares of Class A Common Stock issuable
upon conversion of this Debenture may not be sold or transferred unless (i) they
first shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope reasonably satisfactory to the
Company) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold pursuant
to Rule 144 under the Act. Except as otherwise provided in the Securities
Purchase Agreement, each certificate for shares of Class A Common Stock issuable
upon conversion of this Debenture that have not been so registered and that have
not been sold pursuant to an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN
OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY
WITH APPLICABLE STATE SECURITIES LAWS.
Upon the request of a holder of a certificate representing any shares of Class
A Common Stock issuable upon conversion of this Debenture, the Corporation
shall remove the foregoing legend from the certificate or issue to such holder
a new certificate therefor free of any transfer legend, if (i) with such
request, the Corporation shall have received either (A) an opinion of counsel,
in form, substance and scope reasonably satisfactory to the Company to the
effect that any such legend may be removed from such certificate, or (B)
satisfactory representations from the Holder that Holder is eligible to sell
such security pursuant to Rule 144 or (ii) a registration statement under the
Securities Act covering such securities is in effect. Nothing in this Debenture
shall (i) limit the Corporation's obligation under the Registration Rights
Agreement, or (ii) affect in any way the Holder's obligations to comply with
applicable securities laws upon the resale of the securities referred to
herein.
L. Status as Debentureholder. Upon submission of a Notice of Conversion
by Holder, the principal amount of this Debenture and the interest thereon
covered thereby shall be deemed converted into shares of Class A Common Stock
and the holder's rights with respect thereto shall cease and terminate,
excepting only the right to receive certificates for such shares of Class A
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to Holder because of a failure by the Corporation to comply with
the terms of this Debenture. Notwithstanding the foregoing, if Holder has not
received certificates for all shares of Class A Common Stock prior to the tenth
(10th) business day after the expiration of the Delivery Period with respect to
a conversion for any reason, then (unless Holder otherwise elects to retain its
status as a holder of Class A Common Stock) the portion of the principal amount
and interest thereon subject to such conversion shall be deemed outstanding
under this Debenture and the Corporation shall, as soon as practicable, return
this Debenture to the Holder. In all cases, Holder shall retain all of its
rights and remedies (including, without limitation, (i) the right to receive
Conversion Default Payments pursuant to Article VI.A to the extent required
thereby for such Conversion Default and any subsequent Conversion Default and
(ii) the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Article VI.B) for the Corporation's
failure to convert this Debenture.
M. Remedies Cumulative. The remedies provided in this Debenture shall
be cumulative and in addition to all other remedies available under this
Debenture, at law or in equity (including a decree of specific performance
and/or other injunctive relief), and nothing herein shall limit Holder's right
to pursue actual damages for any failure by the Corporation to comply with the
terms of this Debenture. The Corporation acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that
the remedy at law for any such breach may be inadequate. The Corporation
therefore agrees, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, Borrower has caused this Debenture to be
signed in its name by its duly authorized officer this 30th day of May, 1997.
BASE TEN SYSTEMS, INC.
By:_______________________________
Name:
Title:
<PAGE>
NOTICE OF CONVERSION
To: Base Ten Systems, Inc.
One Electronics Drive
P.O. Box 3151
Trenton, NJ 08619
Telecopy: (609) 586-1593
Attention: President
The undersigned hereby irrevocably elects to convert $____________ principal
amount of the Debenture (the "Conversion"), into shares of Class A common stock
("Class A Common Stock") of Base Ten Systems, Inc. (the "Corporation")
according to the conditions of the Convertible Term Debenture dated May 30,
1997 (the "Debenture"), as of the date written below. If securities are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. No fee will be charged to
the holder for any conversion, except for transfer taxes, if any. A copy of the
Debenture is attached hereto (or evidence of loss, theft or destruction
thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of
this Debenture shall be made pursuant to registration of the Class A Common
Stock under the Securities Act or pursuant to an exemption from registration
under the Act.
In the event of partial exercise, please reissue an appropriate Debenture(s)
for the principal balance which shall not have been converted.
