SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS
FILED PURSUANT TO RULE 13D-1(A) AND AMENDMENTS
THERETO FILED PURSUANT TO RULE 13D-2(A)
(AMENDMENT NO. 1)
Base Ten Systems, Inc.
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(Name of Issuer)
Class A Common Stock
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(Title of Class of Securities)
069 779 20 5
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(CUSIP Number)
Jesse L. Upchurch
500 Main Street
Fort Worth, Texas 76102
(817) 870-0301
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
__________________, 199_
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box / /.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
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CUSIP NO. 069 779 20 5
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1 NAME OF REPORTING PERSON AND
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
JESSE L. UPCHURCH SS# ###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [x] (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (See Instructions)
PF, WC
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
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7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 12,274,953
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 12,161,519
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,274,953
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
55.4%
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14 TYPE OF REPORTING PERSON*
IN
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<PAGE>
SCHEDULE 13D
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CUSIP NO. 069 779 20 5
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1 NAME OF REPORTING PERSON AND
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
DREW SYCOFF SS# ###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [x] (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (See Instructions)
PF,WC
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 12,274,953
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 113,434
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,274,953
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
55.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Item 1. Security and Issuer:
Class A Common Stock issued by:
Base Ten System, Inc.
One Electronics Drive
Trenton, New Jersey 08619
Item 2. Identity and Background
1. (a)-(c)
Jesse L. Upchurch, whose business address is, c/o Upchurch
Corporation, 500 Main Street, Fort Worth, TX 76102, is the Chairman
and CEO of Upchurch Corporation, a privately held company, with a
principal business address at 500 Main Street, Fort Worth, TX
76102. Mr. Upchurch holds shares of Class A Common Stock of Base
Ten Systems, Inc. (the "Company") directly and indirectly through
Trust C of the Constance J. Upchurch Family Trust ("Trust C"), of
which Mr. Upchurch is the Trustee. The shares held by Trust C were
transferred from the Estate of Constance Upchurch (the "Estate"),
through which Mr. Upchurch had acquired and held shares of Class A
Common, as executor and beneficiary of the Estate.
Mr. Upchurch is also the sole stockholder of World Video Library
("WVL"), through which he also had acquired and held shares of Class
A Common until December 31, 1998, at which time such shares were
distributed to Mr. Upchurch (and thereafter held directly by him).
(d) Criminal Proceedings:
Not Applicable
(e) Civil Proceedings Relating to Federal or State securities laws:
Not Applicable
(f) Citizenship:
United States
2. (a)-(c)
Drew Sycoff, whose business address is c/o Andrew Garrett, Inc., 52
Vanderbilt Avenue, 20th Floor, New York, NY 10017, is the President
of Andrew Garrett, Inc., with a principal business address at 52
Vanderbilt Avenue, 20th Floor, New York, NY 10017. Mr. Sycoff holds
shares of Class A Common Stock of the Company directly and indirectly
through Andrew Garrett, Inc. ("AGI"), of which Mr. Sycoff owns 98% of
the capital stock. AGI is a broker-dealer registered under the
Securities Exchange Act of 1934, and a portion of the shares held by
AGI are held in a trading account that is used to make a market for
the Class A Common shares on the NASDAQ National Market, with the
remaining portion held in an account used for investment purposes.
(d) Criminal Proceedings:
Not Applicable
(e) Civil Proceedings Relating to Federal or State securities laws:
Not Applicable
(f) Citizenship:
United States
Item 3. Source and Amount of Funds Or Other Consideration
1. Mr. Upchuch used personal fund, Estate funds, Trust C funds and
WVL working capital to acquire the Class A Common shares
reported herein.
2. Mr. Sycoff used personal funds and AGI working capital to
acquire the Class A Common shares reported herein.
Item 4. Purpose of Transaction
The reporting persons are considering the possible courses of action
that they may pursue to help maximize shareholder value, including
possible changes in senior management and the Board of Directors. At
a meeting with the Company's Chairman and Chief Executive Officer,
Thomas Gardner, and two of the Company's Directors, Messrs. Schafer
and Sword, on April 2, 1999, a representative of the reporting
persons notified Messrs. Gardner, Schafer and Sword that the
reporting persons were requesting the prompt resignation of Mr.
Gardner from all positions with the Company held by him and a
complete change in the Board of Directors of the Company at or before
the forthcoming 1999 Annual Meeting of the Company's shareholders,
which the reporting persons believe is scheduled to be held on May 7,
1999. The reporting persons believe that, under the Company's
Certificate of Incorporation, two of the six positions on the Board
of Directors are subject to election at that Annual Meeting.
Item 5. Interest in Securities of the Issuer
1. (a) The aggregate number of Class A Common shares beneficially
owned by Mr. Upchurch is 12,274,953, including 1,000,000
warrants exercisable for an equal number of Class A Common
shares, representing 55.4% of the Class A Common shares
outstanding (treating the 1,000,000 shares for which the
warrants are exercisable as outstanding for this purpose).
(b) The number of shares as to which Mr. Upchurch has:
(i) sole power to vote or to direct the vote is
-0-.
(ii) shared power to vote or to direct the vote is
12,274,953.
(iii) sole power to dispose or to direct the disposition of
is 12,161,519.
(iv) shared power to dispose of or to direct the
disposition of is -0-.
(c) On March 5, 1999, Mr. Upchurch, on behalf of Trust C,
purchased 2,500,000 Class A Common shares upon conversion of
the Company's 9.01% subordinated convertible debentures, at
an exercise price of $4.00 per share.
On March 11, 1999, Mr. Upchurch purchased 100,000 Class A
Common shares in the open market, at a price of $1.91 per
share.
On March 16, 1999, Mr. Upchurch puchased 50,000 Class A
Common shares in the open market, at a price of $1.78 per
share.
On March 23, 1999, Mr. Upchurch purchased 25,000 Class A
Common shares in the open market, at a price of $1.53 per
share.
(d) Not Applicable.
(e) Not Applicable.
2. (a) The aggregate number of Class A Common shares beneficially
owned by Mr. Sycoff is 12,274,953, including 1,000,000
warrants exercisable for an equal number of Class A Common
shares, representing 55.4% of the Class A Common shares
outstanding (treating the 1,000,000 shares for which the
warrants are exercisable as outstanding for this purpose).
(b) The number of shares as to which Mr. Sycoff has:
(i) sole power to vote or to direct the vote is -0-.
(ii) shared power to vote or to direct the vote is
12,274,953.
(iii) sole power to dispose or to direct the disposition of
is 113,434.
(iv) shared power to dispose or to direct the disposition
of is -0-.
(c) Mr. Sycoff, through AGI, has made numerous purchases and
sales of the Class A Common shares during the past 60 days
in the ordinary course of business as a broker-dealer, for
the purpose of making a market for the Class A Common shares
on the NASDAQ National Market. In this capacity, shares of
Class A Common were purchased and sold from January 31, 1999
through April 1, 1999, for prices ranging from $1.13 to
$2.78 per share.
(d) Not Applicable.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Base Ten Systems, Inc. and Jesse L. Upchurch entered into a Purchase
Agreement dated August 8, 1996, pursuant to which 9.01% convertible
subordinated debentures, due August 31, 2003, were issued and sold
to Mr. Upchurch for an aggregate purchase price of $10,000,000.
Interest on the debentures was payable semi-annually, at a rate of
9.01% per year. The Company had the right to call the debentures
after February 28, 1998 if the Class A Common Stock of the Company
traded at a price between $15.00 and $17.50 per share. Mr. Upchurch
had the right, provided he held at least 80% of the principal amount
of the debentures, to nominate two directors to the Board of
Directors of the Company, to be recommended by the Company's
management in the Company's proxy statements. The Company agreed to
register the shares issuable upon conversion of the debentures under
the Securities Act of 1933 (the "Act"), on the demand of holders of
at least 66-2/3% of the principal amount of the debentures at any
time after February 28, 1996, in order to permit such holders to
offer and sell such shares. The Company also agreed to permit
holders to participate in other registrations covering offerings by
the Company or its security holders. The debentures were originally
convertible into 800,000 shares of Class A Common, at an exercise
price of $12.50 per share. Mr. Upchurch and the Company agreed to
modify the terms of the debentures to make them convertible into
2,500,000 shares, at an exercise price of $4.00 per share. Mr.
Upchurch (on behalf of Trust C) executed and delivered to the
Company an irrevocable consent dated December 22, 1998, pursuant to
which he consented to such modification and the conversion of the
debentures upon consummation of the exchange of the Company's Series
A, Convertible Preferred Shares outstanding as of December 1, 1998
for the Company's Series B, Convertible Preferred Shares.
Base Ten Systems, Inc. and Jesse L. Upchurch entered into a Stock
Purchase Agreement dated November 12, 1998, pursuant to which
6,666,666 shares of Class A Common Stock and 1,000,000 warrants to
purchase Class A Common Stock, at an exercise price of $3.00 per
share, were sold to Mr. Upchurch for an aggregate of $20,000,000.
The Company agreed to register the 6,666,666 shares and the shares
issuable upon exercise of the warrants under the Act in order to
permit Mr. Upchurch to offer and sell such shares. The Company also
agreed to permit Mr. Upchurch to participate in other registrations
covering offerings by the Company or its security holders.
Each of the reporting persons has agreed to act together with
respect to the matters described in response to Item 4 hereof,
including voting their respective shares in the election of
Directors and other corporate matters, in order to help maximize
shareholder value for the Company's shareholders.
Item 7. Material to be filed as Exhibits.
Exhibit A - Purchase Agreement dated August 8, 1996 between Base Ten
Systems, Inc. and Jesse L. Upchurch.
Exhibit B - Irrevocable Consent dated August 8, 1996 by Jesse L.
Upchurch, on behalf of Trust C of the Constance J. Upchurch Family
Trust.
Exhibit C - Stock Purchase Agreement dated November 12, 1998 between
Base Ten Systems, Inc. and Jesse L. Upchurch.
Exhibit D - Joint Filing Agreement dated April 1, 1999 between Jesse
L. Upchurch and Drew Sycoff.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 2, 1999
/s/ Jesse L. Upchurch
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Signature
Name: Jesse L. Upchurch
/s/ Drew Sycoff
---------------------------
Signature
Name: Drew Sycoff
EXHIBIT A
PURCHASE AGREEMENT
9.01% CONVERTIBLE SUBORDINATED DEBENTURES
DUE AUGUST 31, 2003
THIS PURCHASE AGREEMENT (this "Agreement") is made as of the 8th day
of August, 1996, by and between BASE TEN SYSTEMS, INC., a New Jersey corporation
with its principal executive offices located at One Electronics Drive, Trenton,
New Jersey 08619 (the "Company") and JESSE L. UPCHURCH, an individual with an
address at c/o Upchurch Corporation, 500 Main Street, Fort Worth, Texas 76102
(the "Purchaser").
The parties hereto, intending to be legally bound, agree as follows:
1. AUTHORIZATION OF CONVERTIBLE DEBENTURES.
The Company has authorized the issuance and sale of an aggregate
of up to $10,000,000 principal amount of its 9.01% Convertible Subordinated
Debentures due August 31, 2003 (the "Convertible Debentures"). The Convertible
Debentures are convertible into shares of the Company's Class A Common Stock,
par value $1.00 per share (such shares to be issued upon conversion of the
Convertible Debentures being hereinafter referred to herein as the "Shares"), at
the Conversion Price defined in Article 12 of this Agreement. Interest on the
Convertible Debentures is payable semi-annually on the last day of February and
August in each year, commencing on February 28, 1997 (which first interest
payment shall be for the period from and including the date of issuance of the
respective Convertible Debenture through February 28, 1997, at the interest rate
specified in the form of Convertible Debenture attached hereto as Exhibit A).
2. SALE AND PURCHASE OF CONVERTIBLE DEBENTURES.
Subject to the terms and conditions hereof, the Company hereby
sells to the Purchaser, and the Purchaser hereby purchases from the Company, (i)
on the Closing Date specified in Article 3, a Convertible Debenture in the
aggregate principal amount of $4,500,000 at a purchase price of 100% of the
principal amount, and (ii) on August 22, 1996, a Convertible Debenture in the
aggregate principal amount of not less than $4,500,000 and up to $5,500,000 at a
purchase price of 100% of the principal amount.
3. CLOSING.
The closing (the "Closing") of the purchase and sale of the
Convertible Debentures will take place on August 8, 1996 or such other time and
date as shall be mutually agreed upon by the Purchaser and the Company. Such
time and date is herein called the "Closing Date."
On the Closing Date the Company shall deliver to the Purchaser a
Convertible Debenture in the aggregate principal amount of $4,500,000, dated the
Closing Date, against delivery by the Purchaser to the Company of a certified or
official bank check(s) or wire transfer(s) in an aggregate amount equal to the
aggregate purchase price for such Convertible Debenture, payable to the order of
the Company in immediately available funds.
On August 22, 1996, Company shall deliver to the Purchaser a
Convertible Debenture in the aggregate principal amount of not less than
$4,500,000 and up to $5,500,000, dated as of such date, against delivery by the
Purchaser to the Company of a certified or official bank check(s) or wire
transfer(s) in an aggregate amount equal to the aggregate purchase price for
such Convertible Debenture, payable to the order of the Company in immediately
available funds.
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants that:
4.1 Organization and Existence, Authority, etc. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of the State of New Jersey, and has all requisite corporate power and
authority to carry on its business as now conducted and proposed to be
conducted; the Company has all requisite corporate power and authority to enter
into this Agreement, to issue the Convertible Debentures as contemplated herein
and to carry out the provisions and conditions of this Agreement and of the
Convertible Debentures, including the issuance of the Shares in accordance with
the terms of this Agreement and the Convertible Debentures. This Agreement and
the Convertible Debentures have been duly executed and delivered by, and
constitute the valid and binding obligations of, the Company, enforceable in
accordance with their respective terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to the effect of
general principals of equity which may limit the availability of remedies
(whether in a proceeding at law or in equity). The Company is duly qualified and
is authorized to do business and is in good standing as a foreign corporation in
each jurisdiction in which the conduct of its business or ownership of its
properties would so require, except where the failure to be so qualified would
not have a material adverse effect on its business and financial condition,
taken as a whole.
4.2 Litigation. Except as disclosed in the Company Commission Filings
(as hereinafter defined), to the knowledge of the Company, there is no action,
suit or proceeding pending, or threatened, against the Company before any court,
administrative agency or arbitrator which could reasonably be expected to result
in any material adverse change in the business, properties, condition (financial
or otherwise) of the Company taken as a whole, or which challenges the validity
of any action taken or to be taken pursuant to or in connection with this
Agreement or the Convertible Debentures.
4.3 Charter Documents. Neither the execution nor the delivery of this
Agreement or the Convertible Debentures, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with the terms and
provisions hereof or thereof, will conflict with, or result in a breach of or
creation of a lien under, the terms, conditions or provisions of, or constitute
a default under, the charter or by-laws of the Company, as amended, copies of
which have been provided to the Purchaser.
4.4 Authorized and Outstanding Capital Stock. The Company has
authorized (i) 22,000,000 shares of Class A Common Stock, par value $1.00 per
share (the "Common Stock"), of which 7,323,068 shares are issued and outstanding
as of July 31, 1996, and (ii) 12,000,000 shares of Class B Common Stock, par
value $1.00 per share of which 449,645 shares are issued and outstanding as of
July 31, 1996, and (iii) 1,000,000 shares of preferred stock, none of which are
issued and outstanding. All of such outstanding shares of Common Stock have been
validly issued and are fully paid and non-assessable. The Company has authorized
(i) the issuance and sale to the Purchaser of an aggregate of $9,000,000
principal amount of the Convertible Debentures and (ii) the issuance upon
conversion of the Convertible Debentures of the Shares of the Company's Common
Stock into which such Convertible Debentures are convertible in accordance with
Article 11 or 12, as applicable, of this Agreement. The Shares, when issued in
accordance with the terms of this Agreement and the Convertible Debentures, will
be validly issued, fully paid and non-assessable.
4.5 Broker's and Finder's Fees. The Company will pay all broker's and
finder's fees incurred by the Company in connection with the sale of the
Convertible Debentures.
