As Filed with the Securities and Exchange Commission on February 11, 1998
Registration No. 333-________________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
BASE TEN SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1804206
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(State or other jurisdiction (I.R.S. employer Identification no.)
or incorporation or organization)
One Electronics Drive
Trenton, New Jersey 08619
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(Address of registrant's principal executive offices) (Zip Code)
Thomas E. Gardner
Base Ten Systems, Inc.
One Electronics Drive
Trenton, NJ 08619
(609-586-7010)
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(Name and address of agent for service)
Approximate Date of Commencement of Proposed Sale to the Public:
From time to time following the effective date of this Registration Statement
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans please check the following
box: ----
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: X
---
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: -----
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement for the same offering: ----
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: ----
<TABLE>
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered(1) Per Unit Offering Price Fee
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Class A Common Stock,
$1.00 par value 4,942,900 $7.125 (2) $35,218,162(2) $10,389.36
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Total Fee $10,389.36
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(1) Pursuant to Rule 416, this Registration Statement also relates to
an indeterminate number of additional shares of Class A Common Stock issuable
upon exercise of 1,452,900 warrants and options and conversion of Series A
Preferred Shares pursuant to (i) anti-dilution provisions contained in such
warrants, options and Series A Preferred Shares, and (ii) adjustments to the
conversion price of the Series A Preferred Shares, which shares of Class A
Common Stock are registered hereunder.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee, and pursuant to Rule 457(c), based on the average of the high
and low sales prices of the Class A Common Stock, as reported on the Nasdaq
National Market on February 9, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
PROSPECTUS
4,942,900 Shares
BASE TEN SYSTEMS, INC.
Class A Common Stock
All 4,942,900 shares (the "Shares") of Class A Common Stock ("Class A
Common Stock") of Base Ten Systems, Inc., a New Jersey corporation (the
"Company" or "Base Ten"), offered hereby are being offered by certain
stockholders of the Company (the "Selling Stockholders"), including three
directors. The Shares may be offered by the Selling Stockholders or by pledgees,
donees, transferees or other successors in interest from time to time in open
market transactions, negotiated transactions, principal transactions or by a
combination of these methods of sale. See "Plan of Distribution."
Of the Shares offered hereby, 3,490,000 Shares are issuable to certain
Selling Stockholders upon conversion of outstanding convertible Series A
Preferred Stock (the "Series A Preferred Shares) issued in a two-phase private
financing completed on December 31, 1997; and 760,000 Shares are issuable to
certain Selling Stockholders upon exercise of outstanding warrants that were
issued to the purchasers of the Series A Preferred Shares (the "Preferred Share
Warrants"). The Preferred Share Warrants were issued contemporaneously with the
Series A Preferred Shares and are exercisable at an average exercise price of
$16.25 per share.
An aggregate of 346,300 of the Shares offered hereby are issuable to
certain Selling Stockholders upon exercise of outstanding warrants that were
issued to certain Selling Stockholders for placement agent services or financial
advisory services rendered to the Company in connection with the sale of the
Series A Preferred Shares (the "Related Warrants"). The Related Warrants are
exercisable at exercise prices ranging from $10.312 to $15.625 and include an
aggregate of approximately 95,000 warrants issued to Alexander M. Adelson, an
officer and director of the Company.
Of the Shares offered hereby, 346,600 Shares are issuable upon exercise
of outstanding warrants or options issued to certain Selling Stockholders for
services rendered to the Company (the "Services Warrants/Options"). The Services
Warrants/Options were issued for consulting, financial advisory or executive
search services or for directors' services rendered to the Company on various
occasions over the past twelve months and are exercisable at exercise prices
ranging from $9.875 to $18.00. The Services Warrants/Options include 20,000
options issued to David Batten and 10,000 options issued to Alan S. Poole,
directors of the Company, and 72,500 warrants issued to Mr. Adelson.
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company will, however, receive
the exercise prices upon exercise of the Preferred Share Warrants, the Related
Warrants and the Services Warrants/Options. Base Ten has agreed to bear all
expenses in connection with the registration and sales of the Shares, other than
underwriting discounts and selling commissions. The Company has also agreed to
indemnify the Selling Stockholders against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
On February 9, 1998, the last reported sale price of the Class A
Common Stock on the Nasdaq National Market was $6.875. The Class A Common
Stock is traded under the Nasdaq symbol "BASEA."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
(SEE "RISK FACTORS" BEGINNING ON PAGE 2.)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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February ___, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "SEC"). Reports and other information filed by the
Company can be inspected and copied at prescribed rates at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W. Judiciary Plaza,
Washington, D.C. 20549 and the following Regional Offices of the SEC: 7 World
Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street,
14th Floor, Chicago, Illinois 60661-2511. Copies of these material can also be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. Such material may be accessed
electronically by means of the SEC's World Wide Web Site at http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the SEC under the
Exchange Act are incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended
October 31, 1997 (Commission File No. 0-7100 filed on February 11,
1998).
2. Proxy Statement dated December 15, 1997 for the Company's
Special Meeting of Stockholders (Commission File No. 0-7100, Schedule
14A filed on December 15, 1997).
3. Current Report on Form 8-K dated October 27, 1997
(Commission File No. 0-7100 filed November 12, 1997) reporting the
execution of an Asset Purchase Agreement with Strategic Technologies,
Inc. relating to the Company's sale of assets relating to the Company's
Government Technology Division.
4. Current Report on Form 8-K dated December 9, 1997
(Commission File No. 0-7100 filed December 18, 1997) reporting the
first phase of the Company's private placement of Series A Preferred
Shares and Class A Common Stock purchase warrants.
5. Current Report on Form 8-K dated December 31, 1997
(Commission File No. 0-7100 filed January 9, 1998) reporting (i) the
Company's sale of assets relating to the Company's Government
Technology Division, (ii) the second phase of the Company's private
placement of Series A Preferred Shares and Class A Common Stock
purchase warrants and (iii) the special meeting of stockholders held on
December 31, 1997.
6. Current Report on Form 8-K dated January 29, 1998
(Commission File No. 0-7100 filed February 2, 1998) reporting the
Company's change in fiscal year.
7. All documents filed by the Company after the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, prior to the filing of a post-effective amendment which
indicates that all Shares offered hereby have been sold or which
deregisters any Shares then remaining unsold. All of these documents
will be deemed to be incorporated herein by reference and to be a part
hereof from their respective filing dates.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request, a copy of the documents
incorporated by reference in this Prospectus. Requests should be directed to
Base Ten Systems, Inc., One Electronics Drive, Trenton, New Jersey 08169,
Attention: William F. Hackett (609) 586-7010. Additional copies of the
Prospectus are also available from the Company or the Transfer Agent upon
request.
<PAGE>
SUMMARY INFORMATION
The following summary is qualified in its entirety by the detailed
information and consolidated financial statements included elsewhere or
incorporated by reference in this Prospectus.
Base Ten is engaged in the design, development and manufacture of
comprehensive software solutions for the pharmaceutical and medical device
manufacturing industries based on its core technology of safety critical
software. Base Ten's activities include development of information technology to
improve process productivity for a wide range of government regulated
manufacturing industries.
RISK FACTORS
In addition to the other information included and incorporated by
reference in this Prospectus, the following factors should be carefully
considered in evaluating the Company and an investment in the Class A Common
Stock.
*FORWARD LOOKING INFORMATION
This Risk Factor section contains forward looking information within
the meaning of The Private Securities Litigation Reform Act of 1995. These
statements appear in a number of places and can be identified by an "asterisk"
reference to a particular section of the foregoing or by the use of such
forward-looking terminology such as "believe", "expect", "may", "will", "should"
or the negative thereof or variations thereof. Such forward looking statements
involve certain risks and uncertainties, including the particular factors
described in this Risk Factors section. In each case actual results may differ
materially from such forward looking statements. The Company does not undertake
to publicly update or revise its forward looking statements even if experience
or future changes make it clear that any projected results (expressed or
implied) will not be realized.