Date of Conversion:
Applicable Conversion Price:
Amount of Accrued and Unpaid Interest
on the Principal Amount to be converted,
if any:
Amount of Conversion Default
Payments to be Converted, if any:
Number of Shares of
Common Stock to be Issued:
Signature:
Name:
Address:
* The Corporation is not required to issue shares of Class A Common Stock until
the original Debenture (or evidence of loss, theft or destruction thereof) to
be converted are received by the Corporation or its transfer agent. The
Corporation shall issue and deliver shares of Class A Common Stock to an
overnight courier not later than the later of (a) three (3) business days
following receipt of this Notice of Conversion and (b) the date of surrender of
this Debenture (or evidence of loss, theft or destruction thereof), and shall
make payments pursuant to the Debenture for the failure to make timely
delivery.
EXHIBIT B
to
Securities
Purchase
Agreement
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON MAY 30, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
Right to Purchase _______Shares of
Class A Common Stock,
par value $1.00 per share
Date: May 30, 1997
BASE TEN SYSTEMS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _____________________________
or its registered assigns, is entitled to purchase from BASE TEN SYSTEMS, INC.,
a New Jersey corporation (the "Company"), at any time or from time to time
during the period specified in Section 2 hereof, ___________ (_______) fully
paid and nonassessable shares of the Company's Class A common stock, par value
$1.00 per share (the "Class A Common Stock"), at an exercise price per share
(the "Exercise Price") equal to one hundred and twenty percent (120%) of the
Market Price (as defined in Section 4(1)(ii) hereof) of the Class A Common Stock
on the date of issuance hereof (the "Issue Date"). The number of shares of Class
A Common Stock purchasable hereunder (the "Warrant Shares") and the Exercise
Price are subject to adjustment as provided in Section 4 hereof. The term
"Warrants" means this Warrant and the other warrants of the Company issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the other signatories thereto (the
"Securities Purchase Agreement").
<PAGE>
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, clearance of a certified or official bank check
or by wire transfer for the account of the Company, of the Exercise Price for
the Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a Cashless Exercise (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement, and the Company does not
have sufficient authorized but unissued shares of Class A Common Stock available
to effect such exercise in accordance with the provisions of this Section 1 (an
"Exercise Default"), the Company shall issue to the holder all of the shares of
Class A Common Stock which are available to effect such exercise and, within
five (5) business days of the attempted exercise of this Warrant, refund to the
holder that portion of the holder's payment of the Exercise Price allocable to
the number of shares of Class A Common Stock included in the Exercise Agreement
which exceeds the amount which is then issuable by the Company (the "Excess
Amount"). The Excess Amount shall, notwithstanding anything to the contrary
contained herein, not be exercisable for Class A Common Stock in accordance with
the terms hereof until (and at the holder's option on or at any time after) the
date additional shares of Class A Common Stock are authorized by the Company to
permit such exercise. The Company shall pay to the holder payments ("Exercise
Default Payments") for an Exercise Default in the amount of (a) (N/365),
multiplied by (b) the Market Price (as defined in Section 4(1) below) on the
Exercise Default Date (as defined below) less the Exercise Price, multiplied by
(c) the Excess Amount on the date the Exercise Agreement giving rise to the
Exercise Default is transmitted in accordance with this Section 1 (the "Exercise
Default Date"), multiplied by (d) .24, where N = the number of days from the
Exercise Default Date to the date (the "Authorization Date") that the Company
authorizes a sufficient number of shares of Class A Common Stock to effect
exercise of this Warrant in full. The Company shall send notice to the holder of
the authorization of additional shares of Class A Common Stock, the
Authorization Date and the amount of holder's accrued Exercise Default Payments.
The accrued Exercise Default Payment for each calendar month shall be paid in
cash or shall be convertible into Class A Common Stock at the Exercise Price, at
the holder's option, as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Class A
Common Stock, the holder may convert such payment amount into Class A Common
Stock (in accordance with the terms contained in Article VI of the Debentures)
at the Exercise Price (as in effect at the time of conversion) at any time after
the fifth (5th) day of the month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Class A Common Stock as required pursuant to the terms of Section 4(h)
of the Securities Purchase Agreement or to otherwise issue shares of Class A
Common Stock upon exercise of this Warrant in accordance with the terms hereof,
and each holder shall have the right to pursue all remedies available at law or
in equity (including a decree of specific performance and/or injunctive relief).
