SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 30,
1997, by and among BASE TEN SYSTEMS, INC., a New Jersey corporation, with
headquarters located at Xxx Xxxxxxxxxxx Xxxxx, X.X. Xxx 0000, Xxxxxxx, Xxx
Xxxxxx 00000 (the "Company"), and the purchaser or the purchasers (collectively,
the "Purchasers") set forth on the execution page(s) hereof.
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
B. Each Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, a unit (each, a "Unit") consisting of (i) a
convertible debenture in the principal amount of $100,000 of the Company, in the
form attached hereto as Exhibit A (the "Debenture"), convertible into shares of
the Company's Class A common stock, par value $1.00 per share (the "Class A
Common Stock") and (ii) a warrant (the "Warrant"), in the form attached hereto
as Exhibit B, to acquire 1,800 shares of Common Stock. The shares of Class A
Common Stock issuable upon conversion of or otherwise pursuant to the Debentures
are referred to herein as the "Conversion Shares" and the shares of Class A
Common Stock issuable upon exercise of or otherwise pursuant to the Warrants are
referred to herein as the "Warrant Shares." The Debentures, Warrants, Conversion
Shares and Warrant Shares are collectively referred to herein as the
"Securities"; and
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS
a. Purchase Price. The purchase price (the "Purchase Price") per Unit
shall be equal to $100,000.
b. Form of Payment. At the Closing (as defined below), each Purchaser
shall pay the aggregate Purchase Price for the number of Units being purchased
by such Purchaser at the Closing (as set forth on the signature page hereto) by
wire transfer to the Company, in accordance with the Company's written wiring
instructions, against delivery of the duly executed Debentures and Warrants
being purchased by such Purchaser hereunder and the Company shall deliver such
Debentures and Warrants against receipt of such aggregate Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units pursuant to this Agreement (the "Closing")
shall be 12:00 noon Eastern Time on May 30, 1997, or such other time, as may be
mutually agreed upon by the Company and the Purchasers (the "Closing Date"). The
Closing shall occur at the offices of Klehr, Harrison, Xxxxxx, Xxxxxxxxx &
Xxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company that:
a. Investment Purpose. Purchaser is purchasing the Units for
Purchaser's own account for investment only and not with a present view towards
the public sale or distribution thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Purchaser understands that Purchaser must
bear the economic risk of this investment indefinitely, unless the Securities
are registered pursuant to the Securities Act and any applicable state
securities or blue sky laws or an exemption from such registration is available,
and that the Company has no present intention of registering any such Securities
other than as contemplated by the Registration Rights Agreement. Notwithstanding
anything in this Section 2(a) to the contrary, by making the representations
herein, the Purchaser does not agree to hold the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act.
b. Accredited Investor Status. Purchaser is an "Accredited Investor" as
that term is defined in Rule 501(a)(3) of Regulation D. Purchaser was not formed
for the specific purpose of purchasing the Units.
c. Reliance on Exemptions. Purchaser understands that the Units are
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and the rules, regulations and policies governing registration and resale
thereof and that the Company is relying upon the truth and accuracy of, and
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Units.
d. Information. Purchaser and its advisors, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Units which have been
requested by Purchaser or its counsel. Purchaser and its counsel, if any, have
been afforded the opportunity to ask questions of the Company and have received
what Purchaser believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
Purchaser or its counsel or any of its representatives shall modify, amend or
affect Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below. PURCHASER UNDERSTANDS THAT PURCHASER'S INVESTMENT
IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
e. Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Purchaser understands that (i) the Securities
have not been and except as provided in the Registration Rights Agreement, are
not being registered under the Securities Act or any state securities laws, and
may not be transferred unless (a) subsequently registered thereunder, or (b)
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope reasonably satisfactory to the
Company, the cost of which shall be borne by the Purchaser) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration or (c) sold pursuant to Rule 144 promulgated
under the Securities Act (or a successor rule) ("Rule 144"); (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any resale
of such Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to, and in accordance with the
terms and conditions of, the Registration Rights Agreement).
