EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "Agreement"), dated as of December 31, 1998,
by and among Base Ten Systems, Inc., a New Jersey corporation (the "Company"),
and the holders of the Series A Preferred Shares (as defined below), set forth
on the signature pages hereto (the "Holders").
WHEREAS:
A. The Company and the Holders are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under 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 "1933 Act");
B. The Company and the Holders entered into a Securities Purchase
Agreement, dated as of December 4, 1997 (the "Purchase Agreement"), pursuant to
which the Holders (i) purchased the Company's Convertible Preferred Shares,
Series A (the "Series A Preferred Shares"), which are convertible into Class A
Common Shares, $1.00 par value per share, of the Company (the "Common Stock"),
upon the terms and subject to the limitations and conditions set forth in the
Certificate of Amendment of Restated Certificate of Incorporation Providing for
Designation, Preferences and Rights of the Convertible Preferred Shares, Series
A (the "Series A Certificate of Designation") and (ii) in consideration for the
purchase of the Series A Preferred Shares, received Class A Common Stock
Purchase Warrants to purchase shares of Common Stock (the "Series A Warrants");
C. In connection with the Purchase Agreement, the Company and the
Holders entered into a Registration Rights Agreement, dated as of December 4,
1997 (the "Registration Rights Agreement");
D. The Company has authorized a new series of preferred stock,
designated as Series B Convertible Preferred Stock (together with any Series B
Preferred Stock issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, the "Series
B Preferred Shares"), having the rights, preferences and privileges set forth in
the Certificate of Amendment of Restated Certificate of Incorporation Providing
for Designation, Preferences and Rights of the Convertible Preferred Shares,
Series B, attached hereto as Exhibit "A" (the "Series B Certificate of
Designation"), which are convertible into shares of Common Stock upon the terms
and subject to the limitations and conditions set forth in the Series B
Certificate of Designation (the "Conversion Shares");
E. The Company has authorized the issuance to the Holders of additional
Class A Common Stock Purchase Warrants, in the form attached hereto as Exhibit
"B", to purchase shares of Common Stock (the "Additional Warrants");
F. The Company desires to amend the terms of the Series A Warrants in
accordance with the terms of this Agreement by issuing new warrants, in the
forms attached hereto as Exhibit "B" and Exhibit "C", containing such amended
terms in exchange for the outstanding Series A Warrants (collectively, the
"Amended Warrants" and together with the Additional Warrants, the "Warrants").
The shares of Common Stock issuable upon exercise of the Warrants are referred
to herein as the "Warrant Shares";
G. The Company desires to (i) have each Holder exchange the number of
Series A Preferred Shares identified on the signature pages hereto as being held
by such Holder and all Series A Preferred Shares hereafter issued to such
Holders, for Series B Preferred Shares, (ii) amend the terms of certain of the
outstanding Series A Warrants held by each Holder by issuing to each Holder a
number of Amended Warrants, in the form attached hereto as Exhibit "B," equal to
the number of Series A Warrants received by the Holders in consideration for the
purchase of the Series A Preferred Shares being exchanged for Series B Preferred
Shares and for certain Series A Preferred Shares held and thereafter converted
prior to the date hereof, (iii) amend the terms of certain of the outstanding
Series A Warrants held by each Holder by issuing to each Holder a number of
Amended Warrants, in the form attached hereto as Exhibit "C," equal to the
number of Series A Warrants held by the Holders but not included in clause (ii)
of this Recital G, and (iv) issue to each Holder Additional Warrants, each upon
the terms and conditions stated in this Agreement;
H. Each Holder wishes to (i) exchange the number of Series A Preferred
Shares identified on the signature pages hereto as being held by such Holder and
all Series A Preferred Shares hereafter issued to such Holders, for Series B
Preferred Shares, (ii) amend the terms of the Series A Warrants held by such
Holder on the Closing Date (as defined below) by exchanging such Series A
Warrants for an equal number of Amended Warrants, and (iii) receive a number of
Additional Warrants, each upon the terms and conditions stated in this
Agreement;
I. All capitalized terms used but not defined in this Agreement shall
have the meanings ascribed to them in either the Purchase Agreement, the Series
A Certificate of Designation or the Registration Rights Agreement. The Series B
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares are
collectively referred to herein as the "Securities".