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the Issue Date and before 5:00 p.m., New York City time
on the fifth (5th) anniversary of the Issue Date (the "Exercise Period")
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Class A
Common Stock to provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of
the shares of Class A Common Stock issuable upon exercise of this Warrant upon
each national securities exchange or automated quotation system, if any, upon
which shares of Class A Common Stock are then listed or become listed (subject
to official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Class A Common Stock shall be so
listed, such listing of all shares of Class A Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Class A Common
Stock receivable upon the exercise of this Warrant above the Exercise Price then
in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Class A Common Stock upon the exercise of this
Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all of the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent.
(a) Adjustment of Exercise Price. Except as otherwise provided
in Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Class A Common Stock or Class B Common Stock,
par value $1.00 per share, of the Company ("Class B Common Stock" and
collectively with Class A Common Stock, "Common Stock") for no consideration or
for a consideration per share less than the Market Price (as hereinafter
defined) on the date of issuance (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:
P
--
E' = E x O + M
--------------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined
in Section 4(1));
O = the number of shares of Common Stock
outstanding immediately prior to the Dilutive
Issuance;
P = the aggregate consideration, calculated as
set forth in Section 4(b) hereof, received by
the Company upon such Dilutive Issuance; and
CSDO = the total number of shares of Common Stock
Deemed Outstanding (as defined in Section
4(l)) immediately after the Dilutive
Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under Section 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "Options") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price on the date of issuance ("Below Market
Options"), then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Below Market Options (assuming full exercise,
conversion or exchange of Convertible Securities, if applicable) will, as of the
date of the issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Below Market Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Below
Market Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Market
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof at the
time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Below Market Options or upon the exercise, conversion
or exchange of Convertible Securities issuable upon exercise of such Below
Market Options.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or
sells any Convertible Securities, whether or not immediately convertible (other
than where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is less
than the Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon such
exercise, conversion or exchange" is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
issuance or sale of all such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
exercise, conversion or exchange thereof at the time such Convertible Securities
first become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or
sells any Convertible Securities with a fluctuating conversion or exercise price
or exchange ratio (a "Variable Rate Convertible Security"), then the price per
share for which is issuable upon such exercise, conversion or exchange for
purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed
to be the lowest price per share which would be applicable (assuming all holding
period and other conditions to any discounts contained in such Convertible
Security have been satisfied) if the Market Price on the date of issuance of
such Convertible Security was 75% of the Market Price on such date (the "Assumed
Variable Market Price"). Further, if the Market Price at any time or times
thereafter is less than or equal to the Assumed Variable Market Price last used
for making any adjustment under this Section 4 with respect to any Variable Rate
Convertible Security, the Exercise Price in effect at such time shall be
readjusted to equal the Exercise Price which would have resulted if the Assumed
Variable Market Price at the time of issuance of the Variable Rate Convertible
Security had been 75% of the Market Price existing at the time of the adjustment
required by this sentence.
(iii) Change in Option Price or Conversion Rate. If
there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange of any Convertible Securities; or (iii) the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in effect
will be readjusted to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(vi) Exceptions to Adjustment of Exercise Price. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding as of the
date hereof as set forth on Schedule 3(c) of the Securities Purchase Agreement
in accordance with the terms of such securities as of such date, including those
securities with respect to which vesting or the exercise period therefore has
not yet occurred; (ii) upon the grant or exercise of any stock or options which
may hereafter be granted or exercised under any employee benefit plan of the
Company now existing or to be implemented in the future, so long as the issuance
of such stock or options is approved by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose; (iii) upon the
issuance of any debentures (the "Debentures") or Warrants issued or issuable in
accordance with terms of the Securities Purchase Agreement; or (iv) upon
conversion of the Debentures or exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the
Company, at any time during the Exercise Period, subdivides (by any stock split,
stock dividend, recapitalization, reorganization, reclassification or otherwise)
its shares of Common Stock into a greater number of shares, then, after the date
of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company, at any time during the Exercise Period, combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time during the Exercise Period, then as a
condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the holder of this Warrant will have the right to
acquire and receive upon exercise of this Warrant in lieu of the shares of Class
A Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Class A Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Section 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Section 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
(f) Distribution of Assets. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "Distribution"), at any time during the Exercise Period, then
the holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets (or rights) which would have been payable to
the holder had such holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution.