g. Legends. Purchaser understands that the Debentures, Warrants and,
until such time as the Conversion Shares and the Warrant Shares have been
registered under the Securities Act as contemplated by the Registration Rights
Agreement or otherwise may be sold by Purchaser pursuant to Rule 144 without any
restriction as to the public resale thereof, the certificates for the Conversion
Shares and the Warrant Shares will bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
the certificates for such Securities):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under the Act, or an opinion of counsel,
in form, substance and scope reasonably satisfactory to the Company,
that registration is not required under the Act or unless sold pursuant
to Rule 144(k) under the Act.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Sec urity is registered under the Securities Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
reasonably satisfactory to the Company (the cost of which shall be borne by such
holder), to the effect that a public sale or transfer of such Security may be
made without registration under the Securities Act or (c) such holder provides
the Company with reasonable assurances that such Security can be sold pursuant
to Rule 144 without any restriction as to the number of Securities acquired as
of a particular date that can then be immediately sold. Purchaser agrees to
comply with all applicable prospectus delivery requirements, if any. In the
event the above legend is removed from any Security and thereafter the
effectiveness of a registration statement covering such Security is suspended or
the Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to Purchaser the
Company may require that the above legend be placed on any such Security that
cannot then be sold pursuant to an effective registration statement or Rule 144
without any restriction as to the number of Securities acquired as of a
particular date that can then be immediately sold, which legend shall be removed
when such Security may be sold pursuant to an effective registration statement
or Rule 144 without any restriction as to the number of Securities acquired as
of a particular date that can then be immediately sold. Purchaser agrees to take
all actions reasonably necessary to comply with the provisions of this
paragraph, including, without limitation, submitting the Security to the Company
or its transfer agent for the purpose of affixing or removing such legend.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
i. Residency. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the signature page hereto executed by such
Purchaser.
j. No Brokers. Other than dealings with The Tail Wind Fund, the
Purchasers have taken no action which would give rise to any claim by any person
for brokerage commissions, finder fees or similar payments by the Company
relating to this Agreement or the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
where the failure so to qualify would have a Material Adverse Effect. "Material
Adverse Effect" means any material adverse effect on the operations, properties,
financial condition or prospects of the Company and its subsidiaries on a
consolidated basis or on the transactions contemplated hereby.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Debentures, the Warrants and the Registration Rights Agreement, to issue and
sell the Debentures and Warrants in accordance with the terms hereof, to issue
the Conversion Shares upon conversion of the Debentures and to issue the Warrant
Shares upon exercise of the Warrants, in accordance with the terms thereof; (ii)
the execution, delivery and performance of this Agreement, the Debentures, the
Warrants and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Debentures, the issuance and
reservation for issuance of the Conversion Shares issuable upon conversion
thereof and the reservation for issuance and the issuance of the Warrant Shares
issuable upon exercise of the Warrants) have been duly authorized by the
Company's Board of Directors and, except as set forth on Schedule 3(b) hereof,
no further consent or authorization of the Company, its Board or Directors, and
its shareholders is required (under Rule 4460(i) promulgated by the National
Association of Securities Dealers, Inc. ("NASD") or otherwise); (iii) this
Agreement has been duly executed and delivered by the Company; and (iv) this
Agreement constitutes, and, upon execution and delivery by the Company of the
Registration Rights Agreement, the Debentures and the Warrants, such agreements
will constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their terms.
c. Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Debentures and the Warrants) exercisable
for, or convertible into or exchangeable for any shares of capital stock and the
number of shares to be reserved for issuance upon conversion of the Debentures
and exercise of the Warrants is set forth on Schedule 3(c). All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
(including the Conversion Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except as disclosed in Schedule 3(c) or as
contemplated herein, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement). The Company has
furnished to each Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws as in effect on the date hereof (the
"By-laws"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company. The Company shall provide each Purchaser with a written update of this
representation signed by the Company's Chief Executive Officer or Chief
Financial Officer on behalf of the Company as of the Closing Date.
