Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
December 4, 1997, by and between BASE TEN SYSTEMS, INC., a New Jersey
corporation (the "Company"), with headquarters located at Xxx Xxxxxxxxxxx Xxxxx,
Xxxxxxx, Xxx Xxxxxx, 00000 and the purchasers ("Purchasers") set forth on the
execution pages hereof.
RECITALS
A. The Company and Purchasers 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. Purchasers desire (a) to purchase, upon the terms and conditions
stated in this Agreement, in the aggregate at the First Closing and the Second
Closing, Nineteen Million U.S. Dollars ($19,000,000) face amount of the
Company's Convertible Preferred Shares (the "Preferred Shares"), in the form
attached hereto as Exhibit A, convertible into shares of the Company's Class A
Common Shares, par value $1.00 per share (the "Common Stock") and (b) to
receive, in consideration for such purchase, Stock Purchase Warrants (the
"Warrants"), in the form attached hereto as Exhibit B, to acquire shares of
Common Stock. The shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants are referred to herein as "Warrant Shares". The shares
of Common Stock to be issued to the Purchasers upon conversion of the Preferred
Shares are referred to herein as the "Common Shares." The Preferred Shares may
be exchanged for senior subordinated notes (the "Notes") by the Purchasers under
the terms and conditions specified in the Certificate of Amendment. The
Preferred Shares, the Common Shares, the Warrants, the Warrant Shares and the
Notes are collectively referred to herein as the "Securities."
C. Contemporaneously 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, the rules and regulations promulgated thereunder and
applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and each Purchaser hereby agree as
follows:
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ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase of Preferred Shares. Subject to the terms and conditions
of this Agreement, the issuance, sale and purchase Nine Million Three Hundred
Seventy Five Thousand U.S. Dollars ($9,375,000) face amount of the Preferred
Shares shall be consummated in an initial closing (the "First Closing"). On the
date of the First Closing, subject to the satisfaction or waiver of the
conditions set forth in Article VI and Section 7.1, the Company shall issue and
sell to the Purchasers, and the Purchasers severally and not jointly agree to
purchase from the Company, the Preferred Shares specified below the signature
for each such Purchaser on this agreement for an aggregate purchase price of
Nine Million Three Hundred Seventy Five Thousand U.S. Dollars ($9,375,000) (the
"Initial Purchase Price"). Subject to the terms and conditions of this
Agreement, the issuance, sale and purchase of Nine Million Six Hundred Twenty
Five Thousand U.S. Dollars ($9,625,000) face amount of the Preferred Shares
shall be consummated in a second closing (the "Second Closing," the first
Closing and the Second Closing are collectively referred to as the "Closing").
On the date of the Second Closing, subject to the satisfaction or waiver of the
conditions set forth in Section 7.2, the Company shall issue and sell to the
Purchasers, and the Purchasers severally and not jointly agree to purchase from
the Company, the Preferred Shares specified below the signature for each such
Purchaser on this agreement for an aggregate purchase price of Nine Million Six
Hundred Twenty Five Thousand U.S. Dollars (the "Additional Purchase Price," and,
together with the Initial Purchase Price, the "Purchase Price").
1.2 Form of Payment. The Purchasers shall pay the Initial Purchase
Price and the Additional Purchase Price for the Preferred Shares by wire
transfer to the account designated pursuant to the Escrow Agreement by and among
the Company, the Purchasers and the escrow agent ("Escrow Agent") designated
therein in the form attached hereto as Exhibit D ("Escrow Agreement") upon
delivery to the Escrow Agent of the Preferred Shares and, at the First Closing,
the Warrants, all in accordance with the terms of the Escrow Agreement, and upon
satisfaction of the other Closing conditions.
1.3 First Closing Date. Subject to the satisfaction (or waiver) of the
conditions set forth in Article VI and Section 7.1 below, and further subject to
the terms and conditions of the Escrow Agreement, the date and time of First
Closing shall be at 10:00 a.m. California time, on December 4, 1997 (the "First
Closing").
1.4 Second Closing Date. Subject to the satisfaction (or waiver) of the
conditions set forth in Section 7.2 below, and further subject to the terms and
conditions of the Escrow Agreement, the date and time of Second Closing shall be
at 10:00 a.m. California time, on December 30, 1997, or such other date upon
which the conditions set forth in Section 7.2 have been satisfied.
1.5 Warrants. In consideration of the purchase by Purchasers of the
Preferred Shares, the Company shall at the First Closing and at the Second
Closing, as applicable, issue Warrants
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to the Purchasers to acquire an aggregate of 40,000 Common Shares for each
$1,000,000 face amount of Preferred Shares purchased.
ARTICLE II
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants to the Company as of the date
hereof and as of the Closing, severally and solely with respect to itself and
its purchase hereunder and not with respect to any other Purchaser, as set forth
in this Article II. Each Purchaser makes no other representations or warranties,
express or implied, to the Company in connection with the transactions
contemplated hereby and any and all prior representations and warranties, if
any, which may have been made by the Purchaser to the Company in connection with
the transactions contemplated hereby shall be deemed to have been merged in this
Agreement and any such prior representations and warranties, if any, shall not
survive the execution and delivery of this Agreement.
2.1 Investment Purpose. Purchaser is purchasing the Preferred Shares
and the Warrants for Purchaser's own account for investment only and not with a
present view toward or in connection with the public sale or distribution
thereof in violation of the applicable securities laws. Purchaser will not,
directly or indirectly, offer, sell, pledge or otherwise transfer the Securities
or any interest therein except pursuant to transactions that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act, the rules and regulations promulgated pursuant thereto and
applicable state securities laws. 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
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. By making the representations
in this Section 2.1, 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 from registration under the Securities Act and any
applicable state securities laws.
2.2 Accredited Investor Status. Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D and Purchaser has
indicated on a duly executed Investor Questionnaire and Representation Agreement
in the form attached hereto as Exhibit E in which capacity that it so qualifies
as an "accredited investor."
2.3 Reliance on Exemptions. Purchaser understands that the Preferred
Shares, Notes and Warrants 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 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 Preferred Shares, Notes and Warrants.