(g) Notice of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Class A
Common Stock are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the Market
Price of a share of Class A Common Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out of
retained earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all of its assets
to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; then, in each such case,
the Company shall give to the holder of this Warrant (a) notice of the date on
which the books of the Company shall close or a record shall be taken for
determining the holders of Common Stock entitled to receive any such dividend,
distribution, or subscription rights or for determining the holders of Common
Stock entitled to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, notice of the date (or, if not
then known, a reasonable approximation thereof by the Company) when the same
shall take place. Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be. Such notice shall be given at least 30 days prior to the record
date or the date on which the Company's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv)
above.
(k) Certain Events. If, at any time during the Exercise
Period, any event occurs of the type contemplated by the adjustment provisions
of this Section 4 but not expressly provided for by such provisions, the Company
will give notice of such event as provided in Section 4(g) hereof, and the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of shares of Class A Common Stock acquirable upon exercise
of this Warrant so that the rights of the holder shall be neither enhanced nor
diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the
number of shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the
lower of the average of the closing bid prices for the shares of Class A Common
Stock as reported on the Nasdaq National Market for the (a) five (5) or (b)
thirty (30) trading days immediately preceding such date, or (ii) if the Nasdaq
National Market is not the principal trading market for the shares of Class A
Common Stock, the lower of the average of the last reported bid prices on the
principal trading market for the Class A Common Stock for the (a) five (5) or
(b) thirty (30) trading days immediately preceding such date or, if there is no
bid price for such period, the last reported sales price for such period, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the average fair market value as
reasonably determined by an investment banking firm selected by the Company and
reasonably acceptable to the holder, with the costs of the appraisal to be borne
by the Company. The manner of determining the Market Price of the Class A Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.
(iii) "Common Stock," for purposes of this Section 4,
includes the Class A Common Stock, the Class B Common Stock and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant to
this Warrant shall include only Class A Common Stock, par value $1.00 per share,
in respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Class A Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 7(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Section 7(f) and (g) hereof and to the
provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until
due presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the other signatories
thereto (the "Registration Rights Agreement").
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Class A Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant 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, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
and any tax measured by income or asset value) 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 Warrants
pursuant to this Section 7.
(e) Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope reasonably satisfactory to the Company) to the effect that
such exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee be
an "accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter, status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer.
Notwithstanding anything contained herein to the contrary, in no event shall the
holder hereof exercise Warrants to the extent that (a) the number of shares of
Class A Common Stock beneficially owned by such holder and its affiliates (other
than shares of Class A Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein) and (b) the number of shares of Class A Common Stock issuable
upon exercise of the Warrants (or portion thereof) with respect to which the
determination described herein is being made, would result in beneficial
ownership by such holder and its affiliates of more than 4.9% of the outstanding
shares of Class A Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (a) hereof.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
9. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
P.O. Box 3151
Trenton, NJ 08619
Telecopy: (609) 586-1593
Attention: Chief Executive Officer
with a copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
P.O. Box 1945
Morristown, NJ 07962-1945
Attention: Warren J. Casey
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esquire
10. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
contracts made and to be performed in the State of New Jersey. The Company
irrevocably consents to the jurisdiction of the United States federal courts
located in the State of New Jersey, in any suit or proceeding based on or
arising under this Warrant and irrevocably agrees that all claims in respect of
such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company agrees that service of process upon the
Company mailed by first class mail shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the holder's right to serve process in any other manner
permitted by law. The Company agrees 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.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
(b) Descriptive Headings. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Cashless Exercise. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised at any time after May
30, 1998 until the end of the Exercise Period, by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Class A Common Stock to be issued upon
such exercise in accordance with the terms hereof (a "Cashless Exercise"). In
the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash,
the holder shall surrender this Warrant for that number of shares of Class A
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Class A Common
Stock and the Exercise Price, and the denominator of which shall be the then
current Market Price per share of Class A Common Stock.