d. Issuance of Shares. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance, and, upon conversion of the
Debentures and exercise of the Warrants in accordance with the terms thereof,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights of stockholders of the Company.
e. No Conflicts. Except as disclosed in Schedule 3(e), the execution,
delivery and performance of this Agreement, the Registration Rights Agreement,
the Debentures and the Warrants by the Company, and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Debentures, Warrants, Conversion Shares and Warrant Shares) will not (i) result
in a violation of the Certificate of Incorporation or By-laws or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations) applicable to
the Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its subsidiaries is in default (and no event
has occurred which, with notice or lapse of time or both, would put the Company
or any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for possible defaults or rights as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Debentures or the Warrants, in each case in accordance with the
terms hereof or thereof. Except as disclosed in Schedule 3(e), the Company is
not in violation of the listing requirements of the NASDAQ National Market
("NASDAQ") and does not reasonably anticipate that the Class A Common Stock will
be delisted by NASDAQ in the foreseeable future.
f. SEC Documents, Financial Statements. Except as disclosed in Schedule
3(f), since April 30, 1994, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (all of the foregoing filed prior to the date
hereof and after April 30, 1994, and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). The Company has delivered to each Purchaser true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, as amended or supplemented, at the
time they were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of the Company
included in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
g. Absence of Certain Changes. Since October 31, 1996, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in Schedule 3(g) or in the SEC Documents.
h. Absence of Litigation. Except as disclosed in the SEC Documents or
Schedule 3(h), there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such which would have a Material Adverse Effect.
i. Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof and otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
j. Acknowledgment Regarding Purchasers' Purchase of Units. The Company
acknowledges and agrees that none of the Purchasers or their affiliates are
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the transactions contemplated
hereby, and any advice given by any Purchaser, or any of their representatives,
affiliates or agents, in connection with this Agreement and the transactions
contemplated hereby is merely incidental to each Purchaser's purchase of Units.
The Company further represents to each Purchaser that the Company's decision to
enter into this Agreement has been based solely on an independent evaluation by
the Company and its representatives.
k. Current Registration Form. The Company is currently eligible to
register the resale of its Class A Common Stock on a registration statement on
Form S-3 under the Securities Act.
l. No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
m. No Integrated Offering. Neither the Company, nor, to the Company's
best knowledge, any of its affiliates, or any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offerers to buy any security under circumstances that would
require registration of the Securities being offered hereby under the Securities
Act.
n. No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with Tail Wind Inc. whose commissions
and fees in the aggregate amount of the product of (i) .05 and (ii) the
aggregate Purchase Price for the number of Units purchased pursuant to this
Agreement will be paid by the Company at the Closing.
o. Acknowledgment of Dilution. The number of Conversion Shares issuable
upon conversion of the Debentures may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the Class
A Common Stock declines. The Company acknowledges that its obligation to issue
Conversion Shares upon conversion of the Debentures in accordance with the
Debentures is absolute and unconditional, regardless of the dilution that such
issuance may have on the ownership interests of other stockholders.
p. Intellectual Property. Except for information which is in the public
domain, each of the Company and its subsidiaries owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted
and as described in the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1996. Neither the Company nor any subsidiary of the Company
infringes or is in conflict with any right of any other person with respect to
any Intangibles which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
q. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
4. COVENANTS.
a. Commercially Reasonable Efforts. The parties shall use all
commercially reasonable efforts timely to satisfy each of the conditions
described in Sections 6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Purchasers promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
c. Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
d. Use of Proceeds. The Company shall use the proceeds from the sale of
the Units as set forth on Schedule 4(d); provided, however, that the Company
shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person
(except in connection with its direct subsidiaries).