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2.4 Information. Purchaser has been furnished all materials relating to
the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been specifically requested by
Purchaser, including without limitation the Company's Annual Report on Form
10-K/A for the Year ended October 31, 1996; Quarterly Report on Form 10-Q for
the period ended January 31, 1997, as amended by Forms 10-Q/A filed with the
Securities and Exchange Commission ("SEC") on April 3, 1997, May 28, 1997, and
June 11, 1997, respectively; Quarterly Report on Form 10-Q for the period ended
April 30, 1997; Quarterly Report on Form 10-Q for the period ended July 31, 1997
(the "Current Quarterly Report"); Current Reports on Form 8-K filed with the SEC
on June 13, 1997, June 9, 1997 and November 11, 1997; Preliminary Proxy
Statement filed with the SEC on October 29, 1997; and Proxy Statement filed with
the SEC on February 7, 1997 (such documents collectively, the "SEC Documents").
Purchaser has been afforded the opportunity to ask questions of the Company and
has received what Purchaser believes to be complete and satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its representatives nor any other
disclosures or documents (including without limitation the SEC Documents) shall
modify, amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in this Agreement or in any Exhibit
hereto or in any certificate issued in connection herewith or therewith.
Purchaser understands that Purchaser's investment in the Securities involves a
high degree of risk, including without limitation the risks and uncertainties
disclosed in the SEC Documents and the Prospectus (as defined below). Subject to
the foregoing, Purchaser acknowledges the disclosures presented under the
caption "Risk Factors" in the Prospectus dated August 22, 1997 included in the
Company's Form S-3 Registration Statement filed with the SEC, and the
incorporation of those disclosures by reference herein.
2.5 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.
2.6 Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be offered, sold, pledged or otherwise transferred unless
subsequently registered thereunder or an exemption from such registration is
available (which exemption the Company expressly agrees may be established as
contemplated in clauses (b) and (c) of Section 5.1 hereof); (ii) any sale of
such Securities made in reliance on Rule 144 under the Securities Act (or a
successor rule) ("Rule 144") may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of such
Securities without registration under the Securities Act under circumstances in
which the seller 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 this Agreement or the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained
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herein to the contrary, the Securities may be pledged as collateral in
connection with any margin account or other lending arrangement.
2.7 Legends. Purchaser understands that, subject to Article V hereof,
the certificates for the Preferred Shares and Warrants, the Notes and, until
such time as the Common Shares and 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 (subject to and in accordance with
the procedures specified in Article V hereof), the certificates for the Common
Shares and Warrant Shares, will bear a restrictive legend (the "Legend") in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
2.8 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 respective terms, except (i) to the extent
that such validity or enforceability may be subject to or affected by any
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights or
remedies of creditors generally, or by other equitable principles of general
application, and (ii) as rights to indemnity and contribution under the
Registration Rights Agreement may be limited by Federal or state securities
laws.
2.9 Residency. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the signature page hereto executed by Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the date hereof and
as of each Closing as set forth in this Article III. The Company makes no other
representations or warranties, express or implied, to the Purchasers in
connection with the transactions contemplated hereby and any and all prior
representations and warranties, if any, which may have been made by the Company
to the Purchasers in connection with the transactions contemplated hereby shall
be deemed to have been merged in this Agreement and any such prior
representations and warranties, if any, shall not survive the execution and
delivery of this Agreement.
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3.1 Organization and Qualification. Each of the Company and 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 or be in good standing would have a Material
Adverse Effect. "Material Adverse Effect" means any effect which, individually
or in the aggregate with all other effects, is or could reasonably be expected
to be materially adverse to the business, operations, properties, financial
condition, operating results or prospects of the Company and its subsidiaries,
taken as a whole on a consolidated basis or on the transactions contemplated
hereby or on any of the Securities.
3.2 Authorization: Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue, sell and perform its obligations
with respect to the Preferred Shares, Warrants and Notes in accordance with the
terms hereof and the terms of the Preferred Shares, Warrants and Notes, to issue
the Common Shares and Warrant Shares upon conversion of the Preferred Shares and
exercise of the Warrants, respectively, in accordance with the terms and
conditions of the Preferred Shares and Warrants, respectively, and subject to
the limitations set forth in Sections 14A:7-14.1 and 14A:7-16 of the New Jersey
Business Corporation Act (the "Corporate Law Restrictions") to issue the Notes
in accordance with the terms and conditions of the Preferred Shares; (b) the
execution, delivery and performance of this Agreement 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 Preferred Shares, the Notes and the Warrants, and the issuance and
reservation for issuance of the Common Shares and the Warrant Shares) have been
duly authorized by all necessary corporate action and, except as set forth on
Schedule 3.2 hereof and except as contemplated by Section 4.8 hereof, no further
consent or authorization of the Company, its board of directors, or its
stockholders or any other person, body or agency, and no filing with any person,
body or agency, is required with respect to any of the transactions contemplated
hereby or thereby (whether under rules of the National Association of Securities
Dealers ("NASD") or otherwise); (c) this Agreement, the Registration Rights
Agreement, certificates for the Preferred Shares, the Warrants and the Notes
have been (or, in the case of the Notes, will be upon issuance) duly executed
and delivered by the Company; and (d) this Agreement, the Registration Rights
Agreement, the Preferred Shares, and the Warrants constitute, and the Notes,
when issued, will constitute, legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except (i) to the extent that such validity or enforceability may be
subject to or affected by any bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights or remedies of creditors generally, or by
other equitable principles of general application, and (ii) as rights to
indemnity and contribution under the Registration Rights Agreement may be
limited by Federal or state securities laws, and (iii) as to the Notes, to the
Corporate Law Restrictions.
3.3 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
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reserved for issuance pursuant to the Company's stock option plans, the number
of shares reserved for issuance pursuant to securities (other than the Preferred
Shares or the Warrants) exercisable for, or convertible into or exchangeable for
any shares of Common Stock and the number of shares to be reserved for issuance
upon conversion of the Preferred Shares and exercise of the Warrants is set
forth in the Current Quarterly Report, as the same may be modified or
supplemented by Schedule 3.3. 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 Common
Shares and the Warrant Shares) are subject to preemptive rights or any other
similar rights of the stockholders of the Company or of any other person or
entity which have not been satisfied or waived, or any liens or encumbrances.
Except as disclosed in Schedule 3.3, as of the date of this Agreement and as of
each Closing Date, (i) there are no outstanding options, warrants, scrip, rights
to subscribe for, 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 contracts,
commitments, understandings 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) issuance of the Securities
will not trigger antidilution or similar rights for any other present or future
outstanding or authorized securities of the Company, and (iii) 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 Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("Certificate of Incorporation"),
and the Company's By-laws as in effect on the date hereof (the "By-laws"). The
Company has set forth on Schedule 3.3 all instruments and agreements (other than
the Certificate of Incorporation and By-laws) governing or concerning securities
convertible into or exercisable or exchangeable for Common Shares of the Company
(and the Company shall provide to Purchaser copies thereof upon the request of
Purchaser).