Recurring Losses
The Company experienced net losses from continuing operations of $8.4
million and $16.0 million in the years ended October 31, 1996 and 1997,
respectively. These losses resulted primarily from interest, write-offs of
capitalized software, expenses of non-capitalized development of PHARM2(TM) (the
Company's primary manufacturing execution system), amortization of software
development expenditures incurred in prior periods, expenses relating to
marketing and sales of commercial products, and certain costs related to the
divestiture of the Government Technology Division and changes in senior
management. The Company anticipates incurring an additional loss in 1998 and may
continue to incur losses in subsequent periods. The Company's ability to achieve
profitable operations is dependent upon, among other things, the completion of
current development and testing activities for PHARM2(TM), successful marketing
of its manufacturing execution system products, timely delivery and successful
installation and validation of its systems by its customers, and successful
competition in the markets in which the Company participates. While no
assurances can be given, the Company anticipates returning to profitability in
1999.*
Shift in Focus of Business
Historically, the Company was involved in the design, development,
manufacturing, and marketing of complex precision electronic systems for the
defense industry. In the early 1990's, the Company commenced the development of
software solutions for the pharmaceutical and medical device manufacturing
industries. The reduction in defense-related revenues and increasing price
competitiveness encountered in connection with the bid process as the defense
industry consolidated in the early 1990's resulted in a reduction in the
Company's revenues, the incurrence of operating losses, and the need to fund the
operating losses. In 1997, the Board authorized the Company to pursue efforts to
sell certain assets relating to defense - related products (the "GTD Sale"). On
December 31, 1997, following approval by the shareholders at a special meeting,
the defense - related assets were sold to a recently organized corporation,
Strategic Technology Systems, Inc. ("Strategic"). As a result of the GTD Sale,
the Company's management and financial resources will focus solely on the
development, production and manufacturing of software for the pharmaceutical and
medical devices manufacturing industries and on the enhancement of marketing and
sales efforts to address the potential market for its global computerized
manufacturing execution system. As a result of the GTD Sale and the shift in
focus of the business, the Company is expected to experience a decrease in
revenues for the next year.
The shift in focus of the business has and will continue to involve the
establishment of strategic marketing relationships and the addition of marketing
and technological personnel for the Company's commercial software products. If
the Company experiences significant growth, it may be required to hire, train
and manage additional qualified personnel in the areas in which the Company does
not have significant experience and may be required to implement improvements to
its operations, financial and management systems. In the event that the Company
is unable to attract and manage such additional personnel or to successfully
implement such improvements, its business, results of operations and financial
condition could be materially adversely affected.*
Dependence on Products
The Company's potential for long-term growth and profitability depends
on the success of its PHARMASYST(R) and PHARM2(TM) (an advanced version of
PHARMASYST(R)) products. The Company has devoted substantial resources to the
development of PHARMASYST(R) software, including $1.3 million that was
capitalized and will be amortized by June 1999 and $6.8 million that was
capitalized through October 31, 1997, for PHARM2(TM) and will be amortized by
June 1999.
The Company has delivered eight PHARMASYST(R) and PHARM2(TM)
applications. The installation of a manufacturing execution system in a
manufacturing facility is a complex process involving integration with existing
hardware platforms, operating systems and other existing systems. Once a system
is installed, it must undergo testing to ensure it operates and performs as
defined and required and can undergo extended periods of modifications and
corrections to meet customer requirements, some of which may be at the Company's
expense. Such expenses adversely affect the Company's operating statement
proportional to the degree of difficulty in meeting customer requirements.
Current versions of PHARMASYST(R) and PHARM2(TM) may require extensive field
support because of their relative newness. While no assurances can be given, the
Company expects that this cost will be reduced with more field experience.
The manufacturing process, of which a computerized manufacturing
execution system is a component, must undergo further testing for validation in
accordance with defined procedures. Two of the Company's PHARMASYST(R)
installations have been validated by the Company's customers. One additional
PHARMASYST(R) product and one additional PHARM2(TM) product are believed to have
completed the testing necessary for validation but have not been formally
declared validated by the customers and no assurance can be given that such
validation will be formalized. Although the Company expects its products to be
validated, the Company cannot control customer procedures and validation cannot
be assured. The success of PHARMASYST(R) and PHARM2(TM) will depend on the
Company's ability to integrate PHARMASYST(R) and PHARM2(TM) into other
manufacturing facilities and the customer's ability to validate its
manufacturing process. The Company's success will also depend on its ability to
establish strategic relationships with leading systems integrators and other
marketing efforts. There can be no assurance that PHARMASYST(R) or PHARM2(TM)
will achieve market acceptance. Failure of PHARMASYST(R) or PHARM2(TM) to
achieve market acceptance would have a material adverse effect on the Company's
business, results of operations and financial condition.*
The Company is focusing its PHARMASYST(R)-related efforts on developing
and marketing PHARM2(TM), the advanced version of PHARMASYST(R). While the
Company has delivered eight PHARMASYST(R) and PHARM2(TM) applications,
additional testing is required to make further releases to complete the desired
functionality. The Company is late on ten contracts relative to the installation
of PHARM2(TM), and with the passage of time, may become late on additional
contracts and may be required to pay penalty charges. The Company's customers
have the right to cancel contracts in the event the Company fails to perform.
Should the Company be unable successfully to complete the testing of PHARM2(TM),
or if existing or future customers cancel outstanding contracts, the Company's
business, results of operations and financial condition would be materially
adversely affected.*
Liquidity
During the year ended October 31, 1997, the Company used $12.8 million
of cash in its continuing operations. The use of cash for continuing operations
was due primarily to the Company's net loss of $16.0 million and the costs of
capitalizing the development of its manufacturing execution systems software.
Net cash provided from financing activities during the year ended
December 31, 1997 was attributable to the exercise of options and warrants for
the purchase of the Company's Class A Common Stock and convertible securities
and Class A Common Stock purchase warrants on May 31, 1997. The total cash
received from financing activities in fiscal 1997 was $7,486,000. At October 31,
1997, the Company's cash and other liquid assets were $1,502,000.
On May 1, 1997, the Company entered into an agreement whereby it became
a minority owner of a limited liability company (the "LLC"). Under the terms of
the agreement, the Company made a capital contribution to the LLC of its rights
to its uPACS(TM) technology, which is a system for archiving ultrasound images
with networking, communication and off-line measurement capabilities. In
exchange for such capital contribution, the Company received a 9% interest in
the LLC. An outside investor made an initial capital contribution of $2 million
and a subsequent capital contribution of $1 million, in return for a 91%
interest in the LLC. The Company believes that the funds available under the LLC
will be sufficient to fund operations in connection with uPACS(TM) through
January 1999.* In connection with the formation of the LLC, the Company entered
into a Services and License Agreement whereby the Company has agreed to complete
the development of the uPACS(TM) technology and undertake to market, sell and
distribute systems using the uPACS(TM) technology. The LLC will pay the Company
its expenses in connection with such services and remit to the LLC royalties in
connection with the sale of systems using the uPACS(TM) technology. At such time
as the LLC has distributed to the outside investor an aggregate amount equal to
$4.5 million of its net cash flow, the Company would become a 63% owner of the
LLC and the outside investor will own a 37% interest in the LLC. There can be no
assurance that uPACS(TM) will be successful or that the LLC will operate
profitably or that funds under the LLC will be sufficient for further
development and marketing of uPACS(TM). The Company cannot predict if or when
uPACS(TM) sales will commence in its updated versions. There is intense
competition in this market and the Company has not established its market
position. The Company anticipates difficulty in achieving such sales until
further product development is completed and market tested.*
On May 30, 1997, the Company sold 55 units ("Units") at $100,000 per
Unit, for an aggregate of $5,500,000, to two 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, and (ii)
a 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. These prices were subsequently revised to $13.05 and $13.53 pursuant
to an agreement between the holders and the Company in consideration of the
holders' willingness to grant the Company a waiver to sell the GTD. The
Convertible Debentures were 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 July 1997 the Company retained Cowen & Co. as its financial advisor
to assist with the financial and investment banking-related aspects of the
Company's ongoing business plan.
On December 31, 1997, the Company completed the second of a two-phase
private financing pursuant to which it sold to a limited number of institutional
investors an aggregate of $19 million of Series A Preferred Shares with
accompanying Common Stock purchase warrants. The terms of the securities issued
in connection with this transaction and other material information related
thereto is contained in Base Ten's Current Reports on Form 8-K filed on December
18, 1997, and January 9, 1998 which are incorporated herein by reference.
The Company believes that cash generated by its operations and existing
capital resources, the funds available from the LLC, and the net proceeds from
the sale of the Series A Preferred Shares will be sufficient to fund its
operations through fiscal year end 1998. The Company is relying, however, on the
continued successful development and marketing of its leading product,
PHARM2(TM), to stimulate new orders and permit the delivery of existing orders.
If the Company should not receive the currently anticipated orders at the time
and in the amounts planned during fiscal 1998, the Company may need to reduce
its operating costs or seek additional funding. The effect of cost reductions
could have an adverse effect on the Company's ability to market, develop, and
implement its products with the result that the Company would continue to incur
losses.* Further, there is no assurance regarding whether or on what terms any
additional funding would be available to the Company.