4.6 Commission Filings and Financial Statements. The Company has
heretofore made available to the Purchaser true and complete copies of all
reports, registration statements, definitive proxy statements and other
documents (in each case together with all amendments and supplements thereto)
filed by the Company with the Commission since April 30, 1996 (such reports,
registration statements, definitive proxy statements and other documents,
together with any amendments and supplements thereto, are sometimes collectively
referred to as the "Company Commission Filings"). The Company Commission Filings
constitute all of the documents (other than preliminary materials) that the
Company was required to file with the Commission since such date. As of the
irrespective dates, each of the Company Commission Filings complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as applicable, and the rules and regulations under each such Act,
and none of the Company Commission Filings contained as of such date and untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When filed with the
Commission the financial statements included in the Company Commission Filings
complied as to form in all material respects with the applicable rules and
regulations of the Commission and were prepared in accordance with generally
accepted accounting principles (as in effect from time to time) applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto), and such financial statements fairly present in accordance
with generally accepted accounting principles in all material respects the
financial position of the Company as at the dates thereof and the results of its
operations and its cash flows for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments and the absence of footnotes. Since April 30, 1996, except as
disclosed in the Company Commission Filings filed with the Commission prior to
the date hereof, the Company has not incurred any liability or obligation of any
kind outside of the ordinary course of business, and no other event has
occurred, which in the ordinary course of business, and no other event has
occurred, which in any case or in the aggregate, would have a material adverse
effect on the business, assets, results of operations or financial condition of
the Company.
4.7 Tax Returns and Payments. The Company has filed all tax returns
required by law to be filed by it and has paid all material taxes, assessments
and other governmental charges levied upon the Company and any of its
properties, assets, income or franchises which are due and payable, other than
those presently payable without penalty or interest or those that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established on
the books of the Company in accordance with generally accepted accounting
principles. The charges, accruals and reserves on the books of the Company in
respect of Federal, state and foreign income taxes for all fiscal periods are
adequate in the opinion of the Company, and the Company has not been notified of
any material unpaid assessment for additional Federal, state or foreign income
taxes for any period or any basis for any such assessment for which adequate
provision has not been made in its accounts in accordance with generally
accepted accounting principles.
4.8 Indebtedness. The Company Commission Filings correctly describe
all material secured and unsecured Indebtedness of the Company outstanding, or
for which the Company has commitments, on the date of this Agreement, and
identify in all material respects the collateral securing any such secured
Indebtedness. The Company is not in material default with respect to the payment
of any material Indebtedness or with respect to any instrument or agreement
relating thereto.
4.9 Title to Properties. The Company has good and sufficient title to
its material properties and assets, including the properties and assets
reflected in the financial statements as of and for the period ended April 30,
1996 (except properties and assets disposed of since such date in the ordinary
course of business and properties and assets held under Capital Leases). The
Company enjoys peaceful and undisturbed possession under all material leases
necessary in any material respect for the operation of its material properties
and assets, and all such leases are valid and subsisting and are in full force
and effect.
4.10 Compliance with Other Instruments. The Company is not in
violation of any term of its certificate or articles of incorporation or
by-laws, and the Company is not in material violation of any material term of
any material agreement or instrument to which it is a party or by which it is
bound or any material term of any applicable law, ordinance, rule or regulation
of any governmental authority or any material term of any applicable order,
judgment or decree of any court, arbitrator or governmental authority, the
consequences of which violation might have a materially adverse effect on the
business, condition (financial or other), operations, assets or properties of
the Company; the execution, delivery and performance of this Agreement and the
Convertible Debentures will not result in any material violation of or be in
material conflict with or constitute a material default under any such term; and
there is no such term which materially adversely affects the business, condition
(financial or other), operations, assets, or properties of the Company, taken as
a whole.
4.11 Governmental Consent. No material consent, approval or
authorization of, or declaration or filing with, any governmental authority on
the part of the Company or any of its Subsidiaries is required for the valid
execution and delivery of this Agreement or the valid offer, issue, sale and
delivery of the Convertible Debentures pursuant to this Agreement, except where
the failure to obtain such consent or make such filing would not have a material
adverse effect on the business, operations or assets of the Company, and except
for appropriate filings (i) NASDAQ National Market System of an additional
listing application for the Shares, and (ii) with such state securities
commissions in respect of "blue sky" laws as may be appropriate.
4.12 Use of Proceeds. The Company will apply the net proceeds of the
sale of the Convertible Debentures principally for funding the Company's
continued development of PHARMASYST and PHARM2 and new versions and upgrades of
its manufacturing execution systems, its development of a new image archiving
system to be marketed under the uPACS name, for additional sales marketing and
support activities, and for general corporate purposes.
4.13 Solvency. On the Closing date and after giving effect to the
application of the proceeds of the Convertible Debentures as specified in
Section 4.12, the Company will be Solvent.
4.14 Disclosure. To the best of the Company's knowledge, there is no
fact (other than matters of a general economic or political nature which does
not affect the Company uniquely) known to the Company which materially adversely
affects the business, condition (financial or other), operations, assets or
properties of the Company which has not been set forth either in the Company
Commission Filings or in this Agreement or in the other documents, certificates
and instruments delivered to the Purchaser by or on behalf of the Company
specifically for use in connection with the transactions contemplated by this
Agreement.
5. SUBORDINATION.
5.1 Agreement to be Bound. The Company covenants and agrees, and
the Purchaser and any subsequent holder of Convertible Debentures by his (its)
acceptance thereof, likewise covenants and agrees, that the Convertible
Debentures shall be issued subject to the provisions contained in this Article
5; and each person holding any Convertible Debentures, whether upon original
issue or upon transfer or assignment thereof, accepts and agrees to be bound by
such provisions.
All Convertible Debentures shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness (as defined herein).
5.2 Priority of Senior Indebtedness. (a) No payment on account of
principal or interest on the Convertible Debentures shall be made, nor shall any
assets be applied to the purchase or other acquisition or retirement of the
Convertible Debentures, if, at the time of such payment or application or
immediately after giving effect thereto, there shall exist a default in the
payment of any amount due on any Senior Indebtedness. Within ten (10) Business
Days after knowledge of any such default referred to in this Section 5.2(a), the
Company shall furnish a copy thereof to the holder of the Convertible
Debentures, in the manner and at the address specified pursuant to Article 17
hereof.
(b) If there shall have occurred an event of default (other than
a default in the payment of any amount due) with respect to any issue of Senior
Indebtedness, as defined herein, or in the instrument under which the same has
been issued, permitting the holders thereof, after notice or lapse of time, or
both, to accelerate the maturity thereof, then, unless and until such event of
default shall have been cured or waived or shall have ceased to exist, no
payment on account of principal or interest on the Convertible Debentures shall
be made, nor shall any assets be applied to the conversion, redemption or other
acquisition or retirement of the Convertible Debentures until the earliest to
occur of (i) 30 days after the date that notice of such default is given to the
holders of Convertible Debentures pursuant to the last sentence of this Section
5.2(b), or (ii) the date on which the Senior Indebtedness to which such event of
default related is discharged in accordance with its terms, or (iii) the date
such event of default is waived by the holders of such Senior Indebtedness or
otherwise cured. Within ten (10) Business Days after knowledge of any such
default referred to in this Section 5.2(b), the Company shall furnish a copy
thereof to each holder of the Convertible Debentures, in the manner and at the
address specified pursuant to Article 17 hereof.
(c) Upon the occurrence and during the continuance of any Event
of Default under this Agreement or the Convertible Debentures, or upon the
occurrence of an event described in Section 5.2(a) or (b) which gives rise to
the non-payment of principal or interest due on the Convertible Debentures, and
notwithstanding any other provision contained herein or in the Convertible
Debentures to the contrary, each Purchaser hereby agrees, for the benefit of the
holders of Senior Indebtedness, not to ask for, demand, sue for, take or receive
any amount owing under the Convertible Debentures of exercise any remedy
(whether pursuant hereto, including, without limitation, acceleration of the
Convertible Debentures at law, in equity or otherwise) with respect thereto
until the earliest of (i) 30 days after (x) the occurrence of such Event of
Default or (y) the date that notice of such default is given to the holders of
Convertible Debentures pursuant to Sections 5.2(a) or (b), (ii) the date on
which all Senior Indebtedness is accelerated, (iii) if applicable, the date on
which the Senior Indebtedness to which such event of default related is
discharged in accordance with its terms or such event of default is waived by
the holders of such Senior Indebtedness or otherwise cured or (iv) any voluntary
or involuntary petition in bankruptcy filed by or against the Company. Within
ten (10) Business Days after knowledge of any Event of Default under this
Agreement or the Convertible Debentures, the Company shall furnish a copy
thereof to the holders of Senior Indebtedness in the manner and at the addresses
specified in the documents and/or agreements evidencing the applicable Senior
Indebtedness.
5.3 Acceleration of Convertible Debentures; Insolvency. Upon (i) any
acceleration of the principal amount due on the Convertible Debentures or Senior
Indebtedness or (ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution or winding up or total or partial liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full, or payment thereof duly
provided for, to the full satisfaction of the holders of Senior Indebtedness
before the holders of the Convertible Debentures shall be entitled to receive or
retain any assets so paid or distributed in respect thereof; and upon any such
dissolution or winding up or liquidation or reorganization, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Convertible Debentures would
be entitled, except for these provisions, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holders of the Convertible
Debentures if received by them or it, as the case may be, directly to the
holders of Senior Indebtedness, to the extent necessary to pay all such Senior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness before any payment or
distribution is made to the holders of the Convertible Debentures, except that
the holders of Senior Indebtedness of the type described in clause (i) of the
definition of Senior Indebtedness shall be entitled to receive payment in full
of such Senior Indebtedness (or provisions satisfactory to the holders of such
Senior Indebtedness shall be made for such payment) before the holders of other
types of Senior Indebtedness shall be entitled to receive payment on such other
Senior Indebtedness.
In the event that, notwithstanding the provisions of the
preceding paragraph or of Section 5.2 hereof, any payment or distribution of
assets of the Company prohibited by the preceding paragraph or by Section 5.2
hereof shall be received by the holders of the Convertible Debentures before all
Senior Indebtedness is paid in full, or provision made for such payment, to the
full satisfaction of the holders of Senior Indebtedness, in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of,
and shall be paid over or delivered to, the holders of Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness. All payments applied to Senior Indebtedness
pursuant to this paragraph of Section 5.3 shall be allocated among the holders
of Senior Indebtedness in accordance with the provisions of the preceding
paragraph of this Section 5.3.
5.4 Subrogation, Etc. Upon payment in full of all Senior Indebtedness,
the holders of Convertible Debentures shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of assets of
the Company pro rata in proportion to the respective amounts then owing to the
holders of Convertible Debentures; and for purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the holders of Convertible Debentures would be
entitled except for the provisions of this Section 5, and no payment over
pursuant to such provisions to the holders of Senior Indebtedness, shall, as
between the Company and its creditors (other than the holders of Convertible
Debentures and the holders of the Senior Indebtedness), be deemed to be a
payment by the Company to or on account of Senior Indebtedness, it being
understood that the provisions of this Section 5 are intended solely for the
purpose of defining the relative rights of the holders of Convertible Debentures
on the one hand and the holders of Senior Indebtedness on the other hand. The
holders of Senior Indebtedness may amend, modify and otherwise deal with Senior
Indebtedness without any notice to or approval of any holder of Indebtedness
ranking junior to Senior Indebtedness.
5.5 Enforcement. The foregoing subordination provisions shall be for
the benefit of the holders of Senior Indebtedness and may be enforced directly
by such holders against the holders of the Convertible Debentures. Each holder
of Convertible Debentures by his (or its) acceptance thereof shall be deemed to
acknowledge and agree that the subordination provisions of this Article 5 are,
and are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Convertible Debentures, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and each
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
Upon any payment or distribution of assets of the Company, the
holders of the Convertible Debentures shall be entitled to rely upon a
certificate of the receiver, trustee in bankruptcy, liquidation trustee,
Company, agent or other person making such payment or distribution, delivered to
the holders of the Convertible Debentures, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount paid or distributed thereon and all other facts
pertaining thereto or to the provisions of this Article 5.
5.6 Obligations Unimpaired. Nothing in this Article 5, or elsewhere in
this Agreement, or in the Convertible Debentures, is intended to or shall impair
as between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Convertible Debentures, the obligation of
the Company, which shall be absolute and unconditional, to pay the holders of
the Convertible Debentures the principal of and interest on the Convertible
Debentures as and when the same shall become due and payable in accordance with
the terms thereof, or affect the relative rights of the holders of the
Convertible Debentures and other creditors of the Company other than the holders
of Senior Indebtedness, nor shall anything herein or therein prevent the holder
of any Convertible Debentures from exercising all remedies otherwise permitted
by applicable law upon default under this Agreement, subject to the rights, if
any, under this Article 5 of the holders of Senior Indebtedness in respect to
cash, property or securities of the Company received upon the exercise of any
such remedy. Nothing contained in this Article 5 or elsewhere in this Agreement,
or in any of the Convertible Debentures, shall prevent the Company from making
payment of the principal of or interest on the Convertible Debentures at any
time except under the conditions described in Section 5.2 or 5.3 or during the
pendency of any dissolution, winding up, liquidation or reorganization of the
Company.
5.7 Definition of Senior Indebtedness. The term "Senior Indebtedness"
shall mean the principal and interest on (i) all Indebtedness of the Company and
its Subsidiaries for money borrowed from time to time, including that owing to
banks or other financial institutions, an agency or agencies of the federal
government or other institutions engaged in the business of lending money, (ii)
all Capital Leases of the Company and its Subsidiaries, (iii) obligations of the
Company for the reimbursement of any obligor on any Letter of Credit, banker's
acceptance or similar credit transaction, and (iv) any deferrals, renewals and
extensions of any indebtedness described in clauses (i) through (iii) above,
unless under the express provisions of the instrument creating or evidencing any
such indebtedness, or pursuant to which the same is outstanding, such
indebtedness is not superior in right of payment to the Convertible Debentures;
provided, however, that Senior Indebtedness shall not include Indebtedness owed
or owed or owing to any Subsidiary.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 Representations. (a) The Purchaser hereby represents that the
Purchaser is capable of evaluating the risk of its investment in the Convertible
Debentures and is able to bear the economic risk of such investment, that it is
purchasing the Convertible Debenture for its own account and that the
Convertible Debentures are being purchased by the Purchaser for investment and
not with a view to any resale or distribution thereof or of the Shares issuable
upon conversion thereof. If the Purchaser should in the future decide to dispose
of the Convertible Debenture or the Shares (which it does not now contemplate),
it is understood that the Purchaser may do so only in complete compliance with
the Securities Act and any applicable state Blue Sky or securities laws.
(b) The Purchaser hereby represents that the Purchaser is an
"accredited investor" within the meaning of Regulation D of the General Rules
and Regulations promulgated under the Securities Act ("Regulation D"). In
connection therewith, the Purchaser represents and warrants to the Company that
the Purchaser meets either of the following standards for determination of
"accredited investor" status of Regulation D set forth below:
1. A natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000; or
2. A natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same
income level in the current year.
(c) The Purchaser hereby represents that the Purchaser (i) has
received and carefully reviewed the Company Commission Filings, and (ii) has had
the opportunity to ask questions and receive answers from the Company concerning
the Company Commission Filings and the terms and conditions of the offering of
the Convertible Debentures and to obtain any documents relating to the Company
which are publicly available and any additional information or documents
relating to the Company which the Company possesses or can acquire without
unreasonable effort or expense.
(d) The Purchaser acknowledges that the Purchaser is aware of the
risks inherent in an investment in the Company and specifically the risks of an
investment in Convertible Debentures, and that the Purchaser is capable of
bearing a complete loss of such investment.
(e) The Purchaser hereby represents that the execution, delivery
and performance by it of this Agreement and the purchase by it of the
Convertible Debentures does not violate any material term of any law, rule,
regulation, court order, judgment or contractual or other obligation applicable
to the Purchaser, the consequences of which violation might have a materially
adverse effect on the business, condition (financial or other), operations,
assets or properties of such Purchaser.
(f) The Purchaser's Schedule 13D and Forms 3, 4 and 5 filings
with the Commission for the periods since April 30, 1996 are all accurate and
complete and have been timely filed with the Commission.
(g) The Purchaser owns as of the date of this Agreement less than
10% of the voting power of the Company, whether directly, indirectly or
beneficially.
7. CONDITIONS TO OBLIGATIONS.
The Purchaser's obligation to purchase the Convertible Debentures
hereunder is subject to satisfaction of the following conditions at the Closing:
7.1 Accuracy of Representations and Warranties. There presentations
and warranties of the Company herein or in any certificate or document delivered
pursuant hereto shall be true and correct on and as of the Closing Date with the
same effect as though made on and as of the Closing Date.
7.2 Performance; No Default. The Company shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and at the time performed or complied with
by it prior to or at the Closing and at the time of the Closing, no Event of
Default shall have occurred and be continuing.
7.3 Officers' Certificate. The Purchaser shall have received a
certificate dated the Closing Date and signed by the President, a Vice President
or Chairman or Vice Chairman of the Company and by the Secretary, the Treasurer,
an Assistant Secretary or an Assistant Treasurer of the Company, to the effect
that the conditions of Sections 7.1 and 7.2 hereof have been satisfied.
7.4 Proceedings. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all documents incident
thereto shall be in form and substance reasonably satisfactory to the Purchaser,
and the Purchaser's counsel, who shall have received all such originals or
certified or other copies of such documents as they may reasonably request.
7.5 No Litigation. No action, suit or proceeding before any court or
any governmental or regulatory authority shall have been commenced and still be
pending, and no investigation by any governmental or regulatory authority shall
have been commenced and still be pending, against the Company seeking to
restrain, prevent or change the transactions contemplated hereby or questioning
the validity or legality of any of such transactions.
7.6 Purchase Permitted by Applicable Laws. The offering, issuance,
purchase and sale of, and payment for, the Convertible Debentures to be
purchased by the Purchasers on the Closing date on the terms and conditions
herein provided (including the use of the proceeds of such Convertible
Debentures by the Company) shall not violate any law or governmental regulation
applicable to the Purchaser.
7.7 Compliance with Securities Laws. The offering and sale of the
Convertible Debentures at or prior to the Closing under this Agreement shall
have compiled in all material respects with all applicable requirements of
federal and state securities laws.
8. AFFIRMATIVE COVENANTS.
8.1 Office for Payment, Exchange and Registration. So long as any of
the Convertible Debentures are outstanding, the Company will maintain an office
or agency in the United States where the Convertible Debentures may be presented
for payment, conversion, exchange or registration of transfer as provided in
this Agreement. Such office or agency initially shall be the office of the
Company set forth in Article 17 hereof, which place may thereafter from time to
time be changed by notice to the holder or holders of the Convertible Debenture
then outstanding.
8.2 Notices. The Company will give notice to all holders of
Convertible Debentures within 3 Business Days after it learns of the existence
of any Event of Default or any event which, with giving of notice or the lapse
of time or both, would become an Event of Default, describing the same and the
period of existence thereof, and what action the Company has taken is taking or
proposes to take with respect thereto.
8.3 Corporate Existence, Etc. The Company will at all times preserve
and keep in full force and effect its corporate existence, and rights and
franchises deemed material to and those of each of its material Subsidiaries,
except as otherwise specifically permitted by Section 9.1 and except that the
corporate existence of any Subsidiary of the Company may be terminated if, in
the good faith judgment of the Board of Directors, such termination is in the
best interest of the Company.
8.4 Payment of Taxes. The Company will, cause each of its Subsidiaries
to, pay all taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its franchises,
business, income or profits before any penalty or interest accrues thereon,
provided that no such tax, assessment, charge or claim need be paid if being
contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required by generally accepted accounting principles shall have been
made therefor.
8.5 Maintenance of Properties; Insurance. The Company will
maintain or cause to be reasonably good repair, working order and condition,
normal wear and tear excepted, all material properties used in the business of
the Company and its Subsidiaries. The Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Subsidiaries against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar business
and similarly situated, of such types and in such amounts as are customarily
carried under similar circumstances by such other corporations.
8.6 Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
except where (i) noncompliance could not reasonably be expected to have a
material adverse effect on the business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) the
necessity of compliance therewith is contested in good faith by appropriate
proceedings.
9. NEGATIVE COVENANTS.
9.1 Consolidation, Merger and Sale. The Company will not, directly or
indirectly, sell, lease, transfer or otherwise dispose of all or substantially
all of its assets or business to any other corporation, or consolidate with or
merge into any other corporation, unless if such surviving or transferee
corporation is a corporation other than the Company, (i) such surviving or
transferee corporation is a corporation organized under the laws of the United
States or of any State of the United States, (ii) all liabilities and
obligations (including registration obligations under Article 13) of the Company
under this Agreement and the Convertible Debentures shall have been expressly
assumed by such surviving or transferee corporation under terms which have no
adverse effect on the rights of the holders of the Convertible Debentures, and
(iii) there shall exist no Event of Default, and no such event which, with
notice, the lapse of time, or both, would constitute an Event of Default, both
immediately before such transaction, and immediately after such transaction upon
giving effect on a pro forma basis to such transaction.
9.2 Transactions with Affiliates. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, engage in any
transaction, including, without limitation, the purchase, sale or exchange of
assets or the rendering of any service, with any Affiliate of the Company,
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Subsidiary's business and upon fair and reasonable terms
that are no less favorable to the Company or such Subsidiary, as the case maybe,
than those which might be obtained in an arm's length transaction at the time
from persons which are not Affiliates, provided that the foregoing restrictions
shall not apply to any transaction between the Company and a wholly-owned
Subsidiary of the Company or between one wholly-owned Subsidiary of the Company
and another wholly-owned Subsidiary of the Company. The Company shall not permit
any Affiliate of the Company to become the holder of any Senior Indebtedness.
9.3 Restricted Indebtedness. The Company will not, directly or
indirectly, incur any Indebtedness the proceeds of which will be used to pay
dividends upon shares of the Company's Common Stock or any other capital stock
of the Company that may from time to time be outstanding.
10. DEFAULTS.
If any of the following events (herein called an "Event of
Default") shall occur and be continuing:
(a) If the Company shall default in the payment (whether or not
such payment is prohibited under Article 5 hereof) of (i) any part of the
principal on any of the Convertible Debentures, when the same shall become due
and payable, whether at maturity or by acceleration or otherwise, or (ii) the
interest on any of the Convertible Debentures, when the same shall become due
and payable, and such default in the payment of interest shall have continued
for fifteen (15) days;
(b) If the Company shall default in the performance of any
agreement or covenant contained in this Agreement or the Convertible Debentures
and such default shall continue for thirty (30) days; or
(c) If any representation or warranty by the Company herein or
any certificate delivered by the Company pursuant hereto shall prove to have
been incorrect in any material respect when made; or
(d) If (i) the Company shall fail to make any payment in respect
of any Indebtedness when due or within any applicable grace period; or (ii) any
other event of default, as defined in any material indenture or material
instrument evidencing or under which there is at the time outstanding any
Indebtedness of the Company, shall occur which (1) results in the acceleration
of the maturity of such Indebtedness or (2) enables (or, with the giving of
notice, would enable) the holder of such Indebtedness or any person acting on
such holder's behalf to accelerate the maturity thereof if, in the case of
subclause (2) hereof, such event or condition has been in existence for 180 days
without being cured or waived; provided, that, the aggregate principal amount of
the Indebtedness referred to Indebtedness clause (i) or (ii) (together with any
other defaulted Indebtedness) exceeds $2,000,000; or
(e) If a final judgment which, either alone or together with
other outstanding final judgments against the Company and its Subsidiaries,
exceeds an aggregate of $2,000,000 shall be rendered against the Company or any
Subsidiary and such judgment shall have continued undischarged or unstayed for
sixty (60) days after entry thereof; or
(f) If the Company or any Subsidiary shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to pay its
debts; or if the Company or any Subsidiary shall suffer the appointment of a
receiver or trustee for it or substantially all of its assets and, if appointed
without its consent, not to be discharged or stayed within sixty (60) days; or
if the Company or any Subsidiary shall suffer proceedings under any law relating
to bankruptcy, insolvency or the reorganization or relief of debtors to be
instituted by or against it, and, if contested by it, not to be dismissed or
stayed within sixty (60) days; or if the Company or any Subsidiary shall fail
generally to pay its debts as they become due; or if the Company or any
Subsidiary shall suffer any writ of attachment or execution or any similar
process to be issued or levied against it or any significant part of its
property with respect to claims in excess of $2,000,000, which is not released,
stayed, bonded or vacated within sixty (60) days after its issue or levy; or if
the Company or any Subsidiary takes corporate action in furtherance of any of
the aforesaid purposes or conditions; then and in each such event the holders of
forty percent (40%) or more in aggregate principal amount of the Convertible
Debentures then outstanding may at any time and unless all defaults shall
theretofore have been remedied) at its or their option, by written notice or
notices to the Company, declare all the Convertible Debentures to be due and
payable, whereupon the same shall forthwith mature and become due and payable,
together with all interest accrued thereon, without presentment, demand,
protestor notice, all of which are hereby waived; provided, however, that this
provision is subject to the condition that if, at any time after the principal
of the Convertible Debentures shall so become due and payable, any arrears of
principal and interest on the Convertible Debentures (with interest at the rate
specified in the Convertible Debentures on any overdue principal and, to the
extent legally enforceable, on any interest overdue) shall be paid by, or for
the account of the Company, then the holder or holders of at least fifty-one
percent (51%) in aggregate principal amount of the Convertible Debentures then
outstanding, by written notice or notices to the Company, may waive such Event
of Default and its consequences and rescind or annul such declaration, but no
such waiver shall extend to or affect any subsequent Event of Default or impair
any right resulting therefrom; provided, further, that notwithstanding the
foregoing, if there shall occur an Event of Default under clause (f) above, then
the Convertible Debentures, together with all interest accrued thereon, shall
immediately mature and become due and payable, without the necessity of any
action by the Purchasers or notice to the Company. If any holder of a
Convertible Debenture shall give any notice or take any other action with
respect to a claimed default, the Company, forthwith upon receipt of such notice
or obtaining knowledge of such other action, will give written notice thereof to
all other holders of the Convertible Debentures then outstanding, describing
such notice or other action and the nature of the claimed default.
10A. BOARD REPRESENTATION.
The Purchaser shall have the right, provided the Purchaser
continues to hold not less than eighty percent (80%) of the aggregate principal
amount of Convertible Debentures issued hereunder to nominate two directors to
the Board of Directors of the Company by giving written notice to the Company of
such nominations together with the written consents of such nominees to serve as
directors not less than 120 days prior to the date that the Company's proxy
statement in connection with its annual meeting of shareholders for the election
of directors is to be mailed to shareholders of record. The Company shall
include such nominees in the slate of directors recommended by the management of
the Company in the proxy statement for the next held annual meeting for the
election of directors.
11. CONVERSION.
11.1 Conversion. Prior to the maturity of the Convertible Debentures,
the holder of the Convertible Debenture shall have the right, at the option of
such holder (whether or not payment upon the Convertible Debentures is
prohibited by the subordination provisions of Article 5) to convert, subject to
the terms and provisions of this Article 11, all or, subject to the proviso
contained in this Section 11.1, any portion of the Convertible Debenture held by
such holder into the number of fully paid and nonassessable Shares as shall be
equal to the aggregate principal amount of Convertible Debenture then being
converted divided by the Conversion Price then in effect, by delivery of the
Convertible Debentures to the Company at the office of the Company provided for
in Section 8.2 herein; provided, however, that no holder of the Convertible
Debenture shall be permitted to exercise its rights with respect to partial
conversions as herein described unless each such holder of the Convertible
Debenture elects to convert a minimum of at least $500,000 principal amount of
its Convertible Debenture or any additional amounts in multiples of $250,000
principal amount of Convertible Debenture; provided, further, that the Company
shall not be required to issue any fractional shares in connection with any
conversion pursuant to this Article 11. In the event that a holder shall
exercise the Convertible Debentures with respect to less than the entire
aggregate principal amount outstanding of such Convertible Debenture, the
Company shall, or shall direct its transfer agent to, issue to the Purchaser
certificates for the Shares of Common Stock for which the Convertible Debenture
is being exercised in such denominations as are required for delivery to the
Purchaser, and the Company shall, or shall direct its transfer agent to,
thereupon deliver such certificates to or in accordance with the instructions of
the Purchaser, and the Company shall issue to the Purchaser a new Convertible
Debenture, duly executed by the Company, in form and substance identical to the
Convertible Debenture surrendered by the Purchaser, for the balance of the
aggregate principal amount of Convertible Debentures that have not been so
converted.
11.2 Delivery of Stock Certificates; Time Conversion Effective; No
Adjustment for Interest or Dividends. As promptly as practicable after the
surrender (as herein provided of a Convertible Debenture for conversion, the
Company shall deliver or cause to be delivered to or upon the written order of
the holder of the Convertible Debenture so surrendered, certificates
representing the number of fully paid and nonassessable Shares into which the
Convertible Debenture may be converted. Subject to the following provisions of
this Section 11.2, such conversion shall be deemed to have been made at the
close of business on the date that such Convertible Debenture shall have been
surrendered for conversion at the office of the Company provided for in Section
8.2 (the "Conversion Date"), so that the rights of the holder of such
Convertible Debenture as a holder thereof, shall cease at such time and the
person or persons entitled to receive any of the Shares upon conversion of the
Convertible Debentures shall be treated for all purposes as having become the
record holder or holders of such Shares at such time; provided, however, that no
such surrender or any date when the stock transfer books of the Company shall be
closed, shall be effective to constitute the person or persons entitled to
receive Shares upon such conversion as the record holder or holders of such
Shares on such date, but such surrender shall be effective to constitute the
person or persons entitled to receive such Shares as the record holder or
holders thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open or the Company is required to
convert Convertible Debentures. The Company will, at the time of such
conversion, upon request of the holder of the Convertible Debenture, acknowledge
in writing its continuing obligation to such holder in respect of any rights
(including, without limitation, any right of registration of the Shares issued
upon such conversion) to which such holder shall continue to be entitled under
this Agreement after such conversion, provided, that, the failure of such holder
to make any such requests shall not affect the continuing obligation of the
Company to such holder in respect of such rights.
If the day for the exercise of the conversion right shall not be
a Business Day, then such conversion right will automatically be deemed to be
exercised on the next succeeding day which is a Business Day.
No adjustments in respect of interest or cash dividends shall be
made upon conversion of any Convertible Debenture. The Company shall pay all
unpaid interest on any Convertible Debenture so converted which has accrued to
(but not including) the date upon which such conversion is deemed to have been
effected in accordance with this Section 11.2.
11.3 Notice to Holders of Election. Upon receipt of an election to
convert by a holder of Convertible Debentures pursuant to this Article 11, the
Company shall, as soon as practicable, notify the holders of the remaining
Convertible Debentures of such election.
11.4 Adjustment of Conversion Price. The Conversion Price shall be
subject to adjustment as of the Closing Date as follows:
(a) In case the Company shall, after the date hereof, (i) pay a
stock dividend or make a distribution in shares of its capital stock (whether
shares of its Common Stock or of capital stock of any other class), (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Common Stock any shares of capital stock of
the Company, the Base Price in effect immediately prior to such action shall be
adjusted so that the holder of a Convertible Debenture thereafter surrendered
for conversion shall be entitled to receive an equivalent number of shares of
capital stock of the Company which he would have owned immediately following
such action had such Convertible Debenture been converted immediately prior
thereto. Any adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
(b) In case the Company, after the date of this Agreement, shall
distribute to all holders of its outstanding Common Stock any shares of capital
stock (other than Common Stock), evidences of its Indebtedness or assets
(including securities and cash, but excluding any cash dividend paid out of
current or retained earnings of the Company and dividends or distributions
payable in stock for which adjustment is made pursuant to subsection (a) of this
Section 11.4) or rights, warrants or options to subscribe for or purchase
securities of the Company, then in each such case the Base Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Base Price in effect immediately prior to the record date of such distribution
by a fraction of which the numerator shall be the Base Price then in effect less
the fair market value on such record date (as determined in good faith by the
Board of Directors of the Company which determination shall be conclusive) of
the portion of the capital stock or the evidences of Indebtedness or the assets
so distributed to the holder of one share of Common Stock or of such
subscription rights, warrants or options applicable to one share of Common Stock
and of which the denominator shall be the Base Price then in effect. Such
adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution. If at the
end of the period during which warrants, rights or options described in this
subsection (b) are exercisable not all such warrants, rights or options shall
have been exercised, the adjusted Base Price shall be immediately readjusted to
what it would have been based on the number of warrants, rights or options
actually exercised.