3.4 Issuance of Shares. The Common Shares and Warrant Shares are duly
authorized and (except for the issuance of shares of Common Stock in excess of
twenty percent (20%) of the Common Stock outstanding at the First Closing Date,
which is subject to the completion of the actions to be taken by the Company and
its stockholders after the First Closing pursuant to Section 4.8) reserved for
issuance, and, upon conversion of the Preferred Shares and exercise of the
Warrants in accordance with the terms thereof, as applicable, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances directly or indirectly imposed or suffered by the Company or
any of its subsidiaries, will be entitled to all rights and preferences accorded
to a holder of Common Stock, shall be entitled to be traded on the same markets
and exchanges as the other shares of Common Stock of the Company are traded, and
will not be subject to preemptive rights or other similar rights of stockholders
of the Company or of any other person or entity. The Preferred Shares and
Warrants are duly authorized and validly issued, fully paid and nonassessable,
and free from all liens, claims and encumbrances directly or indirectly imposed
or suffered by the Company or any of its subsidiaries or affiliates and will not
be subject to preemptive rights or other similar rights of stockholders of the
Company or of any other person or entity.
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3.5 No Conflicts. Except for the issuance of shares of Common Stock in
excess of twenty percent (20%) of the outstanding Common Stock, which is subject
to the completion of the actions to be taken by the Company and its stockholders
after the First Closing pursuant to Section 4.8, the execution, delivery and
performance of this Agreement, the Preferred Shares, the Warrants, the Notes and
the Registration Rights Agreement by the Company, and the consummation by the
Company of transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Preferred Shares, Common Shares, Warrants, Warrant Shares and, subject to the
Corporate Law Restrictions, Notes) will not (a) result in a violation of the
Certificate of Incorporation or By-laws or (b) 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, including without limitation
that certain Securities Purchase Agreement dated as of May 30, 1997 and the
documents related thereto, or (c) result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations and the rules and regulations of the NASD or
Nasdaq) 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. Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or other organizational documents, and neither the
Company nor any of its subsidiaries is in default (and no event has occurred
which has not been waived 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 violations, 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 Purchaser (or any direct or indirect transferee, assignee
or participant of Purchaser or of such transferee, assignee or participant in a
transaction of the type referred to in Section 5.1(b) below ("Purchaser
Transferee")) 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 individually or in the aggregate would not have a
Material Adverse Effect. Except as set forth on Schedule 3.5, or except (A) such
as may be required under the Securities Act in connection with the performance
of the Company's obligations under the Registration Rights Agreement, (B) filing
of a Form D with the SEC, and (C) compliance with the state securities or Blue
Sky laws of applicable jurisdictions, 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 Preferred Shares, the Warrants, the Notes or the Registration
Rights Agreement or to perform its obligations in accordance with the terms
hereof or thereof. The Company is not in violation of the listing requirements
of Nasdaq, does not know of or anticipate any event which could be grounds for
such delisting and does not reasonably anticipate that the Common Shares will be
delisted by Nasdaq during the foreseeable future.
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3.6 SEC Documents. Except as disclosed in Schedule 3.6, since October
31, 1996, 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"). The Company has delivered to each Purchaser true and complete
copies of the SEC Documents, except for 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, 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. None of the statements made in any such SEC Documents which is
required to be updated or amended under applicable law has not been so updated
or amended. The financial statements of the Company included in the SEC
Documents have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, and the rules and regulations of
the SEC 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 do not include footnotes or are 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, immaterial year-end audit adjustments). Except as set
forth in the financial statements or the notes thereto 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
consistent with past practice subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business consistent with past practice and (iii) liabilities
not required under generally accepted accounting principles to be reflected in
such financial statements, in each case of clause (i), (ii) and (iii) next above
which, individually or in the aggregate, are not material to the financial
condition, business, operations, properties, operating results or prospects of
the Company and its subsidiaries or to the transactions contemplated hereby or
to the Securities. To the extent required by the rules of the SEC applicable
thereto, the SEC Documents contain a complete and accurate list of all material
undischarged written or oral contracts, agreements, leases or other instruments
existing as of the respective date of each such SEC Document (or such other date
required by the rules of the SEC) to which the Company or any subsidiary is a
party or by which the Company or any subsidiary is bound or to which any of the
properties or assets of the Company or any subsidiary is subject (each a
"Contract"). Except as set forth in Schedule 3.6, none of the Company, its
subsidiaries or, to the best knowledge of the Company, any of the other parties
thereto, is in breach or violation of any Contract, which breach or violation
could reasonably be expected to have a Material Adverse Effect. No event,
occurrence or condition exists which, with the lapse of time, the giving of
notice, or both, would become a default by the Company or its subsidiaries
thereunder which could reasonably be expected to have a Material Adverse Effect.
The Company has not provided and will not provide to any Purchaser any material
non-public information or any other information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed as of the date of this Agreement and the date of
the First Closing.
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3.7 Absence of Certain Changes. Since October 31, 1996 and to the First
Closing (or, at the Second Closing, since the First Closing to the Second
Closing) 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 3.7 or in the SEC Documents. The sale of the assets of the Government
Technology Division of the Company is, as of the date hereof, proceeding in
accordance with the previous public announcements of the Company regarding such
sale.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8 or in
the SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency, or
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 could reasonably be expected to result in an
unfavorable decision, ruling or finding which would have a Material Adverse
Effect or would adversely affect the transactions contemplated by this Agreement
or any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
There are no facts known to the Company which, if known by a potential claimant
or governmental authority, could reasonably be expected to give rise to a claim
or proceeding which, if asserted or conducted with results unfavorable to the
Company or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect.