Fluctuations in Quarterly Operating Results
Revenues and operating results have been, and are anticipated to
continue to be, subject to significant quarterly fluctuations. If, as a result
of such fluctuations, the Company's operating results in a quarter are below the
expectations of the investment community, the price of the Company's Class A
Common Stock could be materially and adversely affected. Factors that could
cause such fluctuations include changes in customer capital and resource
commitments; late delivery or delayed installation of its products and
consequent penalty charges, the introduction or development of new products or
product improvements by the Company or its competitors; FDA regulatory
requirements; timing of bookings and revenue recognition from percent completion
of customization and other services; and changes in operating expenses. In
addition, the Company includes in its backlog approximately $1.6 million of
signed license agreements for which funding is scheduled to be released before
June 1998, although no assurances can be given that such releases will occur.
The timing of revenues from manufacturing execution systems can be affected by
such factors as long sales cycles and delays in customer authorization
procedures and unplanned variations in the development of software and the
consequent variation in revenue recognized on the percent completion method. In
the second quarter of fiscal 1996, the Company determined that its PHARM2(TM)
product had recently become standardized. Since most orders for this product did
not meet the criteria for long-term contract accounting, the Company determined
that it should recognize revenues from product orders on delivery of standard
product and account for customization and integration to other systems on a
percent completion basis.*
Limited Commercial Marketing Experience; Reliance on Third Party Distribution
Assistance
The Company has limited experience selling products in commercial
markets and intends to rely on an internal sales force and strategic marketing
relationships. The Company has a limited number of sales people and is
attempting to expand its sales force. There can be no assurance that the Company
will be able to identify and hire additional qualified sales people. The Company
also intends to rely on strategic relationships with system integrators and
suppliers of manufacturing automation systems and equipment. The Company has
entered into a limited number of such relationships. To date, no revenues have
been generated from these relationships and it may take further product
improvement of PHARM2(TM) to make such relationships effective. Many of these
strategic partners have similar relationships with certain competitors of the
Company or may offer competing products. There can be no assurance that the
Company will be successful in establishing an internal sales force or such
relationships, that any of these third parties will not give higher priority to
competing products or that any such third parties will be successful in selling
the Company's products.*
Technical Obsolescence; Changing Requirements for Manufacturing Execution
Software
The markets in which the Company competes are characterized by rapid
technological change. Third party software suppliers such as Microsoft and
Oracle may refuse to support software required by the Company for some of its
customers and the Company may have to undergo design changes at its own expense
to accommodate changes in third party software. Such changes can result in
significant costs to the Company which cannot be passed on to its customers.
Competitors may develop and market products embodying new technologies that can
render the Company's existing products obsolete and unmarketable. The market for
manufacturing execution software is subject to changes in customer requirements
arising out of, among other things, changes in manufacturing processes,
management information systems, manufacturing resource planning systems and
regulatory requirements. The Company's ability to market PHARMASYST(R) and any
similar future products successfully will depend in part on its ability to
update and improve those products to address technological and regulatory
developments. Any failure by the Company to anticipate or respond adequately to
such developments, or any significant delays in product improvements or
introductions could result in a loss of competitiveness and could have a
material adverse effect on the Company's business, results of operations, and
financial condition. There can be no assurance that the Company will be
successful in developing such improvements.*
Competition
The markets in which the Company competes are intensely competitive.
The Company believes competition in the manufacturing execution system (MES)
software market is likely to increase substantially. A number of companies
offering products for discrete manufacturers have announced plans to introduce
products designed for process manufacturers. Some companies that offer
host-based systems have begun to offer or have announced plans to introduce
client/server-based systems for process manufacturers and to increase the number
of hardware platforms on which their software operates. Companies addressing
complementary customer needs may develop or acquire technology to compete.
Competitors may merge or establish cooperative relationships with each other or
with third parties to increase their ability to address the needs of the
Company's prospective customers. Many of the Company's competitors are larger
and more established and may be able to respond more quickly than the Company to
new or emerging technologies, changes in customer requirements, or regulatory
changes, or to devote greater resources to developing, promoting and marketing
their products than can the Company. Increased competition could result in price
reductions, reductions in gross margins and loss of market share, any of which
could materially and adversely affect the Company's business, results of
operations and financial condition. There can be no assurance that the Company
will compete successfully with existing or new competitors or that competitive
pressures will not materially and adversely affect the Company's business,
results of operations, and financial condition.*
Change in Management
The Company recently experienced significant changes in its management
structure. The Company's founder, Mr. Myles M. Kranzler, retired as Chief
Executive Officer and President of the Company effective November 1, 1997, and
resigned as Chairman and director effective December 31, 1997. Mr. Kranzler
agreed to act as a consultant to the Company for a period of one year commencing
November 1, 1997, pursuant to the terms of a consulting agreement with the
Company. Mr. Kranzler's retirement was voluntary and did not reflect a dispute
or disagreement with the Company, its management or its policies. Mr. Thomas E.
Gardner was appointed Co-Chairman, Chief Executive Officer and President of the
Company following Mr. Kranzler's respective resignations. Prior to joining the
Company, Mr. Gardner held senior management positions with Johnson & Johnson,
Dun and Bradstreet, Simon and Schuster, and most recently acted as Chief
Executive Officer and President of Access Systems, Inc. Mr. Alexander Adelson,
formerly serving as Vice Chairman and currently a consultant to the Company with
respect to investor relations and financing, currently serves as Co-Chairman of
the Company with Mr. Gardner. The Company's current management does not have the
same level of experience in designing, developing and manufacturing execution
software solutions for the pharmaceutical and medical device manufacturing
industries as did prior management.
Possible Delisting of Class B Common Stock
The Company has been notified by The NASDAQ SmallCap Market ("NASDAQ")
that, with respect to the Class B Common Stock, the Company does not meet the
requirement for the number of holders. The Company submitted a compliance plan
to the NASD which is being considered at a hearing before a panel authorized by
the NASD Board of Governors, however, there can be no assurance that actions
which may be required by the NASD will be approved by the Board of Directors or,
if required, the shareholders of the Company. Should the Company fail to satisfy
the shareholders requirement, or other NASDAQ SmallCap maintenance criteria for
listing for the Class B Common Stock, the Class B Common Stock may be delisted
from the NASDAQ SmallCap. In such event, trading of the Class B Common Stock
would thereafter be conducted in the over-the-counter market in the so-called
"pink sheets" of the NASD's "Electronic Bulletin Board." As a consequence of
such delisting, a holder of Class B Common Stock would likely find it more
difficult to dispose of, or to obtain quotations as to the price of the Class B
Common Stock. The Company does not know the effect, if any, any such delisting
may have upon the Class A Common Stock, except that any such delisting may
prompt the holders of shares of Class B Common Stock (which is convertible into
Class A Common Stock) to convert such shares into shares of Class A Common
Stock, which will result in dilution to the holders of the Class A Common Stock
and further concentrate the power to elect 75% of the Board of Directors in the
remaining holders of Class B Common Stock. In addition, the compliance plan of
the Company, when implemented, may cause dilution to the holders of the Class A
Common Stock.
Product Defects; Product Liability
The Company's products are designed for use in applications in which
errors or failures could have catastrophic results. Pharmaceutical manufacturing
customers will rely on PHARMASYST(R) products for, among other things, quality
control and compliance with FDA-regulated current Good Manufacturing Practice
(cGMP) and other regulatory requirements. A claim may be made that a defect in a
PHARMASYST(R) product failed to prevent defects in pharmaceutical products that
injured consumers. Certain other products of the Company are involved in
critical health care decision-making processes. The Company maintains product
liability insurance of $5.0 million for commercial products and $3.0 million for
defense-related products that were produced prior to the sale of the Government
Technology Division on December 31, 1997, which insurance is subject to certain
deductibles and exclusions. There can be no assurance that the Company's
existing insurance would be adequate to cover any claims arising out of alleged
defects or that the Company will be able to obtain and maintain adequate
insurance coverage in the future.*
Reliance on Single Sources of Supply and Continued Support for Certain Software
The Company relies on single sources of supply for certain software,
such as Microsoft and Oracle, and the continued support for certain software,
such as that provided by Microsoft and Oracle. There can be no assurance that
the Company would be able to locate acceptable alternative sources of supply on
favorable terms or on a timely basis, if any of such single sources were to
become unable to support the Company's requirements. If any of the continued
support for certain software were to become unavailable to the Company from the
single sources of supply, there can be no assurance that the Company would be
able to redesign its products so that they are compatable with the continued
support then offered by the single sources of supply. The Company could
experience production delays and increased costs if any such single sources were
to fail to satisfy the Company's requirements or if any such single sources
discontinued support for certain software and the Company were unable to make
acceptable alternative arrangements on a timely basis. Such delays could have a
material adverse effect on the Company's business, results of operations and
financial condition.*
Proprietary Rights
The Company attempts to protect its proprietary technology with a
combination of copyrights, trademarks, patents, and reliance on trade secret law
and contractual arrangements. Existing copyright and trade secret laws afford
only limited practical protection and customer access to source codes may
increase the possibility of misappropriation or other misuse of the Company's
software. The laws of some foreign countries do not protect proprietary rights
to the same extent as do the laws of the U.S. There can be no assurance that the
Company's precautions will be adequate to prevent others from obtaining
information the Company considers proprietary and important to its competitive
position or that others will not independently develop similar technologies.