(c) Notwithstanding anything in subsection (b) of this Section
11.4 to the contrary, with respect to any rights, warrants or options covered by
subsection (b) of this Section 11.4, if such rights, warrants or options are
only exercisable upon the occurrence of certain triggering events, then for
purposes of this Section 11.4 such rights, warrants or options shall not be
deemed issued or distributed, and any adjustment to the Conversion Price
required by subsection (b) of this Section 11.4 shall not be made until such
triggering events occur and such rights, warrants or options become exercisable.
(e) In any case in which this Section 11.4 shall require that an
adjustment be made immediately following a record date or an effective date, the
Company may elect to defer (but only until five Business Days following the
mailing by the Company to the holders of Convertible Debentures of the
certificate required by subsection (g) of this Section 11.4) issuing to the
holder of any Convertible Debenture converted after such record date or
effective date the shares of Common Stock issuable upon such conversion over and
above the shares of Common Stock issuable upon such conversion on the basis of
the Conversion Price prior to adjustment, and paying to such holder any amount
of cash in lieu of a fractional share.
(f) No adjustment in the Conversion Price shall be required to be
made unless such adjustment would require an increase or decrease of at least
one percent (1%) in such price; provided, however, that any adjustments which by
reason of this subsection (f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11.4 shall be made to the nearest cent.
(g) Whenever the Base Price is adjusted as provided in Section
11.4(a) herein, the Company will promptly mail to the holders of the Convertible
Debentures, a certificate of the Company's Treasurer or Chief Financial Officer
setting forth the Base Price as so adjusted and a brief statement of facts
accounting for such adjustment.
(h) Irrespective of any adjustment or change in the Conversion
Price and the number of Shares actually purchasable under the Convertible
Debentures, the Convertible Debentures theretofore and thereafter issued may
continue to express the Conversion Price per Share and the number of Shares
purchasable thereunder as the Conversion Price per Share and the number of
Shares purchasable as expressed upon the Convertible Debentures when initially
issued.
11.5 Company's Consolidation or Merger. Except as otherwise provided in
Section 9.1 hereof, if the Company shall at any time consolidate or merge into
another corporation, (a) the Company shall give at least five (5) days prior
written notice to the holders of the Convertible Debentures of such
consolidation or merger and the terms thereof, and (b) the holder of a
Convertible Debenture shall thereafter be entitled to receive, upon the
conversion thereof, the securities or property to which a holder of the number
of Shares then deliverable upon the conversion thereof would have been entitled
upon such consolidation or merger, and the Company shall take such steps in
connection with such consolidation or merger as may be necessary to assure such
holder that the provisions of this Agreement shall thereafter be applicable, as
nearly as reasonably may be in relation to any securities or property thereafter
deliverable upon the conversion of the Convertible Debenture including, but not
limited to, obtaining a written acknowledgment from the continuing corporation
or other appropriate corporation of its obligation to supply such securities or
property upon such conversion. Except as otherwise provided in Section 9.1
hereof, a sale of all or substantially all the assets of the Company shall be
deemed a consolidation or merger for the foregoing purposes.
11.6 Reserve of Sufficient Shares. The Company will reserve and keep
available a sufficient number of shares of its Common Stock to satisfy the
conversion requirements of all outstanding Convertible Debentures. The Company
will take all such action as may be necessary to insure that all Shares issued
upon conversion of the Convertible Debentures will be duly and validly
authorized and issued and fully paid and nonassessable.
11.7 Taxes on Conversion. The issuance of certificates for Shares upon
the conversion of Convertible Debentures shall be made without charge to the
holders of Convertible Debentures converting such Convertible Debentures for any
issue or stamp tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as may
be directed by, the holders of the Convertible Debentures converted; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the holder of the Convertible
Debenture converted, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
11.8 Cancellation of Converted Convertible Debentures. All Convertible
Debentures which have been converted shall be canceled by the Company and no
Convertible Debentures shall be issued in lieu thereof.
11.9 Notice to Holders of Convertible Debentures. In case at any time:
(a) the Company shall take any action which would require an
adjustment in the Conversion Price pursuant to Section 11.4(a); or
(b) there shall be any capital reorganization or reclassification
of the Common Stock (other than a change in par value or from par value to no
par value or from no par value to par value of the Common Stock), whether or not
such reorganization or reclassification results in an adjustment in the
Conversion Price, or any consolidation or merger to which the Company and its
Subsidiaries is a party and for which approval of any Stockholders of the
Company is required, or any sale or transfer of all or substantially all of the
assets of the Company and its Subsidiaries; or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Company; then, in any one or more of said cases, the
Company shall give written notice to the holders of the Convertible Debentures,
not less than thirty (30) days before any record date or other date set for
definitive action, of the date on which such adjustment, distribution,
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth such facts as shall indicate the effect of such action (to
the extent such effect may be known at the date of such notice) on the current
Conversion Price and the kind and amount of the Shares and other securities and
property deliverable upon conversion of the Convertible Debentures. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such adjustment, distribution, reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation or
winding up, as the case may be (on which date, in the event of voluntary or
involuntary dissolution, liquidation or winding up of the Company, the right to
convert the Convertible Debentures into Shares shall terminate).
Without limiting the obligation of the Company to provide notice
to the holders of Convertible Debentures or Shares of corporate action
hereunder, it is agreed that failure of the Company to give such notice shall
not invalidate such corporate action of the Company.
12. CALL OF CONVERTIBLE DEBENTURES BY THE COMPANY.
The Company shall not directly or indirectly, call, prepay,
redeem, repurchase, convert or otherwise acquire any Convertible Debentures or
any portion thereof, except as set forth in this Article 12.
12.1 Optional Conversion or Redemption Upon Call by the Company.
The Company may, at its option, call the Convertible Debentures, either in whole
or in part on a pro-rata basis:
(i) at any time on or after February 28, 1998 and
prior August 31, 1998 if the average of the
Closing Prices of the Company's Common Stock for
at least 15 consecutive trading days prior to the
Call Date shall be equal to or in excess of 150%
of the Base Price per share;
(ii) at any time on or after August 31, 1998 and prior
August 31, 1999 if the average of the Closing
Prices of the Company's Common Stock for at least
15 consecutive trading days prior to the Call Date
shall be equal to or in excess of 160% of the Base
Price per share; or
(iii) at any time on or after August 31, 1999 if the
average of the Closing Prices of the Company's
Common Stock for at least 15 consecutive trading
days prior to the Call Date shall be equal to or
in excess of 175% of the Base Price per share.
In the event of a call by the Company pursuant to this Section 12.1,
the holders, at their option, may require the Company to convert their
Convertible Debentures (into fully paid and nonassessable shares of the
Company's Common Stock) at the Conversion Price (the "Holder's Option").
12.2 Notice of Call. The right of the Company to call any Convertible
Debentures pursuant to Section 12.1 shall be conditioned upon its giving notice
of such call (the "Call Notice"), by personal delivery, overnight courier,
certified mail or by facsimile, signed by an authorized officer, to the holders
of Convertible Debentures, not less than fifteen (15) Business Days prior to the
date upon which the call is to be made (the "Call Date"). The Call Notice shall
specify (i) the aggregate principal amount of the Convertible Debentures to be
called, (ii) the date of such call, and (iii) the accrued and unpaid interest
thereon (to, but not including, the Call Date). Within ten (10) Business Days
after receipt of the Call Notice by the holder of a Convertible Debenture, such
holder shall notify the Company, by personal delivery, overnight courier,
certified mail or by facsimile, signed by the holder, of the Holder's Option,
pursuant to which the holder shall direct whether the holder wishes the
Convertible Debentures to be converted or redeemed pursuant to Section 12.1
hereof (in the event that a holder fails to respond to the Call Notice or fails
to respond within the time period or via the means set forth herein, the Holders
Option shall become void and of no further effect and the Company shall be
entitled to redeem the Convertible Debentures as provided in Section 12.1 or
12.2, as the case may be).
12.3 Partial Call. In the event of a partial call by the Company
pursuant to this Article 12, the aggregate principal amount of each call of
Convertible Debentures pursuant to Section 12.1 hereof, shall be allocate among
the Convertible Debentures at the time outstanding, in proportion, as nearly as
practicable, to the respective unpaid principal amounts of such Convertible
Debentures.
12.4 Surrender of Convertible Debentures Upon Call. In the event that
any Convertible Debentures shall be surrendered to the Company upon conversion
as provided in this Article 12, interest shall cease to accrue upon such
Convertible Debentures so surrendered.
12.5 Section 11 Applicable. For purposes of conversion of the
Convertible Debentures by the Company pursuant to this Article 12, the
provisions of Section 11.1 through 11.4 herein, shall be controlling, as if the
same shall have been contained in this Article 12 (except that with respect to
Section 11.2, in the event that a holder shall choose redemption as the Holders
Option (pursuant to Section 12.2 herein), the Company shall make payment to the
holder as soon as practicable after the Conversion Date, by bank or certified
check or by wire transfer).
13. REGISTRATION RIGHTS; RESTRICTIONS ON TRANSFER.
13.1 Notification of Proposed Sale. (a) Unless paragraph (b) of
this Section 13.1 is applicable, each holder of a Convertible Debenture by
acceptance thereof agrees that it will notify the Company in writing before
offering for sale or selling or otherwise disposing (provided, that, conversion
will not be deemed to be a disposition) of any Convertible Debenture or the
Shares, describing briefly the nature of such sale or other disposition, and no
such sale or other disposition shall be made unless and until (i) the holder has
supplied to the Company, if requested by the Company within five (5) Business
Days after receipt of such notice, an opinion of counsel for the holder which
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration under the Securities Act is required with respect to such sale or
other disposition (which opinion may be conditioned upon the transferee's
assuming the obligations of a holder of Convertible Debentures or Shares under
this Section 13.1) or (ii) an appropriate registration statement with respect to
such sale or other disposition of such Convertible Debentures or Shares shall
have been filed by the Company with the Commission and declared effective by the
Commission.
(b) If the holder of Convertible Debentures or Shares has
obtained an opinion of its own counsel that the sale of such Convertible
Debentures or Shares may be made without registration under the Securities Act
pursuant to Rule 144, the notification provided in paragraph (a) need not be
given to the Company prior to the proposed sale, provided, that, the Company
shall not be obliged to register on its registry or transfer books any transfer
pursuant to this subsection (b) unless it is satisfied that the requirements of
Rule 144 or any successor thereto have been satisfied.
(c) The Company may endorse on all Convertible Debentures and on
all certificates evidencing Shares (issued upon conversion of the Convertible
notes) an appropriate legend restricting their transfer except upon compliance
with the provisions of paragraph (a) above, which in the case of the Convertible
Debentures shall be in the terms set out in Exhibit A hereto and in the case of
the Shares shall read as follows - "THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE ACT OR AN OPINION,
IF REQUESTED, OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT"; provided, that, no such legend shall be endorsed on any
Convertible Debenture or Share certificates which, when issued, are no longer
subject to the restrictions of this Section 13.1, and provided, further, that if
an opinion of satisfactory counsel which opinion shall be reasonably
satisfactory to counsel for the Company concludes that the legend is no longer
necessary, the Company will deliver upon transfer or exchange Convertible
Debentures or Share certificates without such legends.
13.2 Obligation to Register. At any time after February 28, 1996,
the holders of not less than sixty-six and two thirds percent (66 2/3%) of the
aggregate principal amount of the Convertible Debentures (we are including for
this purpose and for this purpose only, holders of Convertible Debentures that
have already been converted) shall be entitled to make one demand registration
(the "Demand") and the Company agrees to use its best efforts to file with the
Commission as soon as practicable after the Demand registration statement for
the offering made on a continuous or delayed basis pursuant to Rule 415 under
the Securities Act covering all of the Shares. Such registration statement shall
be on Form S-3 under the Securities Act, if such form is then available for use
by the Company, or if such Form is not then available for use by the Company,
another form that is available to the Company permitting the registration of the
Shares for resale by the holders of the Convertible Debentures or the Shares
("Holders") in the manner or manners reasonably designated by them (including,
without limitation, one or more underwritten offerings). The Company shall use
its best efforts to cause such registration statement to be declared effective
pursuant to the Securities Act as promptly as possible following the filing
thereof, and subject to applicable rules and orders, to keep such registration
statement continuously effective under the Securities Act for two years after
the effectiveness of such registration statement, or such shorter period ending
on the earlier of (i) the date that there are less than 300,000 Shares held by
persons who were holders of the Convertible Debentures, or (ii) August 31, 2003.
13.3 "Piggyback Registration Rights." At any time prior to the
maturity of the Convertible Debentures, the Company shall, at least thirty (30)
days prior to the filing of any registration statement under the Securities Act
(other than a registration statement on Form S-8 or Form S-4 or any successor
forms) relating to the public offering of its Common Stock by the Company or any
of its security holders, give written notice of such proposed filing and of the
proposed date thereof to the Holders, and if, on or before the twentieth (20th)
day following the date on which such notice is given, the Company shall receive
a written request from the Holders requesting that the Company include among the
securities covered by such registration statement some or all of the Shares held
by or to be held after conversion by such Holder or Holders, the Company shall
include such Shares in such registration statement, if filed, so as to permit
such Shares to be sold or disposed of in the manner and on the terms of the
offering thereof set forth in such request.
13.4 Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any registration statement filed pursuant to
Sections 13.2 or 13.3 herein, the following provisions shall apply:
(i) If such registration statement shall be filed pursuant to
Section 13.3 hereof and if the managing underwriter advises the Company in
writing that the inclusion in such registration of some or all of the Shares
sought to be registered by the Holder(s) creates a substantial risk that the
proceeds or price per share that will be derived from such registration will be
reduced or that the number of shares to be registered at the insistence of the
Holder(s), plus the number of shares of Common Stock sought to be registered by
the Company and any other stockholders of the Company is too large a number to
be reasonably sold, then, in such event, the number of shares sought to be
registered for the stockholders of the Company shall be reduced, pro rata in
proportion to the number of shares sought to be registered to the number of
shares recommended be sold by the managing underwriter.
(ii) If requested by the Holder(s) in connection with a
registration statement filed pursuant to Section 13.2, the Company will enter
into an underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in form and substance to the Company,
the holder(s) and the underwriters, and to contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in such agreements used by the managing underwriter, including,
without limitation, restrictions of sales of Common Stock or other securities by
the Company as may be reasonably agreed to between the Company and such
underwriters, and indemnities and rights to contributions to the effect and to
the extent provided in Sections 13.5 and 13.6 hereof. The Holders shall be a
party to any underwriting agreement relating to an underwritten sale of their
Shares and may, at their option, require that any or all of the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters, shall also be made to and for the benefit of the Holders. All
representations and warranties of the Holders shall be made to or for the
benefit of the Company.
(iii) The Company shall provide a transfer agent and registrar
(which may be the same entity) for the Shares, not later than the effective date
of such registration.
(iv) All expenses in connection with the preparation and filing
of a registration statement filed pursuant to Sections 13.2 or 13.3shall be
borne solely by the Company, except for any transfer taxes payable with respect
to the disposition of such Shares, and any underwriting discounts and selling
commissions applicable solely to such sales of Shares, which shall be paid by
the Holders of the Shares being registered.
(v) The Company shall use its best efforts to cause all of the
shares covered by such registration statement to be quoted on the NASDAQ
National Market System, if the quoting or listing of such registered shares is
permitted by such exchange.
(vi) Following the effective date of such registration statement,
the Company shall, upon the request of the Holders, forthwith supply such number
of prospectuses (including exhibits thereof and preliminary prospectuses and
amendments and supplements thereto) meeting the requirements of the Securities
Act and such other documents as are referred to in the prospectus as shall be
reasonably requested by the Holders to permit the Holders to make a public
distribution of their Shares.