3.9 Disclosure. No information, statement or representation relating to
or concerning the Company or any of its subsidiaries set forth in this Agreement
contains an untrue statement of a material fact. No information relating to or
concerning the Company or any of its subsidiaries set forth in any of the SEC
Documents contains a statement of material fact that was untrue as of the date
such SEC Document was filed with the SEC. The Company has not herein or in the
SEC Documents omitted to state a material fact necessary in order to make the
statements and representations made herein or therein, in light of the
circumstances under which they were made, not misleading.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or fiduciary of the Company or any of its subsidiaries (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, that this Agreement and the transaction contemplated
hereby, and the relationship between the Purchaser and the Company, are
"arms-length", and that any statement made by Purchaser (except as set forth in
Article II) or any of its representatives or agents, in connection with this
Agreement, and the transactions contemplated hereby is not advice or a
recommendation, is merely incidental to Purchaser's purchase of the Securities
and (except as set forth in Article II) has not been relied upon as such in any
way by the Company, its officers or directors. The Company further represents to
Purchaser that the Company's decision to enter into this Agreement and the
transactions contemplated hereby have been based solely on an independent
evaluation by the Company and its representatives.
666427.1
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3.11 S-3 Registration. The Company is currently eligible to register
the resale of the Common Shares on a registration statement on Form S-3 under
the Securities Act.
3.12 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 described in Rule 502(c) under
Regulation D, with respect to any of the Securities being offered hereby.
3.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would either require registration of
any of the Securities under the Act or prevent the parties hereto from
consummating, or delay or interfere with the consummation of, the transactions
contemplated hereby pursuant to an exemption from the registration under the
Securities Act pursuant to the provisions of Regulation D. The transactions
contemplated hereby are exempt from the registration requirements of the
Securities Act, assuming the accuracy of the relevant representations and
warranties herein contained of the Purchaser and of Xxxxx & Company ("Cowen")
and Shoreline Pacific Institutional Finance, the Institutional Division of
Financial West Group ("Shoreline") in their letters to the Company dated as of
December 2, 1997 (copies of which are attached as Schedule 3.13 hereto) to the
extent relevant for such determination. To the Company's knowledge, such
representations and warranties of Cowen and Shoreline are accurate. The issuance
of the Securities to the purchasers will not be integrated with any other
issuance of the Company's securities (past, present or future) which require
stockholder approval under the rules of Nasdaq.
3.14 No Brokers. The Company has taken no action, directly or
indirectly, which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by Purchaser relating to this
Agreement or the transactions contemplated hereby, except for dealings with
Cowen and Shoreline the fees of which shall be paid in full by the Company out
of escrow at the First Closing. The Company will indemnify the Purchaser from
and against any fees and expenses (including without limitation reasonable
attorneys fees and expenses) sought or other claims made by Cowen or Shoreline.
3.15 Intellectual Property. Except as disclosed in the SEC Documents,
each of the Company and its subsidiaries owns, is licensed to use, or possesses
adequate and enforceable rights to use all material 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") used or necessary for the conduct of its
business as now being conducted and as described in the Company's Annual Report
on Form 10-K/A for its most recently ended fiscal year. To the Company's best
knowledge, except as disclosed in the SEC Documents, neither the Company nor any
subsidiary of the Company infringes on or is in conflict with any right of any
other person with respect to any Intangibles nor is there any claim of
infringement made by a third party against or involving the Company or any of
its subsidiaries, which infringement, conflict or claim,
666427.1
12
individually or in the aggregate, could reasonably be expected to result in an
unfavorable decision, ruling or finding which would have a Material Adverse
Effect.
3.16 Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in Schedule 3.16. No Key Employee,
to the best of the knowledge of the Company and its subsidiaries, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best of the knowledge of the
Company and its subsidiaries, any intention to terminate his employment with, or
services to, the Company or any of its subsidiaries. "Key Employee" means Xx. X.
Xxxxxxx.
3.17 No "Poison Pill". The Company does not have in effect a
shareholders rights plan or similar plan in the nature of a "poison pill." If
the Company adopts such a plan, none of the Purchaser's Preferred Shares,
Warrants, Common Shares and Warrant Shares will be deemed to trigger such plan.
3.18 Dilution. The Company acknowledges that the number of Common
Shares and Warrant Shares may increase substantially in certain circumstances
(subject to the limitation on issuance of Common Shares set forth in Section
(d)(H)(i) of the Certificate of Amendment), including the circumstances where
the trading price of the Company's Common Stock declines. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Common Shares and the Warrant Shares upon conversion or
exercise of the Preferred Shares or Warrants. The Company further acknowledges
that its obligation to issue Common Shares and Warrant Shares upon conversion of
the Preferred Shares or exercise of the Warrants in accordance with this
Agreement, the Certificate of Amendment and the Warrants is absolute and
unconditional regardless of the dilutive effect such issuance has on the
ownership interests of other stockholders of the Company.
3.19 Certain Transactions. Except as disclosed in the SEC Documents and
except for arm's length transactions pursuant to which the Company or any of its
direct or indirect subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its direct or
indirect subsidiaries could obtain from third parties, none of the officers,
directors, or employees of the company is presently a party to any transaction
with the Company or any of its direct or indirect subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
666427.1
13
3.20 Permits; Compliance. The Company and each of its direct and
indirect subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits"), and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits except for such Company Permits the failure of which to
possess, or the cancellation or suspension of which, would not, individually or
in the aggregate, have a Material Adverse Effect. Neither the Company nor any of
its direct or indirect subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Since October 31,
1996, neither the Company nor any of its direct or indirect Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations could
not reasonably be expected to have a Material Adverse Effect.
3.21 Insurance. The Company and each of its direct and indirect
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company and
its direct and indirect subsidiaries are engaged. Neither the Company nor any
such direct or indirect subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The parties shall use their reasonable best efforts
to timely satisfy each of the conditions described in Articles VI and VII of
this Agreement.
4.2 Securities Laws. The Company agrees to timely file a Form D with
respect to the Securities with the SEC as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing. The Company
agrees to file a Form 8-K disclosing this Agreement and the transactions
contemplated hereby with the SEC within five (5) business days following the
date of the First Closing. The Company shall, on or prior to the date of First
Closing or the Second Closing, as applicable, take such action as is necessary
to qualify the Securities for sale to the Purchaser at such Closing in
compliance with applicable securities laws of the states of the United States or
obtain exemption therefrom, and shall provide evidence of any such action so
taken to the Purchaser on or prior to the date of such Closing.
4.3 Reporting Status. So long as the Purchaser or a Purchaser
Transferee beneficially owns any unconverted Preferred Shares or unexercised
Warrants, (a) the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company
666427.1
14
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, and (b) the Company will use its best efforts to
maintain its ability and eligibility to register its Common Shares and Warrant
Shares on Form S-3.