While the Company does not believe any of its products infringe the rights of
any third parties, there can be no assurance that third parties will not assert
claims of infringement against the Company, that any such assertion will not
result in costly litigation or require the Company to obtain licenses to
intellectual property rights, or that such licenses will be available on
reasonable terms, if at all.*
Dependence on Key Personnel
The Company believes its success will depend in large part upon its
ability to attract and retain highly skilled technical, managerial and sales and
marketing personnel, and to retain its personnel with process manufacturing
expertise. Competition for such personnel is intense and the services of
qualified personnel are difficult to obtain or replace. The Company has from
time to time experienced difficulty in locating candidates with appropriate
qualifications. In particular, the Company has encountered difficulties in
hiring sufficient numbers of technical service personnel. There can be no
assurance that the Company will be successful in attracting and retaining the
personnel required to develop, market, service and support its products and
conduct its operations successfully.* The Company relies upon its Chief
Executive Officer and Co-Chairman, Thomas E. Gardner, the loss of whom, in the
absence of a suitable replacement, could have a material adverse effect on the
Company.
Foreign Trade and Currency Exchange Related Risks
A portion of the Company's revenues is derived from foreign customers
and is subject to disruption by political and economic conditions abroad.
Currency exchange fluctuations could increase the price of the Company's
products to foreign customers or decrease the price of competing foreign
products to U.S. customers.*
The Company has a facility in the United Kingdom that relies on stable
values of the pound Sterling. Variations in the value of the pound could affect
the Company's costs either positively or negatively. The Company spends
approximately $2.0 million, or 1.2 million pounds Sterling, annually at the
current exchange rate.
The Company has contracts in the United Kingdom of approximately $1.8
million annually which, except for ancillary services, are denominated in U.S.
dollars and are unaffected by the exchange rates. All other Company contracts
are denominated in U.S. dollars. The Company does not currently engage in any
hedging transactions.
Control by Holders of Class B Common Stock
Holders of the Company's Class B Common Stock, of which approximately
38% is owned by current or former officers and directors of the Company,
including Mr. Kranzler and members of his family, are entitled to elect 75% of
the members of the Company's Board of Directors. In addition, holders of Class B
Common Stock are entitled to cast one vote per share of such stock, compared to
one-tenth of one vote per share of Class A Common Stock, on all matters
submitted to the Company's stockholders other than the election of directors.
This would entitle holders of Class B Common Stock to 38% of the Company's
outstanding combined voting power as of the date of this Prospectus in matters
other than the election of directors. See "Description of Capital Stock."
Absence of Dividends
The Company has not paid dividends on its Class A Common Stock or its
Class B Common Stock since 1985 and presently intends to retain any future
earnings for reinvestment in its businesses for the foreseeable future. In
addition, the Company has agreed with the holders of Convertible Debentures
issued in connection with the Company's May 1997 private offering not to redeem,
or declare or pay any cash distribution or dividend on, any capital stock so
long as any holder beneficially owns at least 10% of the original aggregate
principal amount or face amount of the Convertible Debentures. This condition
has been partially waived by the holders of the Convertible Debentures to permit
the Company to pay dividends on its Series A Preferred Shares under certain
conditions that require the payment of dividends.
Regulation
The Company's PHARM2(TM) and PHARMASYST(R) products do not require FDA
clearance at this time although the Company anticipates that such approval may
be required in the future. Should such approval be required and the Company is
unable to obtain such approval or should such approval be delayed, the Company
would suffer material adverse effects to its business.
Other products the Company has developed are considered, and the
archiving software for ultrasound images that the Company intends to develop
will be considered, "medical devices" under FDA regulations. Before such
products may be marketed in the U.S., they could require FDA clearance of a
pre-market notification application ("510(k) clearance") or FDA clearance of a
pre-market approval application ("PMA"). Obtaining such clearance can take
substantial time and can require substantial expenditures. Many other countries
regulate the manufacture, marketing and use of medical devices in ways similar
to the U.S. There can be no assurance that the Company will be able to obtain
required clearances for any products it develops on a timely or cost-effective
basis, if at all.
Should government policy dictate that the Company's products are of a
sensitive technological character in which the best interests of the United
States will be served by prohibiting their export, the Company could suffer a
serious and immediate loss of business.
Effect of Actual or Potential Future Conversions Below Market Price
The Series A Preferred Shares, as well as the Company's outstanding
Convertible Debentures and the Class B Common Stock, are convertible at any time
or from time to time, into shares of Class A Common Stock, and the Series A
Preferred Shares and Convertible Debentures are convertible at per share
conversion prices that may be substantially below the then current market price
of the Class A Common Stock. In addition, because the pricing formula for
purposes of measuring the conversion price of the Series A Preferred Shares is
referenced to a short period selected by the holder who intends to convert from
within a longer pre-conversion period, the actual conversion price may be lower
than either or both of the average market price of the Class A Common Stock over
the longer pre-conversion period and the market price of the Class A Common
Stock on the date of conversion. The potential issuance of Class A Common Stock
upon the conversion of the Series A Preferred Shares at conversion prices that
may be significantly lower than then current market prices may have a depressive
effect on the market price of, and reduce trading activity in, the Class A
Common Stock. See "Description of Capital Stock - Preferred Stock."
Dilution
If all the Series A Preferred Shares, Convertible Debentures and Class
B Common Stock were converted into the maximum number of shares of Class A
Common Stock, the number of shares of Class A Common Stock outstanding would
increase by approximately 64.5% and the existing holders of Class A Common Stock
would incur significant dilution in their ownership interests and proportionate
voting power. Moreover, as the holders of Class B Common Stock have the right to
elect 75% of the Directors of the Company, conversion of Class B Common Stock
into Class A Common Stock could reduce the number of holders of Class B Common
Stock, thereby further concentrating control of the Company's Board of Directors
in the hands of fewer persons.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth (i) the names of the Selling
Stockholders, (ii) to the best of the Company's knowledge, the total number of
shares of Class A Common Stock owned beneficially by the Selling Stockholders as
of the date of this Prospectus, (iii) the number of Shares to be offered for the
account of the Selling Stockholders in this offering and (iv) to the best of the
Company's knowledge, the number of shares and percentage of Class A Common Stock
to be owned beneficially by the Selling Stockholders after giving effect to this
offering assuming such Selling Stockholders sell their shares set forth under
"Shares to be Offered."
<TABLE>
<CAPTION>
Shares Beneficially Owned
Shares Beneficially Shares Beneficially
Owned Before Offering Shares to Owned After Offering
Name Number be Offered Number Percentage(1)
- ---- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
JMG Capital Partners, L.P. (2)(7) 111,842 111,842 -0- -0-
Triton Capital Investments,Ltd.(2)(7) 111,842 111,842 -0- -0-
RGC International Investors, LDC(3)(7) 1,701,043 894,737 806,306 4.9%
Shepherd Investment International, Ltd. (4)(7) 782,895 782,895 -0- -0-
Stark International(4)(7) 782,895 782,895 -0- -0-
Societe Generale(5)(7) 1,118,421 1,118,421 -0- -0-
Elara Ltd.(6)(7) 223,684 223,684 -0- -0-
Keyway Investment, Inc. (6)(7) 223,684 223,684 -0- -0-
Cowen & Co. (8)(9) 43,893 43,893 -0- -0-
Harlan Kleiman(9) 37,860 37,860 -0- -0-
Robert Shacter (9)) 12,233 12,233 -0- -0-
Steven Lamar(9) 5,626 5,626 -0- -0-
Thomas Griesel(9) 1,688 1,688 -0- -0-
Strategic Growth International(10) 500,000 350,000 150,000 1.9%
Alexander M. Adelson(11) 562,916 167,500 395,416 5%
David Batten(12) 38,900 20,000 18,900 -0-
Alan S. Poole(13) 20,000 10,000 10,000 -0-
Ramsey/Beirne Assoc., Inc.(14) 11,100 11,100 -0- -0-
Promethean Investment Group LLC(15) 30,000 30,000 -0- -0-
Kris Adriaenssens(16) 3,000 3,000 -0- -0-
TOTAL 6,323,522 4,942,900
</TABLE>
- ----------------
*Represents less than 1% of the total outstanding shares of Class A Common
Stock.