NOW THEREFORE, the Company and each of the Holders severally (and not
jointly) hereby agree as follows:
1. EXCHANGE OF SERIES A PREFERRED SHARES FOR SERIES B
PREFERRED SHARES; AMENDMENT OF WARRANTS; AND ISSUANCE OF ADDITIONAL WARRANTS.
a. Exchange of Series A Preferred Shares for Series B
Preferred Shares. On the Closing Date (as defined below), (i) the Company shall
issue to each Holder a number of Series B Preferred Shares (or fractions
thereof) having an aggregate Purchase Price (as defined in the Series B
Certificate of Designation) equal to the Aggregate Exchange Value (as defined
herein) of the Series A Preferred Shares identified on the signature pages
hereto as being held by such Holder and (ii) each Holder shall deliver all of
such outstanding Series A Preferred Shares to the Company in exchange for such
number of Series B Preferred Shares determined in accordance with clause (i) of
this Section 1(a). For purposes hereof, the "Aggregate Exchange Value" of the
outstanding Series A Preferred Shares held by a Holder shall equal the sum of
(x) the aggregate Purchase Price (as defined in the Series A Certificate of
Designation) of such Series A Preferred Shares, plus (y) any accrued and unpaid
dividends on such Series A Preferred Shares through the Closing Date, plus (z)
any accrued and unpaid Illiquidity Payments, Conversion Default Payments, Late
Registration Payments, Delay Compensation and Delisting Payments (as each such
term is defined in the Series A Certificate of Designation) with respect to such
Series A Preferred Shares through the Closing Date.
b. Amendment of the Series A Warrants by Issuance of
the Amended Warrants. On the Closing Date (as defined below), (i) the Company
shall amend 40,000 Series A Warrants for each 1,000 Series A Preferred Shares
(or a portion thereof for less than 1,000 shares) identified on the signature
pages hereto as being held by each Holder, hereafter issued to such Holder, and
held by such Holder on September 1, 1998 and thereafter converted at a Variable
Conversion Price (as defined in the Series A Certificate of Designation) of
$4.00 (or more) prior to November 9, 1998, by issuing to each Holder
certificates representing the number of Amended Warrants, in the form attached
hereto as Exhibit "B", equal to the number of such Series A Warrants exchanged
by such Holder and (ii) the Company shall amend all other Series A Warrants held
by each Holder which are not included in clause (i) of this Section (1)(b), by
issuing to each Holder certificates representing the number of Amended Warrants,
in the form attached hereto as Exhibit "C", equal to the number of such Series A
Warrants exchanged by such Holder. Each Holder shall surrender all Series A
Warrants then held by such Holder in exchange for certificates representing an
equal number of Amended Warrants in the form attached hereto as Exhibit "B" or
Exhibit "C", as applicable.. The certificates for the Amended Warrants, which
shall be in the form attached hereto as Exhibit "B", shall contain the same
terms as the Series A Warrants but shall include the following amendments:
(i) The Exercise Price (as defined in the
Series A Warrants) shall be reduced from $16.25 to $3.00;
(ii) The Holder shall be permitted to effect
a Cashless Exercise pursuant to Section 1(b) of the Series A Warrants only when
(x) the prospectus included in the Registration Statement (as defined herein)
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under which they were made, not misleading, or (y)
sales cannot be made pursuant to the Registration Statement in compliance with
the securities laws for any other reason; and
(iii) The Company shall be entitled on any
day occurring on or after the first anniversary of the Closing Date on which the
Closing Bid Price (as defined in the Series B Certificate of Designation) of the
Common Stock on each trading day during the twenty (20) consecutive trading day
period ending on the trading day immediately preceding such date (such twenty
(20) consecutive trading day period being referred to herein as the "Calculation
Period") is equal to or greater than $4.00 per share, to deliver a written
notice to the Holder requiring such Holder to exercise the Amended Warrants in
accordance with the terms thereof on the date which is ten (10) trading days
following the date of such notice (the "Exercise Date"); provided, however, that
the Company shall have such right if and only if (x) for a period of thirty (30)
consecutive trading days prior to the beginning of such Calculation Period and
(y) at all times during such Calculation Period and continuing through the
Exercise Date, the Warrant Shares are (1) authorized and reserved for issuance,
(2) listed for trading on each principal exchange or market on which the shares
of Common Stock of the Company were then traded and (3) registered for resale
pursuant to an effective registration statement under the 1933 Act; provided,
further, however, that the Holder shall not be required to exercise the Amended
Warrants with respect to any such notice unless the Closing Bid Price of the
Common Stock on the trading day immediately preceding the Exercise Date is at
least equal to $3.90 and the aggregate of cash (and cash equivalents) as shown
on the most recent balance sheet of the Company filed by the Company with the
Securities and Exchange Commission pursuant to Section 15 (d) of the Securities
Exchange Act of 1934, is less than $5,000,000.