(d) Business Day. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on which
banking institutions in the State of New York or the State of New Jersey are
authorized or obligated by law, regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
BASE TEN SYSTEMS, INC.
By: _________________________________
Name:_____________________________
Title:____________________________
<PAGE>
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: Base Ten Systems, Inc.
One Electronics Drive
P.O. Box 3151
Trenton, NJ 08619
Telecopy: (609) 586-1593
Attention: President
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Class A Common Stock of Base Ten Systems, Inc., a
New Jersey corporation (the "Company"), evidenced by the attached Warrant, and
herewith makes payment of the Exercise Price with respect to such shares in
full, all in accordance with the conditions and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Class A Common Stock obtained on exercise of the Warrant, except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws, and agrees that the following
legend may be affixed to the stock certificate for the Class A Common Stock
hereby subscribed for if resale of such Class A Common Stock is not registered
or if Rule 144(k) is unavailable:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID
ACT, OR AN OPINION OF COUNSEL, IN FORM,
SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR UNLESS SOLD PURSUANT TO RULE
144(K) UNDER SAID ACT.
ii. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:_________________ _____________________________________
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Class A Common Stock covered thereby set
forth hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
- ------------------
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
-------------------------------------------
Address:------------------------------------
------------------------------------
Note: The above signature should correspond exactly with
the name on the face of the within Warrant.
EXHIBIT C
to
Securities
Purchase
Agreement
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 30,
1997 by and among BASE TEN SYSTEMS, INC., a corporation organized under the laws
of the State of New Jersey, with headquarters located at One Electronics Drive,
P.O. Box 3151, Trenton, New Jersey 08619 (the "Company"), and the undersigned
(the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors units
("Units") consisting of (i) convertible debentures ("Debentures") in the
aggregate principal amount of Five Million Five Hundred Thousand Dollars
($5,500,000) due May 30, 2000, which are convertible into shares (the
"Conversion Shares") of the Company's common stock, par value $1.00 per share
(the "Class A Common Stock"), and (ii) warrants (the "Warrants") to acquire an
aggregate of Ninety Nine Thousand (99,000) shares of Class A Common Stock (the
"Warrant Shares").
B. To induce the Initial Investors to execute and deliver the
Securities 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;
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.
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Investors" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act and pursuant to
Rule 415 under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion
Shares (including any Conversion Shares issuable with respect to Conversion
Default Payments under the Debentures or with respect to any prepayment of the
Debentures) issued or issuable with respect to the Debentures, the shares of
Common Stock issued or issuable in satisfaction of interest payments under the
Debentures and the Warrant Shares issued or issuable with respect to the
Warrants and any shares of capital stock issued or issuable, from time to time
(with any adjustments), on or in exchange for or otherwise with respect to any
of the foregoing.
(iv) "Registration Statement" means a registration
statement of the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or prior to the date (the "Filing Date") which is ten (10) days after that
certain Registration Statement on Form S-3 (Reg. No. 333-21923) of the Company
is declared effective by the SEC, but not earlier than that date which is twenty
(20) days after the Closing Date (as defined in the Securities Purchase
Agreement) or later than that date which is forty-five (45) days after the
Closing Date, file with the SEC a Registration Statement on Form S-3 (or, if
Form S-3 is not then available, on such form of Registration Statement as is
then available to effect a registration of all of the Registrable Securities),
covering the resale of at least 1,269,773 shares of Registrable Securities,
which Registration Statement, to the extent allowable under the Securities Act
and the Rules promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Class A Common Stock as may become issuable upon conversion of the
Debentures 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 Debentures or the Exercise Price of the
Warrants in accordance with the terms thereof. The Registrable Securities
included in the Registration Statement shall be allocated to the Investors as
set forth in Section 11(k) hereof. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the reasonable
approval of) the Initial Investors and their counsel prior to its filing or
other submission.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
Initial Investors, shall have the right to select a total of one legal counsel
to represent the Investors and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
c. Payments by the Company. The Company shall cause the
registration statement to become effective as soon as practicable, but in no
event later than the one hundred and eightieth (180th) day after the Closing
Date (the "Registration Deadline"). If (i) the registration statement(s)
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not declared effective by the SEC on or before the
Registration Deadline or if, after the registration statement has been declared
effective by the SEC, sales of all the Registrable Securities (including any
Registrable Securities required to be registered pursuant to Section 3(b)
hereof) cannot be made pursuant to the registration statement (by reason of a
stop order or the Company's failure to update the registration statement or any
other reason outside the control of the Investors) or (ii) the Class A Common
Stock is not listed or included for quotation on the Nasdaq National Market
("Nasdaq"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") at any time after the Registration Deadline, then the
Company will make payments to the Investors in such amounts and at such times as
shall be determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or reduction of their
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity). The Company shall pay to
each Investor an amount equal to the aggregate principal amount of the
Debentures held by such Investor (including, without limitation, Debentures that
have been converted into Conversion Shares then held by such Investor) (the
"Aggregate Principal Amount"), multiplied by one and one half percent (1.5%),
multiplied by the sum of (y) the number of months (prorated for partial months)
after the Registration Deadline and prior to the date the Registration Statement
filed pursuant to Section 2(a) is declared effective by the SEC and (z) the
number of months (prorated for partial months) that sales cannot be made
pursuant to the registration statement after the Registration Statement has been
declared effective or the Class A Common Stock is not listed or included for
quotation on Nasdaq, the NYSE or AMEX; provided, however, that there shall be
excluded from each such period any delays which are solely attributable to (A)
changes (other than corrections of Company mistakes with respect to information
previously provided by the Investors) required by the Investors in the
Registration Statement with respect to information relating to the Investors,
including, without limitation, changes to the plan of distribution or (B) a
change in the policies, procedures, interpretations, positions, practices or
rules of the SEC made public after May 30, 1997 and provided, further, such
period shall end on that date on which an Event of Default (as defined in the
Debentures) pursuant to Article VIII.A(iii) of the Debentures is declared. (For
example, if the Registration Statement is not effective by the Registration
Deadline, the Company would pay $15,000 per month for each $1,000,000 of
Aggregate Principal Amount until the date the Registration Statement becomes
effective. Such amounts shall be paid in cash or, at each Investor's option, may
be convertible into Class A Common Stock at the "Conversion Price" (as defined
in the Debentures). Any shares of Class A Common Stock issued upon conversion of
such amounts shall be Registrable Securities. If the Investor desires to convert
the amounts due hereunder into Registrable Securities, it shall so notify the
Company in writing within two (2) business days of the date on which such
amounts are first payable in cash and such amounts shall be so convertible
(pursuant to the mechanics set forth under Article IV of the Debentures),
beginning on the last day upon which the cash amount would otherwise be due in
accordance with the following sentence. Payments of cash pursuant hereto shall
be made within five (5) days after the end of each period that gives rise to
such obligation, provided that, if any such period extends for more than thirty
(30) days, interim payments shall be made for each such thirty (30) day period.
d. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to a firm commitment
underwritten offering for its own account or the account of others under the
Securities Act of any of its equity securities (other than on Form S-4 or Form
S-8 or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans) the Company shall send to each Investor who is entitled to registration
rights under this Section 2(d) written notice of such determination and, if
within fifteen (15) days after the date of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Class A Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
as the underwriter shall permit. Any exclusion of Registrable Securities shall
be made pro rata among the Investors seeking to include Registrable Securities,
in proportion to the number of Registrable Securities sought to be included by
such Investors; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Class A Common Stock included in such underwritten offering.