(1) Based on a total of 7,828,818 shares of Class A Common Stock outstanding on
December 31, 1997.
(2) Represents (i) 91,842 shares of Class A Common Stock issuable upon
conversion of the Series A Preferred Shares and (ii) 20,000 shares of Class
A Common Stock issuable upon exercise of the Preferred Share Warrants.
(3) Represents (i) 734,737 shares of Class A Common Stock issuable upon
conversion of the Series A Preferred Shares, (ii) 160,000 shares of Class A
Common Stock issuable upon exercise of the Preferred Share Warrants, and
(iii) 806,306 shares of Class A Common Stock issuable upon exercise of
convertible debentures (the "Convertible Debentures") and warrants to
purchase Class A Common Stock which are not being offered hereby. Pursuant
to the terms of the Convertible Debentures the Selling Stockholder is not
entitled to receive shares of Class A Common Stock upon conversion of the
Convertible Debentures to the extent that the sum of (i) the number of
shares of Class A Common Stock beneficially owned by the Selling Stockholder
and its affiliates (exclusive of shares of Class A Common Stock issuable
upon conversion of the unconverted portion of the Selling Stockholder's
Convertible Debentures and shares of Class A Common Stock issuable upon
conversion or exercise of any other securities of the Company) and (ii) the
number of shares of Class A Common Stock issuable upon conversion of the
Convertible Debentures then being converted, would result in beneficial
ownership by the Selling Stockholder and its affiliates of more than 4.9% of
the outstanding Class A Common Stock.
(4) Represents (i) 642,895 shares of Class A Common Stock issuable upon
conversion of the Series A Preferred Shares and (ii) 140,000 shares of Class
A Common Stock issuable upon exercise of the Preferred Share Warrants.
(5) Represents (i) 918,421 shares of Class A Common Stock issuable upon
conversion of the Series A Preferred Shares and (ii) 200,000 shares of Class
A Common Stock issuable upon exercise of the Preferred Share Warrants.
(6) Represents (i) 183,684 shares of Class A Common Stock issuable upon
conversion of the Series A Preferred Shares and (ii) 40,000 shares of Class
A Common Stock issuable upon exercise of the Preferred Share Warrants.
(7) Includes a portion of 450,000 shares of Class A Common Stock issuable
pursuant to anti-dilution provisions of the Series A Preferred Shares and
adjustments to the conversion price of the Series A Preferred Shares, which
shares have been prorated among the identified Selling Stockholders.
Pursuant to the terms of the Series A Preferred Shares, no holder of Series
A Preferred Shares is entitled to receive shares of Class A Common Stock
upon conversion of the holder's Series A Preferred Shares to the extent that
the sum of (i) the number of shares of Class A Common Stock beneficially
owned by the Selling Stockholder and its affiliates (exclusive of shares of
Class A Common Stock issuable upon conversion of the unconverted portion of
the Selling Stockholder's Series A Preferred Shares and shares of Class A
Common Stock issuable upon conversion or exercise of any other securities of
the Company) and (ii) the number of shares of Class A Common Stock issuable
upon conversion of the Series A Preferred Shares then being converted, would
result in beneficial ownership by the Selling Stockholder and its affiliates
of more than 4.9% of the outstanding Class A Common Stock.
(8) The Selling Stockholder was retained by the Company in 1997 to provide
financial advisory services to the Company.
(9) Represents shares of Class A Common Stock issuable upon exercise of Related
Warrants at an exercise price of $15.625 per share. The Selling Stockholders
acted as placement agents to the Company in connection with the sales of the
Series A Preferred Shares.
(10)The Selling Stockholder was retained by the Company in 1997 to provide
financial advisory and consulting services to the Company. Represents (i)
74,000 shares of Class A Common Stock issuable upon exercise of Related
Warrants at an exercise price of $12.50 per share, (ii) 76,000 shares of
Class A Common Stock issuable upon exercise of Related Warrants at an
exercise price of $10.312 per share, (iii) 150,000 shares of Class A Common
Stock issuable upon exercise of Services Warrants/Options at an exercise
price of $10.125 per share, (iv) 50,000 shares of Class A Common Stock
issuable upon exercise of Services Warrants/Options at an exercise price of
$9.875 per share and (v) 150,000 warrants to purchase Class A Common Stock
which are not being offered hereby.
(11)The Selling Stockholder serves as Co-Chairman of the Board of Directors and
a director of the Company and has served as a director of the Company since
1992. Since 1992, the Selling Stockholder has been providing consulting
services to the Company under a consulting agreement with the Company.
Includes (i) 46,875 shares of Class A Common Stock issuable upon exercise of
Related Warrants at an exercise price of $12.50 per share, (ii) 48,125
shares of Class A Common Stock issuable upon exercise of Related Warrants at
an exercise price of $10.312 per share, (iii) 27,500 shares of Class A
Common Stock issuable upon exercise of Services Warrants/Options, at an
exercise price of $10.125 per share, issued to the Selling Stockholder on
May 30, 1997 for consulting services rendered in connection with certain
financing activities, and (iv) 45,000 shares of Class A Common Stock
issuable upon exercise of Services Warrants/Options, at an exercise price of
$10.00 per share, issued to the Selling Stockholder on June 9, 1997 for
consulting services rendered, all of which Related Warrants and Services
Warrants/Options are subject to approval of the Company's shareholders and
will be submitted for shareholder approval at the 1998 Annual Meeting of
Shareholders. Also includes 72,416 shares of Class A Common Stock and
warrants to purchaser 323,000 shares of Class A Common Stock which are not
being offered hereby.
(12)The Selling Stockholder currently serves, and since 1997 has served, as a
director of the Company. Includes (i) 10,000 shares of Class A Common Stock
issuable upon exercise of Services Warrants/Options, at an exercise price of
$10.375 per share, issued to the Selling Stockholder on April 29, 1997 for
services rendered in the Selling Stockholder's capacity as a director, and
(ii) 10,000 shares of Class A Common Stock issuable upon exercise of
Services Warrants/Options, at an exercise price of $10.875 per share, issued
to the Selling Stockholder on October 13, 1997 for services rendered in the
Selling Stockholder's capacity as a director. All of the Selling
Stockholder's Services Warrants/Options are subject to approval of the
Company's shareholders and will be submitted for shareholder approval at the
1998 Annual Meeting of Shareholders. Also includes 18,900 shares of Class A
Common Stock which are not being offered hereby.
(13)The Selling Stockholder serves as a director of the Company and has served
in such position since 1994. Includes 10,000 shares of Class A Common Stock
issuable upon exercise of Services Warrants/Options, at an exercise price of
$10.875 per share, issued to the Selling Stockholder on October 13, 1997 for
services rendered in the Selling Stockholder's capacity as a director. All
of the Selling Stockholder's Services Warrants/Options are subject to
approval of the Company's shareholders and will be submitted for shareholder
approval at the 1998 Annual Meeting of Shareholders.
(14)Represents 11,100 shares of Class A Common Stock issuable upon exercise of
Services Warrants/Options, at an exercise price of $10.00 per share, issued
to the Selling Stockholder on June 10, 1997 for executive search services
rendered.
(15)Represents 30,000 shares of Class A Common Stock issuable upon exercise of
Services Warrants/Options, at an exercise price of $18.00 per share, issued
to the Selling Stockholder on October 22, 1997 pursuant to contractual
obligations related to certain financing opportunity break-up fees.
(16)Represents 3,000 shares of Class A Common Stock issuable upon exercise of
Services Warrants/Options, at an exercise price of $10.375 per share, issued
to the Selling Stockholder on April 29, 1997 for consulting services
rendered.
The information set forth in the foregoing table was provided to the
Company by the Selling Stockholders. The Company agreed to register the Shares
for the account of the Selling Stockholders and has filed with the SEC under the
Securities Act a Registration Statement on Form S-3 of which this Prospectus is
a part, covering the resale of the Shares from time to time.
USE OF PROCEEDS
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company will, however, receive
the exercise price upon exercise of the Preferred Share Warrants, the Related
Warrants and the Services Warrants/Options. Should any Preferred Share Warrants,
Related Warrants and Services Warrants/Options be exercised, any proceeds
derived therefrom will be used by the Company for working capital.