4.4 Information. The Company agrees to send the following reports to
the Purchaser and Purchaser's Transferee until each Purchaser and Purchaser's
Transferee has converted all of its Preferred Shares and exercised all Warrants:
(a) within three (3) business days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, any proxy
statements and any Current Reports on Form 8-K; and (b) within one (1) business
day after release, copies of all press releases issued by the Company or any of
its subsidiaries. The Company further agrees to promptly provide to the
Purchaser and Purchaser's Transferee any information with respect to the
Company, its properties, or its business or Purchaser's investment as the
Purchaser and Purchaser's Transferee may reasonably request; provided, however,
that the Company shall not be required to give the Purchaser any material
nonpublic information. If any information requested by the Purchaser from the
Company contains material nonpublic information, the Company shall inform the
Purchaser in writing that the information requested contains material nonpublic
information and shall in no event provide such information to Purchaser without
the express written consent of the Purchaser after being so informed.
4.5 Listing. The Company shall use its best efforts to continue the
uninterrupted listing and trading of its Common Stock and, upon registration,
the Common Shares and Warrant Shares on the AMEX, the Nasdaq National Market or
the New York Stock Exchange; and comply in all material respects with the
Company's reporting, filing and other obligations under the By-laws and rules of
such exchange or Nasdaq, as applicable. If and so long as the Common Stock and,
following registration, the Common Shares and Warrant Shares are not listed on
one of such Exchanges or Nasdaq, as partial compensation for the added liquidity
risk of such delisting the Company shall be obligated to make the following
additional cash payments (the "Delisting Payments"). The Delisting Payments will
be equal to one-half of one percent (1/2%) of the Purchase Price of any
outstanding Preferred Shares for each month (or part thereof, pro-rated)
following the date the Common Stock is delisted (the "Delisting Date")
continuing through the date the Common Stock is listed on one of such Exchanges
or Nasdaq (the "New Listing"). The Delisting Payments will be paid to the holder
of the Preferred Shares in cash within five (5) business days following the
earlier of (i) the end of each month following the Delisting Date, or (ii) the
effective date of the New Listing. Nothing herein shall limit the Preferred
Share holder's right to pursue actual damages for the Company's failure to
maintain its listing on such exchange or Nasdaq.
4.6 Prospectus Delivery Requirement. The Purchaser understands that the
Securities Act may require delivery of a prospectus relating to the Common
Shares in connection with any sale thereof pursuant to a registration statement
under the Securities Act covering the resale by the Purchaser of the Common
Shares being sold, and the Purchaser shall comply with the applicable prospectus
delivery requirements of the Securities Act, if any, in connection with any such
sale.
666427.1
15
4.7 Share Authorization. The Company covenants and agrees that it
shall (i) use its best efforts to solicit by proxy the authorization (the
"Shareholder Approval") of the issuance of shares of Common Stock in excess of
twenty (20) percent of the outstanding shares of Common Stock by the
stockholders of the Company not later than 60 days following the date of the
First Closing, and (ii) use its best efforts to obtain the Shareholder Approval
not later than 120 days following the date of the First Closing.
4.8 Pre-emptive Right to Participate in Future Private Equity
Financings.
(a) The Company shall not, prior to the later of (i) the Second
Closing or (ii) the date of effectiveness of a registration statement with
respect to the resale of the Common Shares and Warrant Shares (such earlier
date, the "Release Date"), issue Class A Common Shares or securities which are
convertible into or exercisable for Class A Common Shares or any other classes
of common shares of the Company (a "Private Equity Financing"), except for
Permitted Issuances (as defined below). If at any time after the Release Date
and prior to conversion or redemption of all of the Preferred Shares, the
Company proposes a Private Equity Financing, other than a Permitted Issuance,
the Company shall give each Purchaser the opportunity to purchase its pro rata
share (as calculated below) of such Private Equity Financing on the same terms
as offered to other persons, on the terms described below. For purposes of this
Section 4.9(a), "Permitted Issuance" means any issuance(i) pursuant to any
currently outstanding convertible debentures, warrants or options (including
shares issued in lieu of cash interest payments), (ii) pursuant to options
either already granted or which may be granted to employees or consultants
pursuant to the Company's existing employee stock option plans or any successor
plan approved by the Company's board of directors, (iii) pursuant to the
conversion of the Preferred Shares or exercise of the Warrants, (iv) pursuant to
any stock dividend upon, or upon any subdivision or combination of shares of the
Class A Common Shares, (v) pursuant to a firm commitment underwritten public
offering, (vi) in connection with an acquisition or merger of another company by
or with the Company or (vii) in connection with any future equity financing
whereby Class A Common Shares, or warrants or options to purchase Class A Common
Shares, are issued to a Strategic Investor (as defined in Section 4.9(d)
hereof).
(b) Each Purchaser shall have the right to purchase its pro rata share
of such Private Equity Financing based on the ratio which (x) the Class A Common
Shares issuable on conversion or exercise of Preferred Shares or Warrants
purchased by such Purchaser on the Closing Date to (y) all of the then issued
and outstanding Class A Common Shares of the Company plus the Class A Common
Shares then issuable upon conversion or exercise of any preferred stock, any
warrants and any convertible debentures, options and other warrants then
outstanding, before giving effect to the proposed Private Equity Financing.
(c) The Company shall deliver to each Purchaser, at least five (5)
business days prior to the closing of such Private Equity Financing, written
notice describing the terms and conditions of the proposed Private Equity
Financing, and providing each Purchaser the opportunity to purchase its pro rata
share (as calculated above) of the Private Equity Financing. Any portion of the
Private Equity Financing required to be so offered and so offered which is not
purchased (or irrevocably committed to be purchased) by a Purchaser within five
(5) business days following the
666427.1
16
receipt by the Purchasers of such offer may be sold by the Company at any time
thereafter on the same terms set forth in the offer, provided, however, that if
the Company does not consummate such Private Equity Financing within twenty (20)
business days after receipt by the Purchasers of the written notice noted in
this Section 4.9(c), the rights of the Purchasers under this Section 4.9 shall
again apply to such Private Equity Financing.
(d) For the purposes of this Section 4.9, "Strategic Investor" shall
mean any person or entity which has or is proposed to have a material business,
technology or commercial relationship with the Company in addition to any equity
financing provided by such person or entity.
(e) So long as any of the Preferred Shares are outstanding the Company
shall not issue any additional shares of Class B Common Stock, other than upon
exercise of existing options to purchase Class B Common Stock.
4.9 Sale of Division. Each Purchaser covenants and agrees that it shall
vote all Preferred Shares or Common Shares which it owns or subsequently
acquires in favor of the proposed sale by the Company, described in the SEC
Documents, of substantially all of the assets of the Government Technology
Division of the Company to Strategic Technology Systems, Inc., a Nevada
corporation.