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 and any other Investor 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 current
eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC
the Registration Statement required by Section 2(a), and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which all the
Registrable Securities (in the reasonable opinion of counsel to the Initial
Investors) may be immediately sold to the public without registration (the
"Registration Period") or restriction, which Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein and all
documents incorporated by reference therein) 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 not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
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,
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 seller
or sellers thereof as set forth in the Registration Statement. In the event the
number of shares available under a Registration Statement filed pursuant to this
Agreement is, for any three (3) consecutive trading days (the last of such three
(3) trading days being the "Registration Trigger Date"), insufficient to cover
one hundred thirty-five percent (135%) of the Registrable Securities issued or
issuable upon conversion of the Debentures and exercise of the Warrants held by
any Investor, the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover two hundred percent (200%) of the Registrable Securities
issued or issuable to such Investor, in each case, as soon as practicable, but
in any event within fifteen (15) days after the Registration Trigger Date (based
on the market price of the Class A Common Stock and other relevant factors on
which the Company reasonably elects to rely). The Company shall cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. In the event the Company fails to
obtain the effectiveness of any such Registration Statement within ninety (90)
days after a Registration Trigger Date, each Investor shall thereafter have the
option, exercisable in whole or in part at any time and from time to time by
delivery of a written notice to the Company (a "Redemption Notice"), to require
the Company to purchase for cash, a portion of the Investor's Debentures such
that the total number of shares of Class A Common Stock issuable to such
Investor upon conversion of its Debentures and exercise of its Warrants does not
exceed 135% of the Registrable Securities issued or issuable upon conversion of
such Investor's Debentures and exercise of such Investor's Warrants. The
purchase price per Debenture shall be equal to the Default Amount (as defined in
Article VI.A of the Debentures) therefor. If the Company fails to purchase any
of such Debentures within five (5) business days after its receipt of a
Redemption Notice, then such Investor shall be entitled to the remedies provided
in Article VIII.C of the Debentures.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (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 prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion, if any, 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 reasonable 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 in the
United States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications 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; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) 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 the Investors who hold a majority in interest
of the Registrable Securities being offered in an offering select underwriters
for the 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
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
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 issued, to obtain the
withdrawal of such order at the earliest practicable moment 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 one legal counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing with
the SEC, and 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 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 next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish,
on the date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Investors and in form, scope and substances as is customarily given in an
underwritten public offering and (ii) in the case of an underwriting, 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
underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector 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
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) 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 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 its 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 the 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 not make any
disclosure of information concerning an Investor provided to the Company 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, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. 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 prior
to making such disclosure, and allow the 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 the NASDAQ National Market or the NYSE or the AMEX or another national
securities exchange and on each additional national securities exchange on which
securities of the same class or series 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 the designation and quotation, of all the
Registrable Securities covered by the Registration Statement on the Nasdaq and,
without limiting the generality of the foregoing, to arrange for or maintain 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 and may be the transfer agent or registrar for
securities of the Company, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company 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) an opinion of such
counsel in the form attached hereto as Exhibit 1.
p. At the reasonable request of any Investor, the Company
shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such 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 complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
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.
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 offered 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.
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 in
usual and customary form entered into by the Company, (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 any expenses in excess of those
payable by the Company pursuant to Section 5 below.
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, the fees and disbursements
contemplated by Section 3(j) hereof, and the reasonable fees and disbursements
of one legal counsel selected by the Investors pursuant to Section 2(b) 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,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees,
agents and each person who control any Investor within the meaning of Section 15
of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), if any, (each, an "Indemnified Person"), against
any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated 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, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (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 reasonable 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): (i) 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 such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) 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; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person 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,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person 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 severally and not jointly
to indemnify, hold harmless and defend, 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, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, 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 subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with 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 Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds actually received by 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, and the Indemnified Party failed to utilize such
corrected prospectus.
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 the 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 party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that such indemnifying party shall not be
entitled to assume such defense and an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel, which counsel shall be
reasonably acceptable to the indemnifying party, 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 conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding or the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified Party
and the indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in addition
to those available to such indemnifying party. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall be selected by
Investors holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates (with the approval of
the Initial Investors if it holds Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. 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 actually 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 by an indemnifying party 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 person 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) contribution (together with any
indemnification or other obligations under this Agreement) 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
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4(c) of the Securities Purchase Agreement)
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 owns
Debentures, Warrants or Registrable Securities, promptly upon request, (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act 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 of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Debentures, the Warrants or the Registrable Securities 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 (a) the
name and address of such transferee or assignee, and (b) 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
receives 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, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
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 written consent of the Company, the
Initial Investors (to the extent the Initial Investors still own Debentures,
Warrants or Registrable Securities) 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. MISCELLANEOUS.