PLAN OF DISTRIBUTION
The Shares being offered hereunder by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest, will be offered
from time to time in open market transactions, negotiated transactions,
principal transactions or by a combination of these methods of sale. The Selling
Stockholders may effect these transactions by selling Shares in ordinary
brokerage transactions, which may include long or short sales, in transactions
which involve cross or block trades or any other transactions permitted by
NASDAQ-NMS, through sales to one or more dealers for resale of the Shares as
principals, in privately negotiated transactions, through the writing or
exercise of options on the Shares (whether such options are listed on an
exchange or otherwise) or by a combination of such methods of sale, at fixed
prices that may be changed, at market prices or at negotiated prices. The Shares
may also be sold pursuant to Rule 144 under the 1933 Act. Broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders or purchasers for whom the broker-dealers may act as
agent or to whom they sell as principal or both. Compensation paid to a
particular broker-dealer might be in excess of customary commissions. The
Selling Stockholders and broker-dealers participating in the sale of Shares may
be deemed to be underwriters, and any profit on the sale of Shares or
compensation received by them may be deemed to be underwriting compensation
under the Securities Act.
The Company has agreed with the Selling Stockholders, among other
things, (i) to bear all expenses (other than underwriting discounts and selling
commissions, and fees and expenses of counsel and other advisers to the Selling
Stockholders) in connection with the registration and sale of the Shares being
offered by the Selling Stockholders and (ii) to indemnify the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act, as an underwriter or otherwise.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General.
The authorized capital stock of Base Ten consists of 22,000,000 shares
of Class A Common Stock, 2,000,000 shares of Class B Common Stock and 1,000,000
shares of Preferred Stock, all of which have a par value of $1.00 per share.
Base Ten has designated 19,000 shares of the Preferred Stock as Series A
Preferred Stock.
Common Stock
Dividends. Both classes of Base Ten's Common Stock have identical cash
and property dividend rights except that no cash or property dividend may be
paid on the Class B Common Stock unless a dividend at least equal in amount is
paid concurrently on the Class A Common Stock. Cash or property dividends can be
declared and paid on the Class A Common Stock without being declared and paid on
the Class B Common Stock.
If a dividend is paid in shares of Class A Common Stock or Class B
Common Stock, shares of Class A Common Stock may be paid to holders of shares of
Class A Common Stock and shares of Class B Common Stock may be paid to holders
of shares of Class B Common Stock. The same number of shares is to be paid in
respect of each outstanding share of Class A Common Stock or Class B Common
Stock. Base Ten may not subdivide or combine shares of either class without, at
the same time proportionately subdividing or combining shares of the other
class.
Voting Rights. Holders of Class A Common Stock are entitled to elect
25% of the members of the Board of Directors (rounded to the next highest whole
number) so long as the number of outstanding shares of Class A Common Stock is
at least 10% of the number of outstanding shares of both classes. Currently, the
holders of Class A Common Stock are entitled, as a class, to elect two directors
of Base Ten, and the holders of the Class B Common Stock are entitled, as a
class, to elect the remaining four directors. As a result of this provision, the
holders of a majority of the Class B Common Stock can elect a majority of the
directors and thereby control Base Ten, regardless of the number of shares of
Class B Common Stock outstanding from time to time. Directors may be removed,
only for cause, by the holders of the class of common stock which elected them.
Except for the election or removal of directors as described above and
except for class votes as required by law or Base Ten's Restated Certificate of
Incorporation, holders of both classes of common stock vote or consent as a
single class on all matters, with each share of Class A Common Stock having
one-tenth vote per share and each share of Class B Common Stock having one vote
per share. See "Preferred Stock."
The outstanding shares of the Class A Common Stock currently represents
approximately 94% of the total number of shares of both classes of common stock
outstanding. If the number of outstanding shares of Class A Common Stock should
become less than 10% of the total number of shares of both classes of common
stock outstanding, the holders of Class A Common Stock would not have the right
to elect 25% of the Board of Directors, but would have one-tenth vote per share
for all directors, and the holders of Class B Common Stock would have one vote
per share for all directors.
Conversion. At the option of the holder of record, each share of Class
B Common Stock is convertible at any time into one share of Class A Common
Stock. Conversion of a significant number of shares of Class B Common Stock into
Class A Common Stock could put control of the Board of Directors into the hands
of the holders of a relatively small equity interest in Base Ten who continue to
hold the Class B Common Stock. The Class A Common Stock is not convertible.
Other Rights. Shareholders of Base Ten common stock have no preemptive
or other rights to subscribe for additional shares. On liquidation, dissolution
or winding up of Base Ten, all shareholders of common stock, regardless of
class, are entitled to share ratably in any assets available for distribution.
No shares of either class are subject to redemption. All outstanding shares are
fully paid and non-assessable.
Transfer Agent. The transfer agent and registrar for shares of the
Class A Common Stock and Class B Common Stock is American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York 10005.
Preferred Stock
General. Base Ten's Board of Directors is empowered to fix the designations,
powers, preferences and relative, participating, optional or other special
rights of the Preferred Stock and the qualifications, limitations or
restrictions of those preferences or rights. The voting rights of the Class B
Common Stock described above are subject to voting rights that may be granted in
connection with the creation of any series of Preferred Stock. However, no issue
of Preferred Stock may change the ratio of one-tenth of a vote for each share of
Class A Common Stock to one vote for each share of Class B Common Stock
described above.
Series A Preferred Stock. As of December 31, 1997, the Company had issued 19,000
shares of Series A Preferred Shares. Holders of Series A Preferred Shares have
the following rights, privileges and preferences:
Term; Dividends and Illiquidity Payments. The Series A Preferred Shares
have a term of three years and pay a cumulative dividend of 8.0% per annum
during any quarter in which the closing bid price for the Class A Common Stock
is less than $8.00 for any 10 consecutive trading days. An equivalent payment is
payable to any holder of Series A Preferred Shares which is subject during any
quarter to a standstill period (as described below) following a Base Ten
underwritten public offering or which is non-convertible because of the
limitations described below. Such dividends and payments are payable only prior
to conversion, and payable in cash or additional Series A Preferred Shares at
Base Ten's option; however, if Base Ten elects to pay the dividend in Series A
Preferred Shares, the amount of such payment will be 125% of the cash amount
due.
Liquidation Preference. The Series A Preferred Shares have a
liquidation preference as to principal amount and any accrued and unpaid
dividends.
Conversion Rights. The Series A Preferred Shares are convertible at any
time or from time to time into Class A Common Stock, at a conversion price equal
to the lesser of (i) $16.25 per share, or (ii) the Weighted Average Price of the
Class A Common Stock prior to the conversion date. Weighted Average Price is
defined as the volume weighted average price of Class A Common Stock on NASDAQ
(as reported by Bloomberg Financial Markets) over any two trading days in the 20
trading day period ending on the day prior to the date the holder gives notice
of conversion (excluding the lowest closing bid price in the period). The holder
has the right to select such two days. No more than 3,040,000 shares of Class A
Common Stock shall be issued upon conversion of all of the Series A Preferred
Shares, except for additional shares of Class A Common Stock issuable pursuant
to anti-dilution provisions and certain adjustments to the conversion price in
certain circumstances. Any Series A Preferred Shares remaining outstanding
because of this limitation may be redeemed at the holder's option for a
subordinated 8% promissory note maturing when the Series A Preferred Shares
would have matured.
Company Redemption Right. Base Ten has the right, at any time, to
redeem all or any part of the outstanding Series A Preferred Shares or
subordinated notes at 130% of their original purchase price.
Mandatory Redemption on Maturity. Any Series A Preferred Shares or
subordinated notes still outstanding three years after issuance must be redeemed
in either cash or at Base Ten's option, in Class A Common Stock. If Base Ten
elects to make the redemption in Class A Common Stock, the amount of such
payment will be 125% of the original purchase price.
Voting Rights. The holders of the Series A Preferred Shares have the
same voting rights as the holders of Class A Common Stock, calculated as if all
outstanding shares of Series A Preferred Shares had been converted into shares
of Class A Common Stock on the record date for determination of shareholders
entitled to vote on the matter presented.
Warrants. For each $1 million of the Series A Preferred Shares
purchased, the purchaser received five-year warrants to purchase 40,000 shares
of Class A Common Stock exercisable at $16.25 per share.
Right of First Refusal. So long as the Series A Preferred Shares remain
outstanding, each holder has the right (with certain exceptions) to purchase, on
five days notice, up to that portion of any future equity financing by Base Ten
which would be sufficient to enable the holder to maintain its percentage
interest in Base Ten equity on a fully diluted basis.