(vii) The Company shall prepare, if necessary, and file such
amendments and supplements to such registration statement filed pursuant to
Section 13.2 hereof, as may be necessary to keep such registration statement
effective, subject to applicable laws, rules and orders, for a period of five
years after the Closing date, or such shorter period ending when there cease to
be outstanding any Shares or Convertible Debentures held by the Holders, and to
comply with the provisions of the Securities Act with respect to the offer and
sale or other disposition of the Shares covered by such registration statement
during the period required for distribution of the Shares.
(viii) The Holders may select the underwriter or underwriters
(which shall be of nationally recognized standing), if any, who are to undertake
any offering and distribution of the Shares to be included in a registration
statement filed under the provisions of Subsection 13.2 hereof, subject to the
Company's prior approval of the underwriter, which approval shall not be
unreasonably withheld.
(ix) The Company shall use its best efforts to register the
Shares covered by any such registration statements filed pursuant to Section
13.2 under such securities or Blue Sky laws in addition to those in which the
Company would otherwise sell shares, as the Holders reasonably request, except
that neither the Company nor the Holders shall for any such purpose be required
to execute a general consent to service of process or to qualify to do business
as a foreign corporation in any jurisdiction where it is not so qualified. The
fees and expenses incurred in connection with such registration shall be borne
by the Company.
(x) The Holders shall cooperate fully with the Company and
provide the Company with all information reasonably requested by the Company for
inclusion in the registration statement or as necessary to comply with the
Securities Act. The Company shall cooperate fully with any underwriters selected
by the Holders and counsel to such underwriters, and shall provide reasonable
and customary access to the Company's books and records (upon receipt from such
underwriters of customary confidentiality agreements) in order to facilitate
such underwriters' review and examination of the Company in connection with such
underwriting.
(xi) The Company shall notify the Holders, at anytime after
effectiveness when a prospectus relating thereto is required to be delivered
under the Securities Act within the period mentioned in subdivision (vii) of
this Section 13.4, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Holders shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Holders prepare
and furnish the Holders promptly a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances than existing.
(xii) The Company shall furnish to the Holders at the time of the
disposition of the Shares, a signed copy of an opinion of the Company's regular
in-house or outside general counsel, or other counsel of the Company's selection
reasonably acceptable to, and which opinion shall be reasonably satisfactory in
form and substance to, the Holders to the effect that: (a) a registration
statement covering such Shares has been filed with the Commission under the
Securities Act and has been made effective by order of the Commission, (b) said
registration statement and prospectus contained therein comply as to form in all
material respects with the requirements of the Securities Act, and nothing has
come to such counsel's attention (after due inquiry) which would cause such
counsel to believe that either said registration statement or such prospectus
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
(in the case of such prospectus, in light of the circumstances under which they
were made) not misleading, (c) after due inquiry such counsel knows of no legal
or governmental proceedings required to be described in such registration
statement or prospectus which are not described as required, or of any contracts
or documents of a character required to be described in such registration
statement or such prospectus to be filed as an exhibit to such registration
statement or to be incorporated by reference therein which are not described and
filed as required and (d) to such counsel's knowledge, no stop order has been
issued by the Commission suspending the effectiveness of such registration
statement; it being understood that such opinion may contain such qualifications
and assumptions as are customary in the rendering of similar opinions, and that
such counsel may rely, as to all factual matters treated therein, on
certificates of the Company (copies of which shall be delivered to the Holders).
(xiii) The Company will use its best efforts to comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act, to the
extent it shall be required to do so pursuant to such sections, and at all times
while so required shall use its best efforts to comply with all other public
information reporting requirements of the Commission of Rule 144 promulgated by
the Commission under the Securities Act) from time to time in effect and
relating to the availability of an exemption from the Securities Act for the
sale of any of the Company's Common Stock held by the Holders. The Company will
also cooperate with the Holders in supplying such information and documentation
as may be necessary for the Holders to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Company Common Stock held by the Holders.
13.5 Indemnification.
(i) In the event of the registration of the registration of any
shares of the Company under the Securities Act pursuant to the provisions of
Sections 13.2 or 13.3, the Company agrees to indemnify and hold harmless the
Holders, each underwriter, broker or dealer, if any, and their directors,
officers and employees, of such Shares, and each other person, if any, who
controls the holders of the Convertible Debentures or the Shares (or a permitted
assignee thereof), such underwriter, broker or dealer within the meaning of the
Securities Act, from and against any and all losses, claims, damages for
liabilities (or actions in respect thereof), joint or several, to which the
Holders (and as applicable) its directors, officers or employees, or such
underwriter, broker or dealer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities for actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such shares were registered under the
Securities Act, any preliminary prospectus or final prospectus relating to such
Shares, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation under the Securities
Act applicable to the Company or relating to any action or in action required by
the Company in connection with any such registration and will reimburse the
Holders, each such underwriter, broker or dealer and controlling person, and
their directors, officers or employees, for any legal or other expenses
reasonably incurred by the Holders or such underwriter, broker or dealer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary prospectus, such final prospectus or such amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by the Holders and as applicable, such Holders'
directors, officers or employees, or such underwriter, broker, dealer or
controlling person for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(ii) In the event of the registration of any Shares of the
Holders under the Securities Act for sale pursuant to the provisions of this
Agreement, the Holders agree to indemnify and hold harmless the Company, its
directors, officers and employees, from and against any losses, claims, damages
or liabilities, joint or several, to which the Company, its directors, officers
or employees, may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Shares were registered under the Securities Act, any preliminary prospectus or
final prospectus relating to such Shares, or any amendment or supplement
thereof, or arise out of or are based upon omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, which untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance upon and
in conformity with written information furnished to the Company by the Holders
for use in the preparation thereof. Such indemnity shall remain in full effect
irrespective of any investigation by any person indemnified above.
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 13.4 (for purposes of this Section 13.4, an
"Indemnified Party") of notice of the commencement of any action or claim
relating to any registration statement filed under Sections 13.2 or 13.3 or as
to which indemnity may be sought hereunder, such Indemnified Party will, if a
claim for indemnification hereunder in respect thereof is to be made against any
other party hereto (for purposes of this Section 13.4, an "Indemnifying Party"),
give written notice to such Indemnifying Party of the commencement of such
action or claim, but the failure to so notify the Indemnifying Party will not
relieve it from any liability which it may have to any Indemnified Party
otherwise than pursuant to the provisions of this Section 13.4 and shall also
not relieve the Indemnifying Party of its obligations under this Section 13.4,
except to the extent that the Indemnified Party is damaged solely as a result of
the failure to give timely notice. In case any such action is brought against an
Indemnified Party, and it notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled (at its own expense) to
participate in and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense with counsel
satisfactory to such Indemnified Party, of such action and/or to settle such
action and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; provided, however,
that no Indemnifying Party and no Indemnified Party shall enter into any
settlement agreement which would impose any liability on such other party or
parties without the prior written consent of such other party or parties.
13.6 Contribution. If the indemnification provided for in Section
13.5 hereof is unavailable to the Indemnified Party in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) as between the Company and the Holders on the
one hand and the underwriters on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Holders on the
one hand and the underwriters on the other from the offering of the Shares, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Holders on the one hand and of the underwriters on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and each Holder
on the other, in such proportion as is appropriate to reflect the relative fault
of the Company and of each Holder in connection with such statements or
omissions, as well as any other relevant equitable considerations.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 13.6 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 13.5 hereof had been available under
the circumstances.
The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 13.6, no Holder or underwriter
shall be required to contribute any amount in excess of the amount by which (i)
in the case of a Holder, the net proceeds received by such Holder from the sale
of Shares or (ii) in the case of an underwriter, the total price at which the
Shares purchased by it and distributed to the public were offered to the public
exceeds, in any case, the amount of any damages that such Holder or underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
13.7 Survival. The indemnity and contribution agreements contained in
this Section 13 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company and (iii) the consummation of the sale or successive resales of
the Shares.
14. REPLACEMENT OF CONVERTIBLE DEBENTURES.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Convertible Debenture and, in the case
of any such loss, theft, or destruction, upon delivery of a bond of indemnity
satisfactory to the Company or in the case of any such mutilation, upon
surrender and cancellation of such Convertible Debenture, the Company will issue
a new Convertible Debenture of like tenor as if the lost, stolen, destroyed or
mutilated Convertible Debenture were then surrendered for exchange in lieu of
such lost, stolen, destroyed or mutilated Convertible Debenture.
15. AMENDMENT AND WAIVER.
Except as set forth in Article 5, this Agreement may be amended (or any
provision thereof waived) with the consent of the Company and the Holders of at
least sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount
of the Convertible Debentures then outstanding; provided, however, that no such
amendment or waiver shall (i) change the fixed maturity of any Convertible
Debenture, the rate or the time of payment of interest thereon, the principal
amount thereof or the circumstances under which such Convertible Debentures may
be called, converted to redeemed without the consent of the holders of all the
Convertible Debentures then outstanding, (ii) reduce the aforesaid percentage of
Convertible Debentures, the holders of which are required to consent to any
amendment or waiver, without the consent of the holders of all the Convertible
Debentures then outstanding or (iii) increase the percentage of the aggregate
principal amount of the Convertible Debentures that the holders of which may
declare the Convertible Debentures to be due and payable under Article 10
herein, without the consent of the holders of all of the Convertible Debentures
then outstanding or (iv) modify the conversion rights or the Conversion Price
and adjustments thereto (as outlined in Articles 11 and 12 herein) in any
material respect, without the consent of the holders of all of the Convertible
notes then outstanding or (v) alter the registration rights under Article 13
herein in any material respect, without the consent of the holders of all of the
Convertible Debentures then outstanding and all of the Shares outstanding other
than Shares which have been sold in registered public offerings; and provided,
further, that no amendment or waiver of any provision of Article 5 shall be
effective against any holder of Senior Indebtedness who has not consented
thereto. The Company and each holder of a Convertible Debenture then or
thereafter outstanding shall be bound by any amendment or waiver effected in
accordance with the provisions of this Article, whether or not such Convertible
Debenture shall have been marked to indicate such modification but any
Convertible Debenture issued thereafter shall bear a notation as to any such
modification. Promptly after obtaining the written consent of the holders herein
provided, the Company shall transmit a copy of such modification to all of the
holders of the Convertible Debentures then outstanding.
16. HOME OFFICE PAYMENT.
The Company will make payments of principal and interest by check
payable to the order of the Holder duly mailed or delivered to the Holder at the
address of the Holder, or at such other address as the Holder may designate in
writing, or, if requested by the Holder, by wire transfer to its (or its
nominee's) account at any bank or trust company in the United States of America,
notwithstanding any contrary provisions herein or in the Convertible Debenture
with respect to the place of payment. All such payments shall be made in
immediately available funds. The Purchaser agrees that, before the Convertible
Debenture is assigned or transferred, the Purchaser will make or cause to be
made a notation thereof of principal payments previously made thereon and of the
date to which interest thereon has been paid and will notify the Company of the
name and address of the transferee of such Convertible Debenture if such name
and address are known to the Purchaser.
17. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered by
courier or mailed express mail or transmitted by telex, facsimile, or other
means of electronic transmission:
(a) if to the Purchaser, at such Purchaser's address as set forth
in the preamble, or at such other address as may have been furnished to the
Company by the Purchaser in writing; or
(b) if to any other holder of a Convertible Debenture, at such
address as the payee thereof shall have designated to the Company by a written
notice stating that such holder has acquired such Convertible Debenture and
designating such an address, or at such other address as may have been furnished
to the Company by such holder in writing; or
(c) if to the Company, at One Electronic Drive, Trenton, New
Jersey 08619; Attention: Myles M. Kranzler, Chief Executive officer, or at such
other address as may have been furnished to the Purchaser or other holders of
Convertible Debentures in writing by the Company.
18. ENTIRE AGREEMENT.
This Agreement and the Convertible Debentures embody the entire
agreement and understanding between the Purchasers and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
19. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
20. HEADINGS.
The headings of the articles and sections of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof.
21. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of New Jersey, without giving effect to
its conflict of laws rules.
22. COUNTERPARTS.
This Agreement may be signed in any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument. Facsimile signatures shall be deemed acceptable and binding.
23. SEVERABILITY.
Any provision hereof or of the Convertible Debentures which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
24. DEFINITIONS.
The following terms, when used in this Agreement, shall have the
following meanings:
"Affiliate" shall mean any person that controls, is controlled by or
is under common control with the person in question. For purposes hereof,
"control" and the correlative definitions "controlled by" and "under common
control with" shall mean the power and ability to direct the management and
affairs of the person in question, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" has the meaning set forth in the preamble.
"Base Price" means the Closing Price of the Common Stock on the
Business Day immediately prior to the Closing Date.
"beneficial owner" has the meaning set forth in Rule 13d-3 promulgated
by the Commission under the Exchange Act.
"Board" or "Board of Directors" means, with respect to any person
which is a corporation, a joint stock company or a business trust, the board of
directors or other group, however designated, which is charged with legal
responsibility for the management of such person, or any committee of such board
of directors or group, however designated, which is authorized to exercise the
power of such board or group in respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in the State of New Jersey are legally authorized to close.
"Capital Lease" shall mean a lease of property which is capitalized on
the financial statements of the lessee in accordance with generally accepted
accounting principles.
"Closing" has the meaning set forth in Article 3.
"Closing Date" has the meaning set forth in Article 3.
"Closing Price" means (i) the last reported sale price as reported on
the composite tape of the NASDAQ National Market System (or, in case no such
sale takes place on such day, the average of the closing bid and asked prices on
the NASDAQ National Market System) or the successor market or exchange on which
the Common Stock is listed or admitted to trading, or (ii) if the Common Stock
is not listed or admitted to trading on any national securities exchange or on
the NASDAQ National Market System, the average of the highest reported bid and
lowest reported asked price as furnished by NASDAQ, the national Quotation
Bureau, Inc., or comparable system or organization, or (iii) in the absence of
any of the foregoing, the fair market value as determined in good faith by the
Board of Directors of the Company (which determination shall be conclusive).
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Company" means Base Ten Systems, Inc., a New Jersey corporation, and
its successors and assigns, including any successor corporation by merger formed
for the purpose of reincorporating the Company in the State of Delaware.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement, means the aggregate for the Company and its
Subsidiaries of the amounts signified by such term, with intercompany items
eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital of
any such person, other than the parent of such group.
"Conversion Date" has the meaning set forth in Section 11.2.
"Convertible Debentures" has the meaning set forth in Article 1.
"Conversion Price" means 125% of the Base Price, as the same may be
adjusted from time to time in accordance with the terms of this Agreement.
"Demand" has the meaning set forth in Section 13.2.
"Event of Default" has the meaning set forth in Article 10.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"generally accepted accounting principles" means, unless otherwise
stated, generally accepted accounting principles in effect from time to time.
"Holders" has the meaning set forth in Section 13.2.
"Holder's Option" has the meaning set forth in Section 12.1.
"Indebtedness" of any person means and includes, without duplication,
as of any date as of which the amount thereof is to be determined, (i) all
obligations of such person to repay money borrowed (including, without
limitation, all debentures payable and drafts accepted representing extensions
of credit, all obligations evidenced by bonds, debentures or other similar
instruments and all obligations upon which interest charges are customarily
paid), (ii) the value of all Capital Leases (as such term is defined in
accordance with generally accepted accounting principles in effect on the date
of this Agreement) in respect of which such person is liable as lessee or as the
guarantor of the lessee, (iii) the principal amount of all monetary obligations
which are secured by any lien or security interest existing on property owned by
such person whether or not the obligations secured thereby shall have been
assumed by such person, (iv) all guaranties of the Indebtedness of any other
person and (v) all amounts from time to time owing to trade creditors arising in
the ordinary course of such person's business.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Purchaser" has the meaning set forth in the preamble.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" has the meaning set forth in Section 5.7.
"Share" or "Shares" has the meaning set forth in Article 1.
"Solvent" shall mean when used with respect to any person that as of
the date as to which the person's solvency is to be measured:
(a) the fair saleable value of its assets is in excess of
the total amount of its liabilities (including
contingent liabilities as valued in accordance with
applicable law) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able to meet its debts as they mature.