a. 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. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
P.O. Box 3151
Trenton, NJ 08619
Telecopy: (609) 586-1593
Attention: Chief Executive Officer
with a copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
P.O. Box 1945
Morristown, NJ 07962-1945
Attention: Warren J. Casey
If to an Investor, at such address as such Investor shall have
provided in writing to the Company or such other address as
such Investor furnishes by notice given in accordance with
this Section 11(b)
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esquire
and if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).
c. 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. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey applicable to contracts made
and to be performed in the State of New Jersey. The Company irrevocably consents
to the jurisdiction of the United States federal courts located in the State of
New Jersey in any suit or proceeding based on or arising under this Agreement
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company, mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the
Investors' right to serve process in any other manner permitted by law. The
Company agrees 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.
e. This Agreement, the Securities Purchase Agreement, the
Debentures and the Warrants (including all schedules and exhibits thereto)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Securities Purchase Agreement, the Debentures and
the Warrants supersede all prior agreements and understandings among the parties
hereto and thereto with respect to the subject matter hereof and thereof.
f. 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.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. 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 of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. 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.
j. All consents, approvals and other determinations to be made
by the Investors or the Initial Investors pursuant to this Agreement shall be
made by the Investors or the Initial Investors holding a majority of the
Registrable Securities (determined as if all Debentures and Warrants then
outstanding had been converted into or exercised for Registrable Securities)
held by all Investors or Initial Investors, as the case may be.
k. The initial number of Registrable Securities included on
any Registration Statement and each increase to the number of Registrable
Securities included thereon shall be allocated pro rata among the Investors
based on the number of Registrable Securities held by each Investor at the time
of such establishment or increase, as the case may be. In the event an Investor
shall sell or otherwise transfer any of such holder's Registrable Securities,
each transferee shall be allocated a pro rata portion of the number of
Registrable Securities included on a Registration Statement for such transferor.
Any shares of Class A Common Stock included on a Registration Statement and
which remain allocated to any person or entity which does not hold any
Registrable Securities shall be allocated to the remaining Investors, pro rata
based on the number of shares of Registrable Securities then held by such
Investors.
l. For purposes of this Agreement, the term "business day"
means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York or the State of New Jersey are authorized
or obligated by law, regulation or executive order to close.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BASE TEN SYSTEMS, INC.
By:----------------------------
Name:
Its:
Initial Investors:
By:----------------------------
Name:
Its:
By:----------------------------
Name:
Its:
By:----------------------------
Name:
Its:
<PAGE>
Exhibit 1
to
Registration
Rights
Agreement
[Date]
[Name and address
of transfer agent]
RE: BASE TEN SYSTEMS, INC.
We are counsel to BASE TEN SYSTEMS, INC., a corporation organized under
the laws of the State of New Jersey (the "Company"), and we understand that
[Name of Investor] (the "Holder") has purchased from the Company units ("Units")
consisting of (i) convertible debentures due March 30, 2000 (the "Debentures")
which are convertible into shares (the "Conversion Shares") of the Company's
Class A common stock, par value $1.00 per share (the "Class A Common Stock"),
and (ii) warrants (the "Warrants") to acquire shares of Common Stock (the
"Warrant Shares"). The Units were purchased by the Holder pursuant to a
Securities Purchase Agreement, dated as of May 30, 1997, by and among the
Company and the signatories thereto (the "Agreement"). Pursuant to a
Registration Rights Agreement, dated as of May 30, 1997, by and among the
Company and the signatories thereto (the "Registration Rights Agreement"), the
Company agreed with the Holder, among other things, to register the Registrable
Securities (as that term is defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the "Securities Act"), upon the terms
provided in the Registration Rights Agreement. In connection with the Company's
obligations under the Registration Rights Agreement, on _____ __, 1997, the
Company filed a Registration Statement on Form S-___ (File No. 333-
_____________) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities, which names the
Holder as a selling stockholder thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other appropriate language to be included.]
Very truly yours,
cc: [Name of Investor]