e. Additional Equity Capital; Right of First Offer. The Company agrees
that, so long as any Debentures or Warrants are outstanding, without the prior
written consent of the Purchasers, it will not consummate any additional equity
financing (including debt financing with an equity component) in any form having
Class A Common Stock registration rights and/or public resale rights, which
rights are effective within 270 days after the Closing Date. Notwithstanding
anything to the contrary in the immediately preceding sentence, the limitations
contained therein shall not restrict the Company's ability to satisfy any
contractual obligations existing as of the date hereof as such are disclosed on
Schedule 3(c) hereto. In addition, during the 360 day period beginning on the
Closing Date, the Company will not conduct any offering or sale or enter into an
agreement to conduct a sale (a "Floating Discount Offering") of any of its Class
A Common Stock or securities which are convertible into or exchangeable or
exercisable for Class A Common Stock based on a sales, conversion, exchange or
exercise price calculated as a discount to the trading price of the Class A
Common Stock during a specified period unless it shall have first delivered to
each Purchaser, at least five (5) business days prior to the closing of such
Floating Discount Offering, written notice describing the proposed Floating
Discount Offering, including the terms and conditions thereof, and providing
each Purchaser and its affiliates, an option during the five (5) business day
period following receipt of such notice by the Purchasers to purchase all or any
portion of such Purchaser's Applicable Percentage (as defined below) of the
securities being offered in the Floating Discount Offering on the same terms as
contemplated by such Floating Discount Offering (the limitations referred to in
this sentence are collectively referred to as the "Floating Discount
Limitations"). The Floating Discount Limitations shall not apply to (i) the
issuance of securities in connection with a strategic merger, consolidation,
acquisition or sale of assets, or in connection with any strategic partnership
or joint venture, or in connection with the disposition or acquisition of a
business, product or license by the Company or exercise of options by employees,
consultants or directors, (ii) the issuance of securities pursuant to an
underwritten public offering with the financial institution or its affiliates as
has been disclosed to the Purchasers in writing as of the date hereof or (iii)
any public offering to effect a Prepayment at Borrower's Election (as defined in
the Debenture). For purposes of this Section 4(e), "Applicable Percentage" at
any time with respect to any Purchaser shall mean the percentage obtained by
dividing (x) the aggregate number of Conversion Shares then owned by, or
issuable upon conversion of Debentures to, such Purchaser by (y) the aggregate
number of Conversion Shares then outstanding or issuable to all Purchasers
(determined as set forth in clause (x) of this sentence).
Notwithstanding any Purchaser's exercise or failure to
exercise all or a portion of their rights granted pursuant to this Section 4(e),
if the Company, at any time during the 360 day period beginning on the Closing
Date, consummates or enters into an agreement to consummate any additional
equity financing (including debt financing with an equity component) with any
third party on terms which vary from the terms of the transactions contemplated
hereby or which grants rights to the purchasers therein which vary from the
rights granted to the Purchasers in connection with the transactions
contemplated hereby (collectively, the "Subsequent Benefits"), each Purchaser
shall have the right, exercisable in its sole discretion, by providing the
Company with written notice not later than forty five (45) days of the receipt
by such Purchaser of all applicable documentation governing such equity
financing ("Applicable Documentation"), to amend the Securities, this Agreement
and/or any other agreements entered into in connection herewith in such a manner
so as to afford such Purchaser with any or all such Subsequent Benefits. The
Company shall send to each Purchaser who, at the time of consummation of such
equity financing owns any Debentures or Warrants, copies of such Applicable
Documentation as soon as practicable following consummation of such equity
financing. The Company agrees that it shall execute and deliver any and all
documents, take all actions and do, or cause to be done, all other things
necessary to afford the Purchasers with the Subsequent Benefits.
f. Expenses. At the Closing, the Company shall pay Eighteen Thousand
Dollars ($18,000) to Tail Wind Inc. in consideration of the expenses incurred by
Tail Wind Inc. in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement.
g. Financial Information. The Company agrees to send the following
reports to each Purchaser until such Purchaser transfers, assigns or sells all
of its Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its
proxy statements and any Current Reports on Form 8-K; and (ii) within three (3)
days after release, copies of all press releases issued by the Company or any of
its subsidiaries.
h. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Class A Common Stock to provide for the full conversion of the
outstanding Debentures and issuance of the Conversion Shares in connection
therewith and the full exercise of the Warrants and the issuance of the Warrant
Shares in connection therewith and as otherwise required by the Debentures and
the Warrants. In that regard, a "sufficient number of shares" with respect to
the Debentures shall be deemed to be equal to the number of shares of Class A
Common Stock required to be reserved for issuance by the Company pursuant to
Article V of the Debentures. The Company shall not reduce the number of shares
reserved for issuance upon conversion of the Debentures and the full exercise of
the Warrants without the consent of the Purchasers holding a majority of the
principal amount of the Debentures then held by all Purchasers.
i. Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Class A Common Stock
are then listed (subject to official notice of issuance) and shall maintain, so
long as any other shares of Class A Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable upon conversion of
the Debentures and Warrant Shares from time to time issuable upon exercise of
the Warrants. The Company will take all action necessary to continue the listing
and trading of its Class A Common Stock on the NASDAQ, the New York Stock
Exchange ("NYSE") or the American Stock Exchange ("AMEX") and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASD and such exchanges, as applicable.
j. Corporate Existence. So long as a Purchaser beneficially owns any
Debentures or Warrants, the Company shall maintain its corporate existence,
except in the event of a merger, consolidation or sale of all or substantially
all of the Company's assets, as long as the surviving or successor entity in
such transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of Class
A Common Stock authorized and available for issuance in order to effect the
conversion of all Debentures and exercise in full of all Warrants outstanding as
of the date of such transaction, (ii) has no legal, contractual or other
restrictions on its ability to perform the obligations of the Company hereunder
and under the agreements and instruments entered into in connection herewith and
(iii) is a publicly traded corporation whose common stock and the shares of
capital stock issuable upon conversion of the Debentures and exercise of the
Warrant are (or would be upon issuance thereof) listed for trading on the
NASDAQ, NYSE or AMEX.
k. No Dividends, Etc. So long as a Purchaser beneficially owns at least
ten percent (10%) of the original aggregate principal amount or face amount, as
applicable, of the Debentures, the Company shall not redeem, or declare or pay
any cash distribution or dividend on, any capital stock of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to time by such
Purchaser to the Company upon conversion of the Debentures or exercise of the
Warrants. Prior to registration of the Conversion Shares and Warrant Shares
under the Securities Act or resale of such Securities under Rule 144, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than such instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof in the case of the Conversion Shares and Warrant Shares
prior to registration of the Conversion Shares and Warrant Shares under the
Securities Act, will be given by the Company to its transfer agent with respect
to the Conversion Shares or the Warrant Shares and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way each Purchaser's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any. If a Purchaser provides the Company
with an opinion of counsel, which opinion of counsel shall be in form, substance
and scope reasonably satisfactory to the Company (the cost of which shall be
borne by the Purchaser), to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from
registration, the Company shall permit the transfer, and, in the case of the
Conversion Shares and Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by a Purchaser. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Purchaser by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that a
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell Units to a
Purchaser at the Closing is subject to the satisfaction, at or before the
Closing, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion. The obligation of the Company to issue and
sell the Units to any Purchaser hereunder is distinct and separate from its
obligation to issue and sell Units to any other Purchaser hereunder and any
failure by one or more Purchasers to fulfill the conditions set forth herein or
to consummate the purchase of Units hereunder will not relieve the Company of
its obligations with respect to any other Purchaser.
a. The applicable Purchaser shall have executed the signature page to
this Agreement and the Registration Rights Agreement, and delivered the same to
the Company.
b. The applicable Purchaser shall have paid the Purchase Price for the
Units purchased in accordance with Section 1(b) above.
c. The representations and warranties of the applicable Purchaser shall
be true and correct in all material respects as of the date when made and as of
the date and time of the Closing as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date), and
the applicable Purchaser shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable
Purchaser at or prior to the Closing.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase Units at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
following conditions, provided that these conditions are for such Purchaser's
sole benefit and may be waived by such Purchaser at any time in the Purchaser's
sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to such Purchaser.