Five Percent Limitation. The holders of the Series A Preferred Shares
are not entitled to receive shares of Class A Common Stock upon a conversion to
the extent that the sum of (i) the number of shares of Class A Common Stock
beneficially owned by the holder and its affiliates (exclusive of shares of
Class A Common Stock issuable upon conversion of the unconverted portion of the
Series A Preferred Shares and shares of Class A Common Stock issuable upon
conversion or exercise of any other securities of the Company) and (ii) the
number of shares of Class A Common Stock issuable upon conversion of the Series
A Preferred Shares then being converted, would result in beneficial ownership by
the holder and its affiliates of more than 4.9% of the outstanding Class A
Common Stock.
Registration. Base Ten granted the holders of the Series A Preferred
Shares mandatory registration rights with respect to the resale of the shares of
Class A Common Stock underlying the Series A Preferred Shares (including any
Series A Preferred Shares which may be issued as a dividend) and the shares of
Class A Common Stock underlying the warrants issued to the holders of the Series
A Preferred Shares. The Registration Statement of which this prospectus is a
part (the "Registration Statement"), relates to the resale of such shares of
Class A Common Stock. Pursuant to the terms of the registration rights agreement
between Base Ten and the holders, the Registration Statement is to be effective
no later than March 2, 1998. In the event the Registration Statement is not
declared effective by the SEC by such date, Base Ten will be required to pay the
holders of the Series A Preferred Shares an amount equal to 1 1/2% of the
original purchase price of the Series A Preferred Shares for each month until
the Registration Statement has been declared effective. The holders have agreed,
if requested by a managing underwriter, to a 90-day standstill period following
any underwritten Base Ten public offering during which period the holders may
not sell the Class A Common Stock underlying both the Series A Preferred Shares
and the warrants issued to the holders, but not in excess of two such
standstills in any 18-month period. In the event a standstill period is
effective, the maturity date of the Series A Preferred Shares would be extended
by the duration of the standstill period.
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
Item 14. Other Expenses of Issuance and Distribution.
<S> <C>
SEC registration fee $ 10,400*
NASDAQ fees and expenses $ 17,500*
Blue sky fees and expenses $ 1,000*
Printing and engraving costs $ 10,000*
Legal fees $ 35,000*
Accounting fees $ 25,000*
Miscellaneous $ 10,000*
Total $108,900*
</TABLE>
* Estimated
Item 15. Indemnification of Officers and Directors
Article 9 of Base Ten's Restated Certificate of Incorporation, as
amended, provides as follows:
Any present or future Director or Officer of the Corporation, and any
present or future director or officer of any other corporation serving
as such at the request of the Corporation, or the legal representative
of any such Director or Officer, shall be indemnified by the
Corporation against reasonable costs, expenses (exclusive of any amount
paid to the Corporation in settlement) and counsel fees paid or
incurred in connection with any action, suit or proceeding to which any
such Director or Officer or his legal representative may be made a
party by reason of his being or having been such Director or Officer;
provided that, (1) said action, suit or proceeding shall be prosecuted
against such Director or Officer or against his legal representative to
final determination, and it shall not be finally adjudged in said
action, suit or proceeding that he had been derelict in the performance
of his duties as such Director or Officer, or (2) said action, suit or
proceeding shall be settled or otherwise terminated as against such
Director or Officer or his legal representative without a final
determination on the merits and it shall be determined by a majority of
the members of the Board of Directors who are not parties to said
action, suit or proceeding, or by a person or persons specially
appointed by the Board of Directors to determine the same that said
Director or Officer has not in any substantial way been derelict in the
performance of his duties as charged in such action, suit or
proceeding. The foregoing right of indemnification shall not be
exclusive of other rights to which such Director or Officer or legal
representative may be entitled by law, and shall inure to the benefit
of the heirs, executors or administrators of such Director or Officer.
Article 10 of Base Ten's Restated Certificate of Incorporation, as
amended, provides as follows:
No director or officer of the corporation shall be personally liable to
the corporation or its shareholders for damages for breach of any duty
owed to the corporation or its shareholders, except for liability for
any breach of duty based upon an act or omission (a) in breach of such
director's or officer's duty of loyalty to the corporation or its
shareholders, (b) not in good faith or involving a knowing violation of
law, or (c) resulting in receipt by such director or officer of an
improper personal benefit. As used in this Article, an act or omission
in breach of a director's or officer's duty of loyalty means an act or
omission which such director or officer knows or believes to be
contrary to the best interests of the corporation or its shareholders
in connection with a matter in which such director or officer has a
material conflict of interest.
The provisions of this Article shall be effective as and to the fullest
extent that, in whole or in part, they shall be authorized or permitted
by the laws of the State of New Jersey. No repeal or modification of
the provisions of this Article nor, to the fullest extent permitted by
law, any modification of law shall adversely affect any right or
protection of a director or officer of the corporation which exists at
the time of such repeal or modification.
Article X of Base Ten's By-Laws, as amended, entitled "Indemnification:
Insurance," provides as follows:
Section 1. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right
of the Corporation) by reason of the fact that he is or was a director
or officer of the Corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement to the maximum
extent permitted by law, and shall advance expenses incurred by such
person in any such action to the maximum extent permitted by law
accordance with the procedures provided by applicable law.
Section 2. To the extent, according to standards and in such manner as
the Board of Directors may direct pursuant to and in accordance with
applicable law in the particular case, the Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including an
action by or in the right of the Corporation) by reason of the fact
that he is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement.
Section 3. The indemnification provided by this Article X shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any agreement, vote of
stockholder or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 4. The Corporation, acting by its Board of Directors, shall
have power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such
liability under the provisions of this Article X. Nothing in this
Section 4 shall obligate the Corporation to indemnify any person to any
extent other than as provided in Sections 1, 2, 3 and 4 of this Article
X.
Statutory authority for indemnification of and insurance for Base Ten's
directors and officers is contained in the New Jersey Business Corporation Act
("the Act"), in particular, Section 14A:3-5 of the Act, the material provisions
of which may be summarized as follows:
Directors and officers may be indemnified in non-derivative proceedings
against settlements, judgments, fines and penalties and against reasonable
expenses (including counsel fees) where the person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and also, in a criminal proceeding, he must have had no
reasonable cause to believe that his conduct was unlawful. In derivative
proceedings such persons may be indemnified against reasonable expenses
(including counsel fees) where the person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, but not against settlements, judgments, fines or penalties except
that, without a court determination as to entitlement to indemnity, no indemnity
may be provided to a person who has been adjudged liable to the corporation. In
all cases, the Act provides that indemnification may only be made by the
corporation (unless ordered by a court) only as authorized in a specific case
upon a determination that indemnification is proper in the circumstances because
the person has met the applicable standard of conduct required of the person,
requires a person to be indemnified for reasonable expenses (including counsel
fees) to the extent he has been successful in any proceeding and permits a
corporation to advance expenses upon an undertaking for repayment if it shall be
ultimately determined that the director or officer is not entitled to
indemnification. The indemnification and advancement of expenses provided by or
granted pursuant to the Act is not exclusive of other rights of indemnification
to which a corporate agent may be entitled under a certificate of incorporation,
by-law, agreement, vote of shareholders or otherwise. However, no
indemnification may be made to or on behalf of a director or officer if a final
adjudication adverse to the director or officer establishes that the director's
or officer's acts or omissions were in breach of his duty of loyalty to the
corporation or its shareholders, were not in good faith or involved a knowing
violation of law, or resulted in receipt by the director or officer of an
improper personal benefit. A corporation may purchase and maintain insurance on
behalf of any directors and officers against expenses incurred in any proceeding
and liabilities asserted against them by reason of being or having been a
director of officer, whether or not the corporation would have the power to
indemnify the directors or officers against such expenses and liabilities under
the statute.
Each of the officers and directors of Base Ten is insured against
certain liabilities which he might incur in his capacity as an officer or
director of Base Ten or its subsidiaries pursuant to a Directors and Officers
Insurance and Company Reimbursement Policy issued by National Union Fire
Insurance Company of Pittsburgh, PA., and Zurich Insurance Company of
Philadelphia, PA. The general effect of the policy is that if any claims are
made against officers or directors of Base Ten or its subsidiaries or any of
them for a Wrongful Act (as defined in the policy) while acting in their
individual or collective capacities as directors or officers, to the extent Base
Ten or its subsidiary has properly indemnified such officers and directors, the
insurer will, subject to the retention amount, reimburse Base Ten or its
subsidiary for 100% of any Loss (as defined in the policy). In addition, to the
extent that Base Ten or its subsidiary has not indemnified an officer or
director, the insurer will, subject to the retention amount, pay on behalf of
such officer or director 100% of the Loss. Defense Costs (as defined in the
Policy) are part of Loss and are subject to the limits of the policy.