"Subsidiary" means any corporation organized under the laws of the
United States or of any state or of the District of Columbia or any foreign
jurisdiction of which (other than directors' qualifying shares required by law)
at least a majority of the shares of each class of the capital stock entitled to
vote at the time as of which any determination is being made, is owned,
beneficially and of record, by the Company or one or more of its Subsidiaries,
or both.
IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement of the date first written above.
BASE TEN SYSTEMS, INC.
By: /s/ MYLES M. KRANZLER
-----------------------
Name: MYLES M. KRANZLER
Title: Chief Executive Officer
/s/ JESSE L. UPCHURCH
-----------------------
JESSE L. UPCHURCH
<PAGE>
EXHIBIT A
THIS CONVERTIBLE SUBORDINATED DEBENTURE AND THE SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ARE NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN THE
PURCHASE AGREEMENT REFERRED TO HEREIN.
BASE TEN SYSTEMS, INC.
9.01% Convertible Subordinated
Debenture due August 31, 2003
Dated: August ___, 1996
Trenton, New Jersey
FOR VALUE RECEIVED, the undersigned, BASE TEN SYSTEMS, INC. (the
"Company"), a New Jersey corporation, hereby promises to pay to JESSE L.
UPCHURCH or his registered assigns, the principal sum of ----------($---- ) on
August 31, 2003, with interest (computed on the basis of a 360-day year of
twelve 30-day months) on the unpaid balance of such principal sum from the date
hereof at the interest rate of 9.01% per annum, payable semi-annually on the
last day of February and August in each year, commencing on February 28, 1997
(which first interest payment shall be for the period from the date hereof
through February 28, 1997), until the principal hereof shall have become due and
payable, whether at maturity or by acceleration or otherwise.
Payments of principal and interest shall be made in lawful money of
the United States of America at the principal office of the Company in Trenton,
New Jersey or at such other place as the Company shall have designated for such
purpose to the holder hereof in writing and may be paid by check mailed, or wire
transfer as provided in the Purchase Agreement referred to below, to the
registered address designated by the holder hereof for such purpose.
This Convertible Debenture is issued pursuant to a certain Purchase
Agreement (hereinafter called the "Purchase Agreement") dated as of August 8,
1996, between the Company and the Purchaser (capitalized terms not otherwise
defined herein shall have their respective meanings as set forth in the Purchase
Agreement).
This Convertible Debenture is subject to the provisions of and is
entitled to the benefits of the Purchase Agreement. In addition, the payment of
the principal and interest on this Convertible Debenture is subordinated in
right of payment to the prior payment in full of certain other obligations of
the Company to the extent and in the manner set forth in the Purchase Agreement.
Each holder of this Convertible Debenture, by accepting the same, agrees to and
shall be bound by the provisions of the Purchase Agreement.
This Convertible Debenture is transferable only upon the conditions
specified in the Purchase Agreement. Notwithstanding the foregoing, however,
this Debenture is registered with the Company as to both principal and interest
and transfer of this Convertible Debenture can be effected only by surrender of
this Convertible Debenture and either reissuance by the Company of this
Convertible Debenture or by issuance by the Company of a new Convertible
Debenture. The Company shall maintain a register for the registration and
transfer of this Convertible Debenture (the "Schedule"), containing the name and
address of any holder(s) of this Convertible Debenture. All transfers of this
Convertible Debenture and/or transferees of this Convertible Debenture shall be
registered in the Schedule. This Convertible Debenture may be assigned only upon
the surrender thereof at the address of the Company set forth in the Purchase
Agreement. Thereupon, the Company shall execute in the name of the assignee
either a reissued Convertible Debenture or a new Convertible Debenture, shall
register such transfer in the Schedule and shall deliver either a reissued
Convertible Debenture or a new Convertible Debenture to the holder. Upon
surrender or presentation of this Convertible Debenture to the Company for
transfer, this Convertible Debenture shall be duly endorsed and shall specify
the name and address of the transferee.
This Convertible Debenture is convertible into Common Stock of the
Company (as set forth in Articles 11 and 12 of the Purchase Agreement) in the
manner, and upon the terms and conditions, including without limitation, the
anti-dilution provisions, provided in the Purchase Agreement.
In case an Event of Default, as defined in the Purchase Agreement,
shall occur and be continuing, the principal of this Convertible Debenture may
be declared due and payable in the manner and with the effect provided in the
Purchase Agreement.
No reference herein to the Purchase Agreement and no provision hereof
or thereof shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal hereof and interest hereon at
the respective times and places set forth herein and in the Purchase Agreement.
This Convertible Debenture is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State of New Jersey,
without giving effect to its conflict of laws rules.
Subject to the provisions of Article 19 of the Purchase Agreement, the
Company may treat the person in whose name this convertible Debenture is
registered as the owner and holder of this Convertible Debenture for the purpose
of receiving payment of principal and interest on this Convertible Debenture and
for all other purposes whatsoever and the Company shall not be affected by any
notice to the contrary.
IN WITNESS WHEREOF, BASE TEN SYSTEMS, INC. has caused this Convertible
Debenture to be dated, and to be executed on its behalf by its officer thereunto
duly authorized.
BASE TEN SYSTEMS, INC.
By: ---------------------
Name:
Title:
- --------------------------------------------------------------------------------
REGISTER FOR TRANSFERS
Name of Holder Address
-------------- -------
EXHIBIT B
December 22, 1998
Base Ten Systems, Inc.
One Electronics Drive
Trenton, NJ 08619
Re: BaseTen Systems, Inc. (the "Company")
9.01% Convertible Subordinated Debenture
The undersigned holder of (i) the Company's 9.01%
ConvertibleSubordinated Debenture in the principal sum of $4,500,000, dated
August 12, 1996and due August 31, 2003, and (ii) the Company's 9.01% Convertible
SubordinatedDebenture in the principal sum of $5,500,000, dated August 22, 1996
and dueAugust 31, 2003, (collectively referred to as the "9.01% Debenture"),
herebyconsents to the following:
1. The undersigned holder irrevocably consents to the conversion of
theentire 9.01% Debenture upon, and only upon, the exchange of all of the
Company'sSeries A, Convertible Preferred Shares outstanding as of December 1,
1998 intothe Company's Series B, Convertible Preferred Shares. The original
9.01%Debenture is being forwarded to the Company under separate cover in
anticipationof the aforementioned conversion.
2. The undersigned holder consents to the modification of the
9.01%Debenture to decrease the conversion price at which the 9.01% Debenture
isconvertible into shares of Class A Common Stock from $12.50 to $4.00
(asapproved by the Company's shareholders at the Special Meeting held on
November10, 1998), simultaneous with the conversion of the 9.01% Debenture by
theundersigned in accordance with paragraph 1 above.
3. The undersigned holder hereby directs that the Company effect
theconversion of the 9.01% Debenture upon, and only upon, the exchange of all
ofthe Company's Series A, Convertible Preferred Shares outstanding as of
December1, 1998 into the Company's Series B, Convertible Preferred Shares.
Very truly yours,
TRUST C OF THE
CONSTANCE J. UPCHURCH FAMILY TRUST
JESSE L. UPCHURCH
--------------------------------------
Jesse L. Upchurch, Trustee
EXHIBIT C
STOCK PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of the
12th day of November, 1998, by and between BASE TEN SYSTEMS, INC., a New Jersey
corporation with its principal executive offices located at One Electronics
Drive, Trenton, New Jersey 08619 (the "Company") and JESSE L. UPCHURCH, an
individual with an address at c/o Andrew Garrett, Inc., 52 Vanderbilt Avenue,
20th Floor, New York, New York 10017 (the "Purchaser").
The parties hereto, intending to be legally bound, agree as
follows:
1. AUTHORIZATION OF ISSUANCE.
The Company has authorized the issuance and sale of (i) an
aggregate of up to $20,000,000 of its Class A Common Stock, par value $1.00 per
share, (the "Common Stock") at a purchase price of $3.00 per share, and
(ii)50,000 Common Stock Purchase Warrants for each $1,000,000 of Common Stock
purchased.
2. SALE AND PURCHASE.
Subject to the terms and conditions hereof, the Company hereby
sells to the Purchaser, and the Purchaser hereby purchases from the Company, on
the Closing Date, (i) up to 6,666,666 shares of Common Stock (the "Shares"), and
(ii) up to 1,000,000 Common Stock Purchase Warrants (the "Warrants"). The shares
of Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." The Shares, the Warrants and the Warrant Shares are
referred to herein as the "Securities."
3. CLOSING.
The closing (the "Closing") of the purchase and sale of the
Shares and the Warrants will take place within five (5) Business Days following
the date the Company obtains Stockholder Approval or such other time and date as
shall be mutually agreed upon by the Purchaser and the Company. Such time and
date is herein called the "Closing Date." The closing shall occur at the offices
of Pitney, Hardin, Kipp & Szuch, 200 Campus Drive, Florham Park, New
Jersey,07932, or at such other location as may be agreed to by the parties.
On the Closing Date the Company shall deliver to the Purchaser
certificates representing the Shares (or evidence that the Company has
instructed its transfer agent to issue the Shares) and the Warrants against
delivery by the Purchaser to the Company of a certified or official bank
check(s) or wire transfer(s) in an aggregate amount equal to the aggregate
purchase price for the Shares, payable to the order of the Company in
immediately available funds.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants that:
4.1 Organization and Existence, Authority, etc. The Company is
a corporation duly organized and validly existing and in good standing under the
laws of the State of New Jersey, and has all requisite corporate power and
authority to carry on its business as now conducted and proposed to be
conducted; the Company has all requisite corporate power and authority to enter
into this Agreement, to issue the Shares and the Warrants as contemplated herein
and to carry out the provisions and conditions of this Agreement and of the
Warrants. This Agreement and the Warrants have been duly executed and delivered
by, and constitute the valid and binding obligations of, the Company,
enforceable in accordance with their respective terms, subject to the effect of
any applicable bankruptcy, moratorium, insolvency, reorganization or other
similar law affecting the enforce ability of creditors' rights generally and to
the effect of general principals of equity which may limit the availability of
remedies (whether in a proceeding at law or in equity). The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in each jurisdiction in which the conduct of its business or
ownership of its properties would so require, except where the failure to be so
qualified would not have a material adverse effect on its business and financial
condition, taken as a whole.
4.2 Litigation. Except as disclosed in the Company Commission
Filings (as hereinafter defined), to the knowledge of the Company, there is no
action, suit or proceeding pending, or threatened, against the Company before
any court, administrative agency or arbitrator which could reasonably be
expected to result in any material adverse change in the business, properties,
condition (financial or otherwise) of the Company taken as a whole, or which
challenges the validity of any action taken or to be taken pursuant to or in
connection with this Agreement.
4.3 Charter Documents. Neither the execution nor the delivery
of this Agreement, the Shares or the Warrants, nor the consummation of the
transactions contemplated hereby, nor compliance with the terms and provisions
hereof, will conflict with, or result in a breach of or creation of a lien
under, the terms, conditions or provisions of, or constitute a default under,
the charter or by-laws of the Company, as amended, copies of which have been
provided to the Purchaser.
4.4 Authorized and Outstanding Capital Stock. At September
25,1998, the Company had authorized (i) 40,000,000 shares of Class A Common
Stock, par value $1.00 per share, of which 10,477,221 shares were issued and
outstanding, and (ii) 2,000,000 shares of Class B Common Stock, par value $1.00
per share, of which 77,236 shares were issued and outstanding, and (iii)
997,800.9375, shares of preferred stock. Of the preferred stock, 18,177.734375
shares have been designated as Series A Convertible Preferred Stock, par value
$1.00 per share, all of which were issued and outstanding. All of such
outstanding shares of Common Stock and preferred stock have been validly issued
and are fully paid and non-assessable. The Company has authorized (i) the
issuance and sale to the Purchaser of up to an aggregate of 6,666,666 shares of
Common Stock, (ii) the issuance and sale to the Purchaser of up to 1,000,000
Warrants, and (iii) upon conversion of the Warrants, the Warrant Shares. The
Shares and the Warrant Shares, when issued in accordance with the terms of this
Agreement and the Warrants, will be validly issued, fully paid and
non-assessable.
4.5 Broker's and Finder's Fees. The Company will pay all
broker's and finder's fees incurred by the Company in connection with the sale
of the Shares and the Warrants, as described on Schedule 4.5.
4.6 Commission Filings and Financial Statements. The Company
has heretofore made available to the Purchaser true and complete copies of all
reports, registration statements, definitive proxy statements and other
documents (in each case together with all amendments and supplements thereto)
filed by the Company with the Commission since June 30, 1998 (such reports,
registration statements, definitive proxy statements and other documents,
together with any amendments and supplements thereto, are sometimes collectively
referred to as the "Company Commission Filings"). The Company Commission Filings
constitute all of the documents (other than preliminary materials) that the
Company was required to file with the Commission since such date. As of their
respective dates, each of the Company Commission Filings complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as applicable, and the rules and regulations under each such Act,
and none of the Company Commission Filings contained as of such date and untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When filed with the
Commission the financial statements included in the Company Commission Filings
complied as to form in all material respects with the applicable rules and
regulations of the Commission and were prepared in accordance with generally
accepted accounting principles (as in effect from time to time) applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto), and such financial statements fairly present in accordance
with generally accepted accounting principles in all material respects the
financial position of the Company as at the dates thereof and the results of its
operations and its cash flows for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments and the absence of footnotes. Since June 30, 1998, except as
disclosed in the Company Commission Filings filed with the Commission prior to
the date hereof, the Company has not incurred any liability or obligation of any
kind outside of the ordinary course of business, and no other event has
occurred, which in the ordinary course of business, and no other event has
occurred, which in any case or in the aggregate, would have a material adverse
effect on the business, assets, results of operations or financial condition of
the Company.
4.7 Tax Returns and Payments. The Company has filed all tax
returns required by law to be filed by it and has paid all material taxes,
assessments and other governmental charges levied upon the Company and any of
its properties, assets, income or franchises which are due and payable, other
than those presently payable without penalty or interest or those that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established on
the books of the Company in accordance with generally accepted accounting
principles. The charges, accruals and reserves on the books of the Company in
respect of Federal, state and foreign income taxes for all fiscal periods are
adequate in the opinion of the Company, and the Company has not been notified of
any material unpaid assessment for additional Federal, state or foreign income
taxes for any period or any basis for any such assessment for which adequate
provision has not been made in its accounts in accordance with generally
accepted accounting principles.
4.8 Indebtedness. The Company Commission Filings correctly
describe all material secured and unsecured Indebtedness of the Company
outstanding, or for which the Company has commitments, on the date of this
Agreement, and identify in all material respects the collateral securing any
such secured Indebtedness. The Company is not in material default with respect
to the payment of any material Indebtedness or with respect to any instrument or
agreement relating thereto.
4.9 Title to Properties. The Company has good and sufficient
title to its material properties and assets, including the properties and assets
reflected in the financial statements as of and for the period ended June
30,1998 (except properties and assets disposed of since such date in the
ordinary course of business and properties and assets held under Capital
Leases). The Company enjoys peaceful and undisturbed possession under all
material leases necessary in any material respect for the operation of its
material properties and assets, and all such leases are valid and subsisting and
are in full force and effect.
4.10 Compliance with Other Instruments. The Company is not in
violation of any term of its certificate or articles of incorporation or
by-laws, and the Company is not in material violation of any material term of
any material agreement or instrument to which it is a party or by which it is
bound or any material term of any applicable law, ordinance, rule or regulation
of any governmental authority or any material term of any applicable order,
judgment or decree of any court, arbitrator or governmental authority, the
consequences of which violation might have a materially adverse effect on the
business, condition (financial or other), operations, assets or properties of
the Company; the execution, delivery and performance of this Agreement and the
Warrants, will not result in any material violation of or be in material
conflict with or constitute a material default under any such term; and there is
no such term which materially adversely affects the business, condition
(financial or other), operations, assets, or properties of the Company, taken as
a whole.