The certificates for the Amended Warrants,
which shall be in the form attached hereto as Exhibit "C", shall contain the
same terms as the Series A Warrants but shall be amended to provide that in the
event the Holder thereof is also the Holder of Amended Warrants in the form
attached hereto as Exhibit "B", and the Company shall be entitled under the
terms thereof to deliver a written notice to the Holder requiring such Holder to
exercise such Amended Warrants in the form attached hereto as Exhibit "B", and
the Company gives such notice, and the conditions to require such exercise have
been met, then the Exercise Price for such Amended Warrants in the form attached
hereto as Exhibit "C" shall thereafter equal the lesser of (i) the Exercise
Price then in effect under such Amended Warrants in the form attached hereto as
Exhibit "C" and (ii) the Closing Bid Price of the Common Stock on the trading
day immediately preceding the Exercise Date with respect to the Amended Warrants
in the form attached hereto as Exhibit "B."
c. Issuance of Additional Warrants. On the Closing
Date (as defined below), the Company shall issue to each Holder Forty Thousand
(40,000) Additional Warrants for each One Million Dollars ($1,000,000) of
Aggregate Exchange Value (or a portion thereof for less than $1,000,000) of
Series A Preferred Shares being exchanged by such Holder on the Closing Date or
held by such Holder on September 1, 1998 and thereafter converted at a Variable
Conversion Price (as defined in the Series A Certificate of Designation) of
$4.00 (or more) prior to November 9, 1998. The Additional Warrants shall be
identical to the Amended Warrants in the form attached hereto as Exhibit "B"
except that the term of the Additional Warrants shall be four years from the
date of issuance of the Additional Warrants.
d. 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 exchange of the Series A Preferred Shares and Series A
Warrants and issuance of the Series B Preferred Shares, the Amended Warrants and
the Additional Warrants pursuant to this Agreement (the "Closing Date") shall be
12:00 noon Eastern Standard Time within five (5) business days after the date on
which the conditions set forth in Sections 7(i) and 7(j) are met or such other
mutually agreed upon time; provided that the Closing (as defined herein) shall
occur no later than March 15, 1999. The closing of the transactions contemplated
by this Agreement (the "Closing") shall occur on the Closing Date at the offices
of the Company, One Electronics Drive, Trenton, New Jersey 08619, or at such
other location as may be agreed to by the parties.
2. HOLDERS' REPRESENTATIONS AND WARRANTIES. Each Holder
severally (and not jointly) represents and warrants to the Company solely as to
such Holder that:
a. Authorization; Enforcement. This Agreement has
been duly and validly authorized. This Agreement has been duly executed and
delivered on behalf of the Holder, and this Agreement constitutes a valid and
binding agreement of the Holder enforceable in accordance with its terms.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Holder that:
a. Organization and Qualification. The Company and
each of its subsidiaries, if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and 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 in which its ownership or use of property or
the nature of the business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. "Material Adverse Effect" means any material adverse
effect on (i) the Securities, (ii) the business, operations, assets, financial
condition or prospects of the Company and its subsidiaries, if any, taken as a
whole, or (iii) on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith.
b. Authorization; Enforcement. (i) The Company has
all requisite corporate power and authority to file and perform its obligations
under the Series B Certificate of Designation and to enter into and perform this
Agreement and the Warrants and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Series B Preferred Shares and the Warrants and the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares issuable upon
conversion or exercise thereof) have been duly authorized by the Company's Board
of Directors and no further consent or authorization of the Company, its Board
of Directors, or its shareholders, including any approval required by Rule
4460(i) of the National Association of Securities Dealers, Inc., is required
(other than the approval of the holders of Series A Preferred Shares effected
pursuant to Section 8(e)(i) hereof), (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 Warrants and the execution and
filing of the Series B Certificate of Designation, each of such agreements and
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
c. Issuance of Shares. The Series B Preferred Shares,
upon issuance in accordance with the terms of this Agreement, will be duly
authorized and validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof. The Conversion Shares and Warrant Shares are duly authorized and
reserved for issuance, and, upon conversion of the Series B Preferred Shares 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 or shareholders of the Company and will not impose personal liability
upon the holder thereof.