ARTICLE V
LEGEND REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
5.1 Removal of Legend. The Legend shall be removed and the Company
shall issue, or shall cause to be issued, a certificate without such Legend to
the holder of any Security upon which it is stamped, and a certificate for a
security shall be originally issued without the Legend, if: (a) the resale of
such Security is registered under the Securities Act; or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
satisfactory to the Company and its counsel (the reasonable cost of which shall
be borne by the Company if neither an effective registration statement under the
Securities Act or Rule 144 is available in connection with such sale) to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act pursuant to an exemption from such
registration requirements; or (c) such Security can be sold pursuant to Rule
144, the Holder provides the Company with reasonable assurances that the
Security can be so sold without restriction, and a registered broker dealer
provides to the Company's transfer agent and counsel copies of (i) a "will sell"
letter satisfying the guidelines established by the SEC and its staff from time
to time and (ii) a customary seller's representation letter with respect to such
a sale to be made pursuant to Rule 144 and (iii) a Form 144 in respect of such
Security executed by such holder and filed (or mailed for filing) with the SEC;
or (d) such Security can be sold pursuant to Rule 144(k). Each Purchaser agrees
to sell all registered Securities, including those represented by a
certificate(s) from which the Legend has been removed, or which were originally
issued without the Legend, pursuant to an effective registration statement, in
accordance with the manner of distribution described in such registration
statement and, if required by the Securities Act, to deliver a prospectus in
connection with such
666427.1
17
sale or in compliance with an exemption from the registration requirements of
the Securities Act. In the event the Legend is removed from any Security or any
Security is issued without the Legend and the Security is to be disposed of
other than pursuant to the registration statement or pursuant to Rule 144, then
prior to, and as a condition to, such disposition such Security shall be
relegended as provided herein in connection with any disposition if the
subsequent transfer thereof would be restricted under the Securities Act. Also,
in the event the Legend is removed from any Security or any Security is issued
without the Legend and thereafter the effectiveness of a registration statement
covering the resale of 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 holding such Security, the
Company may require that the Legend be placed on any such Security that cannot
then be sold pursuant to an effective registration statement or Rule 144 or with
respect to which the opinion referred to in clause (b) next above has not been
rendered, which Legend shall be removed when such Security may be sold pursuant
to an effective registration statement or Rule 144 or such holder provides the
opinion with respect thereto described in clause (b) next above.
5.2 Transfer Agent Instructions. The Company shall instruct its
transfer agent, in a form satisfactory to the Purchasers, to issue certificates,
registered in the name of the Purchaser or its nominee, for the Common Shares
and the Warrant Shares in such amounts specified from time to time by the
Purchaser upon conversion or exercise of the Preferred Shares and the Warrants,
respectively. Such certificates shall bear the Legend only to the extent
provided by Section 5.1 above. The Company covenants that no instruction other
than such instructions referred to in this Article V, and stop transfer
instructions to give effect to Section 2.6 hereof in the case of the Common
Shares and Warrant Shares prior to registration of the Common Shares and Warrant
Shares under the Securities Act or "black-out" periods as provided in the
Registrations Rights Agreement between the Company and the Purchaser, dated of
such date herewith, will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company. Nothing in this Section shall affect in any way the Purchaser's
obligations and agreement set forth in Section 5.1 hereof to resell the
Securities pursuant to an effective registration statement and to deliver a
prospectus as required in Section 5.1 in connection with such sale or in
compliance with an exemption from the registration requirements of applicable
securities laws. If (a) the Purchaser provides the Company with an opinion of
counsel, which opinion of counsel shall be in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
satisfactory to the Company and its counsel (the reasonable cost of which shall
be borne by the Company if neither an effective registration statement under the
Securities Act nor Rule 144 is available in connection with such sale), to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration or (b) the Purchaser transfers
Securities to an affiliate which is an accredited investor (within the meaning
of Regulation D under the Securities Act) and which delivers to the Company in
written form the same representations, warranties and covenants made by
Purchaser hereunder or pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Common Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denomination as specified by the Purchaser.
666427.1
18
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 The obligation of the Company hereunder to issue and sell the
Preferred Shares and Warrants to the Purchaser at the First Closing and the
Second Closing is subject to the satisfaction, as of the date of each such
Closing, of each of the following conditions, 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:
(i) The Purchaser shall have executed the signature page to this
Agreement, the Registration Rights Agreement and the Escrow Agreement and
delivered the same to the Company and Shoreline. The Purchaser shall have
completed and executed the Investor Questionnaire and Representation
Agreement and delivered the same to the Company and Shoreline.
(ii) The Purchaser shall have wired to the account of the Escrow Agent
pursuant to the Escrow Agreement the Initial Purchase Price, in the case of
the First Closing, and the Additional Purchase Price, in the case of the
Second Closing.
(iii) The representations and warranties of the Purchaser shall be
true and correct in all material respects as of the date when made and as
of such 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 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 Purchaser at or prior to such
Closing.
(iv) 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 restricts or prohibits the consummation of any of the
transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE
7.1 The obligation of the Purchaser hereunder to purchase the
Preferred Shares and Warrants to be purchased by it on the date of the First
Closing is subject to the satisfaction as of the date of the First Closing, of
each of the following conditions, provided that these conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in the
Purchaser's sole discretion:
(i) The Company shall have executed the signature page to this
Agreement, the Registration Rights Agreement and the Escrow Agreement and
delivered the same to Purchaser and Shoreline.
666427.1
19
(ii) The Company shall have delivered to the Escrow Agent duly issued
Preferred Shares being so purchased by each Purchaser at the First Closing
and certificates for the appropriate number of Warrants in such
denominations as are reasonably requested by Purchaser.
(iii) The Common Shares shall be listed on the Nasdaq National Market
and trading in the Common Shares shall not have been suspended or limited
by the NASD, Nasdaq or the SEC or other regulatory authority, and no such
proceeding seeking suspension shall be pending.
(iv) 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
First 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 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
First Closing. Purchaser shall have received a certificate, executed by the
Chief Executive Officer or Chief Financial Officer of the Company, dated as
of the First Closing to the foregoing effect.
(v) 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.
(vi) Purchaser shall have received an opinion of (i) Pitney Xxxxxx,
special New Jersey counsel to the Company, and (ii) Battle Xxxxxx, special
securities counsel to the Company, dated as of the First Closing, in the
forms attached hereto as Exhibits F-1 and F-2, respectively.
(vii) The Transfer Agent Instructions set forth in Section 5.2 shall
have been delivered to the Company's transfer agent.
(viii) The Certificate of Amendment shall have been filed with the
Secretary of State of New Jersey.
(ix) The Common Shares required to be authorized and reserved pursuant
to Section (d)H(8) of the Certificate of Amendment shall have been duly
authorized and reserved by the Company.
7.2 The obligation of the Purchaser hereunder to purchase the
Preferred Shares to be purchased by it on the date of the Second Closing is
subject to the satisfaction as of the date of the Second Closing, of each
of the following conditions, provided that these conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in
the Purchaser's sole discretion:
(i) The First Closing shall have occurred, and no more than 120 days
shall have passed since the date of the First Closing.
666427.1
20
(ii) The Shareholder Approval shall have been duly obtained; and a
copy of the minutes of the meeting of the stockholders of the Company,
certified by the Secretary of the Company as being true and correct,
reflecting such approval shall have been provided to each Purchaser.
(iii) 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
Second 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 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
Second Closing. Purchaser shall have received a certificate, executed by
the Chief Executive Officer or Chief Financial Officer of the Company,
dated as of the Second Closing to the foregoing effect.
(iv) The Company shall have delivered to the Escrow Agent duly issued
Preferred Shares being so purchased by each Purchaser at the Second Closing
and certificates for the appropriate number of Warrants in such
denominations as are reasonably requested by Purchaser.
(v) The Common Shares shall be listed on the Nasdaq National Market
and trading in the Common Shares shall not have been then suspended or
limited by the NASD, Nasdaq or the SEC or other regulatory authority, and
no such proceeding seeking suspension shall be pending.
(vi) Purchaser shall have received a bring-down opinion of (i) Pitney
Xxxxxx, special New Jersey counsel to the Company, and (ii) Battle Xxxxxx,
special securities counsel to the Company, dated as of the Second Closing,
addressing the matters referred to in the forms attached hereto as Exhibits
F-1 and F-2, respectively .
(vii) 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 following the Second Closing.
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law: Jurisdiction. This Agreement shall be governed by
and construed in accordance with the corporate law of the Company's Jurisdiction
of incorporation (in respect of matters of corporation law) and the laws of the
State of New York (in respect of all other matters) applicable to contracts made
and to be performed in the State of New York. The parties hereto irrevocably
consent to the jurisdiction of the United States federal courts and state courts
located in the Borough of Manhattan in the State of New York in any suit or
proceeding based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that
666427.1
21
all claims in respect of such suit or proceeding may be determined in such
courts. The Company and each Purchaser irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in such forum.
The Company and each Purchaser further agrees that service of process upon the
Company or such Purchaser, as applicable, mailed by the first class mail in
accordance with Section 8.6 shall be deemed in every respect effective service
of process upon the Company or such Purchaser in any suit or proceeding arising
hereunder. Nothing herein shall affect any Purchaser's or the Company's right to
serve process in any other manner permitted by law. The parties hereto agree
that a final 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. The parties hereto irrevocably waive any right to trial by jury
under applicable law.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts 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. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall promptly cause
additional original executed signature pages to be delivered to the other
parties.
8.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4 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.
8.5 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 Purchaser makes 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 each Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by nationally-recognized
overnight courier or by facsimile machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission). The addresses for such communications shall be:
666427.1
22
If to the Company:
Base Ten Systems, Inc.
Xxx Xxxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxxxx X. Xxxxxxx
with a copy to:
Battle Xxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to JMG Capital Partners, L.P.
JMG Capital Partners, L.P.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxxx Xxxxxx
If to Triton Capital Investments, Ltd.:
Triton Capital Investments, Ltd.
c/o JMG Capital Partners, L.P.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxxx Xxxxxx
If to RGC International Investors, LDC:
RGC International Investors, LDC
c/o Xxxx Xxxx Capital Management, L.P.
RGC General Partner Corp
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxx X. Xxxxxxxx
666427.1
23
and with a copy to:
Ballard, Spahr, Xxxxxx Xxxxxxxxx
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxxx, Esq.
If to Shepherd Investments International, Ltd.:
Shepherd Investments International, Ltd.
c/o Staro Asset Management
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Mr. Xxx Xxxxx
and with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxx, Esq.
If to Xxxxx International:
Xxxxx International
c/o Staro Asset Management
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Mr. Xxx Xxxxx
and with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxx, Esq.
666427.1
24
If to Societe Generale:
Societe Generale
1221 Avenue of the Xxxxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxxxx Xxxxxx
with a copy to:
Xxxxxx & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxx Xxxx, Esq.
If to Elara Ltd.:
Elara Ltd.
x/x Xxxxxxxx Xxxxxxx
XX Xxx 000
Xxxxxx Xxxx Xxxxxxxx
Wickhams Cay
Road Town, Tortolla
British Virgin Islands
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxxx Xxxxxx
If to Midland Xxxxxx Capital, Inc. Keyway Investments:
Keyway InvesmentsMidland Xxxxxx Capital, Inc.
c/o Midland Xxxxxx Capital, Inc.
BCE Xxxxx-000 Xxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X0X0
Xxxxxx
666427.1
25
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx
with a copy to:
Xxxxxxx Xxxxxxxx Xxxxx & Squier
000 0xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Mr. Xxxx Xxxxx, Esq.
in each case with a copy to:
Shoreline Pacific Institutional Finance
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: General Counsel
and:
Xxxxx & Co.
0 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Mr. Xxxx Xxxxx
Each party shall provide notice to the other party of any change in address.
8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor the Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other except,
with respect to the Company, in accordance with Section (d)G of the Certificate
of Amendment. Notwithstanding the foregoing, the Purchaser may subject to and in
666427.1
26
compliance with Section 5.2 hereof, assign all or part of its rights and
obligations hereunder to any of its "affiliates," as that term is defined under
the Securities Act, without the consent of the Company so long as such affiliate
is an accredited investor (within the meaning of Regulation D under the
Securities Act) and agrees in writing to be bound by this Agreement.
8.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns (including transferees permitted in accordance with Section 8.7) and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
8.9 Survival; Indemnity. The representations and warranties of the
Company and the Purchaser and the agreements and covenants set forth herein
shall survive each Closing hereunder through the date three months following the
fifth anniversary of this Agreement notwithstanding any due diligence
investigation conducted by or on behalf of the Company or any Purchaser as the
case may be. The Company agrees to indemnify and hold harmless each Purchaser
and each of such Purchaser's respective officers, directors, employees,
partners, agents and affiliates for loss or damage or expenses (including
reasonable attorneys fees) arising as a result of or related to any breach or
alleged breach by the Company of any of its respective representations or
covenants set forth herein, in the Certificate of Amendment or in the
Registration Rights Agreement, including advancement of expenses as they are
incurred.
8.10 Public Filings: Publicity. As soon as practicable following the
First Closing, the Company shall issue a press release with respect to the
transactions contemplated hereby. The Company and each Purchaser shall have the
right to review before issuance any press releases, SEC or Nasdaq or other
exchange filings, or any other public statements with respect to the
transactions contemplated hereby (which review shall not be unreasonably
delayed); provided, however, that the Company shall be entitled, without the
prior review of the Purchasers, to make any press release or SEC, AMEX, Nasdaq
or other exchange filings with respect to such transactions as is required by
applicable law and regulations (although the Company shall make all reasonable
efforts to consult with the Purchasers in connection with any such press release
prior to its release and shall provide the Purchasers with a copy thereof as
provided in Section 4.4 hereof). Except to the extent required by law or with
the prior written consent of the affected Purchaser, the Company shall not use
the names of the Purchasers in press releases and public communications. Each of
the Purchasers hereby consents to its identification as a Purchaser in any proxy
solicitation seeking the Shareholder Approval.
8.11 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.
8.12 Remedies. No provision of this Agreement providing for any remedy
to a Purchaser or the Company shall limit any remedy which would otherwise be
available to such Purchaser or the Company at law or in equity. Nothing in this
Agreement shall limit any rights
666427.1
27
a Purchaser may have under any applicable federal or state securities laws with
respect to the investment contemplated hereby. The Company and each Purchaser
acknowledges that a breach by it of its respective obligations hereunder will
cause irreparable harm to each Purchaser, in the case of the Company, and the
Company, in the case of a Purchaser. Accordingly, the Company and each Purchaser
acknowledges that the remedy at law for a material breach of its respective
obligations under this Agreement will be inadequate and agrees, in the event of
a breach or threatened breach by the Company or a Purchaser, as the case may be,
of the provisions of this Agreement, that a Purchaser or the Company, as the
case may be, shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate compliance, without
the necessity of showing economic loss and without any bond or other security
being required.
8.13 Acknowledgment By Purchasers Who Are Also Holders Of The Company's
Convertible Term Debentures. Any Purchaser under this Agreement who is also a
holder ("Holder") of Convertible Term Debentures of the Company hereby
acknowledges and agrees, solely with respect to the transactions contemplated by
this Agreement and no other transaction, that any purchases made by Holder under
this Agreement shall be in lieu of and in full and complete satisfaction of any
right of first offer ("First Offer") with respect to the Securities such Holder
may be entitled to under the first paragraph of Section 4(e) of that certain
Securities Purchase Agreement, dated as of May 30, 1997, by and between the
Company and each of The Tail Wind Fund, Ltd. and RGC International Investors,
LDC. The Company hereby represents and warrants to the Purchasers that the
Company has complied with and satisfied in full the First Offer to the extent
not otherwise waived by a Holder with regard to the transactions contemplated by
this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.
666427.1
28
BASE TEN SYSTEMS, INC.
By: ___________________________________
Name:
Title:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS:
JMG CAPITAL PARTNERS, L.P.
By: ___________________________________
Name: Xxxxxxxx Xxxxxx
Title: President, JMG Capital
Management, Inc.
General Partner,
JMG Capital Partners, L.P.
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 246.711
Warrants Purchased at First Closing: 9,868
Preferred Shares Purchased at Second Closing: 253.289
Warrants Purchased at Second Closing: 10,132
TRITON CAPITAL INVESTMENTS, LTD
By: __________________________________
Xxxxxxxx Xxxxxx
Vice President, Triton Capital
Investments, Ltd.
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 246.711
Warrants Purchased at First Closing: 9,868
666427.1
29
Preferred Shares Purchased at Second Closing: 253.289
Warrants Purchased at Second Closing: 10,132
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, LP/RGC
General Partner Corporation
By: ___________________________________
Xxxx X. Xxxxxxxx
Managing Director
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 1,973.684
Warrants Purchased at First Closing: 78,947
Preferred Shares Purchased at Second Closing: 2,026.316
Warrants Purchased at Second Closing: 81,053
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
SHEPHERD INVESTMENTS INTERNATIONAL,
LTD.
By: __________________________________
Name:
Managing Member, Staro Asset Management,
LLC
Investment Manager, Shepherd Investments
International, Ltd.
DATE:
Aggregate Subscription Amount
666427.1
30
Preferred Shares Purchased at First Closing: 1,726.974
Warrants Purchased at First Closing: 69,079
Preferred Shares Purchased at Second Closing: 1,773.026
Warrants Purchased at Second Closing: 70,921
XXXXX INTERNATIONAL
By:
Name: __________________________________
Managing Member, Staro Asset
Management, LLC
Investment Manager, Xxxxx International
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 1,726.974
Warrants Purchased at First Closing: 69,079
Preferred Shares Purchased at Second Closing: 1,773.026
Warrants Purchased at Second Closing: 70,921
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
SOCIETE GENERALE
By: __________________________________
Name:
Title:
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 2,467.105
Warrants Purchased at First Closing: 98,684
Preferred Shares Purchased at Second Closing: 2,532.895
Warrants Purchased at Second Closing: 101,316
666427.1
31
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
ELARA LTD.
By: __________________________________
Xxxxxxxx Xxxxxx, Talisman Capital
President, Elara Ltd.
DATE:
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 493.421
Warrants Purchased at First Closing: 19,737
Preferred Shares Purchased at Second Closing: 506.579
Warrants Purchased at Second Closing: 20,263
[SIGNATURES CONTINUED ONTO NEXT PAGE]
PURCHASERS CONTINUED:
KEYWAY INVESTMENTS
By: __________________________________
Xxxxxxx X. Xxxxxx
Title:
DATE:
666427.1
32
Aggregate Subscription Amount
Preferred Shares Purchased at First Closing: 493.421
Warrants Purchased at First Closing: 19,737
Preferred Shares Purchased at Second Closing: 506.579
Warrants Purchased at Second Closing: 20,263
666427.1
33