4.11 Governmental Consent. No material consent, approval or
authorization of, or declaration or filing with, any governmental authority on
the part of the Company or any of its Subsidiaries is required for the valid
execution and delivery of this Agreement or the valid offer, issue, sale and
delivery of the Shares and the Warrants pursuant to this Agreement, except where
the failure to obtain such consent or make such filing would not have a material
adverse effect on the business, operations or assets of the Company, and except
for appropriate filings (i) with the NASDAQ National Market System of an
additional listing application for the Shares and the Warrant Shares, and (ii)
with such state securities commissions in respect of "blue sky" laws as may be
appropriate.
4.12 Use of Proceeds. The Company will apply the net proceeds
of the sale of the Shares as follows: (i) up to $5,000,000 will be utilized for
a stock buy-back program of up to 1,000,000 shares of Common Stock, (ii) up
to$2,000,000 will be applied to possible acquisitions, and (iii) the balance of
the net proceeds will be applied to the Company's continued development of BASE
10(TM)MX and BASE10(TM)CS and for general corporate purposes.
4.13 Solvency. On the Closing Date and after giving effect to
the application of the proceeds of the Shares as specified in Section 4.12, the
Company will be Solvent.
4.14 Disclosure. To the best of the Company's knowledge, there
is no fact (other than matters of a general economic or political nature which
does not affect the Company uniquely) known to the Company which materially
adversely affects the business, condition (financial or other), operations,
assets or properties of the Company which has not been set forth either in the
Company Commission Filings or in this Agreement or in the other documents,
certificates and instruments delivered to the Purchaser by or on behalf of the
Company specifically for use in connection with the transactions contemplated by
this Agreement.
5. REPRESENTATIONS OF THE PURCHASER.
5.1 Representations. (a) The Purchaser hereby represents that
the Purchaser is capable of evaluating the risk of its investment in the Shares
and is able to bear the economic risk of such investment, that it is purchasing
the Shares for its own account and that the Shares are being purchased by the
Purchaser for investment and not with a view to any resale or distribution
thereof. If the Purchaser should in the future decide to dispose of the Shares
(which it does not now contemplate), it is understood that the Purchaser may do
so only in complete compliance with the Securities Act and any applicable state
Blue Sky or securities laws.
(b) The Purchaser hereby represents that the Purchaser is an
"accredited investor" within the meaning of Regulation D of the General Rules
and Regulations promulgated under the Securities Act ("Regulation D"). In
connection therewith, the Purchaser represents and warrants to the Company that
the Purchaser meets either of the following standards for determination of
"accredited investor" status of Regulation D set forth below:
1. A natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of
his purchase exceeds $1,000,000; or
2. A natural person who had an individual income in
excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income
level in the current year.
(c) The Purchaser hereby represents that the Purchaser (i) has
received and carefully reviewed the Company Commission Filings, and (ii) has had
the opportunity to ask questions and receive answers from the Company concerning
the Company Commission Filings and the terms and conditions of the offering of
the Shares and to obtain any documents relating to the Company which are
publicly available and any additional information or documents relating to the
Company which the Company possesses or can acquire without unreasonable effort
or expense.
(d) The Purchaser acknowledges that the Purchaser is aware of
the risks inherent in an investment in the Company and specifically the risks of
an investment in the Shares, and that the Purchaser is capable of bearing a
complete loss of such investment.
(e) The Purchaser hereby represents that the execution,
delivery and performance by it of this Agreement and the purchase by it of the
Shares does not violate any material term of any law, rule, regulation, court
order, judgment or contractual or other obligation applicable to the Purchaser,
the consequences of which violation might have a materially adverse effect on
the business, condition (financial or other), operations, assets or properties
of such Purchaser.
(f) The Purchaser's Schedule 13D and Forms 3, 4 and 5 filings
with the Commission for the periods since June 30, 1998 are all accurate and
complete and have been timely filed with the Commission.
(g) As of September 30, 1998, the Purchaser owns approximately
22.5% of the voting power of the Company, whether directly, indirectly or
beneficially.
6. CONDITIONS TO OBLIGATIONS. The Purchaser's obligation to
purchase the Shares hereunder is subject to satisfaction of the following
conditions at the Closing:
6.1 Stockholder Approval. The Company shall have obtained
Stockholder Approval.
6.2 Accuracy of Representations and Warranties. The
representations and warranties of the Company herein or in any certificate or
document delivered pursuant hereto shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing Date.
6.3 Performance. The Company shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing.
6.4 Officers' Certificate. The Purchaser shall have received a
certificate dated the Closing Date and signed by the President, a Vice President
or Chairman or Vice Chairman of the Company and by the Secretary, the Treasurer,
an Assistant Secretary or an Assistant Treasurer of the Company, to the effect
that the conditions of Sections 6.1, 6.2 and 6.3 hereof have been satisfied.
6.5 Proceedings. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be in form and substance reasonably
satisfactory to the Purchaser, and the Purchaser's counsel, who shall have
received all such originals or certified or other copies of such documents as
they may reasonably request.
6.6 No Litigation. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced and
still be pending, and no investigation by any governmental or regulatory
authority shall have been commenced and still be pending, against the Company
seeking to restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such transactions.
6.7 Purchase Permitted by Applicable Laws. The offering,
issuance, purchase and sale of, and payment for, the Shares to be purchased by
the Purchaser on the Closing Date on the terms and conditions herein provided
(including the use of the proceeds of such Shares by the Company) shall not
violate any law or governmental regulation applicable to the Purchaser.
6.8 Compliance with Securities Laws. The offering and sale of
the Shares at or prior to the Closing under this Agreement shall have compiled
in all material respects with all applicable requirements of federal and state
securities laws.
7. LEGENDS. The Company may endorse on all certificates
evidencing Shares and Warrants Shares (issued upon conversion of the Warrants) a
legend restricting their transfer that shall read as follows: "THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933,AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
ACT OR AN OPINION, IF REQUESTED, OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT"; provided, that if an opinion of
satisfactory counsel which opinion shall be reasonably satisfactory to counsel
for the Company concludes that the legend is no longer necessary, the Company
will deliver upon transfer or exchange Share or Warrant Share certificates
without such legends.
8. REGISTRATION RIGHTS.
8.1 Mandatory Registration. As soon as practical after the
Closing Date, the Company will file a Registration Statement on Form S-3 (if
such form is then available for use by the Company, or if such form is not then
available for use by the Company, another form that is available to the Company)
permitting the registration of the Shares and the Warrant Shares for resale by
the Purchaser in the manner or manners reasonably designated by the Purchaser
(including, without limitation, one or more underwritten offerings). The Company
shall use its best efforts to cause such registration statement to be declared
effective pursuant to the Securities Act as promptly as possible following the
filing thereof, and subject to applicable rules and orders, to keep such
registration statement continuously effective under the Securities Act until the
earlier of (i) the date on which all of the Shares and Warrant Shares have been
sold, or (ii) the date on which the Shares and Warrant Shares (in the opinion of
the Purchaser's counsel) may be immediately sold without registration pursuant
to Rule 144 under the Securities Act (the "Registration Period").
8.2 "Piggyback Registration Rights." At any time prior to
expiration of the Registration Period in the event a Registration Statement
permitting the registration of the Shares and the Warrant Shares for resale by
the Purchaser is not in effect, the Company shall, at least thirty (30) days
prior to the filing of any registration statement under the Securities Act
(other than a registration statement on Form S-8 or Form S-4 or any successor
forms) relating to the public offering of its Common Stock by the Company or any
of its security holders, give written notice of such proposed filing and of the
proposed date thereof to the Purchaser, and if, on or before the twentieth
(20th) day following the date on which such notice is given, the Company shall
receive a written request from the Purchaser requesting that the Company include
among the securities covered by such registration statement some or all of the
Shares or the Warrant Shares held by or to be held after conversion by the
Purchaser, the Company shall include such Shares or Warrant Shares in such
registration statement, if filed, so as to permit such Shares or Warrant Shares
to be sold or disposed of in the manner and on the terms of the offering thereof
set forth in such request.
8.3 Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any registration statement filed pursuant to
Sections8.1 or 8.2 herein, the following provisions shall apply:
(i) If such registration statement shall be filed
pursuant to Section 8.2 hereof and if the managing underwriter advises the
Company in writing that the inclusion in such registration of some or all of the
Shares or Warrant Shares sought to be registered by the Purchaser creates a
substantial risk that the proceeds or price per share that will be derived from
such registration will be reduced or that the number of shares to be registered
at the insistence of the Purchaser, plus the number of shares of Common Stock
sought to be registered by the Company and any other stockholders of the Company
is too large a number to be reasonably sold, then, in such event, the number of
shares sought to be registered for the stockholders of the Company shall be
reduced, pro rata in proportion to the number of shares sought to be registered
to the number of shares recommended be sold by the managing underwriter.
(ii) If requested by the Purchaser in connection
with a registration statement filed pursuant to Section 8.1, the Company will
enter into an underwriting agreement with the underwriters for such offering,
such agreement to be reasonably satisfactory in form and substance to the
Company, the Purchaser and the underwriters, and to contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in such agreements used by the managing underwriter,
including, without limitation, restrictions of sales of Common Stock or other
securities by the Company as may be reasonably agreed to between the Company and
such underwriters, and indemnities and rights to contributions to the effect and
to the extent provided in Sections 9.1 and 9.2 hereof. The Purchaser shall be a
party to any underwriting agreement relating to an underwritten sale of the
Shares or Warrant Shares and may, at the Purchaser's option, require that any or
all of the representations, warranties and covenants of the Company to or for
the benefit of such underwriters, shall also be made to and for the benefit of
the Purchaser. All representations and warranties of the Purchaser shall be made
to or for the benefit of the Company.
(iii) The Company shall provide a transfer agent
and registrar (which may be the same entity) for the Shares and the Warrant
Shares, not later than the effective date of such registration.
(iv) All expenses in connection with the
preparation and filing of a registration statement filed pursuant to Sections
8.1 or 8.2shall be borne solely by the Company, except for any transfer taxes
payable with respect to the disposition of such Shares and Warrant Shares, and
any underwriting discounts and selling commissions applicable solely to such
sales of Shares and Warrant Shares, which shall be paid by the Purchaser.
(v) The Company shall use its best efforts to cause
all of the Shares and Warrant Shares covered by such registration statement to
be quoted on the NASDAQ National Market System if the quoting or listing of such
registered shares is permitted by such exchange.
(vi) Following the effective date of such
registration statement, the Company shall, upon the request of the Purchaser,
forthwith supply such number of prospectuses (including exhibits thereof and
preliminary prospectuses and amendments and supplements thereto) meeting the
requirements of the Securities Act and such other documents as are referred to
in the prospectus as shall be reasonably requested by the Purchaser to permit
the Purchaser to make a public distribution of the Shares and Warrant Shares.
(vii) The Company shall prepare, if necessary, and
file such amendments and supplements to such registration statement filed
pursuant to Sections 8.1 and 8.2 hereof, as may be necessary to keep such
registration statement effective, subject to applicable laws, rules and orders,
during the Registration Period.
(viii) The Purchaser may select the underwriter or
underwriters (which shall be of nationally recognized standing), if any, who are
to undertake any offering and distribution of the Shares and Warrant Shares to
be included in a registration statement filed under the provisions of
Subsection8.2 hereof, subject to the Company's prior approval of the
underwriter, which approval shall not be unreasonably withheld.
(ix) The Company shall use its best efforts to
register the Shares and the Warrant Shares covered by any such registration
statements filed pursuant to Section 8.2 under such securities or Blue Sky laws
in addition to those in which the Company would otherwise sell shares, as the
Purchaser reasonably request, except that neither the Company nor the Purchaser
shall for any such purpose be required to execute a general consent to service
of process or to qualify to do business as a foreign corporation in any
jurisdiction where it is not so qualified. The fees and expenses incurred in
connection with such registration shall be borne by the Company.
(x) The Purchaser shall cooperate fully with the
Company and provide the Company with all information reasonably requested by the
Company for inclusion in the registration statement or as necessary to comply
with the Securities Act. The Company shall cooperate fully with any underwriters
selected by the Purchaser and counsel to such underwriters, and shall provide
reasonable and customary access to the Company's books and records (upon receipt
from such underwriters of customary confidentiality agreements) in order to
facilitate such underwriters' review and examination of the Company in
connection with such underwriting.
(xi) The Company shall notify the Purchaser, at any
time after effectiveness when a prospectus relating thereto is required to be
delivered under the Securities Act within the period mentioned in subdivision
(vii) of this Section 8.3, of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Purchaser shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Purchaser
prepare and furnish the Purchaser promptly a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances than existing.
(xii) The Company shall furnish to the Purchaser at
the time of the disposition of the Shares and the Warrant Shares, a signed copy
of an opinion of the Company's regular in-house or outside general counsel, or
other counsel of the Company's selection reasonably acceptable to, and which
opinion shall be reasonably satisfactory in form and substance to, the Purchaser
to the effect that: (a) a registration statement covering such Shares and
Warrant Shares has been filed with the Commission under the Securities Act and
has been made effective by order of the Commission, (b) said registration
statement and prospectus contained therein comply as to form in all material
respects with the requirements of the Securities Act, and nothing has come to
such counsel's attention (after due inquiry) which would cause such counsel to
believe that either said registration statement or such prospectus contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein (in the case of
such prospectus, in light of the circumstances under which they were made) not
misleading, (c) after due inquiry such counsel knows of no legal or governmental
proceedings required to be described in such registration statement or
prospectus which are not described as required, or of any contracts or documents
of a character required to be described in such registration statement or such
prospectus to be filed as an exhibit to such registration statement or to be
incorporated by reference therein which are not described and filed as required
and (d) to such counsel's knowledge, no stop order has been issued by the
Commission suspending the effectiveness of such registration statement; it being
understood that such opinion may contain such qualifications and assumptions as
are customary in the rendering of similar opinions, and that such counsel may
rely, as to all factual matters treated therein, on certificates of the Company
(copies of which shall be delivered to the Holders).
(xiii) The Company will use its best efforts to
comply with the reporting requirements of Sections 13 and 15(d) of the Exchange
Act, to the extent it shall be required to do so pursuant to such sections, and
at all times while so required shall use its best efforts to comply with all
other public information reporting requirements of the Commission of Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any of the Company's Common Stock held by the Purchaser. The
Company will also cooperate with the Purchaser in supplying such information and
documentation as may be necessary for the Purchaser to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Company Common Stock held by the Purchaser.
<PAGE>
9. INDEMNIFICATION AND CONTRIBUTION; SURVIVAL.
9.1 Indemnification.
(i) In the event of the registration of any shares
or Warrant Shares under the Securities Act pursuant to the provisions of
Sections 8.1 or 8.2, the Company agrees to indemnify and hold harmless the
Purchaser, each underwriter, broker or dealer, if any, and their directors,
officers and employees, of such Shares or Warrant Shares, and each other person,
if any, who controls Purchaser, such underwriter, broker or dealer within the
meaning of the Securities Act, from and against any and all losses, claims,
damages for liabilities (or actions in respect thereof), joint or several, to
which the Purchaser (and as applicable) its directors, officers or employees, or
such underwriter, broker or dealer or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities for actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such shares were registered under the
Securities Act, any preliminary prospectus or final prospectus relating to such
Shares or Warrant Shares, or any amendment or supplement thereof, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of any rule or
regulation under the Securities Act applicable to the Company or relating to any
action or inaction required by the Company in connection with any such
registration and will reimburse the Purchaser, each such underwriter, broker or
dealer and controlling person, and their directors, officers or employees, for
any legal or other expenses reasonably incurred by the Purchaser or such
underwriter, broker or dealer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, such preliminary prospectus, such
final prospectus or such amendment or supplement thereto in reliance upon and
inconformity with written information furnished to the Company by the Purchaser
and as applicable, such Purchaser's directors, officers or employees, or such
underwriter, broker, dealer or controlling person for use in the preparation
thereof. Such indemnity shall remain in full effect irrespective of any
investigation by any person indemnified above.
(ii) In the event of the registration of any
Shares or Warrant Shares of the Purchaser under the Securities Act for sale
pursuant to the provisions of this Agreement, the Purchaser agrees to indemnify
and hold harmless the Company, its directors, officers and employees, from and
against any losses, claims, damages or liabilities, joint or several, to which
the Company, its directors, officers or employees, may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Shares or Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus relating to such Shares or Warrant Shares, or any amendment or
supplement thereof, or arise out of or are based upon omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser for use in the preparation thereof. Such indemnity
shall remain in full effect irrespective of any investigation by any person
indemnified above.