d. Series of Preferred Shares. The terms,
designations, powers, preferences and relative, participating and optional or
special rights, and the qualifications, limitations and restrictions of each
series of preferred stock of the Company (other than the Series B Preferred
Shares) are as stated in the Certificate of Incorporation, filed on or prior to
the date hereof, and the Bylaws. The terms, designations, powers, preferences
and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of the Series B Preferred Shares
are as stated in the Series B Certificate of Designation.
e. No Conflicts. The execution, delivery and
performance of this Agreement and the Warrants by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Series B Certificate of
Designation and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares) will not (i) conflict with or result in a violation
of any provision of the Certificate of Incorporation or By-laws (each as defined
in the Purchase Agreement) or (ii) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) 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 could put the Company or
any of its subsidiaries in default) under, and neither the Company nor any of
its subsidiaries has taken any action or failed to take any action that would
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 by which any property or assets of the
Company or any of its subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its subsidiaries, if any, are not
being conducted, and shall not be conducted so long as a Holder owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the 1933 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, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement, or the
Warrants in accordance with the terms hereof or thereof or to issue the Series B
Preferred Shares and Warrants in accordance with the terms hereof and to issue
the Conversion Shares upon conversion of the Series B Preferred Shares and the
Warrant Shares upon exercise of the Warrants. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is not in violation of the continued listing
requirements of the Nasdaq National Market ("Nasdaq") and does not reasonably
anticipate that the Common Stock will be delisted by the Nasdaq in the
foreseeable future. The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
f. Disclosure. All information relating to or
concerning the Company or any of its subsidiaries set forth in this Agreement
and provided to the Holders 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 the Company or any of its subsidiaries or its or their business,
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
(assuming for this purpose that the Company's reports filed under the 1934 Act
(as defined in the Purchase Agreement) are being incorporated into an effective
registration statement filed by the Company under the 1933 Act).
g. Acknowledgment Regarding Holders' Purchase of
Securities. The Company acknowledges and agrees that the Holders are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Holder is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Holder or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Holders' purchase of the Securities. The Company further
represents to each Holder that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
h. 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 in any security or solicited any
offers to buy any security under circumstances that would require registration
under the 1933 Act of the issuance of the Securities to the Holders. The
issuance of the Securities to the Holders will not be integrated with any other
issuance of the Company's securities (past, current or future) for purposes of
any shareholder approval provisions applicable to the Company or its securities
other than the issuance of the Series A Preferred Shares.
i. Recent Sale of Common Stock. After November 9,
1998, the Company issued, in a private placement, 6,666,666 shares of its Common
Stock for an aggregate of $19,999,998, together with the issuance of warrants to
purchase 1,000,000 shares of Common Stock at an exercise price of $3.00 per
share.
4. COVENANTS.
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Sections 6 and 7
of this Agreement.
b. Additional Equity Capital. Subject to the
exceptions described below, during the Lock-up Period (as defined below) the
Company will not, without the prior written consent of a majority-in-interest of
the Holders, negotiate or contract with any party to obtain additional equity
financing (including debt financing with an equity component) that involves (A)
the issuance of Common Stock at a discount to the market price of the Common
Stock on the date of issuance (taking into account the value of any warrants or
options to acquire Common Stock issued in connection therewith) or (B) the
issuance of convertible securities that are convertible into an indeterminate
number of shares of Common Stock or (C) the issuance of Common Stock upon the
conversion of a security convertible into, or exercisable for, Common Stock
based on a conversion or exercise price which was fixed at the time of issuance
of the security being converted or exercised at a discount to the market price
of the Common Stock on the date of issuance of such convertible or exercisable
security (the limitations referred to in this sentence are collectively referred
to as the "Capital Raising Limitations"). The "Lock-up Period" is the period
beginning on the date hereof and ending three hundred sixty-five (365) days from
the Closing Date (plus any days in which sales cannot be made under the
Registration Statement (as defined below)). The Capital Raising Limitations
shall not apply to any transaction involving (i) issuances of securities in a
firm commitment underwritten public offering (excluding a continuous offering
pursuant to Rule 415 under the 1933 Act), (ii) issuances of securities as
consideration for a merger, consolidation or purchase of assets, or in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or in connection with the disposition
or acquisition of a business, product or license by the Company, or (iii) the
issuance of Common Stock upon the conversion of a security convertible into or
exercised for, Common Stock based on a conversion or exercise price which was
fixed at the time of issuance of the security being converted or exercised at a
price equal to or greater than the market price of the Common Stock on the date
of issuance of such convertible or exercisable security. The Capital Raising
Limitations also shall not apply to the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof or to the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by the shareholders of the Company.
c. Expenses. Each of the parties to this Agreement
shall bear their own expenses.
d. Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion or exercise
of the outstanding Series B Preferred Shares and Warrants and issuance of the
Conversion Shares and Warrant Shares in connection therewith (based on the
Conversion Price of the Series B Preferred Shares or Exercise Price of the
Warrants in effect from time to time). The Company shall not reduce the number
of shares of Common Stock reserved for issuance upon conversion of Series B
Preferred Shares and exercise of the Warrants without the consent of each Holder
then owning any shares of Series B Preferred Shares or Warrants. The Company
shall use its best efforts at all times to maintain the number of shares of
Common Stock so reserved for issuance at no less than the number that is then
actually issuable upon full conversion of the Series B Preferred Shares and
exercise of the Warrants (based on the Conversion Price of the Series B
Preferred Shares or Exercise Price of the Warrants in effect from time to time).
If at any time the number of shares of Common Stock authorized and reserved for
issuance is below the number of Conversion Shares and Warrant Shares issued and
issuable upon conversion of the Series B Preferred Shares and exercise of the
Warrants (based on the Conversion Price of the Series B Preferred Shares or
Exercise Price of the Warrants then in effect), the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of shareholders
to authorize additional shares to meet the Company's obligations under this
Section 4(d), in the case of an insufficient number of authorized shares, and
using its best efforts to obtain shareholder approval of an increase in such
authorized number of shares.
e. No Integration. The Company shall not make any
offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of Securities to be
integrated with any other offering of securities by the Company for the purpose
of any shareholder approval provision applicable to the Company or its
securities.
f. Integration of Certain Covenants of the Purchase
Agreement. The agreements and covenants set forth in Sections 2.6, 2.7, 4.2,
4.3, 4.4, 4.5 and 4.6 and Article V of the Purchase Agreement shall be
incorporated herein and shall be applicable as if the terms "Securities",
"Preferred Shares", "Warrants," "Common Shares" and "Warrant Shares" set forth
in the Purchase Agreement are deemed to include the Securities, Series B
Preferred Shares, Warrants, Common Shares and Warrant Shares, respectively.
References in such sections of the Purchase Agreement to the "Agreement" shall
be deemed to mean this Agreement.
5. REGISTRATION RIGHTS.
a. Registration Rights. On or before January 13,
1999, the Company shall file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") covering the
resale by the Holders of (i) the Conversion Shares issuable upon conversion of
the Series B Preferred Shares and (ii) the Warrant Shares issuable upon exercise
of the Warrants.
b. Incorporation of Registration Rights Agreement.
The terms, rights and obligations set forth in the Registration Rights Agreement
shall be incorporated herein subject to the following amendments:
(i) The term "Registrable Securities" shall
be deemed to include (i) the Conversion Shares issuable upon conversion of the
Series B Preferred Shares, (ii) the Warrant Shares issuable upon exercise of the
Warrants and (iii) the Common Stock issued upon conversion of the Series A
Preferred Shares;
(ii) The time periods required for filing
the Registration Statement and the Required Effective Date (as defined in the
Registration Rights Agreement) set forth in Section 2(a) of the Registration
Rights Agreement shall not apply to the Registration Statement and the number of
shares of Common Stock initially included in the Registration Statement shall be
no less than the sum of (i) 1.5 times the number of Conversion Shares and (ii)
the number of Warrant Shares, as determined on the date of filing of the
Registration Statement (assuming, for purposes of such determination, that such
date of filing is the Closing Date such that all of the Amended Warrants and
Additional Warrants have been issued and all of the Series A Preferred Shares
then outstanding have been exchanged for Series B Preferred Shares); and
(iii) Section 2(b) of the Registration
Rights Agreement shall not apply to the Registrable Securities.
c. Acknowledgement Regarding Registration of Common
Stock Underlying Series A Preferred Shares. The shares of Common Stock issued
upon conversion of the Series A Preferred Shares are registered under the
Company's Registration Statement on Form S-3, File No. 333-46095. The Company
acknowledges that it is obligated to keep such Registration Statement effective
and to keep such shares registered until the earlier of (i) the date on which
all of such shares have been sold, or (ii) the date on which such shares may be
immediately sold without registration pursuant to Rule 144(k) under the 1933
Act.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to exchange the Series A Preferred Shares
for the Series B Preferred Shares, to amend the Series A Warrants by issuance of
the Amended Warrants and to issue the Additional Warrants to a Holder at the
Closing is subject to the satisfaction, at or before the Closing Date 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:
a. The applicable Holder shall have executed this
Agreement and delivered the same to the Company.
b. The applicable Holder shall have delivered Series
A Preferred Shares and Series A Warrants in accordance with Section 1 above.
c. The Series B Certificate of Designation shall have
been accepted for filing with the Secretary of State of the State of New Jersey.
d. The representations and warranties of the
applicable Holder shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and the
applicable Holder 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 Holder
at or prior to the Closing Date.
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in 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 HOLDER'S OBLIGATION TO PURCHASE. The
obligation of each Holder hereunder to exchange the Series A Preferred Shares
for the Series B Preferred Shares, and to exchange the Series A Warrants for the
Amended Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions, provided that these conditions
are for such Holder's sole benefit and may be waived by such Holder at any time
in its sole discretion:
a. The Company shall have executed this Agreement and
delivered the same to the Holder.
b. The Company shall have delivered to such Holder
duly executed certificates (in such denominations as the Holder shall request)
representing the Series B Preferred Shares, Additional Warrants and Amended
Warrants in accordance with Section 1 above.
c. The Series B Certificate of Designation shall have
been accepted for filing with the Secretary of State of the State of New Jersey,
and a copy thereof certified by such Secretary of State shall have been
delivered to such Holder.
d. The Irrevocable Transfer Agent Instructions (as
defined in the Purchase Agreement), in form and substance satisfactory to a
majority-in-interest of the Holders, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
e. The representations and warranties of the Company
set forth in this Agreement shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made at such time
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 (including those incorporated herein by reference to
the Purchase Agreement), satisfied or complied with by the Company at or prior
to the Closing Date. The representations and warranties of the Company set forth
in Sections 3.3, 3.6, 3.7, 3.8, 3.11, 3.15, 3.16, 3.17, 3.18, 3.19, 3.20 and
3.21 of the Purchase Agreement shall be true and correct in all material
respects as of the Closing Date as though made at such time and shall be
applicable as if the terms "Securities", "Preferred Shares", "Warrants", "Common
Shares" and "Warrant Shares" set forth in the Purchase Agreement are deemed to
include the Securities, Series B Preferred Shares, Warrants, Common Shares and
Warrant Shares, respectively and any references to "Agreement" in such sections
shall be deemed to mean this Agreement. References in such sections of the
Purchase Agreement to "SEC Documents" shall be deemed to refer to reports filed
by the Company with the Securities and Exchange Commission after January 1,
1998. The Holder shall have received a certificate or certificates, executed by
the chief executive officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Holder including, but not limited to certificates with respect to the
Company's Certificate of Incorporation, By-laws and Board of Directors'
resolutions relating to the transactions contemplated hereby.
f. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in 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.
g. The Conversion Shares and the Warrant Shares shall
have been authorized for quotation on Nasdaq and trading in the Common Stock on
Nasdaq shall not have been suspended by the SEC or Nasdaq.
h. The Holder shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Holder and in substantially the same form as
Exhibit "D" attached hereto.
i. The Registration Statement filed by the Company
pursuant to Article V covering the resale of the Registrable Securities
underlying the Series B Preferred Shares and the Warrants shall be effective and
no stop order shall have been issued in respect thereof.
j. The Holders of $10,000,000 of the Company's 9.01%
Convertible Subordinated Debentures (the "Debentures") have exchanged the
Debentures for Two Million Five Hundred Thousand (2,500,000) shares of Common
Stock, or shall have executed and delivered to the Company an effective
irrevocable direction for such exchange effective upon the exchange of the
Series A Preferred Shares for the Series B Preferred Shares, and the exchange of
the Series A Warrants for the Amended Warrants.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York without
regard to the principles of conflict of laws. The parties hereto hereby submit
to the exclusive jurisdiction of the United States Federal Courts located in
Borough of Manhattan in the State of New York with respect to any dispute
arising under this Agreement, the agreements entered into in connection herewith
or the transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in one 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.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
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. Consents to Transaction. Subject to the Closing of
the transactions contemplated by this Agreement, the Holders consent to (i) the
creation, establishment and issuance of the Series B Preferred Shares in
accordance with the terms hereof; (ii) the exchange or conversion of the
Debentures for Two Million Five Hundred Thousand (2,500,000) shares of Common
Stock; (iii) the issuance of options to purchase Common Stock in accordance with
the 1998 Stock Option and Stock Award Plan, Employee Stock Purchase Plan and
1998 Director's Stock Award Plan of the Company as amended and approved by the
shareholders of the Company, and the issuance of Common Stock upon exercise of
such options.
f. 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 Holder
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
g. 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 (including
a recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
Trenton, New Jersey 08619
Attention: Chief Executive Officer
Facsimile: (609) 586-1593
With copy to:
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962
Facsimile: (973) 966-1550
Attention: Joseph Lunin
If to a Holder: To the address set forth immediately below such
Holder's name on the signature pages hereto.
Each party shall provide notice to the other parties of any change in
address.
h. 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 any Holder shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2.6 of the Purchase Agreement,
any Holder may assign its rights hereunder to any person that purchases
Securities in a private transaction from a Holder or to any of its "affiliates,"
as that term is defined under the 1934 Act, without the consent of the Company.
i. 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.
j. Survival. The representations and warranties of
the Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8
(including the covenants integrated from the Purchase Agreement pursuant to
Section 4(f) of this Agreement) shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the
Holders. The Company agrees to indemnify and hold harmless each of the Holders
and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by the Company
of any of its representations, warranties and covenants set forth in Sections 3,
4 and 5 hereof (including the covenants integrated from the Purchase Agreement
pursuant to Section 4(f) of this Agreement) or any of its covenants and
obligations under this Agreement or the Registration Rights Agreement, including
advancement of expenses as they are incurred.
k. Publicity. The Company and each of the Holders
shall have the right to review a reasonable period of time before issuance of
any press releases, SEC, NASDAQ or NASD filings, or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of each of the
Holders, to make any press release or SEC, NASDAQ or NASD filings with respect
to such transactions as is required by applicable law and regulations (although
each of the Holders shall be consulted by the Company in connection with any
such press release prior to its release and shall be provided with a copy
thereof and be given an opportunity to comment thereon).
l. 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.
m. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
IN WITNESS WHEREOF, the undersigned Holders and the Company
have caused this Agreement to be duly executed as of the date first above
written.
BASE TEN SYSTEMS, INC.
THOMAS E. GARDNER
By:-------------------------------------------
Name: Thomas E. Gardner
Title: Chairman and Chief Executive Officer
Number of
Series A
Preferred
Shares held by
Holder.
ELARA LTD.
By: GEOFFREY TIRMAN 540.046875
--------------------------------
Geoffrey Tirman
Talisman Capital
President, Elara Ltd.
JMG CAPITAL PARTNERS,
LP.
By: JONATHAN GLASER 413.4453125
--------------------------------
Jonathan Glaser
President,
JMG Capital
Management, Inc.
General Partner
JMG Capital Partners,
L.P.
TRITON CAPITAL INVESTMENTS, LTD.
JONATHAN GLASER
By: 413.4453125
--------------------------------
Jonathan Glaser
RGC INTERNATIONAL
INVESTORS, LDC
By: Rose Glen Capital
Management, L.P.,
Investment Manager
By: RGC General Partner Corp.,
as General Partner
GARY S. KAMINSKY
--------------------------------
By: Gary S. Kaminsky 3,307.5625
Managing Director
Number of
Series A
Preferred
Shares held by
Holder.
SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.
MICHAEL A. ROTH
By: -------------------------------- 2,964.1171875
Name: Michael A. Roth
Managing Member,
Staro Asset
Management, LLC
Investment Manager
Shepherd Investments
International, Ltd.
STARK INTERNATIONAL
MICHAEL A. ROTH
By: -------------------------------- 2,964.1171875
Name: Michael A. Roth
Managing Member,
Staro Asset
Management, LLC
Investment Manager,
Stark International
SOCIETE GENERALE
FRANCOIS BARTHELEMY
By: --------------------------------
Francois Barthelemy
FVP
GUILLAUME POLLET
By: -------------------------------- 3,975
Guillaume Pollet
FVP