The retention amount under the policy is $250,000. The retention amount
is first applied to Base Ten or its subsidiary. The retention amount is not
applicable to officers or directors if Base Ten or its subsidiary is not
permitted or required to indemnify the officers or directors. If, however, Base
Ten or its subsidiary is permitted or required to indemnify the officers or
directors, then the retention amount does apply to them.
Under the policy, the term "Wrongful Act" means any actual or alleged
error, or misstatement, or misleading statement, or act, or omission, or neglect
or breach of duty by the directors or officers in their capacities as such,
individually or collectively, or any matter claimed against them solely by
reason of their being directors or officers of Base Ten or its subsidiaries,
except that certain claims are excluded by the terms and conditions of the
policy. The term "Loss" means damages, judgments, settlements and Defense Costs.
The term "Defense Costs" means reasonable and necessary fees, costs and expenses
consented to by the insurer resulting solely from the investigation, adjustment,
defense and appeal of any claim against any director or officer, but excluding
salaries of officers or employees of Base Ten or its subsidiaries.
Item 16. Exhibits.
The following documents are filed as Exhibits to this Registration
Statement:
Exhibit
Number Exhibit
- ------- -------
3. (a) Restated Certificate of Incorporation, as amended, of Registrant
(incorporated by reference to Exhibit 4(a) to Amendment No. 1 to
Registrant's Registration Statement on Form S-8 (File No. 2-84451)
filed on July 31, 1990). *
(b) Certificate of Amendment of the Restated Certificate of
Incorporation dated September 1, 1992 (incorporated by reference
to Exhibit 4(b)(2) to Amendment No. 3 to Registrant's Registration
Statement on Form S-1 (File No. 33-48404) filed on September 3,
1992). *
(c) Certificate of Amendment of Restated Certificate of Incorporation
dated December 2, 1997 (incorporated by reference to Exhibit 99.3
of Registrant's Current Report on Form 8-K (File No 0-7100) dated
December 9, 1997). *
(d) Amended By-Laws of the Registrant (incorporated by reference to
Exhibit 3(e) to Registrant's Annual Report on Form 10-K (File No.
0-7100) for the fiscal year ended October 31, 1997 filed on
January 29, 1998). *
5. Opinion of Pitney, Hardin, Kipp & Szuch
10. (bb) Securities Purchase Agreement between the Registrant and certain
purchasers dated December 4, 1997 (incorporated by reference to
Exhibit 99.1 of Registrant's Current Report on Form 8-K (File No.
0-7100) dated December 9, 1997). *
10. (cc) Registration Rights Agreement between the Registrant and certain
purchasers dated December 4, 1997 (incorporated by reference to
Exhibit 99.2 of Registrant's Current Report on Form 8-K (File No.
0-7100) dated December 9, 1997). *
10. (dd) Common Stock Purchase Warrant issued by the Registrant to certain
purchasers dated December 4, 1997 (incorporated by reference to
Exhibit 99.4 of Registrant's Current Report on Form 8-K (File No.
0-7100) dated December 9, 1997). *
23. (a) Consent of Deloitte & Touche LLP
(b) Consent of Pitney, Hardin, Kipp & Szuch (contained in Ex. 5).**
24. Power of Attorney (contained on the signature page of this
Registration Statement) **
- ---------------------
* Incorporated by Reference.
** Included elsewhere in this Registration Statement.
Item 17. Undertakings.
1. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions discussed in Item 15 of this Registration
Statement, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
a controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Trenton, State of New Jersey, on the 11th
day of February, 1998.
BASE TEN SYSTEMS, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
By: THOMAS E. GARDNER By: WILLIAM F. HACKETT By: WILLIAM F. HACKETT
----------------------- ----------------------- ----------------------------
Thomas E. Gardner William F. Hackett William F. Hackett
Chief Executive Officer Chief Financial Officer Principal Accounting Officer
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Thomas E. Gardner and William F.
Hackett, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution for him and in his name, place and stead in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming what said attorneys-in-fact and agents or their
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Title Date
<S> <C> <C>
By:THOMAS E. GARDNER President, Chief Executive February 11, 1998
- ---------------------- Officer and Co-Chairman
Thomas E. Gardner
By:ALEXANDER M. ADELSON Co-Chairman and Director February 11, 1998
- ----------------------
Alexander M. Adelson
By:WILLIAM SWORD Director February 11, 1998
- ----------------------
William Sword
By:ALAN S. POOLE Director February 11, 1998
- ----------------------
Alan S. Poole
By:DAVID C. BATTEN Director February 11, 1998
- ----------------------
David C. Batten
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------
3. (a) Restated Certificate of Incorporation, as amended, of
Registrant (incorporated by reference to Exhibit 4(a) to
Amendment No. 1 to Registrant's Registration Statement on Form
S-8 (File No. 2-84451) filed on July 31, 1990). *
(b) Certificate of Amendment of the Restated Certificate of
Incorporation dated September 1, 1992 (incorporated by
reference to Exhibit 4(b)(2) to Amendment No. 3 to
Registrant's Registration Statement on Form S-1 (File No.
33-48404) filed on September 3, 1992). *
(c) Certificate of Amendment of Restated Certificate of
Incorporation dated December 2, 1997 (incorporated by
reference to Exhibit 99.3 of Registrant's Current Report on
Form 8-K (File No 0-7100) dated December 9, 1997). *
(d) Amended By-Laws of the Registrant (incorporated by reference
to Exhibit 3(e) to Registrant's Annual Report on Form 10-K
(File No. 0-7100) for the fiscal year ended October 31, 1997
filed on January 29, 1998). *
5. Opinion of Pitney, Hardin, Kipp & Szuch
10. (bb) Securities Purchase Agreement between the Registrant and
certain purchasers dated December 4, 1997 (incorporated by
reference to Exhibit 99.1 of Registrant's Current Report on
Form 8-K (File No. 0-7100) dated December 9, 1997). *
10. (cc) Registration Rights Agreement between the Registrant and
certain purchasers dated December 4, 1997 (incorporated by
reference to Exhibit 99.2 of Registrant's Current Report on
Form 8-K (File No. 0-7100) dated December 9, 1997). *
10. (dd) Common Stock Purchase Warrant issued by the Registrant to
certain purchasers dated December 4, 1997 (incorporated by
reference to Exhibit 99.4 of Registrant's Current Report on
Form 8-K (File No. 0-7100) dated December 9, 1997). *
23. (a) Consent of Deloitte & Touche LLP.
(b) Consent of Pitney, Hardin, Kipp & Szuch (contained in Exhibit
5) **
24. Power of Attorney (contained on the signature page of this
Registration Statement). **
- ---------------
* Incorporated by reference.
** Included elsewhere in this Registration Statement.
PITNEY, HARDIN, KIPP & SZUCH
MAIL P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
February 11, 1998
Base Ten Systems, Inc.
One Electronics Drive
Trenton, New Jersey 08619
We have acted as counsel to Base Ten Systems, Inc. (the Company) in connection
with the registration by the Company under the Securities Act of 1933, as
amended (the Act) of 4,942,900 shares of Class A Common Stock of the Company
(the Shares).
We have examined the Registration Statement on Form S-3 (the Registration
Statement), dated February 11, 1998 to be filed by the Company with the
Securities and Exchange Commission in connection with the registration of the
Shares.
We have also examined originals, or copies certified or otherwise identified to
our satisfaction, of the Restated Certificate of Incorporation and By-Laws of
the Company, as currently in effect, and relevant resolutions of the Board of
Directors of the Company; and we have examined such other documents as we deemed
necessary in order to express the opinion hereinafter set forth. In our
examination of such documents and records, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals,
and conformity with the originals of all documents submitted to us as copies.
Based on the foregoing, it is our opinion that when, as and if the Registration
Statement shall have become effective pursuant to the provisions of the Act, and
the Shares shall have been duly issued and delivered in the manner contemplated
by the Registration Statement, including the Prospectus therein, the Shares will
be legally issued, fully paid and non-assessable.
The foregoing opinion is limited to the laws of the State of New Jersey, and we
are expressing no opinion as to the effect of the laws of any other
jurisdiction.
We hereby consent to the use of this opinion as an Exhibit to the Registration
Statement. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the Act, or
the Rules and Regulations of the Securities and Exchange Commission thereunder.
VERY TRULY YOURS,
PITNEY, HARDIN, KIPP & SZUCH
-----------------------------
Pitney, Hardin, Kipp & Szuch
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Base Ten Systems, Inc. on Form S-3 of our report dated February 6, 1998
appearing in the Annual Report on Form 10-K of Base Ten Systems, Inc. for the
year ended October 31, 1997.
DELOITTE & TOUCHE LLP
- ---------------------
Deloitte & Touche LLP
Parsippany, New Jersey
February 11, 1998