(iii) Promptly after receipt by a person entitled
to indemnification under this Section 9.1 (for purposes of this Section 9.1, an
"Indemnified Party") of notice of the commencement of any action or claim
relating to any registration statement filed under Sections 8.1 or 8.2 or as to
which indemnity may be sought hereunder, such Indemnified Party will, if a claim
for indemnification hereunder in respect thereof is to be made against any other
party hereto (for purposes of this Section 9.1, an "Indemnifying Party"), give
written notice to such Indemnifying Party of the commencement of such action or
claim, but the failure to so notify the Indemnifying Party will not relieve it
from any liability which it may have to any Indemnified Party otherwise than
pursuant to the provisions of this Section 9.1 and shall also not relieve the
Indemnifying Party of its obligations under this Section 9.1, except to the
extent that the Indemnified Party is damaged solely as a result of the failure
to give timely notice. In case any such action is brought against an Indemnified
Party, and it notifies an Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled (at its own expense) to participate in and,
to the extent that it may wish, jointly with any other Indemnifying Party
similarly notified, to assume the defense with counsel satisfactory to such
Indemnified Party, of such action and/or to settle such action and, after notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume the defense thereof, the Indemnifying Party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, other than the
reasonable cost of investigation; provided, however, that no Indemnifying Party
and no Indemnified Party shall enter into any settlement agreement which would
impose any liability on such other party or parties without the prior written
consent of such other party or parties.
9.2 Contribution. If the indemnification provided for in
Section 9.1 hereof is unavailable to the Indemnified Party in respect of any
losses, claims, damages or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) as between the Company and
the Purchaser on the one hand and the underwriters on the other, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Purchaser on the one hand and the underwriters on the other from
the offering of the Shares and the Warrant Shares, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company and the
Purchaser on the one hand and of the underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations and (ii)
as between the Company on the one hand and each Purchaser on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
each Purchaser in connection with such statements or omissions, as well as any
other relevant equitable considerations.
In no event shall the obligation of any Indemnifying
Party to contribute under this Section 9.2 exceed the amount that such
Indemnifying Party would have been obligated to pay by way of indemnification if
the indemnification provided for under Section 9.1 hereof had been available
under the circumstances.
The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the next
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9.2, neither the Purchaser nor
the underwriter shall be required to contribute any amount in excess of the
amount by which (i) in the case of a Purchaser, the net proceeds received by the
Purchaser from the sale of Shares or the Warrant Shares or (ii) in the case of
an underwriter, the total price at which the Shares purchased by it and
distributed to the public were offered to the public exceeds, in any case, the
amount of any damages that the Purchaser or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
9.3 Survival. The indemnity and contribution agreements
contained in this Section 9 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified Party
or by or on behalf of the Company and (iii) the consummation of the sale or
successive resales of the Shares and the Warrant Shares.
10. AMENDMENT AND WAIVER.
No waiver, amendment, modification or supplement of this
Agreement will be binding upon the Company or the Purchaser unless such waiver,
amendment, modification or supplement is set forth in writing and is executed by
such party.
11. NOTICES.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered by courier or mailed express mail or transmitted by telex, facsimile,
or other means of electronic transmission:
(a) if to the Purchaser, at such Purchaser's address as
set forth in the preamble, or at such other address as may have been furnished
to the Company by the Purchaser in writing; or
(b) if to the Company, at One Electronic Drive, Trenton,
New Jersey 08619; Attention: Thomas E. Gardner, Chairman, Chief Executive
Officer and President, or at such other address as may have been furnished to
the Purchaser in writing by the Company.
12. ENTIRE AGREEMENT.
This Agreement and the Warrants embody the entire
agreement and understanding between the Purchasers and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
13. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not.
14. HEADINGS.
The headings of the articles and sections of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof.
15. GOVERNING LAW.
This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New Jersey, without
giving effect to its conflict of laws rules.
16. COUNTERPARTS.
This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument. Facsimile signatures shall be deemed acceptable and
binding.
17. SEVERABILITY.
Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. DEFINITIONS.
The following terms, when used in this Agreement, shall
have the following meanings:
"Affiliate" shall mean any person that controls, is
controlled by or is under common control with the person in question. For
purposes hereof, "control" and the correlative definitions "controlled by" and
"under common control with" shall mean the power and ability to direct the
management and affairs of the person in question, whether through the ownership
of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the preamble.
"beneficial owner" has the meaning set forth in Rule
13d-3 promulgated by the Commission under the Exchange Act.
"Board" or "Board of Directors" means, with respect to
any person which is a corporation, a joint stock company or a business trust,
the board of directors or other group, however designated, which is charged with
legal responsibility for the management of such person, or any committee of such
board of directors or group, however designated, which is authorized to exercise
the power of such board or group in respect of the matter in question.
"Business Day" means any day other than a Saturday,
Sunday or other day on which banks in the State of New Jersey are legally
authorized to close.
"Capital Lease" shall mean a lease of property which is
capitalized on the financial statements of the lessee in accordance with
generally accepted accounting principles.
"Closing" has the meaning set forth in Article 3.
"Closing Date" has the meaning set forth in Article 3.
"Commission" means the Securities and Exchange
Commission and any other similar or successor agency of the federal government
administering the Securities Act or the Exchange Act.
"Company" means Base Ten Systems, Inc., a New Jersey
corporation, and its successors and assigns, including any successor corporation
by merger formed for the purpose of reincorporating the Company in the State of
Delaware.
"Consolidated" or "consolidated", when used with
reference to any financial term in this Agreement, means the aggregate for the
Company and its Subsidiaries of the amounts signified by such term, with
intercompany items eliminated and, with respect to earnings, after eliminating
the portion of earnings properly attributable to minority interests, if any, in
the capital of any such person, other than the parent of such group.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"generally accepted accounting principles" means, unless
otherwise stated, generally accepted accounting principles in effect from time
to time.
"Indebtedness" of any person means and includes, without
duplication, as of any date as of which the amount thereof is to be determined,
(i) all obligations of such person to repay money borrowed (including, without
limitation, all debentures payable and drafts accepted representing extensions
of credit, all obligations evidenced by bonds, debentures or other similar
instruments and all obligations upon which interest charges are customarily
paid), (ii) the value of all Capital Leases (as such term is defined in
accordance with generally accepted accounting principles in effect on the date
of this Agreement) in respect of which such person is liable as lessee or as the
guarantor of the lessee, (iii) the principal amount of all monetary obligations
which are secured by any lien or security interest existing on property owned by
such person whether or not the obligations secured thereby shall have been
assumed by such person, (iv) all guaranties of the Indebtedness of any other
person and (v) all amounts from time to time owing to trade creditors arising in
the ordinary course of such person's business.
"NASDAQ" means the National Association of Securities
Dealers Automated Quotation System.
"Purchaser" has the meaning set forth in the preamble.
"Securities Act" means the Securities Act of 1933, as
amended.
"Share" or "Shares" has the meaning set forth in Article
1.
"Solvent" shall mean when used with respect to any
person that as of the date as to which the person's solvency is to be measured:
(a) the fair saleable value of its assets is in excess
of the total amount of its liabilities (including
contingent liabilities as valued in accordance
with applicable law) as they become absolute and
matured;
(b) it has sufficient capital to conduct its business;
and
<PAGE>
(c) it is able to meet its debts as they mature.
"Stockholder Approval" means such approvals of the
Company's stockholders as may be required to issue the Shares and the Warrants.
"Subsidiary" means any corporation organized under the
laws of the United States or of any state or of the District of Columbia or any
foreign jurisdiction of which (other than directors' qualifying shares required
by law) at least a majority of the shares of each class of the capital stock
entitled to vote at the time as of which any determination is being made, is
owned, beneficially and of record, by the Company or one or more of its
Subsidiaries, or both.
IN WITNESS WHEREOF, the parties hereto have executed
this Stock Purchase Agreement of the date first written above.
BASE TEN SYSTEMS, INC.
/S/ THOMAS E. GARDNER
By: -----------------------------------
Name: Thomas E. Gardner
Title: Chairman & CEO
/s/ JESSE L. UPCHURCH
----------------------------------------
JESSE L. UPCHURCH
<PAGE>
Schedule 4.5
Brokers and Finders Fees
Andrew Garrett, Inc. will receive commissions equal to 6% of the
aggregate purchase price. Andrew Garrett, Inc., and/or its assignees and/or
designees, will receive warrants to purchase 12,500 shares of Class A Common
Stock for each $1 million of Class A Common Stock purchased.
<PAGE>
FORM OF WARRANT CERTIFICATE
No. Warrant to Purchase __________ Shares
of Class A Common Stock
BASE TEN SYSTEMS, INC.
Class A Common Stock Purchase Warrant
[DATE]
NEITHER THIS WARRANT NOR THE SHARES OF CLASS A COMMON
STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT
WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR BASE TEN
SYSTEMS, INC. RECEIVES AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE
TO BASE TEN SYSTEMS, INC. AND ITS COUNSEL THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.
THIS CERTIFIES THAT _____________ (hereinafter sometimes
called the "Holder") is entitled to purchase from BASE TEN SYSTEMS, INC., a New
Jersey corporation (the "Company"), at the price and during the period herein
after specified, up to ___________ shares (the "Warrant Shares") of the
Company's Class A Common Stock, $1.00 par value (the "Common Stock").
This Warrant is subject to adjustment in accordance with
Paragraph 9 hereof.
1. a. Exerciseability.
The rights represented by this Warrant shall
be exercisable for a period of seven (7) years commencing on the date of grant
(the "Exercise Period"). After expiration of the Exercise Period the Holder
shall have no right to purchase any shares of Common Stock underlying the
Warrant and the Warrant shall terminate.
b. Exercise Price.
The rights represented by this Warrant shall
be exercisable at a purchase price of $3.00 per share (the "Exercise Price"),
subject to adjustment in accordance with Paragraph 8.
2. The rights represented by this Warrant may be
exercised at any time within the Exercise Period above specified, in whole or in
part, by (i) the surrender of this Warrant (with the exercise form at the end
hereof properly executed) at the principal executive office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company); and (ii )payment to the Company of the Exercise Price then in effect
for the number of shares of Common Stock specified in the above-mentioned
exercise form together with applicable stock transfer taxes, if any. This
Warrant shall be deemed to have been exercised, in whole or in part to the
extent specified, on the close of business on the date this Warrant is
surrendered and payment is made in accordance with the foregoing provisions of
this Paragraph 2, and the person or persons in whose name or names the
certificates for shares of Common Stock shall be issuable upon such exercise
shall become the holder or holders of record of such shares of Common Stock so
purchased shall be delivered to such person or persons within a reasonable time,
not exceeding thirty (30) days, after this Warrant shall have been exercised.
3. Holder understands that, except as set forth in
Paragraph 6 hereof, neither the Warrant nor the underlying Warrant Shares will
be registered under the Securities Act and that they must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
or the transaction is exempt from registration. The certificate or certificates
representing any Warrant Shares shall bear the following restrictive legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF (i)
AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT; OR (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT (OR SIMILAR RULE UNDER THE
SECURITIES ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (iii) AN OPINION OF
COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT IS AVAILABLE."
4. The Company covenants and agrees that all shares of
Common Stock which may be issued upon exercise of this Warrant will, upon
issuance, be duly and validly issued, fully paid and nonassessable and no
personal liability will attach to the Holder thereof. The Company further
covenants and agrees that during the Exercise Period, the Company will at all
times have authorized and reserved a sufficient number of shares of its Common
Stock to provide for the exercise of this Warrant.
5. The Warrant shall not entitle the Holder to any
rights, including, without limitation, voting rights, as a stockholder of the
Company.
6. This Warrant and all rights hereunder shall not be
transferred, sold, assigned or hypothecated at any time without the prior
written consent of the Company. This Warrant and all the rights hereunder shall
be binding upon and inure to the benefit of the parties hereto and the
irrespective successors, approved assigns and approved transferees.
7. If, at any time during the Exercise Period, there
shall be any capital reorganization, reclassification of Common Stock (other
than a change in par value or from par value to no par value or from no par
value to par value as a result of a stock dividend or subdivision, split-up or
combination of shares), the consolidation or merger of the Company with or into
another corporation or of the sale of all or substantially all the properties
and assets of the Company as an entirety to any other corporation or person, the
unexercised portion of this Warrant shall, after such reorganization,
reclassification, consolidation, merger or sale, be exercisable for the kind and
number of shares of stock or other securities or property of the Company, or of
the corporation resulting from such consolidation or surviving such merger, to
which the Holder would have been entitled if the Holder had held shares of
Common Stock issuable upon the exercise hereof immediately prior to such
reorganization, reclassification, consolidation, merger or sale. The provisions
of this Paragraph 7 shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers and sales.
8. The Exercise Price and Exercise Period in effect at
anytime and the number and kind of securities purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the happening
of certain events as follows:
a. If, at any time during the Exercise
Period, the Company shall (i) declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect at the time of the
effective date or record date, as the case may be, for such sale, dividend or
distribution or of the effective date of such subdivision, combination or
reclassification shall be appropriately adjusted by the Company.
b. Whenever the Exercise Price payable upon
exercise of this Warrant is adjusted pursuant to Paragraph 8(a) above, the
number of Warrant Shares shall be appropriately and equally adjusted by the
Company at the same time.
c. Notwithstanding any adjustment in the
Exercise Price or the number or kind of shares of Common Stock purchasable upon
the exercise of this Warrant, certificates for Warrants issued prior or
subsequent to such adjustment may continue to express the same price and number
and kind of shares of Common Stock as are initially issuable pursuant to this
Warrant.
d. The Company may, but under no
circumstances is obligated to, modify the terms of this Warrant to extend the
Exercise Period, or to lower the Exercise Price, at any time prior to the
expiration of this Warrant.
9. This Agreement shall be governed by and in accordance
with the laws of the State of New Jersey.
IN WITNESS WHEREOF, BASE TEN SYSTEMS, INC. has caused
this Warrant to be signed by its duly authorized officer as of the date set
forth on the first page hereof.
BASE TEN SYSTEMS, INC.
By:_____________________________________
Name:
Title:
<PAGE>
BASE TEN SYSTEMS, INC.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the rights of
purchase represented by the within Warrant for, and to purchase
thereunder_________ shares of Class A Common Stock (the "Shares") provided for
therein, and requests that certificates for the Shares be issued in the name of:
- -------------------------------------------------------------------------------
(Please Print Name, Address and Social Security Number)
- --------------------------------------------------------------------------------
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant certificate for the balance of the Shares purchasable under
the within Warrant certificate be registered in the name of the undersigned
Holder or his Assignee as below indicated and delivered to the address stated
below.
Dated: ________________, 19____
Name of Holder or Permitted Assignee (Please Print):_________________________
Address:________________________________________________________________________
Signature:______________________________________________________________________
Signature Guaranteed:
Note: The above signature must correspond with the name as written upon
the face of this Warrant certificate in every particular, without
alteration or enlargement or any change whatever, unless this
Warrant has been assigned in accordance with the terms of the
Warrant.
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
(Please Print Name, Address and Social Security Number)
- --------------------------------------------------------------------------------
the within Warrant, hereby irrevocably constituting and appointing
___________________ Attorney to transfer said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated: ______________, 19____ ____________________________________
Signature of Registered Holder
Signature Guaranteed:
Note: The above signature must correspond with the name as written upon
the face of this Warrant certificate in every particular, without
alteration or enlargement or any change whatever, unless this
Warrant has been assigned.
EXHIBIT D
JOINT FILING AGREEMENT
----------------------
The undersigned, and each of them, do hereby agree and consent to the
filing of a single statement on Schedule 13D and amendments thereto in
accordance with the provisions of Rule 13d-1(k)(1) of the Securities Exchange
Act of 1934.
Dated: April 1, 1999
/s/ Jesse L. Upchurch
---------------------------
Signature
Name: Jesse L. Upchurch
/s/ Drew Sycoff
---------------------------
Signature
Name: Drew Sycoff