b. The Company shall have delivered duly executed Debentures and
Warrants (in such denominations as such Purchaser shall request) to such
Purchaser in accordance with Section 1(b) above.
c. The Class A Common Stock shall be authorized for quotation on NASDAQ
and trading in the Class A Common Stock (or NASDAQ generally) shall not have
been suspended by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the date of
the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. Such
Purchaser shall have received a certificate, executed by the chief executive
officer of the Company, dated as of the date of the Closing, to the foregoing
effect and as to such other matters as may be reasonably requested by such
Purchaser.
e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
f. Such Purchaser shall have received the officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
g. Such Purchaser shall have received an opinion of the Company's
counsel, dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to such Purchaser and in substantially the form of
Exhibit D attached hereto.
h. The Company shall have delivered evidence reasonably satisfactory to
the Purchasers that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as Exhibit E.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
contracts made and to be performed in the State of New Jersey. The Company and
each Purchaser irrevocably consent to the jurisdiction of the United States
federal courts located in the State of New Jersey in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company and each Purchaser irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company and each
Purchaser further agree that service of process upon the Company mailed by first
class mail shall be deemed in every respect effective service of process upon
the Company in any suit or proceeding based on or arising under this Agreement.
Nothing herein shall affect any party's right to serve process in any other
manner permitted by law. The Company agrees that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchasers make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchasers.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Base Ten Systems, Inc.
Xxx Xxxxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Pitney, Xxxxxx, Xxxx & Xxxxx
000 Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
If to any other Purchaser, to such address set forth under such
Purchaser's name on the signature page hereto executed by such Purchaser
with a copy to:
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns; provided,
however, that the Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 2, 3, 4, 5 and 8 shall survive
the closings hereunder notwithstanding any due diligence investigation conducted
by or on behalf of any Purchasers. The Company agrees to indemnify and hold
harmless each Purchaser and each of such Purchaser's officers, directors,
employees, partners, agents and affiliates for loss or damage arising as a
result of or related to any breach by the Company of any of its representations
or covenants set forth herein, including advancement of expenses as they are
incurred.
j. Publicity. Prior to the dissemination of any of the following, the
Company shall use all commercially reasonable efforts to give each of the two
Purchasers who purchase the greatest number of Units hereunder at least one
business day to review and provide comments on the applicable portion of any
press releases, SEC, NASDAQ or NASD filings, or any other public statements
which relate to the transactions contemplated by this Agreement. All Purchasers
shall be provided with a copy of any and all documents disseminated pursuant to
this paragraph.
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have occurred
on or before May 30, 1997, unless the parties agree otherwise, this Agreement
shall terminate at the close of business on such date.
m. Force Majeure. Neither the Company nor the Purchasers shall be
responsible for any delay or failure to perform any part of this Agreement to
the extent that such delay or failure is solely caused by fire, flood,
earthquake, explosion, war, labor strike, riot, or act of governmental, civil or
military authority which imposes a moratorium on the performance of the specific
obligation in question. Notice with full details of any such event shall be
given to the other party as promptly as practicable after its occurrence. The
affected party shall use its reasonably best efforts to minimize the effects of
or end any such event so as to facilitate the resumption of full performance
hereunder.
n. Business Day. For purposes of this Agreement the term "business day"
means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York or the State of New Jersey are authorized
or obligated by law, regulation or executive order to close.
o. Joint Participation in Drafting. Each party to this Agreement
participated in the drafting of this Agreement, the Debentures, the Warrants and
the Registration Rights Agreement. As such, the language used herein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
-------------------
By:
Name:
Title:
RESIDENCE:
ADDRESS:
Telecopy:
Attention:
AGGREGATE SUBSCRIPTION AMOUNT
Number of Units:
Purchase Price:
BASE TEN SYSTEMS, INC.
----------------------
By:
Name:
Title:
