<PAGE>
As filed with the Securities and Exchange Commission on February 4, 1997.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MARINE MANAGEMENT SYSTEMS, INC.
(Name of small business issuer in its charter)
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Delaware 7300 06-0886588
(State or other jurisdiction of (Primary Standard Industry (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
470 West Avenue
Stamford, Connecticut 06902
(203) 327-6404
(Address and telephone number of principal executive
offices and principal place of business)
------------------------
Eugene D. Story
President
Marine Management Systems, Inc.
470 West Avenue
Stamford, Connecticut 06902
(203) 327-6404
(Name, address and telephone number of agent for service)
------------------------
Copies to:
Frank J. Marco, Esq. Robert J. Mittman, Esq.
Shipman & Goodwin LLP Tenzer Greenblatt LLP
One American Row 405 Lexington Avenue
Hartford, Connecticut 06103 New York, New York 10174
Telephone No.: (860) 251-5000 Telephone No.: (212) 885-5000
Facsimile No.: (860) 251-5900 Facsimile No.: (212) 885-5001
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
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- ----------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to be to be Price per Offering Registration
Registered Registered Security (1) Price Fee
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$.002 per share ............. 1,380,000(2) $5.00 $6,900,000 $2,090.91
- ----------------------------------------------------------------------------------------------------------------------------
Warrants, each to purchase
one share of Common Stock 1,380,000(2) $0.10 $138,000 $41.82
(3)............
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$.002 per share, issuable
upon exercise of the Warrants 1,380,000(2) $5.00 $6,900,000 $2,090.91
(3)..........................
- ----------------------------------------------------------------------------------------------------------------------------
Underwriter's Warrants, each
to purchase one share of 120,000 $.001 $120 (5)
Common Stock (4)...........
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.002
per share (6).............. 120,000 $7.25 $870,000 $263.64
- ----------------------------------------------------------------------------------------------------------------------------
Underwriter's Warrants, each
to purchase one warrant (4) 120,000 $.0001 $12 (5)
- ----------------------------------------------------------------------------------------------------------------------------
Warrants, each to purchase
one share of Common Stock (6) 120,000 $.145 $17,400 $5.27
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.002
per share (6).............. 120,000 $7.25 $870,000 $263.64
- ----------------------------------------------------------------------------------------------------------------------------
Total --- --- --- $4,756.19
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Assumes the Underwriter's over-allotment option to purchase up to 180,000
additional shares of Common Stock and/or 180,000 Warrants is exercised in
full.
(3) Pursuant to Rule 416, there are also being registered such indeterminable
additional shares of Common Stock as may become issuable pursuant to
anti-dilution provisions contained in the Warrants and the Underwriter's
Warrants.
(4) Represents warrants to be issued by the Company to the Underwriter at the
time of delivery and acceptance of the securities to be sold by the
Company to the public hereunder.
(5) None, pursuant to Rule 457(g).
(6) Issuable upon exercise of the Underwriter's Warrant and/or the warrants
issuable thereunder.
- -------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PRELIMINARY PROSPECTUS, DATED FEBRUARY 4, 1997
SUBJECT TO COMPLETION
MARINE MANAGEMENT SYSTEMS, INC.
1,200,000 Shares of Common Stock and
Redeemable Warrants to Purchase 1,200,000 Shares of Common Stock
Marine Management Systems, Inc. (the "Company") is offering hereby
1,200,000 shares (the "Shares") of the common stock, par value $.002 per share,
of the Company (the "Common Stock") and redeemable warrants to purchase
1,200,000 shares of Common Stock (the "Warrants"). The Shares and Warrants may
be purchased separately. Each Warrant entitles the registered holder thereof to
purchase one share of Common Stock at a price of $5.00, subject to adjustment in
certain circumstances, for a period of four years commencing , 1998. The
Warrants are redeemable by the Company, upon the consent of the Underwriter, at
any time commencing , 1998, upon notice of not
less than 30 days, at a price of $.10 per Warrant, provided that the closing bid
quotation of the Common Stock for the period of 20 consecutive trading days
ending on the third day prior to the day on which the Company gives notice has
been at least 150% (currently $7.50, subject to adjustment) of the then
effective exercise price of the Warrants. See "Description of Securities."
Prior to this offering, there has been no public market for the Common
Stock or Warrants and there can be no assurance that such a market will develop.
It is anticipated that the Shares and Warrants will be quoted on the Nasdaq
SmallCap Market ("Nasdaq") under the symbols "MMSI" and "MMSIW", respectively.
The offering prices of the Shares and Warrants and the exercise price of the
Warrants were determined pursuant to negotiations between the Company and the
Underwriter and do not necessarily relate to the Company's book value or any
other established criteria of value. For a discussion of the factors considered
in determining the offering prices of the Shares and Warrants, see
"Underwriting."
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS WHO
CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" COMMENCING
ON PAGE 10 AND "DILUTION" ON PAGE 23.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------------------------------------------
Per Share.............................. $5.00 $.50 $4.50
- --------------------------------------------------------------------------------------------------------------------
Per Warrant............................ $.10 $.01 $.09
- --------------------------------------------------------------------------------------------------------------------
Total(3)............................... $6,120,000 $612,000 $5,508,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) In addition, the Company has agreed to pay the Underwriter a 3%
nonaccountable expense allowance, to grant the Underwriter warrants (the
"Underwriter's Warrants") to purchase up to 120,000 shares of Common Stock
and/or 120,000 warrants, to retain the Underwriter as a financial
consultant and to grant the Underwriter a right of first refusal in
connection with future financings. The Company has also agreed to indemnify
the Underwriter against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, including the
Underwriter's nonaccountable expense allowance in the amount of $183,600
($211,140 if the Underwriter's over-allotment option is exercised in full),
estimated at $753,600.
(3) The Company has granted the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 180,000 additional
Shares and/or 180,000 additional Warrants on the same terms set forth
above, solely for the purpose of covering over-allotments, if any. If the
Underwriter's over-allotment option is exercised in full, the total price
to public, underwriting discounts and commissions and proceeds to Company
will be $7,038,000, $703,800 and $6,334,200, respectively. See
"Underwriting."
---------------
The Shares and Warrants are being offered, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter and subject to the approval
of certain legal matters by counsel and to certain other conditions. The
Underwriter reserves the right to withdraw, cancel or modify the offering and to
reject any order in whole or in part. It is expected that delivery of
certificates representing the Shares and Warrants will be made against payment
therefor at the offices of the Underwriter, 650 Fifth Avenue, New York, New York
10019, on or about , 1997.
Whale Securities Co., L.P.
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
As of the date of this Prospectus, the Company will become subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and, in accordance therewith, will file
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). The Company intends to
furnish its stockholders with annual reports containing audited financial
statements and such other periodic reports as the Company deems appropriate or
as may be required by law.
----------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS, ON NASDAQ OR OTHERWISE, WHICH STABILIZE OR MAINTAIN THE MARKET
PRICES OF THE COMMON STOCK AND WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Except as otherwise noted, all information contained
in this Prospectus, including per share data and information relating to the
number of shares outstanding, gives retroactive effect to the 1-for-2.7 reverse
split of the Common Stock effected on August 20, 1996 and assumes no exercise of
the Underwriter's over-allotment option to purchase up to 180,000 additional
shares of Common Stock and/or 180,000 additional Warrants. See "Underwriting"
and Note 9 of Notes to Financial Statements.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
The Company
The Company develops, markets, sells and supports software systems, and
sells and supports associated hardware and communications systems, for the
management of commercial ships in the international maritime industry. The
Company's products are designed to enable its customers to operate their
ocean-going ships in a safer and more efficient manner through the use of
shipboard and shore-based computer applications and networks connected by
wireless communications. The Company sells its products in the international
shipping market to operators of all types of ships, including crude oil and
product tankers, gas carriers, container ships, cruise liners, bulk carriers and
other specialty ships. The Company has 27 years of experience in the maritime
industry and has an established international market presence and a significant
installed customer base of over 1,500 installations at over 500 shipboard and
shore-based sites worldwide.
The international maritime market is primarily an open, free market,
allowing ships of any country to compete for business. The broad nature of this
market, coupled with the fact that there are over 80,000 vessels in the world's
commercial fleet competing for business, has generated growing pressure on
shipowners/operators to operate their ships more efficiently. In addition, a
significant expansion of international maritime regulations has occurred in
recent years requiring shipowners/operators to operate their ships in a safer
and more environmentally protective manner or face major liability exposure. At
the same time, however, the economic pressures of the industry are leading to
smaller-sized crews on ships, which is increasing the burdens associated with
efficient ship operation and safety and environmental regulation compliance. The
Company believes that these factors have created an environment where
productivity aids, such as those provided by the Company's information
technology systems, can offer large benefits to shipowners/operators.
The Company's core business currently centers around its existing Fleet
Manager Series products, a multifaceted line of software applications for the
management of ship operations. These applications include: FleetWORKS, a systems
package for shipboard inventory and maintenance management; FleetLINK, a marine
data communications and e-mail systems package for high speed data transmission
over satellite, cellular and/or terrestrial links; and FleetWATCH, a shipboard
reporting and administrative systems package. This suite of integrated
applications allows shipowners/operators to manage costs, manage resources and
comply with both internal and externally mandated safety and environmental
issues, while combining ease of use and broad-based functionality with low
implementation costs and full scalability. The Company has also developed
services to support its Fleet Manager Series products, ranging from database
development and validation to the supply of shipboard computer hardware, related
engineering, integration and training services and maintenance support. The
Fleet Manager Series versions currently being shipped are DOS-based; however,
the Company is in the process of developing Windows-based versions, the initial
modules of which are expected to be available during the first quarter of 1997.
<PAGE>
While many shipowners/operators are just beginning to implement information
technology systems within their enterprises, others have already made
significant investment in their information technology infrastructures. Due to
the increasing proliferation of available technology, more and more of these
infrastructures are incorporating a variety of software environments, computing
platforms and communications protocols and applications supplied by a variety of
vendors, and such variety often results in incompatible systems and applications
within and among an enterprise's many locations. As a result, demand is
increasing for systems that offer shipowners/operators a standard interface,
transparent communications and the ability to integrate enterprise and ship
specific productivity applications for local and remote enterprise users. In
response, the Company has designed, and is currently developing, an Integrated
Shipboard Information Technology ("ISIT") platform (a computer operating
environment standard) for the maritime industry. This platform is designed to
permit the integration of a myriad of ship equipment and informational systems,
including proposed ISIT-complaint versions of the Company's Fleet Manager Series
products currently under development, under a common protocol and to provide a
standard interface to shore-based systems. When completed, the ISIT platform is
intended to provide users with a common communication path for all of their
ISIT-compliant software applications, enabling them to use most satellite
services and a variety of telephone networks and services, including the
Internet. It is also intended to provide a means for collecting and storing a
ship's operating data (for instance, the data found in the various control
systems on the ship's bridge and engine room which operate with their own
proprietary protocols) in a common database and format. The Company believes it
is the only software company developing a systems operating environment
compliant with recently created American Society for Testing and Materials
("ASTM") standards and proposed International Standards Organization ("ISO")
standards, which standards are expected to dictate the software operating
systems standard for the industry.
The Company is developing the ISIT platform as part of a project chosen for
shared expense funding by the United States government. Certain other companies
involved in various technologies and services associated with international ship
operations, design and information technologies are participating in various
related aspects of the project. Upon completion of the project, the Company will
retain all rights to the ISIT platform, subject only to a value added reseller
agreement (and a sharing of a portion of any revenues derived from the
commercialization of the ISIT platform) with the other project members and to
agreements with certain of the Company's sales agents. The Company expects to
complete initial development and to begin initial testing of the ISIT platform
in the second quarter of 1997 and to commence initial marketing of the ISIT
platform and ISIT-complaint versions of its Windows-based Fleet Manager Series
products by the fourth quarter of 1997.
As part of its strategic plan, the Company also intends to expand its
operations in order to provide its customers with satellite communication
services. Currently, the Company provides software solutions for ship-to-shore
communications, but the actual wireless communications services must be procured
by the Company's customers from other vendors. The Company intends to contract
with communications service providers and to resell their communication services
to shipowners/operators as part of a bundled offering with its other products
and services, enabling it to serve as a single-source provider for ship-to-shore
data communications.
The Company believes that once it has completed the ISIT platform and its
negotiation of reseller agreements with one or more satellite communication
service providers, the Company will be in the unique position of being able to
provide shipowners/operators with one-stop shopping for their fleet management
requirements, including application software, platform software, hardware,
systems integration and engineering services and associated communications
services. In addition, the Company believes that the development of the ISIT
platform could be a major breakthrough for the commercial shipping business and
that it represents a strategic opportunity for the Company to significantly
increase its market share position within the maritime industry. Thus, the
Company intends to expand its marketing efforts to focus not only on direct
sales of its products and services to shipowners/operators but also on the
marketing of the ISIT platform to a variety of maritime organizations, including
shipboard control system suppliers and hardware and software vendors, who will
be able to bundle the ISIT platform with their respective product lines.
The Company incurred operating losses of $213,602 and $667,156 for the
fiscal year ended December 31, 1995 and the nine months ended September 30,
1996, respectively, and, at September 30, 1996, had an accumulated deficit of
$4,897,776. The Company expects that it will continue at a loss until, at the
earliest, the Company generates sufficient revenues to offset the cost of its
operations. There can be no assurance that the Company will ever achieve
profitability. See "Risk Factors."
The Company was incorporated in Ohio in 1969 and reincorporated in Delaware
in February 1996. The Company's principal executive offices are located at 470
West Avenue, Stamford, Connecticut 06902, and its telephone number is (203)
327-6404. Third-party trademarks or tradenames referred to in this Prospectus
are the property of their respective owners.
4
<PAGE>
Recent Developments
Fall 1996 Borrowings
In October and November 1996, the Company borrowed an aggregate of $410,000
from six persons, including $100,000 from Lyman C. Hamilton, Jr., a director of
the Company, $50,000 from a trust for the benefit of the mother of Donald F.
Logan, Jr., an executive officer and director of the Company, and $5,000 each
from the brother and niece of Eugene D. Story, an executive officer and director
of the Company (the "Fall 1996 Borrowings"). All of such indebtedness bears
interest at the rate of 10% per annum and matures on the consummation, and will
be paid out of the proceeds, of this offering. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and "Certain Transactions."
December 1996 Borrowings
In September and December 1996, the Company borrowed an aggregate of
$166,000 ($50,000 in September 1996 and $116,000 in December 1996) from five
persons, consisting of $29,000 from Eugene D. Story, $10,000 from Robert D.
Ohmes, $15,000 from Mark E. Story, $22,000 from Donald F. Logan, Jr. and $90,000
from Scott R. Ohmes (the "December 1996 Borrowings"). Messrs. Eugene D. Story,
Robert D. Ohmes, Mark E. Story and Logan are executive officers and directors of
the Company and Scott R. Ohmes is the son of Robert D. Ohmes. All of such
indebtedness bears interest at the rate of 9% per annum and matures on December
2, 1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" and "Certain
Transactions."
Strategic Alliance with Sperry Marine Inc.
In December 1996, the Company and Sperry Marine Inc. ("Sperry"), a
worldwide leader in providing advanced electronic navigation and guidance
systems to commercial and military customers for marine and aircraft
applications and a wholly-owned subsidiary of Litton Industries Inc. ("Litton"),
a $3.6 billion aerospace, defense and commercial electronics company publicly
traded on the New York Stock Exchange, entered into a strategic alliance for the
sale of the Company's products (the "Sperry Alliance"). Sperry has indicated to
the Company that it intends to make its commercial marine electronic navigation
and guidance systems compliant with the Company's proposed ISIT platform.
Consequently, as part of the Sperry Alliance, the Company and Sperry have
entered into a marketing and distribution agreement (the "Sperry Agreement")
pursuant to which Sperry has: (i) the sole right to distribute to the United
States government the Company's proposed ISIT platform products as a part of
and/or within a related Sperry product or system ("Bundled") and the Company's
software application products, whether or not they are Bundled; (ii) the sole
right to distribute all of the Company's software application products and ISIT
platform products which are Bundled and sold under the "Sperry" name; and (iii)
the non-exclusive right to distribute all of the Company's software application
products and ISIT platform products which are Bundled and sold under the
Company's name, subject, in the case of (ii) and (iii), to certain territorial
limitations. In addition, as part of the Sperry Alliance, Sperry agreed to
provide $500,000 in financing to the Company (the "Sperry Financing"). Such
financing was consummated on December 12, 1996 and consisted of a 9% promissory
note of the Company in the principal amount of $250,000, which note will
convert, upon the consummation of this offering, into an aggregate of 100,000
shares of Common Stock (the "Sperry Convertible Note"), a 9% promissory note of
the Company in the principal amount of $250,000, maturing upon the consummation,
and payable out of the proceeds, of this offering (the "Sperry Non-Convertible
Note" and, together with the Sperry Convertible Note, the "Sperry Notes"), and
warrants to purchase 125,000 shares of Common Stock at an exercise price of
$5.00 per share (the "Sperry Warrants"). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" and "Business - Sales and Marketing."
January Bridge Financing
In January 1997, the Company completed the sale of seven investment units
(the "Bridge Units") to six private investors at a price of $50,000 per Bridge
Unit for total gross proceeds of $350,000 (the "January Bridge Financing"). Each
Bridge Unit consisted of a 9% promissory note of the Company in the principal
amount of $50,000, maturing upon the consummation and payable out of the
proceeds, of this offering (each, a "Bridge Note") and 10,000 shares of Common
Stock (the "Bridge Shares"). Immediately prior to the January Bridge Financing,
Eugene D. Story and Robert D. Ohmes contributed 45,000 and 25,000 of their
shares of Common Stock, respectively, to the Company's treasury, which treasury
shares were then issued by the Company to the investors in the January Bridge
Financing as the Bridge Shares. After the payment of $35,000 in placement fees
to the Underwriter, who acted as placement agent for the Company with respect to
the sale of the Bridge Units, and other offering expenses of approximately
$20,000, the Company received net proceeds of approximately $295,000 in
connection with the January Bridge Financing. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and "Description of Securities -
Registration Rights."
5
<PAGE>
Executive Stock Repurchase
Immediately prior to the date of this Prospectus, Eugene D. Story, Robert
D. Ohmes, Donald F. Logan, Jr. and Mark E. Story (each an executive officer and
director of the Company) delivered and transferred to the Company for
cancellation 27,085, 26,910, 14,627 and 9,145 shares of Common Stock,
respectively, and the Company accepted such shares, in full payment and
satisfaction of the Company's outstanding loans to such officers in the amounts
of $135,426, $134,550, $73,137 and $45,724, respectively (the "Executive Stock
Repurchase"). Because it was expected that such loan amounts would be satisfied
with shares of Common Stock prior to the date of this Prospectus, the $388,837
in loans receivable was presented as a component of stockholders' equity in the
Company's financial statements commencing as of December 31, 1995. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources," "Certain Transactions" and Note
15(b) of Notes to Financial Statements.
Pending CII Transactions
The Company and Connecticut Innovations Incorporated ("CII"), an agency of
the State of Connecticut and a principal stockholder of the Company, have agreed
that, immediately prior to the consummation of this offering, all 7,500 shares
of the redeemable preferred stock, par value $100 per share, of the Company (the
"Preferred Stock") will convert into an aggregate of 277,777 shares of Common
Stock (the "Preferred Stock Conversion"). All of such shares of Preferred Stock
were purchased from the Company by CII in August 1996. In addition, the
remaining $236,924 principal amount plus accrued interest outstanding under the
Company's March 1995 promissory note to CII (the "Senior Note") is due upon, and
will be paid out of the proceeds of, this offering. Simultaneous with the
consummation of this offering, the Company will also use $75,000 of the proceeds
from this offering to buy back from CII warrants (the "CII Warrants") currently
exercisable to purchase 129,944 shares of Common Stock at an exercise price of
$2.31 per share (the "CII Warrant Redemption") and such amount will be charged
to operations. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources," "Certain Transactions" and "Description of Securities."
6
<PAGE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities offered.......................................... 1,200,000 shares of Common Stock and warrants to
purchase 1,200,000 shares of Common Stock. See
"Description of Securities."
Common Stock to be outstanding after this offering.......... 4,201,120 shares (1) (2)
Warrants (3)
Number to be outstanding after this offering............. 1,200,000 Warrants
Exercise terms........................................... Exercisable for a period of four years commencing
, 1998, each to purchase one share of
Common Stock at a price of $5.00, subject to
adjustment in certain circumstances. See "Description
of Securities - Public Warrants."
Expiration date.......................................... , 2002 (five years following
the date of this Prospectus).
Redemption............................................... Redeemable by the Company, upon the consent of the
Underwriter, at any time commencing one year following
the date of this Prospectus, upon notice of at least
30 days, at a price of $.10 per Warrant, provided that
the closing bid quotation of the Common Stock has been
at least 150% (currently $7.50, subject to adjustment)
of the then effective exercise price of the Warrants
for a period of 20 consecutive trading days ending on
the third day prior to the day on which the Company
gives notice of redemption. The Warrants will be
exercisable until the close of business on the date
fixed for redemption. See "Description of Securities
- Public Warrants."
Use of Proceeds............................................. The Company intends to apply the net proceeds of this
offering for the repayment of debt and retirement of
warrants, software development, sales and marketing,
entrance into the communications business, capital
equipment and the balance for working capital and
general corporate purposes. See "Use of Proceeds."
Risk Factors................................................ The securities offered hereby are speculative and
involve a high degree of risk and immediate
substantial dilution and should not be purchased by
investors who cannot afford the loss of their entire
investment. See "Risk Factors" and "Dilution."
Proposed Nasdaq symbols..................................... Common Stock - MMSI
Warrants - MMSIW
</TABLE>
- --------
(1) Includes (i) the 70,000 Bridge Shares (which were previously contributed
back to the Company's treasury by two of its officers for issuance in the
January Bridge Financing) and (ii) an aggregate of 377,777 shares of Common
Stock which will be issued in connection with the Preferred Stock
Conversion and the conversion of the Sperry Convertible Note (the "Sperry
Note Conversion") immediately prior to the consummation of this offering.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
7
<PAGE>
(2) Does not include (i) 1,200,000 shares of Common Stock reserved for issuance
upon exercise of the Warrants, (ii) an aggregate of 240,000 shares of
Common Stock reserved for issuance upon exercise of the Underwriter's
Warrants and the warrants included therein, (iii) the 77,767 shares of
Common Stock which were cancelled by the Company in connection with the
Executive Stock Repurchase, (iv) 129,944 shares of Common Stock reserved
for issuance upon exercise of the CII Warrants which are being relinquished
by CII in connection with the CII Warrant Redemption, (v) 347,219 shares of
Common Stock reserved for issuance upon exercise of other outstanding
warrants, (vi) 71,290 shares of Common Stock reserved for issuance upon
exercise of outstanding options granted under the Company's 1996 Key
Employees' Stock Option Plan (the "Stock Option Plan"), (vii) up to 153,750
shares of Common Stock reserved for issuance upon exercise of options
available for future grant under the Stock Option Plan and (viii) an
indeterminable number of shares of Common Stock reserved for issuance in
the event the Company fails under certain circumstances to register, or to
maintain an effective registration statement with respect to, the Bridge
Shares issued in the January Bridge Financing. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity
and Capital Resources," "Management - Stock Option Plan," "Certain
Transactions," "Description of Securities" and "Underwriting."
(3) Does not include any of the warrants referred to in clauses (ii), (iv)
and (v) of footnote (2) above.
Summary Financial Information
(In thousands, except per share data)
Set forth below is certain summary financial information for the periods
and as of the dates indicated. This information is derived from and should be
read in conjunction with, the financial statements of the Company, including the
notes thereto, appearing elsewhere in this Prospectus.
Statement of Operations Data:
<TABLE>
<CAPTION>
Years Ended December 31, Nine Months Ended September 30,
------------------------- -------------------------------
1994 1995 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues........................... $2,386 $4,329 $2,998 $3,505
Gross profit....................... 1,067 1,114 676 962
Income (loss) from operations...... 39 (214) (281) (667)
Net loss........................... (71) (326) (384) (789)
Net loss per share................. (.03) (.14) (.17) (.32)
Weighted average shares
outstanding..................... 2323 2323 2323 2472(1)
Balance Sheet Data:
September 30, 1996
-------------------------------------------------
December 31, 1995 Actual Pro Forma (2) As Adjusted (2)(3)
----------------- ------ ------------- ------------------
Working capital (deficit).......... $ (615) $ (892) $ (645) $3,865
Total assets....................... 2,381 3,128 4,480 7,823
Total liabilities.................. 2,905 2,576 3,797 2,455
Redeemable Preferred Stock......... - 750 750 -
Stockholders' equity (deficit)..... (524)(1) (198)(1) (67) 5,368
</TABLE>
8
<PAGE>
- ----------
(1) As of December 31, 1995 and September 30, 1996, (i)the 77,767 shares of
Common Stock returned for cancellation to the Company by certain
executive officers (in satisfaction of $388,837 in loans outstanding from
the Company to such officers) immediately prior to the date of this
Prospectus, in connection with the Executive Stock Repurchase, were not
included in the weighted average shares outstanding and (ii)the $388,837 in
loans receivable from such officers which were satisfied in connection with
the Executive Stock Repurchase were included as a component of
stockholders' equity, since it was expected that such Executive Stock
Repurchase would be consummated immediately prior to the date of this
Prospectus. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources,"
"Certain Transactions" and Note 15(b) of Notes to Financial Statements.
(2) Adjusted to give retroactive effect to (i) the Fall 1996 Borrowings, (ii)
the December portion of the December 1996 Borrowings, (iii) the Sperry
Financing, (iv) the January Bridge Financing and (v) the Executive Stock
Repurchase. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
(3) Adjusted to give retroactive effect to the Preferred Stock Conversion and
the Sperry Note Conversion which will occur immediately prior to the
consummation of this offering and to the sale of the 1,200,000 Shares and
1,200,000 Warrants offered hereby and the anticipated application of the
estimated net proceeds therefrom, including for the repayment of (i) the
Sperry Non-Convertible Note, (ii) the Fall 1996 Borrowings, (iii) the
Bridge Notes, and (iv) the Senior Note to CII and for the purchase of the
CII Warrants in connection with the CII Warrant Redemption. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."
9
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk including, but not necessarily limited to, the risk factors described
below. Each prospective investor should carefully consider the following risk
factors inherent in and affecting the business of the Company and this offering
prior to making an investment decision.
Going Concern Qualification in the Report of Independent Certified Public
Accountants; History Of Operating Losses; Anticipated Future Losses. The report
of independent certified public accountants on the Company's financial
statements for all periods presented contains an explanatory paragraph stating
that there is substantial doubt as to the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of such uncertainty. The Company incurred
operating losses of $213,602 and $667,156 for the fiscal year ended December 31,
1995 and the nine months ended September 30, 1996, respectively, and, at
September 30, 1996, had an accumulated deficit of $4,897,776. The Company
expects that its operating losses for the fiscal year ended December 31, 1996
will substantially exceed its operating losses for the prior fiscal year and
that the Company will continue at a loss until, at the earliest, the Company
generates sufficient revenues to offset the cost of its operations, including
its continuing product development efforts. Although the Company experienced a
significant growth in sales during the fiscal year ended December 31, 1995 and
the nine months ended September 30, 1996, approximately 34% and 35%,
respectively, of its revenues for such periods were generated from sales of
computer hardware to non-industry related customers and approximately 9% and
23%, respectively, of its revenues for such periods represented government
funding relating to the Company's ISIT platform development project, which
funding is expected to terminate by the end of 1997. The Company's future level
of sales and potential profitability depend on many factors, including an
increased demand for the Company's existing products, the ability of the Company
to develop and sell new products and product versions to meet customers' needs,
the ability of management to control costs and successfully implement the
Company's strategy and the ability of the Company to develop and deliver
products in a timely manner. There can be no assurance that the Company will
experience any significant growth in sales (or even sustain historic sales
levels) in the future or that the Company will ever achieve profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Financial Statements.
Significant Capital Requirements; Working Capital Deficit; Continuing Need
for Additional Financing. The Company's capital requirements have been and will
continue to be significant, and recently its cash requirements have been
exceeding its cash flow from operations (at September 30, 1996, the Company had
a working capital deficit of $891,669) due to, among other things, costs
associated with its product development efforts. Since July 1, 1996, the Company
has raised capital of approximately $1,926,000 through the private placement of
its debt and equity securities and has been dependent on those private
financings to fund a portion of its capital requirements. In addition, based on
the Company's current product development plans and its anticipated expansion
into the satellite communications services business, the Company's capital
requirements are expected to increase. As a result, the Company is dependent
upon the proceeds of this offering to complete the development of its proposed
products and fund its business strategies. Although the Company anticipates,
based on its currently proposed plans and assumptions relating to its operations
(including assumptions regarding the progress and timing of its new product
development efforts), that the net proceeds of this offering, together with
anticipated revenues from operations and its current cash and cash equivalent
balances, will be sufficient to fund the Company's operations and capital
requirements for at least 18 months following the consummation of this offering,
there can be no assurance that such funds will not be expended prior thereto due
to unanticipated changes in economic conditions or other unforeseen
circumstances. In the event the Company's plans change or its assumptions change
or prove to be inaccurate, the Company could be required to seek additional
financing sooner than currently anticipated. The Company has no current
arrangements with respect to, or potential sources of, any additional financing,
and it is not anticipated that existing stockholders will provide any portion of
the Company's future financing requirements. Consequently, there can be no
assurance that any additional financing will be available to the Company when
needed, on commercially reasonable terms, or at all. Any inability to obtain
additional financing when needed would have a material adverse effect on the
Company. In addition, any additional equity financing may involve substantial
dilution to the interests of the Company's then existing stockholders. See "Use
of Proceeds," "Capitalization," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
10
<PAGE>
Significant Outstanding Indebtedness; Consequences of Default and Covenants
under Loans. As of September 30, 1996, the Company had a term loan of
approximately $216,667 and a $400,000 demand line of credit with a bank, both of
which bear interest at 1 1/2% over the bank's prime rate. The term loan is
payable in equal monthly installments of $5,833, plus interest, until June 1998,
at which time the balance of approximately $100,000, plus interest, will be due
in full. Pursuant to an agreement between the Company and the bank, the bank has
agreed to amend the terms of the demand line of credit to provide for its
expiration on April 1, 1998, provided that the Company completes this offering
by May 15, 1997 and the Company maintains an account with the bank with a
minimum balance of $800,000 as additional security for repayment of the loan. As
of September 30, 1996, the Company had no further availability under such
facility. All of the foregoing indebtedness is subject to various financial and
operating covenants, including requirements to maintain certain financial ratios
and a minimum net worth. Since September 30, 1996, the Company has incurred, and
currently has outstanding, an additional $75,000 principal amount of
indebtedness under a note to the bank, bearing interest at 1 1/2% over the
bank's prime rate, which the bank has agreed to amend to reflect a maturity date
of April 1, 1998 provided the Company satisfies the same conditions referred to
above with respect to the extension of the demand line of credit. Although the
Company intends to use approximately $1,305,000 of the proceeds from this
offering to repay the balances due under its Senior Note to CII, the Fall 1996
Borrowings, the Bridge Notes and the Sperry Non-Convertible Note immediately
following the consummation of this offering, the Company will still have, in
addition to its bank indebtedness, an aggregate of $166,000 principal amount of
indebtedness outstanding under notes issued by the Company to certain affiliates
of the Company in connection with the December 1996 Borrowings, which notes bear
interest at the rate of 9% per annum and mature on December 2, 1998, and an
aggregate of $500,000 principal amount of indebtedness outstanding under the
subordinated notes issued by the Company to two of its executive officers in
July 1994, which notes bear interest at 2% over prime. The Company's ability to
meet its debt service obligations will depend on the Company's future
operations, which are subject to prevailing industry conditions and other
factors, many of which are beyond the Company's control. Because both the
Company's bank term loan and note and its operating line of credit bear interest
at rates that fluctuate with prevailing interest rates, increases in such
prevailing rates would increase the Company's interest payment obligations and
could adversely effect the Company's financial condition and results of
operations. Further, the Company's bank indebtedness is secured by substantially
all of the Company's assets. In the event of a violation by the Company of any
of its loan covenants or any other default by the Company on its obligations
relating to its indebtedness, the lenders could declare such indebtedness to be
immediately due and payable and, in certain cases, the bank could then foreclose
on the Company's assets. The Company was in violation of certain of its bank
loan covenants as of September 30, 1996, including covenants regarding its net
worth and cash flow ratios, but was subsequently able to secure waivers from the
bank relating to such violations until March 31, 1997. In addition, as of
September 30, 1996, the Company was in default in payment under its Senior Note
to CII, but CII subsequently waived all payments of principal and interest under
the Senior Note through the consummation of this offering, at which time the
Senior Note is to be repaid in full. Although the Company expects that it will
be in compliance with all of its loan covenants upon the consummation of this
offering, there can be no assurance that the Company will be able to maintain
such compliance in the future. There can also be no assurance that, in the event
the Company either fails to achieve compliance prior to the expiration of its
current waivers or violates its loan covenants in the future, the Company will
be able to secure additional waivers from the bank. A default relating to the
Company's indebtedness, in the absence of a waiver, could have a material
adverse effect upon the Company's business and financial condition. Moreover, to
the extent that all of the Company's assets continue to be pledged to secure its
outstanding bank indebtedness, such assets will not be available to secure
additional indebtedness, which may adversely affect the Company's ability to
borrow in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Certain Transactions" and Notes 4 and 6
of Notes to Financial Statements.
11
<PAGE>
Dependence on Fleet Manager Series; Need to Develop Windows-Based Product
Versions. A majority of the Company's revenues to date have been derived from
its Fleet Manager Series software applications products and from the related
computer hardware and system integration and engineering services provided by
the Company to its Fleet Manager Series customers. Further, the Company
anticipates that these products and services will, and is in fact relying upon
them to, continue to account for a significant portion of its revenues for the
foreseeable future. If sales of the Fleet Manager Series were to decline
significantly for any reason, the Company's business, results of operations and
financial condition would be materially adversely affected. Consequently,
potential investors should be aware that the Fleet Manager Series is currently
comprised solely of DOS-based applications and that the market for marine
software applications products has recently begun to shift from DOS-based
applications toward Windows-based applications. The Company, in response to the
shifting trend, is in the midst of developing Windows-based versions of all of
its Fleet Manager Series products (the first modules of which it expects to have
commercially available during the first quarter of 1997 and the balance by the
end of 1997). Nonetheless, previous introductions of Windows-based products by
the Company's competitors or additional such introductions prior to the
Company's completion of its new product versions, could exert downward price
pressure on the Company's existing Fleet Manager Series products or could render
them obsolete and unmarketable. Moreover, there can be no assurance that the
Company will be able to successfully develop its proposed Window-based products
within anticipated time-frames, or at all, or that, if developed, its new
Windows-based versions will achieve market acceptance. See "Business - The Fleet
Manager Series," "- Research and Development" and "- Competition."
Uncertainties Relating to Development and Commercialization of the
Company's ISIT Platform and ISIT-Compliant Products; Dependence Upon ISIT
Platform Development Project Members. The Company's ISIT platform development
project was chosen for shared expense funding under the United States
government's DARPA/MARITECH program in July 1995. The Company is responsible for
the development of the ISIT platform while certain other companies involved in
various technologies and services associated with international ship operations,
design and information technologies are responsible for various related aspects
of the project. The costs relating to the ISIT platform project have been
budgeted at approximately $3.9 million, of which the Company's expenses have
been estimated at approximately $2 million (before giving effect to the
government's reimbursement funding described below). The total government
expense reimbursement commitment is defined in the cooperative agreement between
the government and the project members (the "Cooperative Agreement") but is
limited to the lower of approximately $2 million and 50% of the project's costs.
The government makes payments to the Company as the project leader upon the
completion of various milestones defined in the Cooperative Agreement, after
which the payments are allocated among the project members according to the
project budget and their expenditures thereunder. Through September 30, 1996,
the Company had expended a total of $1,457,200 in connection with the project
and recognized grant revenues from the government for such project in the amount
of $728,600. The success of the ISIT platform development effort is dependent
upon the project members working together to complete the development project
within scheduled timeframes as the government has the right to terminate the
Cooperative Agreement in the event certain milestones are not met by designated
dates. Pursuant to the Cooperative Agreement, development of the ISIT platform
was originally to be completed by the end of 1996, but it was subsequently
amended to provide for a completion date of June 1997. The Company and the other
project members have recently determined that a further extension, through the
third quarter of 1997, is now required. In keeping with the newly proposed
schedule, the Company expects to begin initial testing of the platform in the
second quarter of 1997 and to commence marketing of the platform by the fourth
quarter of 1997. There can be no assurance, however, that the government will
grant the proposed extension or any further extensions or that even these
revised timetables will be met. Thus, any further delays in the project's
completion could have a material adverse effect on the Company's business. The
Company is also engaged in the development of upgrades of its Fleet Manager
Series software products to make them ISIT-compliant, and its future operating
results will likely depend to a considerable extent upon its ability to also
develop and implement additional ISIT-compliant products. There can be no
assurance that the development of the ISIT platform or of ISIT-compliant
versions of the Fleet Manager Series or other products will be completed, or
that any product resulting from such development will adequately meet the
requirements of the marketplace, be of acceptable quality or achieve market
acceptance. The success of the Company in developing, introducing, selling and
supporting the ISIT platform, ISIT-compliant versions of the Fleet Manager
Series or additional ISIT platform-related products will depend on a variety of
factors in addition to the timely and successful completion of product design
and development, including timely and efficient implementation of manufacturing
processes, effective sales, marketing and customer support service, and the
absence of performance problems or other difficulties that may require design
modifications and related expenses and hinder or damage market acceptance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business - The ISIT Platform Development Project."
12
<PAGE>
Uncertainty of Market Acceptance for the Company's ISIT Platform; Need to
Overcome Industry Bias. The Company's future growth and profitability will
depend, in large part, on the success of its personnel and agents in fostering
acceptance among maritime companies of the ISIT platform and ISIT-compliant
versions of the Fleet Manager Series, the demand and market acceptance for which
are currently untested. Such acceptance will be substantially dependent on
educating these companies as to the distinctive characteristics and perceived
benefits of the ISIT platform. While the Company believes that there exists a
strong industry interest in the ISIT platform, the Company also believes that
many maritime companies have a bias against the use of any information
technology on ships. Accordingly, even if the Company is successful in
demonstrating the efficacy of the ISIT platform, future revenues from the ISIT
platform and the Company's ISIT-compliant products will be dependent upon the
Company overcoming such biases. The Company believes that in order for the ISIT
platform, ISIT-compliant versions of the Fleet Manager Series and additional
ISIT platform-related products to meet with widespread market acceptance, the
ISIT platform must become the industry standard. In other words, additional
application software must be developed by the Company and by third-party
software vendors to interface with the ISIT platform. The creation of an
industrial standard is difficult even for companies with substantially greater
resources than the Company and, accordingly, there can be no assurance that the
ISIT platform will become accepted as the industry standard or that application
software which is ISIT-compliant will become commercially available. Moreover,
the potential market for the ISIT platform is a developing market subject to a
high degree of uncertainty. There can be no assurance that the ISIT platform
will receive the necessary acceptance by the maritime community. If the market
for the ISIT platform fails to develop, develops more slowly than anticipated,
or if ISIT-compliant products do not achieve market acceptance, the Company's
business, results of operations and financial condition will be materially
adversely affected. See "Business - The ISIT Platform Development Project."
Rapid Technological Changes. The market for the Company's products and
products under development is relatively new and is characterized by rapid
technological change, evolving industry standards, changes in end-user
requirements and new product introductions and enhancements. As a result, the
Company and others may, from time to time, announce new or planned products,
capabilities or technologies that have the potential to replace or shorten the
life cycle of, and cause customers to defer purchasing, existing Company
products. In addition, the introduction of products embodying new technologies
and the emergence of new industry standards could render the Company's existing
products and products currently under development obsolete and unmarketable. For
instance, while the Company believes that the Windows NT and Windows 95
operating systems (which will be used by both the ISIT platform and the new
versions of the Fleet Manager Series products currently under development) will
become and remain the industry's operating standards for the next several years,
there can be no assurance that they will not be replaced by new or enhanced
operating systems that obviate the need for the products currently under
development by the Company. If any new or enhanced operating systems were to
gain widespread use and the Company failed to develop and/or adapt its products
for these operating systems on a timely basis, the Company's competitive
position, sales and operating results would be materially adversely affected.
Moreover, the Company's future success will depend, in general, upon its ability
to continually enhance its products and to develop and introduce new products
that keep pace with technological developments and respond to evolving end-user
requirements. There can be no assurance that the Company will be successful in
developing and marketing new products or product enhancements on a timely basis
or that any new products or product enhancements developed by the Company will
achieve market acceptance. See "Business - Research and Development."
Potential for Undetected Errors. Software products as complex as those
offered and being developed by the Company may contain undetected errors or
failures when first introduced or as new versions are released. There can be no
assurance that, despite significant testing by the Company and by current and
potential customers, errors will not be found in new products after commencement
of commercial shipments. In addition, the third-party products upon which the
Company's products and products under development are, or are expected to be,
dependent, such as the Windows 95 and Windows NT operating systems, as well as
certain software products licensed from others and offered by the Company as
system choices with its Fleet Manager Series products, such as the Cargomax
System for ship loading and the Orion and Polaris weather routing software, and
the various computer hardware components used by the Company's customers in
connection with their computer operations, may contain defects which could
reduce the performance of the Company's products or render them useless.
Although the Company has not experienced material adverse effects resulting from
any such errors or defects to date, there can be no assurance that errors or
defects will not be discovered in the future, causing delays in product
introduction and shipments or requiring design modifications that could
materially adversely affect the Company's competitive position, business,
results of operations and financial condition. See "Business - Research and
Development" and "- Intellectual Property."
13
<PAGE>
Risks Relating to Establishment of Satellite Communications Services
Business. The Company intends to use approximately $200,000 of the proceeds from
this offering and to expend significant personnel resources to establish a
satellite communications services business and expects to begin offering
satellite communications services to its customers (bundled with the software
products, hardware components and associated integration and engineering
services already provided by the Company) by the end of 1997. However, although
the Company was one of the first companies to use satellite communications for
ship-to-shore fleet management systems, it has no prior experience relating to
the establishment and operation of a satellite communications services business.
Consequently, there can be no assurance that the Company will be able to
successfully negotiate required reseller agreements with service providers by
such date, or at all, or that it will be able to effectively package its
proposed satellite communications services with its existing products and
services or successfully market and sell these services to its customer base.
There can also be no assurance that, in an industry such as the satellite
communications services industry, which is, in general, characterized by low
margins, the Company will be able to achieve acceptable margins relating to its
proposed services. The Company's prospects relating to its new business venture
must, therefore, be considered in light of the risks, expenses, delays, problems
and difficulties frequently encountered in the establishment of a new business
in an evolving industry characterized by an increasing number of market entrants
and intense competition. In addition, the satellite communications industry is
subject to extensive international and domestic regulation, is rapidly changing
and is dominated by large competitors with significantly greater resources than
the Company. Further, if, after its initial start-up in the satellite
communications services business, the Company, in an effort to reduce its costs,
determines to act as a bulk reseller, the Company will be required to purchase a
significant minimum number of satellite hours from one or more service
providers. If, after the Company's expenditure of significant funds and
resources to establish its proposed satellite communications services business
or, subsequently, to establish itself as a bulk reseller, such venture does not
achieve market acceptance, the Company's business, results of operations and
financial condition could be materially adversely affected. See "Business -
Proposed Satellite Communications Services Business."
Competition. The Company has a number of significant competitors for its
existing line of Fleet Manager Series products, including SpecTec, a division of
Visma ASA, Marinor, Computer Expert Systems LTD and Nautical Technology
Corporation. As markets for these products continue to develop, additional
companies, including companies in the computer hardware, software and networking
industries with significant market presence, may enter the markets in which the
Company competes and further intensify competition. Many of these competitors
and potential competitors have significantly greater financial, technical, sales
and marketing and other resources than the Company. The Company is unaware of
any company in this country or internationally that is currently producing or
marketing a standard shipboard computing platform similar to the ISIT platform.
However, there are numerous other companies that could enter this new market,
many of which have substantially greater financial, technical, production,
marketing and other resources than the Company. In the case of an entity with
such resources, the Company does not believe that there currently are, or likely
to be in the foreseeable future, prohibitive barriers to entry into the business
of developing and marketing a standard shipboard computing platform. The Company
expects that competitors for its new satellite communications services will
include the same land-earth station providers with whom the Company intends to
enter into reseller agreements, including COMSAT Corporation ("COMSAT"),
Teleglobe, British Telecom, PLC and PTT Telecom Netherlands, among others. In
addition, the Company believes that it will face competition from other
satellite communications resellers. Many of these competitors have substantially
greater financial, technical, production, marketing and other resources than the
Company. There can be no assurance that existing or future competition will not
have a material adverse effect upon the Company's operations. See "Business -
Competition."
<PAGE>
Limited Assurances as to Protection of Proprietary Technology. The Company
has no patents relating to proprietary technology, but instead relies primarily
on trade secret laws, confidentiality procedures and contractual provisions,
including confidentiality and/or non-disclosure agreements with its employees
and consultants, to protect its proprietary rights. There can be no assurance
that such measures will be adequate to protect the Company from infringement by
others of its technologies. Despite the Company's efforts to protect its
proprietary rights, it may be possible for, and attempts may be made by,
unauthorized third parties to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. In addition,
the laws of some foreign countries do not protect the Company's intellectual
property to the same extent as do the laws of the United States. The loss of any
material service mark, trademark, trade name, trade secret or copyright could
have a material adverse effect on the Company's business, results of operations
and financial condition. In addition, while the Company does not believe that
its products infringe on the rights of third parties, there can be no assurance
that third parties will not assert infringement claims against the Company in
the future or that any such assertion will not result in costly litigation
and/or a determination adverse to the Company's interests. In the event the
Company's products are ever deemed to infringe on the proprietary rights of
others, the Company could be required to modify the design of its products or
obtain licenses from third parties relating to technology used in its products.
There can be no assurance that the Company would be able to do either in a
timely manner, upon acceptable terms and conditions or at all, and the failure
to do so could have a material adverse effect on the Company's business, results
of operations and financial condition. See "Business - Intellectual Property."
Potential Fluctuations in Quarterly Operating Results. The Company's
quarterly operating results have varied in the past and will vary significantly
in the future depending on factors such as the size and timing of significant
orders and their fulfillment; demand for the Company's products; the successful
development and market acceptance of new products; changes in pricing policies
by the Company or its competitors; the number, timing and significance of
product enhancements and new product announcements by the Company and its
competitors; changes in the Company's level of operating expenses; customer
order deferrals in anticipation of new products or otherwise; fluctuations in
foreign currency exchange rates, in warranty and customer support expenses and
in the financial condition and budgetary processes of the Company's customers;
software bugs and other product quality problems; the timing and volume of sales
discounts provided by the Company; and the nonrenewal of maintenance agreements.
In addition, a significant portion of the Company's expenses are relatively
fixed in the short term. Accordingly, if revenue levels fall below expectations,
operating results are likely to be disproportionately adversely affected. As a
result of these and other factors, the Company believes that its quarterly
operating results will vary in the future and period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Furthermore, due to all of the
foregoing factors, in the event the Company consummates this offering, it is
likely that in some future quarter the Company's operating results will be below
the expectations of public market analysts and investors. In such event, the
price of the Company's Common Stock would likely be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
14
<PAGE>
Lengthy Sales and Installation Cycles. The sales cycle for the Company's
Fleet Manager Series software products, which generally commences at the time of
the Company's initial contact with a prospective customer and ends upon the
execution of a purchase order with that customer, varies by customer but often
extends for periods of six months or more, depending on a number of factors,
including the prospective customer's familiarity with and acceptance of
shipboard information technology systems. (The sales cycle for existing or
repeat customers, which customers have historically represented over one-third
of the Company's annual sales, typically runs shorter.) As a result of the
Company's lengthy sales cycle, the sales process for the Company's products and
services generally requires substantial time commitments, effort and expense,
and there can be no assurance that the Company, after expending such resources,
will obtain a significant contract or order from such efforts. In addition, the
Company's installation cycle, which is the period from the execution of a
purchase order until actual shipboard installation of the software, will
significantly vary by customer, depending on the scope of work, number of sites
and geographical location of the installation, and could, like the Company's
sales cycle, extend for periods of six months or more. The Company does not
recognize revenue from the sale of its software products or from the sale of any
associated hardware until the time of shipment and does not recognize revenue
for its installation and initial training services (representing about 30% of
its revenues) until such installation and training is completed, and in some
cases, as much as one-third of the installation/training fees may be deferred by
the customer until the completion of the one-year warranty period while the
installed products' efficacy is tested. Consequently, for larger orders, a
significant period of time may pass, and significant up-front capital and
resources may be expended by the Company, between the execution of a purchase
order and the recognition of all revenue associated with such sale. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview," "Business - Sales and Marketing" and "- Installation,
Service and Support."
Control by Current Management. Upon the consummation of this offering, the
Company's directors and officers as a group will beneficially own approximately
38.6% of the outstanding shares of Common Stock. As a result of their ownership
of Common Stock, the Company's directors and officers acting together will be
able to continue to exert significant influence over all matters requiring
stockholder approval, including the election of directors and the approval of
significant corporate transactions (such as acquisitions of the Company or its
assets). See "Principal Stockholders" and "Description of Securities."
Dependence on Key Personnel; Dependence on Continuing Ability to Retain
Employees. The Company's success depends to a significant extent on the
continued active participation of a number of key employees, including Eugene D.
Story, its President and Chief Executive Officer, Robert D. Ohmes, its Executive
Vice President and Chief Financial Officer, Donald F. Logan, Jr., its Senior
Vice President - Operations, Mark E. Story, its Vice President - Technical and
Michael P. Barney, its Vice President - Corporate Development and Marketing.
Although the Company has entered into two-year employment agreements with these
individuals, effective upon the consummation of this offering, any incapacity or
inability of such individuals to perform their services could have a material
adverse effect on the Company. Moreover, the Company maintains only limited
amounts of key person life insurance on the lives of any of such employees,
including $200,000 on each of Eugene Story and Robert Ohmes and $500,000 on each
of Donald Logan and Mark Story. In addition, the Company has applied for key
person life insurance on the life of Michael Barney in the amount of $500,000.
The Company believes that its success also depends on its continuing ability to
attract and retain highly qualified technical, managerial and sales personnel.
Competition for such qualified personnel is intense and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel. See "Business - Employees" and "Management."
15
<PAGE>
Dependence on International Revenues; Risks Associated with International
Operations. International revenues represented approximately 31.0% of the
Company's revenues in fiscal 1995 and 19.4% of its revenues for the nine months
ended September 30, 1996. The Company believes that its continued growth and
future profitability will require expansion of its international operations. To
successfully expand international sales, the Company will need to recruit
additional international sales agents and distributors. There can be no
assurance that the Company will be able to maintain or increase international
sales of its products or that the Company's international distribution channels
will be able to adequately service and support the Company's products.
International operations generally are subject to certain risks, including
fluctuations in foreign economic conditions, compliance with foreign regulatory
and market requirements, variability of foreign economic conditions and changing
restrictions imposed by United States export laws. Additional risks inherent in
the Company's international business activities include unexpected changes in
tariffs and other trade barriers, costs of localizing products for foreign
countries, longer accounts receivable payment cycles, currency fluctuations,
potentially adverse tax consequences (including restrictions on the repatriation
of earnings) and the burdens of complying with a wide variety of foreign laws.
There can be no assurance that such factors will not have a material adverse
effect on the Company's future international sales and, consequently, the
Company's business, results of operations and financial condition. All of the
Company's sales are made in United States dollars. The Company does not engage
in any hedging transactions through the purchase of derivative securities. See
"Business - Sales and Marketing."
Dependence Upon Independent Sales Agents. The Company is dependent upon
independent sales agents for substantially all of its international sales.
Accordingly, the Company is dependent upon the continued viability of such
agents. The Company's relationship with its agents is usually established
through a formal sales agency agreement, which generally may be terminated by
either party without cause at the end of each year of the agreement. There can
be no assurance that any of the Company's current agents will continue to
represent the Company's products, and any inability of the Company to retain or
replace its agents could have a material adverse effect on the Company's
business, results of operations and financial condition. In addition, three of
the Company's agents have territorial exclusives (one in Greece, one in
Singapore, Malaysia and Indonesia, and one in Hong Kong, each of which is a
major territory in the maritime industry), and, under the Sperry Agreement,
Sperry has the sole right to sell to the United States government all of the
Company's software application products and the Bundled ISIT platform products.
None of these arrangements is subject to any minimum performance or payment
levels, and some of the Company's agents may offer the products of several
different companies, including, in a few cases, products that are competitive
with those of the Company. There can be no assurance that the Company's agents
will not devote greater resources to marketing and selling the products of other
companies or that economic conditions or industry demand will not adversely
affect the ability of such agents to market and sell the Company's products. The
loss of, or a significant reduction in revenue from, the Company's agents would
have a material adverse effect on the Company. See "Business - Sales and
Marketing."
Dependence Upon Principal Customers. During the fiscal years ended December
31, 1994 and 1995 and the nine months ended September 30, 1996, three, two and
two customers, respectively, each accounted for over 10% of the Company's
revenues in their respective periods. In fiscal 1994, the Company's three
principal customers for such year accounted for an aggregate of 45% of the
Company's revenues, and, in fiscal 1995, two different principal customers
accounted for an aggregate of 23% of the Company's revenues. For the first nine
months of 1996, two different principal customers accounted for an aggregate of
45% of the Company's revenues. Significant sales of computer hardware to one of
these customers (a non-industry customer) generated 32% of the Company's
revenues. Although the Company sells its products to a large number of customers
and no single customer consistently accounts for a significant portion of the
Company's revenues, the inability to replace certain customers could cause the
Company's revenues and operating results to fluctuate from period to period and
the loss of certain customers could have a material adverse impact on the
Company's business. See "Business - Customers."
16
<PAGE>
Reliance Upon Certain Licensed Third-Party Software. The Company is
dependent on third-party suppliers for certain software included with certain of
its products, such as the Cargomax System for ship loading from Herbert
Engineering Corp., the Orion and Polaris weather routing software from
Weathernews, Inc. and the SNAPS purchasing software product from ShipNet AS.
Although the Company believes that the functionality provided by software which
is licensed from third parties is obtainable from multiple sources or could be
developed by the Company, if any such third-party licenses were terminated or
not renewed or if these third parties fail to develop new products in a timely
manner, the Company could be required to develop an alternative approach to
developing its products which could require payment of substantial fees to third
parties, create internal development costs and delays and which might not be
successful in providing the same level of functionality. Such delays, increased
costs and reduced functionality could materially adversely affect the Company's
business, results of operations and financial condition. See "Business -
Intellectual Property."
Potential Conflicts of Interest. Michael C. Hughes, a director of the
Company, is Vice President of Finance and Planning of COMSAT International
Communications, a unit of COMSAT, a provider of satellite communications. Mr.
Hughes serves on the Board of Directors of the Company pursuant to the terms of
an agreement which gives a subsidiary of COMSAT the right to designate such
percentage of the members of the Company's Board of Directors as is equal to the
subsidiary's percentage ownership of the Company's outstanding Common Stock
(subject to the subsidiary's right to designate a minimum of one member during
such time as it continues to own at least 5% of the outstanding Common Stock).
In connection with the Company's intended expansion into the satellite
communications services business, the Company intends to enter into reseller
agreements with one or more satellite communications service providers, which
providers may be direct competitors of COMSAT. Such agreements may give rise to
conflicts of interest for Mr. Hughes. There can be no assurance that if
conflicts do arise, they will be resolved in a manner favorable to the Company.
See "Management."
Possible Exposure to Product Liability Claims; No Product Liability
Insurance. The Company's software license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the limitation
of liability provisions contained in the Company's license agreements may not be
effective as a result of existing or future international, federal, state or
local laws or ordinances or unfavorable judicial decisions. Although the Company
has never had a product liability claim asserted against it, the sale and
support of the Fleet Manager Series and the ISIT platform by the Company may
involve the risk of such claims, any of which may be substantial in light of the
use of the Fleet Manager Series and the anticipated use of the ISIT platform in
high-end applications. The Company maintains no product liability insurance;
consequently, a successful product liability claim brought against the Company
could have a material adverse effect upon the Company's business, results of
operations and financial condition.
No Assurance of Public Trading Market; Arbitrary Determination of Offering
Price; Possible Volatility of Market Price. Prior to this offering, there has
been no public trading market for any of the Company's securities, including the
Shares and Warrants offered hereby. There can be no assurance that a regular
trading market for either the Shares or the Warrants will develop or be
sustained after this offering. The initial public offering prices of the Shares
and Warrants and the exercise price of the Warrants have been determined
arbitrarily by negotiation between the Company and the Underwriter and are not
necessarily related to the Company's asset value, net worth, results of
operations or any other established criteria of value and may not be indicative
of the prices that may prevail in the public market. In addition, the market
prices of the Shares and Warrants may be highly volatile as has been the case
with the securities of other companies in emerging growth businesses. Factors
such as the Company's operating results, the introduction of new products by the
Company or its competitors, changes in financial estimates by securities
analysts, changes in stock prices of the Company's competitors or computer
software companies generally, and factors affecting the computer software
industry generally, may have a significant impact on the market price of the
Company's securities. Additionally, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
the stock of many companies, particularly of small and emerging growth
companies, the common stock of which trade in the over-the-counter market, have
experienced wide price fluctuations which have not necessarily been related to
the operating performance of such companies. See "Underwriting."
17
<PAGE>
Broad Discretion in Application of Proceeds; Substantial Use of
Proceeds to Repay Indebtedness; Benefits to Related Parties. Approximately
$1,274,150 (26.8%) of the estimated net proceeds of this offering has been
allocated to working capital and general corporate purposes. Accordingly, the
Company's management will have broad discretion as to the application of such
proceeds. In addition, the Company intends to use approximately $1,380,250 (29%)
of the estimated net proceeds of this offering to repay certain outstanding
indebtedness and to retire the CII Warrants. Therefore, such proceeds will be
unavailable to fund future growth. In addition to the $75,000 in proceeds to be
paid to CII, a principal stockholder of the Company, in connection with the CII
Warrant Redemption, the indebtedness to be repaid with proceeds from this
offering includes, among other things, approximately $259,850 due to CII in
repayment of the Senior Note, approximately $263,400 due to Sperry, a principal
stockholder of the Company, in repayment of the Sperry Non-Convertible Note, and
approximately $104,200, $52,100, $5,200 and $5,200, respectively, due to Lyman
C. Hamilton, Jr., a director of the Company, a trust for the benefit of the
mother of Donald F. Logan, Jr., an executive officer and director of the
Company, and the brother and niece of Eugene D. Story, an executive officer and
director of the Company, in connection with the repayment of the Fall 1996
Borrowings. See "Use of Proceeds" and "Certain Transactions."
Immediate and Substantial Dilution. A purchaser in this offering will
experience an immediate and substantial dilution of approximately $4.19 (84%)
per share between the adjusted net tangible book value per share after the
consummation of this offering and the initial public offering price of $5.00 per
Share. See "Dilution."
Benefits of Offering to Existing Stockholders. Upon the consummation of
this offering, the existing stockholders of the Company will receive substantial
benefits, including the creation of a public trading market for their securities
(although substantially all of such shares are subject to a 12-month lock-up
agreement with the Underwriter and will not be registered for sale under the
Securities Act of 1933, as amended (the "Securities Act"), and will thus be
"restricted securities" as defined in Rule 144 promulgated under the Securities
Act) and the corresponding facilitation of sales by such stockholders of their
shares of Common Stock in the secondary market, as well as an immediate increase
in net tangible book value of $1.20 per share to such stockholders based upon
the adjusted net tangible book value per share after this offering and the
initial public offering price per share offered hereby. If, at the time the
existing stockholders are able to sell their shares of Common Stock in the
public market, the market price per share remains at the $5.00 initial public
offering price (of which there can be no assurance) such stockholders would
realize an aggregate gain of $9,183,427 ($3.06 per share) on the sale of all of
their existing shares. See "Use of Proceeds," "Dilution," "Underwriting" and
"Shares Eligible for Future Sale."
Current Prospectus and State Registration Required to Exercise Warrants.
Holders of the Warrants will be able to exercise the Warrants only if (i) a
current prospectus under the Securities Act, relating to the securities
underlying the Warrants, is then in effect and (ii) such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states in which the various holders of Warrants reside. Although the
Company has undertaken and intends to use its best efforts to maintain a current
prospectus covering the securities underlying the Warrants following the
consummation of this offering, to the extent required by federal securities
laws, there can be no assurance that the Company will be able to do so. The
value of the Warrants may be greatly reduced if a prospectus covering the
securities issuable upon the exercise of the Warrants is not kept current or if
the securities are not qualified, or exempt from qualification, in the states in
which the holders of Warrants reside. Persons holding Warrants who reside in
jurisdictions in which such securities are not qualified and in which there is
no exemption will be unable to exercise their Warrants and would either have to
sell their Warrants in the open market or allow then to expire unexercised. See
"Description of Securities - Public Warrants."
Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company, upon the consent of the Underwriter at any time,
commencing one year following the date of this Prospectus, at a redemption price
of $.10 per Warrant, upon notice of not less than 30 days', provided that the
closing bid quotation of the Common Stock for a period of 20 consecutive trading
days ending on the third day prior to the date on which the Company gives
notice, has been at least 150% (currently $7.50, subject to adjustment) of the
then effective exercise price of the Warrants. Redemption of the Warrants could
force the holders (i) to exercise the Warrants and pay the exercise price
therefor at a time when it may be disadvantageous for the holders to do so, (ii)
to sell the Warrants at the then current market price when they might otherwise
wish to hold the Warrants, or (iii) to accept the redemption price which is
likely to be substantially less than the market value of the Warrants at the
time of redemption. Although the Company is required to have in effect, as of
the date of redemption (if and when the Warrants become redeemable by the terms
thereof), a current prospectus under the Securities Act relating to the
securities underlying the Warrants, the Company will not be required to qualify
the underlying securities for sale under all applicable state securities laws
prior to exercising its redemption rights. See "Description of Securities -
Public Warrants."
18
<PAGE>
Delaware Anti-Takeover Statute. Section 203 of Delaware's General
Corporation Law prohibits the Company, once public, from entering into certain
business combinations without the approval of its Board of Directors and, as
such, could prohibit or delay mergers or other attempted takeovers or changes in
control with respect to the Company. Such provisions, accordingly, may
discourage attempts to acquire the Company. See "Description of Securities -
Anti-Takeover Provisions of Delaware Law."
Shares Eligible for Future Sale; Registration Rights. Upon consummation of
this offering, the Company will have 4,201,120 shares of Common Stock
outstanding, of which the 1,200,000 Shares offered hereby will be freely
tradeable without restriction or further registration under the Securities Act.
All of the remaining 3,001,120 shares of Common Stock are "restricted
securities," as that term is defined in Rule 144 promulgated under the
Securities Act, and in the future may only be sold pursuant to a registration
statement under the Securities Act, in compliance with the exemption provisions
of Rule 144 or pursuant to another exemption under the Securities Act. Subject
to the contractual restriction described below, 529,914 of these restricted
securities will be freely tradeable under Rule 144 commencing as of the date of
this Prospectus, and the balance will be eligible for sale under Rule 144,
subject to certain volume and manner of sale limitations described in Rule 144,
at various times commencing 90 days following the date of this Prospectus. An
aggregate of 946,640 of such restricted securities and 125,000 shares of Common
Stock issuable upon the exercise of warrants are subject to certain demand and
piggyback registration rights, and the Company has granted the Underwriter
demand and piggyback registration rights with respect to the securities issuable
upon exercise of the Underwriter's Warrants. No prediction can be made as to the
effect, if any, that sales of shares of Common Stock or even the availability of
such shares for sale will have on the market prices prevailing from time to
time. While all of the Company's officers and directors and substantially all of
the Company's stockholders have agreed not to sell, assign or transfer any of
their securities of the Company for a period of 12 months following the date of
this Prospectus without the Underwriter's prior written consent, the possibility
that substantial amounts of Common Stock and/or Warrants may be sold in the
public market subsequent to the offering, pursuant to Rule 144 or otherwise,
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities. See "Description of Securities," "Shares Eligible for Future Sale"
and "Underwriting."
Possible Restrictions on Market-Making Activities in the Company's
Securities. The Underwriter has advised the Company that it may make a market in
the Company's securities. Rule 10b-6 under the Exchange Act may prohibit the
Underwriter from engaging in any market-making activities with regard to the
Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to any solicitation by the
Underwriter of the exercise of Warrants until the later of the termination of
such solicitation activity or the termination (by waiver or otherwise) of any
right that the Underwriter may have to receive a fee for the exercise of
Warrants following such solicitation. As a result, the Underwriter may be unable
to provide a market for the Company's securities during certain periods while
the Warrants are exercisable. Any temporary cessation of such market-making
activities could have an adverse effect on the market price of the Company's
securities. See "Underwriting."
Possible Delisting of Securities from Nasdaq System; Risks Relating to
Low-Priced Securities. It is currently anticipated that the Common Stock and
Warrants will be eligible for listing on Nasdaq upon the completion of this
offering. In order to continue to be listed on Nasdaq, however, the Company must
maintain $2,000,000 in total assets, a $200,000 market value on the public float
and $1,000,000 in total capital surplus. In addition, continued inclusion
requires two market-makers and a minimum bid price of $1.00 per share; provided,
however, that if the Company falls below such minimum bid price it will remain
eligible for continued inclusion in Nasdaq if the market value of the public
float is at least $1,000,000 and the Company has $2,000,000 in capital and
surplus. Nasdaq has recently proposed new maintenance criteria which, if
implemented, would eliminate the exception to the minimum bid price of $1.00 per
share and require, among other things, $2,000,000 in net tangible assets,
$1,000,000 market value on the public float and adherence to certain corporate
governance provisions. The failure to meet these maintenance criteria in the
future may result in the delisting of the Common Stock and Warrants from Nasdaq,
and trading, if any, in the Common Stock and Warrants would thereafter be
conducted in the non-Nasdaq over-the-counter market. As a result of such
delisting, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Common Stock and Warrants.
19
<PAGE>
In addition, if the Common Stock and Warrants were to become delisted
from trading on Nasdaq and the trading price of the Common Stock were to fall
below $5.00 per share, trading in the Common Stock would also be subject to the
requirements of certain rules promulgated under the Exchange Act, which require
additional disclosure by broker-dealers in connection with any trades involving
a stock defined as a penny stock (generally, any non-Nasdaq equity security that
has a market price of less than $5.00 per share, subject to certain exceptions).
Such rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith and impose various sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors (generally defined as an investor with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 individually or $300,000 together
with a spouse). For these type of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to the sale. The
broker-dealer also must disclose the commissions payable to the broker-dealer,
current bid and offer quotations for the penny stock and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Such information must be
provided to the customer orally or in writing before or with the written
confirmation of trade sent to the customer. Monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. The additional burdens
imposed upon broker-dealers by such requirements could, in the event the Common
Stock were deemed to be a penny stock, discourage broker-dealers from effecting
transactions in the Common Stock which could severely limit the market liquidity
of the Common Stock and the ability of purchasers in this offering to sell the
Common Stock in the secondary market.
No Dividends. The Company has never paid cash dividends on its Common Stock
and does not intend to pay any dividends in the foreseeable future. In addition,
certain of the Company's financing agreements contain prohibitions on the
payment of dividends without the lender's consent. See "Dividend Policy."
Limitations on Liability of Directors and Officers. The Company's
Certificate of Incorporation includes provisions to eliminate, to the full
extent permitted by Delaware General Corporation Law as in effect from time to
time, the personal liability of directors of the Company for monetary damages
arising from a breach of their fiduciary duties as directors. The Certificate of
Incorporation also includes provisions to the effect that the Company shall, to
the maximum extent permitted from time to time under the law of the State of
Delaware, indemnify, and upon request shall advance expenses to any director or
officer to the extent that such indemnification and advancement of expense is
permitted under such law, as it may from time to time be in effect. See
"Management - Limitation of Liability and Indemnification."
Tax Loss Carryforward. The Company's net operating loss carryforwards
("NOLs") expire in the years 1999 to 2010. Under Section 382 of the Internal
Revenue Code of 1986, as amended, utilization of prior NOLs is limited after an
ownership change, as defined in Section 382, to an annual amount equal to the
value of the loss corporation's outstanding stock immediately before the date of
the ownership change multiplied by the federal long-term exempt tax rate. The
additional equity financing obtained by the Company since its inception may have
resulted in an ownership change and, thus, in a limitation on the Company's use
of its prior NOLs. In the event the Company achieves profitable operations, any
significant limitation on the utilization of its NOLs would have the effect of
increasing the Company's tax liability and reducing net income and available
cash resources. See Note 11 of Notes to Financial Statements.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,200,000 Shares and
1,200,000 Warrants offered hereby are estimated to be approximately $4,754,400
($5,553,060 if the Underwriter's over-allotment option is exercised in full)
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company. The Company expects to use the net proceeds
(assuming no exercise of the Underwriter's over-allotment option) approximately
as follows:
<TABLE>
<CAPTION>
Approximate
Approximate Percentage
Dollar of Net
Application of Proceeds Amount Proceeds
- ----------------------- ----------- -----------
<S> <C> <C>
Repayment of long-term debt and retirement of warrants (1).... $1,380,250 29.0%
Software development (2)...................................... 1,200,000 25.3
Sales and marketing (3)....................................... 600,000 12.6
Entrance into communications business (4)..................... 200,000 4.2
Capital equipment (5)......................................... 100,000 2.1
Working capital and general corporate purposes (6)............ 1,274,150 26.8
---------- ------
$4,754,400 100.0%
========== =====
</TABLE>
- -----------------
(1) Represents the repayment of (i) the Fall 1996 Borrowings in the aggregate
principal amount of $410,000, including $100,000 to Lyman C. Hamilton, Jr.,
a director of the Company; $50,000 to a trust for the benefit of the mother
of Donald F. Logan, Jr., an executive officer and director of the Company;
and $5,000 each to the brother and niece of Eugene D. Story, an executive
officer and director of the Company; (ii) the Sperry Non-Convertible Note,
in the principal amount of $250,000, to Sperry, a principal stockholder of
the Company; (iii) the Bridge Notes in the aggregate principal amount of
$350,000; (iv) the Senior Note to CII, a principal stockholder of the
Company, in the principal amount of $236,924; and (v) interest accrued on
all of the foregoing, at the rate of 10% per annum in the case of (i) and
(iv) and at the rate of 9% per annum in the case of (ii) and (iii), through
and until the anticipated date of repayment, in the estimated aggregate
amount of $58,326, and the retirement of the CII Warrants in connection
with the CII Warrant Redemption for $75,000. The proceeds from the
Company's recent Fall 1996 Borrowings, Sperry Financing and January Bridge
Financing were, and are, being used in connection with the Company's
operations, for pre-offering expenses payable in connection with this
offering and for working capital and general corporate purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources," "Principal Stockholders,"
"Certain Transactions" and "Description of Securities - Existing Warrants."
(2) Represents the costs associated with the development of Windows-based
versions of the Company's Fleet Manager Series products, extended ISIT
platform development and communications interfaces. See "Business - The
ISIT Platform Development Project" and "-Research and Development."
(3) Represents the costs associated with advertising, seminars, promotional
presentations, marketing materials and presentation software. See "Business
- Sales and Marketing."
(4) Represents equipment costs of $25,000, initial business development
personnel costs of $75,000, marketing and sales costs of $50,000,
contingency costs of $25,000 and miscellaneous expenses of $25,000. See
"Business - Proposed Satellite Communications Services Business."
21
<PAGE>
(5) Represents the costs of computer equipment and furniture and fixtures
associated with the expansion of personnel.
(6) A portion of the proceeds allocated to working capital may be utilized to
pay the salaries of the Company's seven executive officers which salaries
are anticipated to aggregate $750,000 for the twelve months following
the date of this offering. See "Management."
If the Underwriter exercises its over-allotment option in full, the Company
will realize additional net proceeds of $798,660. If the 1,200,000 Warrants
offered hereby are exercised, the Company will realize proceeds relating thereto
of $6,000,000, before any solicitation fees which may be paid in connection
therewith. Such additional proceeds, if received, are expected to be used for
working capital and general corporate purposes. See "Underwriting."
The allocation of the net proceeds from this offering as set forth above
represents the Company's best estimates based upon its currently proposed plans
and assumptions relating to its operations and certain assumptions regarding
general economic conditions. If any of these factors change, the Company may
find it necessary or advisable to reallocate some of the proceeds within the
above-described categories. The Company anticipates, based on its currently
proposed plans and assumptions relating to its operations (including assumptions
regarding the progress and timing of its new product development efforts), that
the net proceeds of this offering, together with anticipated revenues from
operations and its current cash and cash equivalent balances, will be sufficient
to satisfy the Company's operations and capital requirements for at least 18
months following the consummation of this offering. In the event the Company's
plans change or its assumptions change or prove to be inaccurate, the Company
could be required to seek additional financing sooner than currently
anticipated. The Company has no current arrangements with respect to, or
potential sources of, any additional financing, and there can be no assurance
that any additional financing will be available to the Company when needed, on
commercially reasonable terms, or at all. Any inability to obtain additional
financing when needed would have a material adverse effect on the Company.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest-bearing
investments.
DIVIDEND POLICY
The Company has never paid any cash dividends on its capital stock. The
Company currently intends to retain all available earnings (if any) for the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. Certain of the Company's
financing agreements contain prohibitions on the payment of dividends without
the lender's consent.
22
<PAGE>
DILUTION
The difference between the initial public offering price per share of
Common Stock and the net tangible book value per share of Common Stock after
this offering constitutes the dilution to investors in this offering. Net
tangible book value per share on any given date is determined by dividing the
net tangible book value of the Company (total tangible assets less total
liabilities) on such date by the number of then outstanding shares of Common
Stock.
As of September 30, 1996, the net tangible book value (deficit) of the
Company was $(2,315,336) or $(.86) per share. Giving retroactive effect to the
Executive Stock Repurchase and to the receipt of net proceeds totaling
$1,321,000 from the Fall 1996 Borrowings, the December portion of the December
1996 Borrowings, the Sperry Financing and the January Bridge Financing and to
the issuance of the 70,000 Bridge Shares in connection with the January Bridge
Financing and to the issuance, immediately prior to the consummation of this
offering, of 377,777 shares of Common Stock in connection with the Preferred
Stock Conversion and the Sperry Note Conversion, the pro forma net tangible book
value (deficit) of the Company at September 30, 1996 would have been
$(1,184,336) or $(.39) per share. After also giving effect to the sale of the
1,200,000 Shares and the 1,200,000 Warrants offered hereby and the receipt and
application of the net proceeds therefrom (less underwriting discounts and
commissions and estimated expenses of this offering), the as adjusted net
tangible book value of the Company as of September 30, 1996 would have been
$3,398,408 or $.81 per share. This represents an immediate increase in net
tangible book value of $1.20 per share to existing stockholders and an immediate
dilution of $4.19 (84%) per share to new investors in this offering.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price per share....................... $5.00
Net tangible book value (deficit) before pro forma adjustments $ (.86)
Increase attributable to pro forma adjustments.............. .47
----
Pro forma net tangible book value (deficit) before this
offering.................................................... (.39)
Increase attributable to investors in this offering......... 1.20
----
Adjusted net tangible book value after this offering.......... .81
---
Dilution to investors in this offering........................ $4.19
====
</TABLE>
The following table sets forth, with respect to existing stockholders
(giving effect to the Preferred Stock Conversion and the Sperry Note Conversion)
and new investors in this offering, a comparison of the number of shares of
Common Stock purchased from the Company, the percentage ownership of such
shares, the total consideration paid, the percentage of total consideration
paid, and the average price paid per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------- ------------------------ Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 3,001,120 71.4% $ 5,831,040 49.3% $1.94
New investors................ 1,200,000 28.6% $ 6,000,000 50.7% $5.00
--------- ----- ----------- ----
Total............... 4,201,120 100.0% $11,831,040 100.0%
========= ===== =========== =====
</TABLE>
The above table assumes no exercise of the Underwriter's over-allotment
option. If such option is exercised in full, the new investors will have paid
$6,900,000 for 1,380,000 shares of Common Stock, representing approximately
54.2% of the total consideration for 31.5% of the total number of shares
outstanding. In addition, the above table also assumes no exercise of
outstanding stock options and warrants. As of the date of this Prospectus
(assuming the consummation of the CII Warrant Redemption), there are outstanding
warrants to purchase 347,219 shares of Common Stock at exercise prices ranging
from $3.38 to $5.00 per share and options under the Stock Option Plan to
purchase 71,290 shares of Common Stock at an exercise price of $3.38 per share.
To the extent that options or warrants are exercised at prices below the public
offering prices per share, there will be further dilution to new investors. See
"Management - Stock Option Plan," "Description of Securities" and
"Underwriting."
23
<PAGE>
CAPITALIZATION
The following table sets forth the Company's short-term debt and
capitalization as of September 30, 1996 (i) on a historical basis, (ii) on a pro
forma basis to give effect to the Executive Stock Repurchase, the Fall 1996
Borrowings, the December portion of the December 1996 Borrowings, the Sperry
Financing and the January Bridge Financing, and (iii) as further adjusted to
give effect to the Preferred Stock Conversion, the Sperry Note Conversion and
the sale of the 1,200,000 Shares and 1,200,000 Warrants offered hereby and the
anticipated application of the estimated net proceeds therefrom (including for
the repayment of the Sperry Non-Convertible Note, the Senior Note to CII, the
Fall 1996 Borrowings and the Bridge Notes and for the CII Warrant Redemption):
<TABLE>
<CAPTION>
September 30, 1996
----------------- ----------------- -----------------
Actual Pro Forma As Adjusted
------- --------- -----------
<S> <C> <C> <C>
Short-term debt:
Short-term borrowings and advances payable-related
parties............................................. $ 475,000 $ 1,580,000 $ --(1)
Current portion of long-term debt and capital lease
obligations......................................... 307,333 307,333 129,663(1)
------- ------- -------
Total short-term debt........................... $ 782,333 $ 1,887,333 $ 129,663
======= ========= =======
Long-term debt:
Long-term debt and capital lease obligations less
current portion..................................... $ 336,828 $ 336,828 $ 752,574(1)
Advances payable-related party...................... 50,000 166,000 166,000
Subordinated debt-related parties................... 500,000 500,000 500,000
------- ------- -------
Total long-term debt............................ 886,828 1,002,828 1,418,574
------- --------- ---------
Redeemable Preferred Stock, par value $100; 7,500 shares
authorized; 7,500 shares issued and outstanding
(actual and pro forma); none issued and outstanding
(as adjusted) ...................................... 750,000 750,000 -
------- ------- --
Stockholders' equity:
Common Stock, par value $.002; 9,000,000 shares
authorized; 2,701,110 shares issued and outstanding
(actual); 2,623,343 shares issued and outstanding (pro
forma); 4,201,120 shares issued and outstanding (as
adjusted)(2)........................................ 5,402 5,247 8,402
Additional paid-in capital.......................... 5,083,475 4,825,793 10,576,638
Accumulated deficit................................. (4,897,776) (4,897,776) (5,217,102)(3)
Loans receivable officers .......................... (388,837)(4) - -
--------- --- --
Total stockholders' equity (deficit)............ (197,736) (66,736) 5,367,938
---------- ---------- ----------
Total capitalization.......................... $ 1,439,092 $ 1,686,092 $ 6,786,512
========== ========== ==========
</TABLE>
- -----------------
(1) Reflects a reclassification from short-term debt to long-term debt of a
$400,000 demand line of credit, a $75,000 loan and $146,670 of a term
loan, each from a bank.
24
<PAGE>
(2) Does not include (i) 1,200,000 shares of Common Stock reserved for issuance
upon exercise of the Warrants, (ii) an aggregate of 240,000 shares of
Common Stock reserved for issuance upon exercise of the Underwriter's
Warrants and the warrants included therein, (iii) 129,944 shares of Common
Stock reserved for issuance upon exercise of the CII Warrants which are
being relinquished by CII in connection with the CII Warrant Redemption,
(iv) 347,219 shares of Common Stock reserved for issuance upon exercise of
other outstanding warrants, (v) 71,290 shares of Common Stock reserved for
issuance upon exercise of outstanding options granted under the Stock
Option Plan, (vi) up to 153,750 shares of Common Stock reserved for
issuance upon exercise of options available for future grant under the
Stock Option Plan, and (vii) an indeterminable number of shares of Common
Stock reserved for issuance in the event the Company fails under certain
circumstances to register, or to maintain an effective registration
statement with respect to, the Bridge Shares issued in the January Bridge
Financing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Management - Stock Option Plan" and
"Description of Securities."
(3) Assumes approximately $58,326 of interest expense on the Sperry Notes, the
Bridge Notes, the Fall 1996 Borrowings and the Senior Note to CII and
$75,000 for the CII Warrant Redemption, all of which is expected to be paid
from the proceeds of this offering. Also reflects a charge to operations of
$186,000 related to the loan discount and debt issuance costs of the
January Bridge Financing.
(4) The $388,837 in loans receivable from certain executive officers of the
Company was included as a component of stockholders' equity as it was
expected that such loans would be satisfied via the return to the Company of
77,767 shares of Common Stock by such officers in connection with the
Executive Stock Repurchase. See Note 15(b) of Notes to Financial Statements.
25
<PAGE>
SELECTED FINANCIAL DATA
(In thousands, except per share data)
The following selected financial data for each of the two years in the
period ended December 31, 1995 and at December 31, 1995 are derived from, and
should be read in conjunction with, the Company's Financial Statements and Notes
thereto, audited by BDO Seidman, LLP, independent certified public accountants,
included elsewhere in this Prospectus. The auditor's report on the financial
statements at December 31, 1995 and each of the two years in the period ended
December 31, 1995, contains an explanatory paragraph stating that there is
substantial doubt as to the Company's ability to continue as a going concern.
The selected financial data for the nine month periods ended September 30, 1996
and 1995 and at September 30, 1996 are derived from the Company's unaudited
financial statements included elsewhere in this Prospectus. The unaudited
financial statements include all adjustments, consisting only of normally
recurring adjustments, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the entire year
ended December 31, 1996.
Statement of Operations Data:
<TABLE>
<CAPTION>
Years Ended December 31, Nine Months Ended September 30,
----------------------------- -------------------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues........................... $2,386 $4,329 $2,998 $3,505
Gross profit....................... 1,067 1,114 676 962
Income (loss) from operations...... 39 (214) (281) (667)
Net loss........................... (71) (326) (384) (789)
Net loss per share................. (.03) (.14) (.17) (.32)
Weighted average shares
outstanding..................... 2323 2323 2323 2472(1)
Balance Sheet Data:
December 31, 1995 September 30, 1996
----------------- ------------------
Working capital (deficit).......... $ (615) $ (892)
Total assets....................... 2,381 3,128
Total liabilities.................. 2,905 2,576
Redeemable Preferred Stock......... - 750
Stockholders' equity (deficit)(1).. (524) (198)
</TABLE>
- ----------
(1) As of December 31, 1995 and September 30, 1996, (i) the 77,767 shares of
Common Stock returned for cancellation to the Company by certain executive
officers (in satisfaction of $388,837 in loans outstanding from the Company
to such officers) immediately prior to the date of this Prospectus, in
connection with the Executive Stock Repurchase, were not included in the
weighted average shares outstanding and (ii) the $388,837 in loans
receivable from such officers which were satisfied in connection with the
Executive Stock Repurchase were included as a component of stockholders'
equity, since it was expected that such Executive Stock Repurchase would be
consummated immediately prior to the date of this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and Note 15(b) of Notes to
Financial Statements.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company, founded in 1969, develops, markets, sells and supports
software systems, and sells and supports associated hardware and communications
systems, for the management of commercial ships in the international maritime
industry. The Company's products are designed to enable its customers to operate
their ocean-going ships in a safer and more efficient manner through the use of
shipboard and shore-based computer applications and networks connected by
wireless communications. The Company's revenues are primarily derived from
software license fees, hardware sales, and service revenues. License fees
include revenues from noncancelable software license agreements entered into
between the Company and its customers with respect to both the Company's
products and third-party products distributed by the Company. Such revenues are
recognized upon shipment only if no significant Company obligations remain and
collection of the resulting receivable is deemed probable. Hardware sales
consist of revenues from the configuration and resale of computer hardware
systems in connection with the Company's system product sales and from the
resale of hardware components. For instance, the Company acts as a distributor
for a variety of hardware components and has derived significant revenues from
sales of such products to a limited number of non-maritime customers. Revenues
from hardware sales are recognized when the products are delivered. Service
revenues include revenues from installation (including integration and
engineering) services, customer training, on-going customer support, hardware
maintenance and product updates. The Company's installation cycle varies
significantly by customer depending on the scope of work, the number of
installation sites and the geographical location of the installations and can
extend for periods of six months or more. Installation and training fees
(representing about 30% of the Company's revenues) are recognized when such
services are completed; however, in a limited number of cases, as much as
one-third of the installation/training fees may be deferred by the customer
until the completion of the one-year warranty period. Service fees for on-going
customer support, hardware maintenance and product updates are recognized
ratably over the term of the contract, which is typically twelve months.
The Company has devoted substantial resources in connection with the
research and development of new and enhanced software products. Costs incurred
for research and development are charged to operations in the period incurred.
Upon the establishment of technological feasibility, the Company begins to
capitalize certain costs associated with the product which will be available for
sale. Once the product is available for sale, the Company ceases to capitalize
these costs. Upon completion of such products, these costs are amortized and
charged to operations over the estimated economic life of the product. A major
portion of the Company's current capitalized costs relate to products which are
not as yet available for sale. The establishment of technological feasibility
and the estimated economic life of the product requires considerable judgment by
management. Any changes to the estimates made by management may result in more
rapid amortization of the capitalized costs.
The Company's strategy is to aggressively market its existing and future
products both directly and through the use of sales agents around the world.
During 1995 and 1996, the Company significantly increased the number of sales
and marketing personnel and also substantially increased the number of
production and development personnel. In addition, the Company entered into the
Sperry Agreement in December 1996, pursuant to which the Company granted Sperry,
among other things, certain sole rights relating to the distribution of the
Company's software application products and ISIT platform products to the United
States government and non-exclusive rights relating to the distribution of all
the Company's products elsewhere, subject to certain territorial limitations.
The Company incurred operating losses of $213,602 and $667,156 for the
fiscal year ended December 31, 1995 and the nine months ended September 30,
1996, respectively, and, at September 30, 1996, had an accumulated deficit of
$4,897,776. The Company expects that its operating losses for the fiscal year
ended December 31, 1996 will substantially exceed its operating losses for the
prior fiscal year and that the Company will continue at a loss until, at the
earliest, the Company generates sufficient revenues to offset the cost of its
operations. The report of independent auditors on the Company's financial
statements for all periods presented contains an explanatory paragraph stating
that there is substantial doubt as to the Company's ability to continue as a
going concern. In this regard, management's plan is to complete this offering.
The financial statements do not include any adjustments that might result from
the outcome of such uncertainty. The Company's future level of sales and
potential profitability will depend on many factors including an increased
demand for the Company's existing products, the ability of the Company to
develop and sell new products and product versions to meet customers' needs, the
ability of management to control costs and successfully implement the Company's
strategy and the ability of the Company to develop and deliver products in a
timely manner.
27
<PAGE>
Results of Operations
The following table sets forth for the periods indicated selected items of
the Company's operations as a percentage of its net revenues:
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
December 31, September 30,
------------------- ----------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues.................................. 100.0% 100.0% 100.0% 100.0%
Cost of revenues.......................... 55.3 74.3 77.4 72.5
----- ----- ----- -----
Gross profit.............................. 44.7 25.7 22.6 27.5
Operating expenses:
Research and development............. 18.4 5.7 6.2 6.5
Sales and administrative............. 23.7 24.1 24.9 38.3
Depreciation and amortization........ 1.0 0.8 0.9 1.7
---- ---- ---- ---
Total operating expenses.......... 43.1 30.6 32.0 46.5
Income (loss) from operations............. 1.6 (4.9) (9.4) (19.0)
Other income (expense):
Interest income...................... - 0.6 - -
Interest expense..................... (4.6) (3.2) (3.4) (3.5)
----- ----- ----- -----
Total other expense................ (4.6) (2.6) (3.4) (3.5)
Net loss.................................. (3.0)% (7.5)% (12.8)% (22.5)%
===== ===== ===== =====
</TABLE>
Nine Months Ended September 30, 1996 Compared to Nine Months Ended\
September 30, 1995
Revenues. Software revenues increased 27.0% from $1,801,413 in the nine
months ended September 30, 1995 to $2,287,824 in the nine months ended September
30, 1996. The increase was attributable primarily to the increase in revenues
from Federal and State government agencies associated with the development of
the ISIT platform. Such government revenues are expected to terminate by the end
of 1997. Hardware revenues increased 1.8% from $1,196,098 in the nine months
ended September 30, 1995 to $1,217,207 in the nine months ended September 30,
1996. The increase was due to a major sale of hardware components to a
non-maritime customer in keeping with the Company's strategy of reducing its
overall hardware costs by purchasing larger volumes of hardware (in order to
receive correspondingly greater discounts from hardware suppliers and margin
improvements in connection with its total system sales) and then reselling
portions thereof on a distributorship basis. Overall, revenues increased by
16.9% from $2,997,511 in the nine months ended September 30, 1995 to $3,505,031
in the nine months ended September 30, 1996.
Cost of Revenues. Cost of revenues increased 9.5% from $2,321,858 in the
nine months ended September 30, 1995 to $2,543,033 in the nine months ended
September 30, 1996. Cost of revenues increased commensurate with the increase in
sales.
Operating Expenses. Operating expenses increased 70.3% from $956,780 for
the nine months ended September 30, 1995 to $1,629,154 for the nine months ended
September 30, 1996. The increase was attributable primarily to an increase in
selling and marketing expenses.
28
<PAGE>
Net Loss. As a result of the foregoing, the Company's net loss increased
from $383,821 for the nine months ended September 30, 1995 to $789,461 for the
nine months ended September 30, 1996.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. Software revenues increased 69.5% from $1,696,245 in the year
ended December 31, 1994 to $2,874,499 in the year ended December 31, 1995. The
increase was attributable to expanded sales to a major Middle Eastern customer,
government revenues associated with the development of the ISIT platform and an
overall increase in software sales. Hardware revenues increased 111.1% from
$689,298 in the year ended December 31, 1994 to $1,454,771 in the year ended
December 31, 1995. The increase was attributable primarily to significant sales
of hardware components to two non-maritime customers. Overall, revenues
increased by 81.5% from $2,385,543 in the year ended December 31, 1994 to
$4,329,270 in the year ended December 31, 1995.
Cost of Revenues. Cost of revenues increased 143.8% from $1,318,757 in the
year ended December 31, 1994 to $3,215,259 in the year ended December 31, 1995.
Cost of revenues increased at a greater rate than revenues reflecting the more
rapid increase associated with the Company's hardware component (a lower margin
item than software) sales.
Operating Expenses. Operating expenses increased 29.2% from $1,027,643 in
the year ended December 31, 1994 to $1,327,613 in the year ended December 31,
1995. The increase was primarily attributable to an increase in marketing and
sales expenses partially offset by a decrease in research and development
expenses primarily associated with the ISIT platform and the development of
Windows-based versions of the Company's Fleet Manager Series products. The
increase in marketing and sales expenses is expected to continue through the end
of 1996.
Net Loss. As a result of the foregoing, the Company's net loss was $325,700
in the year ended December 31, 1995, compared to a net loss of $71,313 in the
year ended December 31, 1994.
Liquidity And Capital Resources
Since inception, the Company has financed its operations with private
placements of equity, government funding, cash from operations, subordinated
debt, bank term loans, bank credit lines and inventory "floor plan" financing.
For the year ended December 31, 1994, the Company had net cash provided by
operations of $153,564. The cash provided from operations was primarily
attributed to an increase in revenues offset by an increase in trade accounts
receivable. For the year ended December 31, 1995, and the nine months ended
September 30, 1996, the Company had net cash used in operations of $250,760 and
$386,035, respectively. The cash used in operations during these periods was
primarily attributed to the increase in the Company's payroll, marketing and
sales expenses, technical consulting costs and an increase in trade accounts
receivable associated with an increase in revenues.
In July 1995, the Company, on behalf of itself and certain other companies
involved in the ISIT platform development project, entered into a cooperative
agreement (the "Cooperative Agreement") relating to such project with the United
States Department of Transportation, Maritime Administration under the Federal
DARPA/MARITECH program. Pursuant to the Cooperative Agreement, the government
has committed to fund one-half of the actual expenses of the project (currently
budgeted at approximately $3.9 million, of which the Company's expenses have
been estimated at approximately $2 million), up to a maximum of $1,912,763, upon
the achievement of project milestones defined in the Cooperative Agreement. The
Company, as the financial manager for the development project, allocates and
distributes the government's reimbursement payments to the project members
according to the project budget and their expenditures thereunder. The Company's
potential share of the funding is $974,865. Through September 30, 1996, the
Company had expended a total of $1,457,200 in connection with the project and
recognized grant revenues from the government for such project in the amount of
$728,600.
29
<PAGE>
In July 1995, the Company received a grant in the amount of $487,433 from
CII pursuant to the State of Connecticut's Federal Technology Partnership
Program under which the State matches 50% of the funding provided by the United
States government under a recognized Federal cooperative funding program, such
as DARPA/MARITECH. CII provided the first installment of the grant in the amount
of $240,033 in August 1995. The remaining $247,400 was provided in June 1996
upon the Company's successful completion of the required project milestones.
Net cash used in investing activities for the years ended December 31, 1994
and 1995 and the nine months ended September 30, 1996 of $414,146, $517,081 and
$902,321, respectively, was primarily attributed to an increase in capitalized
software costs.
Net cash provided by financing activities for the years ended December 31,
1994 and 1995 of $265,607 and $778,166, respectively, was primarily attributed
to increases in outstanding indebtedness. Net cash provided by financing
activities for the nine months ended September 30, 1996 of $1,288,537 was
primarily attributed to the sale of Common Stock and Preferred Stock.
The Company currently has a $216,667 term loan and a $400,000 demand line
of credit with a bank, both of which bear interest at 1 1/2% over the bank's
prime rate and are secured by substantially all of assets of the Company. The
term loan is payable in equal monthly installments of $5,833 plus interest until
June 1998, at which time the balance of approximately $100,000, plus interest,
will be due in full. The bank has agreed to amend the terms of the demand line
of credit to provide for its expiration on April 1, 1998, provided that the
Company completes this offering by May 15, 1997 and maintains an account with
the bank with a minimum balance of $800,000 as additional security for repayment
of the Company's loans from the bank. As of September 30, 1996, the Company had
no further availability under such facility. The agreement under which the term
loan and the demand line of credit were established contains certain covenants,
including provisions requiring the Company to maintain specified financial
ratios and a minimum net worth. The Company was in violation of certain of its
bank loan covenants as of September 30, 1996, including covenants regarding its
net worth and cash flow ratios but was subsequently able to secure waivers from
the bank relating to such covenant violations until March 31, 1997. In addition,
the Company obtained a $150,000 letter of credit from the bank in October 1995
to secure landlord improvements to the Company's offices, which letter of credit
is guaranteed by the Connecticut Development Authority, an agency of the State
of Connecticut. The letter of credit became self-amortizing at the rate of
$7,500 per month on May 31, 1996, and, as of September 30, 1996, there was a
total of $112,500 outstanding under this facility.
In March 1995, the Company obtained a $500,000 loan from CII bearing
interest at the rate of 10% per annum, evidenced by the Senior Note. In
connection with this loan, the Company issued warrants to CII to purchase an
aggregate of 259,888 shares of Common Stock at an initial exercise price of
$2.31 per share. In August 1996, the Company sold 7,500 shares of its Preferred
Stock to CII in exchange for (i) CII's payment of $500,000 in cash; (ii) the
cancellation of $236,924 of the $473,848 principal amount of indebtedness then
outstanding under the Senior Note, the balance of which is repayable, together
with accrued interest, in aggregate monthly installments of $10,624 (subject to
payment in full upon the consummation of this offering); and (iii) CII's
relinquishment of one-half of its warrants, leaving CII with the CII Warrants to
purchase 129,944 shares of Common Stock. Immediately prior to the consummation
of this offering, the 7,500 shares of Preferred Stock held by CII will be
converted into an aggregate of 277,777 shares of Common Stock. In addition, upon
the consummation of this offering, the Company intends to use a portion of
proceeds from this offering to repay the balance of the Senior Note ($236,924
plus approximately $23,000 in accrued interest) and to redeem the CII Warrants
(approximately $75,000). As of September 30, 1996, the Company was in default in
payment under the Senior Note, but was subsequently able to secure a waiver from
CII of all payments of principal and interest under the Senior Note through the
consummation of this offering, at which time the Senior Note is to be repaid in
full. See "Certain Transactions."
In February through June 1996, the Company sold to 16 accredited investors
an aggregate of 233,326 shares of Common Stock at a purchase price of $3.38 per
share, for an aggregate purchase price of $787,500 (the "1996 Private
Placement"). The net proceeds from this financing were used to fund working
capital requirements for further software development of the Fleet Manager
Series and of the ISIT platform and for additional marketing and sales expenses
related to the Fleet Manager Series.
30
<PAGE>
During 1995, two affiliated parties advanced a total of $225,000 to the
Company. In June 1996, these advances were converted into 66,666 shares of
Common Stock. See "Certain Transactions."
In June 1996, an affiliated party acquired a $75,000 loan from a bank, the
proceeds of which he, in turn, loaned to the Company. Subsequently, in November
1996, such loans were amended to reflect the Company as the bank's borrower and
eliminating the affiliated party as a lender. The Company's note to the bank
evidencing such indebtedness bears interest at 1 1/2% over the bank's prime rate
and the bank has agreed to amend the terms of such note to provide for its
expiration on April 1, 1998, provided that the Company completes this offering
by May 15, 1997 and maintains an account with the bank with a minimum balance of
$800,000 as additional security for repayment of the Company's loans from the
bank. See "Certain Transactions."
In connection with the Fall 1996 Borrowings, the Company borrowed an
aggregate of $410,000 from four affiliated parties and two other persons in
October and November 1996. These loans bear interest at 10% per annum and are
due and payable on the earlier of the consummation of this offering and six
months from the date of issuance of the promissory notes representing such
loans. Such loans are subordinated to all other indebtedness of the Company
except for an aggregate of $500,000 payable to two executive officers of the
Company. Upon the consummation of this offering, the Company intends to use
approximately $426,100 of the proceeds from this offering to repay, in full, the
principal amount of, and accrued interest on, these notes. See "Certain
Transactions."
In connection with the December 1996 Borrowings, the Company borrowed an
aggregate of $166,000 from four affiliated parties in September and December
1996. These loans bear interest at 9% per annum and are due and payable on
December 2, 1998. Such loans are subordinated to all other indebtedness of the
Company except for an aggregate of $500,000 payable to two executive officers of
the Company. See "Certain Transactions."
In connection with the Sperry Financing, the Company borrowed an aggregate
of $500,000 from Sperry in December 1996, in return for which the Company issued
to Sperry (i) the Sperry Convertible Note in the principal amount of $250,000,
convertible into an aggregate of 100,000 shares of Common Stock upon the
consummation of this offering, (ii) the Sperry Non-Convertible Note in the
principal amount of $250,000, and (iii) the Sperry Warrants to purchase 125,000
shares of Common Stock at an exercise price of $5.00 per share. The Sperry Notes
bear interest at the rate of 9% per annum and are due and payable on the earlier
of the consummation of this offering and January 31, 1998. The Company intends,
upon consummation of this offering, to use approximately $255,000 of the
proceeds from this offering to repay the Sperry Non-Convertible Note, including
interest accrued thereon through and until such repayment date. See "Certain
Transactions."
In connection with the January Bridge Financing, the Company borrowed an
aggregate of $350,000 from six private investors in January 1997, in return for
which the Company issued to such investors Bridge Notes in the aggregate
principal amount of $350,000 and an aggregate of 70,000 Bridge Shares from its
treasury stock. Immediately prior to the consummation of the January Bridge
Financing, two affiliates contributed an aggregate of 70,000 shares of Common
Stock to the Company's treasury for issuance by the Company as Bridge Shares to
the investors in the January Bridge Financing. After payment of $35,000 in
placement fees to the Underwriter, which acted as placement agent for the
Company in connection with the January Bridge Financing, and other offering
expenses of approximately $20,000, the Company received net proceeds of
approximately $295,000 in connection with the January Bridge Financing. The
Company intends, upon consummation of this offering, to use approximately
$355,900 of the proceeds from this offering to repay the Bridge Notes, including
interest accrued thereon through and until such repayment date.
Immediately prior to the date of this Prospectus, four affiliated parties
delivered and transferred to the Company for cancellation an aggregate of 77,767
shares of Common Stock and the Company accepted such shares in full payment and
satisfaction of the Company's outstanding loans to such parties in the aggregate
amount of $388,837. Because it was expected that such loan amounts would be
satisfied with shares of Common Stock prior to the date of this Prospectus, the
$388,837 in loans receivable was presented as a component of stockholders'
equity in the Company's financial statements commencing as of December 31, 1995.
See "Certain Transactions."
31
<PAGE>
As of September 30, 1996, the Company had cash of $15,531 and a working
capital deficit of $891,669. Although the Company anticipates that the net
proceeds of this offering, together with anticipated revenues from operations
and its current cash and cash equivalent balances, will be sufficient to fund
the Company's operations and capital requirements for at least 18 months
following the consummation of this offering, there can be no assurance that such
funds will not be expended prior thereto due to unanticipated changes in
economic conditions or other unforeseen circumstances. In the event the
Company's plans change or its assumptions change or prove to be inaccurate, the
Company could be required to seek additional financing sooner than currently
anticipated. The Company has no current arrangements with respect to, or
potential sources of, any additional financing, and it is not anticipated that
existing stockholders will provide any portion of the Company's future financing
requirements. Consequently, there can be no assurance that any additional
financing will be available to the Company when needed, on commercially
reasonable terms, or at all.
32
<PAGE>
BUSINESS
The Company
The Company develops, markets, sells and supports software systems, and
sells and supports associated hardware and communications systems, for the
management of commercial ships in the international maritime industry. The
Company's products are designed to enable its customers to operate their
ocean-going ships in a safer and more efficient manner through the use of
shipboard and shore-based computer applications and networks connected by
wireless communications. The Company sells its products in the international
shipping market to operators of all types of ships, including crude oil and
product tankers, gas carriers, container ships, cruise liners, bulk carriers and
other specialty ships. The Company has 27 years of experience in the maritime
industry and has an established international market presence and a significant
installed customer base.
Industry Background
There are over 80,000 vessels in the world's commercial fleet. The primary
target market for the Company's integrated fleet management systems and services
consists of the 22,500 vessels over 5,000 dead weight tons in the international
"deep sea" trade. The types of vessels in this group include oil tankers,
liquefied natural gas carriers, chemical carriers, bulk carriers, container
ships, roll-on/roll-off carriers, and passenger ships. The ownership of these
vessels includes high concentrations in Greece, Japan, China, Russia, and the
United States. Estimates of market penetration indicate that only approximately
15% of the Company's primary target market currently has integrated fleet
management systems. The secondary target market for the Company's products is
the coastal and inland waterway vessels which represent the other 57,500 vessels
in the world's commercial fleet. However, these vessels are of various sizes and
often have limited resources available for shipboard technology. Consequently,
while this secondary market represents significant potential based on the number
of vessels included in such market, the average sale per vessel in this
secondary market will typically be smaller than the average sale per vessel in
the Company's primary target market.
The international maritime industry is responsible for the transportation
of over 95% of the cargo moving in intercontinental trade and no known means of
transportation or technology currently exists which will permit any significant
change from this transportation format. The market for cargo shipping is
primarily an open, free market, allowing ships of any country to compete for
business. The broad nature of this market, coupled with the fact that there are
over 80,000 vessels in the world's commercial fleet competing for business, has
generated growing pressure on shipowners/operators to operate their ships more
efficiently. In addition, a significant expansion of international maritime
regulations has occurred in recent years requiring shipowners/operators to
operate their ships in a safer and more environmentally protective manner or
face major liability exposure. At the same time, however, the economic pressures
of the industry are leading to smaller-sized crews on ships which is increasing
the burdens associated with efficient ship operation and safety and
environmental regulation compliance. The Company believes that these factors
have created an environment where productivity aids, such as those provided by
information technology systems, can offer large benefits to
shipowners/operators.
Information technology systems enable ships' crews to access and perform
planned maintenance schedules, keep a more accurate inventory of critical parts,
communicate with shore support facilities and access needed information to
operate their ships in a safer and more efficient manner. While many
shipowners/operators are just beginning to implement such systems within their
enterprises, others have already made significant investment in their
information technology infrastructures, frequently incorporating within them a
variety of software environments, computing platforms and communications
protocols. These business critical enterprise applications and personal
productivity tools have also historically been supplied by a variety of vendors,
often resulting in incompatible systems and applications within and among an
enterprise's many locations. As a result of this proliferation of technology,
demand is increasing for systems that offer shipowners/operators a standard
interface, transparent communications and the ability to integrate enterprise
and ship specific productivity applications for local and remote enterprise
users.
33
<PAGE>
Current challenges faced by shipowners/operators employing information
technology systems include:
o Platform Diversity. In addition to Windows, desktop computing systems
within an enterprise may include DOS systems, UNIX workstations,
X-Terminals, MacIntosh systems and OS/2 workstations, many of which do
not support 32-bit Windows applications.
o Remote Users. The diversity of network connection types, protocols and
communication services limits the ability of shipowners/operators and
other organizations to deploy applications on a cost-effective and
efficient basis among remote shipboard users.
o Extended Enterprise. The extension of enterprise information systems to
ships, suppliers, technical support activities and regulatory bodies
creates application deployment issues that are outside the control of
information systems managers, such as the quality and security of the
network connection, the client platform involved and the technical
expertise of the remote user.
o Diverse Shipboard Control Systems. Data residing on diverse,
non-integrated control systems aboard ship which is required for ship
management purposes is currently inaccessible to the ship management
applications software. Enterprise system managers must cope with this
non-compatibility problem existing on remote mobile systems.
o Non-Compatible Satellite Communications. While over the past 15 years
the international shipping industry has operated as a monopoly with
satellite analog data communications provided by the International
Marine Satellite consortium ("INMARSAT"), the delivery of
communications services to ships is expected to change drastically in
the next five years. New lower cost satellite communications services
are being offered using digital data technology. At the present time,
no standard protocol to send data through an earth station into the
public telephone networks exists. System providers and information
technology managers are therefore faced with a difficult operational
problem of locating and acquiring the best communications solutions for
any given situation.
Strategy
In order to address the challenges currently associated with the use of
information technology by the maritime industry, the Company has adopted a
strategic plan focused on three distinct, yet interrelated, areas of the
maritime information technology market, including: (i) the continuation and
enhancement of the Company's core business which centers around its existing
Fleet Manager Series of software products for the management of ship operations
and includes applications ranging from shipboard inventory and maintenance
management to ship-to-shore e-mail; (ii) the development of the Integrated
Shipboard Information Technology ("ISIT") platform, which is designed to become
the first industry standard for computer operating environments to integrate a
myriad of ship equipment and informational systems, including proposed
ISIT-complaint versions of the Company's existing Fleet Manager Series products,
which are currently under development; and (iii) its expansion into the
satellite communication services business as a reseller of satellite
communications services, which expansion the Company expects will allow it to
provide its customers with a single source service for ship-to-shore data
communications. The Company intends to focus on these three strategic areas in
order to become a leading supplier of integrated management and communications
systems to the international maritime industry.
In keeping with its goal, the Company is employing the following
strategies:
Deliver Easy-to-Use, High-End Fleet Management Solutions. The Company
believes that today's maritime requirements dictate high levels of usability due
to crews of varying nationalities, training, sizes and experience levels. In
addition, in order for the systems to be effective at managing operating costs,
the systems must have high levels of functionality in order to encompass a broad
spectrum of international customers. The Company's unique suite of application
software products, the Fleet Manager Series, addresses these needs by providing
ease of use and broad-based functionality with low implementation costs and full
scalability. The Company provides solutions for customers seeking to preserve
existing information technology investments and minimize the costs and
complexity of integrating with existing management systems.
34
<PAGE>
Establish Broad-Based Acceptance of the ISIT Platform. In order to
establish broad-based acceptance of the ISIT platform, the Company intends to
expand its marketing efforts to focus not only on direct sales to
shipowners/operators but also on the marketing of the ISIT platform to a variety
of maritime organizations, including shipboard control system suppliers and
hardware and software vendors, who will be able to bundle the ISIT platform with
their respective product lines. In addition, the Company, both on its own and
through a distribution agreement with Sperry, plans to market the ISIT platform
through shipyards for newbuild ship constructions, with the intention that the
ISIT platform will become the default information technology system for newbuild
ships. In order to better understand the needs of the maritime industry and to
facilitate market acceptance of the ISIT platform, the Company has created an
Industry Advisory Board for the ISIT platform project, which includes 30 firms
representing a broad cross-section of the maritime industry, including
shipowners/operators, communications organizations, shipyards, regulatory bodies
and suppliers of marine equipment.
Develop Strategic Alliances. The Company believes that entering into
strategic alliances for the development and sales of its products will allow for
a broader-based acceptance of such products and a corresponding increase in its
overall sales. To this end, the Company: (i) as the leader of the ISIT platform
development project, formed the ISIT Platform Development Team (consisting of a
group of the leading companies involved in various technologies and services
associated with international ship operations, design and information
technologies) to specifically address the problem of standards for
shipboard/shoreside data access, handling and communications; and (ii) entered
into the Sperry Agreement in December 1996, pursuant to which the Company
granted Sperry, among other things, certain sole rights relating to the
distribution of the Company's software application products and ISIT platform
products to the United States government and non-exclusive rights relating to
the distribution of the Company's products elsewhere, subject to certain
territorial limitations.
Capitalize on Large Installed Customer Base. The Company plans to continue
to leverage its installed base of over 1,500 application system installations at
over 500 shipboard and shore-based sites worldwide. The Company's strategy is to
sell new products, as well as future, enhanced generations of the current Fleet
Manager Series, into this customer base. The additional products intended to be
added to the product line include the ISIT platform, satellite communications
services, Windows-based versions of the Fleet Manager Series, ISIT-compliant
versions of the Fleet Manager Series, and applications within the Fleet Manager
Series. The Company continues to devote significant resources to enhance its
products and services.
Develop Industry Standards. The Company has taken a leadership role in the
development of standards in the area of shipboard information technology
applications. Executives of the Company currently chair two task groups at the
American Society of Testing and Materials ("ASTM") in the F-25 Committee on
Ships and Marine Technology. This Committee has established a liaison with the
International Standards Organization ("ISO") Technical Committee 8, Ships and
Marine Technologies, and has reached consensus that any standards adopted by
ASTM will be submitted to the ISO. The Company believes that taking a leadership
role in the development of relevant industry standards reinforces the industry
perception of the Company as a leader in its field.
Support International Safety. The international regulations for both ship
safety and environmental protection are formulated through the United Nations'
International Maritime Organization ("IMO"). This organization develops
regulations through a treaty process of the United Nations. These regulations
are enforced by the port states through local inspectors. An active effort
within the IMO exists to develop technology applications which will promote
regulation enforcement. Currently, this enforcement is primarily a manual and
labor intensive effort. The Company is working to apply its ISIT platform
technology as the base technology for such technology developments including
vessel traffic services similar to air traffic control and voyage data recorders
similar to flight recorders.
Leverage Worldwide Infrastructure. The Company has developed an extensive
international network of agents to provide direct and indirect sales and
support. The Company's products are designed and built for an international
marketplace. The Company has significant resources allocated to the selection
and development of this agent network, and expects those investments to
continue. International sales represented 44.0% of revenues in fiscal 1994 and
31.0% in fiscal 1995. The Company believes that this network will be an
important competitive factor in taking advantage of the growing use of
technology in the maritime industry.
35
<PAGE>
Differentiate Through Superior Customer Support. The Company believes that
superior customer support is critical for customers to successfully implement
high-end technology solutions. Due to the complexity and logistics of the
maritime environment, support services must be designed to address issues
remotely, in a cost efficient manner, and on a timely basis. The Company has 27
years of experience in supporting the maritime customer base and six years
experience supporting the current Fleet Manager Series. Because each customer
has unique needs, the Company offers modular customer support programs that
match each customer's requirements.
The Fleet Manager Series
The Company's Fleet Manager Series is a multi-faceted line of software
products, including: (i) FleetWORKS, a systems package for the control of the
equipment and spare parts inventory onboard a ship; (ii) FleetLINK, a marine
data communications and e-mail systems package providing data compression and
high speed data transmission over satellites, cellular and/or terrestrial links;
and (iii) FleetWATCH, a shipboard reporting and administrative systems package.
The Fleet Manager Series was developed through several years of industry use and
feedback and is currently in its fifth generation. This suite of integrated
applications allows shipowners/operators to manage costs, manage resources, and
comply with both internal and externally mandated safety and environmental
issues.
The benefits of the Fleet Manager Series include:
o An integrated suite of applications which allows more robust
communication of data between applications and reduces user workload by
preventing multiple data entries.
o Associated systems integration and engineering services which develop
fleet-wide equipment and parts numbering mechanisms and initialize
system operations.
o The ability to dramatically reduce ship-to-shore satellite
communications costs.
The Fleet Manager Series software applications have been designed to offer
ease-of-use and an integration of information for a multitude of ship management
operations using a single user interface. In addition, the Company has developed
services to support these systems, from database development and validation to
the supply of shipboard computer hardware, related engineering, integration and
training services and maintenance support. Thus, in addition to its sale of the
software products themselves, the Company may, for instance, pre-load the Fleet
Manager Series software products on personal computers and sell the bundled
product. Consequently, although individual modules list for between $1,500 and
$9,000, a typical customer may buy multiple modules for multiple ships in a
fleet resulting in a sale to a customer that could approach $50,000, including
hardware and integration and engineering services. Moreover, by offering
standardized PC and LAN configurations, the Company provides an added value to
clients. All these computer hardware configurations include the Company's
MarineCare "exchange-basis" warranty, providing a blanket coverage for all
components supplied by the Company, regardless of manufacturer, with all
individual warranties extended to one full year.
The Fleet Manager Series is designed to provide information about ship
operations in order to assist the shipowner/operator in meeting safety and
environmental requirements. On July 1, 1998, almost all commercial ships over
500 gross tons will be required to comply with the International Safety
Management ("ISM") Code, developed and mandated by the IMO. The ISM Code
includes new procedures which must be followed and requirements which must be
met in order to achieve certification for a ship. The Fleet Manager Series
currently provides shipowners/operators with a substantial portion of the
information required in order to achieve ISM certification.
The Fleet Manager Series versions currently being shipped are DOS-based;
however, the Company is in the process of developing Windows-based versions
(which will be Windows 3.1, Windows95 and Windows NT compliant) of all of its
existing products. Initial modules of the Fleet Manager Series are expected to
be available for the Windows operating systems during the first quarter of 1997
and the balance by the end of 1997. The Company's application software for
Windows will require modification in order to utilize such software on the ISIT
platform being developed. Initial ISIT-compliant modules of the Fleet Manager
Series are expected to be released in mid-1997.
36
<PAGE>
The following lists the modules which are included in each of the
applications in the Fleet Manager Series:
<TABLE>
<CAPTION>
<S> <C>
FleetWORKS FleetLINK
o Equipment Management o Fleet Wide E-Mail
o Spare Parts Inventory Management o Satellite and Cellular Data Communications
o Consumables Management o Global E-Mail Interface
o Requisitioning/Budgeting
o Bar Coding Inventory FleetWATCH
o Purchasing Interface o Vessel Reporting
o Maintenance Scheduling o Cargo Loading
o Equipment History Tracking o Personnel/Payroll Management
o Predictive Maintenance Interface o Weather Reporting
</TABLE>
FleetWORKS
FleetWORKS is a fully integrated inventory and maintenance systems package.
Starting with basic management of equipment name plate status and details,
FleetWORKS may be expanded to include systems for inventory control,
requisitioning, purchase orders, budgeting, consumables ordering, planned
maintenance, predictive maintenance, bar coding and equipment history tracking.
Management believes that FleetWORKS allows the most comprehensive configuration
of software solutions on the market today, offering marine operators the
benefits of a custom-tailored system, while providing the reliability and
economy of standardized software. The Company's proprietary distributed database
technology allows FleetWORKS to operate independently on each ship, while
maintaining an accurate record of each ship's machinery, spare parts and
maintenance databases on the complete fleet-wide shore system. In addition to
fleet-wide control, the software reduces paperwork by automatically transmitting
requisitions to the shore office via satellite. The system also schedules
planned and predictive maintenance which improves maintenance quality, provides
a better overview of machinery condition and creates a detailed equipment
history. Modules list for between $2,000 and $4,000.
FleetLINK
FleetLINK is a marine data communications and e-mail systems package.
FleetLINK provides data compression and high speed data transmission over
satellites, cellular and/or terrestrial links. FleetLINK achieves effective
throughput of up to approximately 30,000 bits per second over INMARSAT A and
approximately 19,000 bits per second with cellular services. In addition to
reliable, error-free ship-to-shore connections, FleetLINK provides full-featured
"paperless forms" to streamline fleet-wide information processing. The software
can transfer most file types between ship and shore computers with interfaces to
commercial e-mail software including cc: Mail, DaVinci e-Mail and a number of
other packages. In addition, FleetLINK exchanges mail and files with X.400
services. FleetLINK is a cost-saving alternative to telex and fax for shipboard
operations. Designed to maximize existing satellite and cellular services,
FleetLINK is intended to meet the needs of the Company's customers in the future
as communications technology rapidly evolves. The data communications and
messaging module lists for approximately $2,000.
FleetWATCH
FleetWATCH is a shipboard reporting and administrative systems package.
FleetWATCH provides consolidated fleet-wide voyage activity data, including
vessel status and position reporting and tracking. This information can be used
by an operations office to evaluate voyage performance and plan subsequent
voyages with a view to maximizing ship efficiency. FleetWATCH also offers a
cargo loading module which provides accurate loading, trim and stability
calculations and maximization loading safety for tankers, container and bulk
carriers. The systems offers fleet personnel and crew information reports and
payroll management in order to streamline personnel management. FleetWATCH
supports quality initiatives such as ISO9000 and ISM by providing an automated
mechanism to deliver safety and quality procedures to ships. Modules list for
between $2,000 and $6,000.
37
<PAGE>
The ISIT Platform Development Project
Utilizing its core technologies and strategic relationships with leaders in
the maritime industry, the Company has taken the premier role in designing, and
is currently developing, the ISIT platform, a software operating environment
standard for the maritime industry. The Company believes that the development of
the ISIT platform could be a major breakthrough for the commercial shipping
business and that it represents a strategic opportunity for the Company to
significantly increase its market share position within the maritime industry,
as the ISIT platform is intended to permit the integration, under a common
protocol, of a myriad of ship equipment and informational systems and to provide
a common computing environment for shipboard systems to share data and
communicate with shore-based management. In addition, the ISIT platform will
reside on top of Microsoft Corporation's Windows NT in order to provide
enterprise-wide distributed processing and is intended to serve as an open
architecture to make data from different sources and vendors available and
accessible in one database. Because it will be an advanced technology
application, the ISIT platform will also have the potential to integrate
information requirements for other industries using any client/server
applications on the Windows NT operating system.
When completed, the ISIT platform is intended to provide three primary
services for any shipboard application. First, it is designed to provide a
stable platform on which software applications which are ISIT-compliant can run
and to include a layer of standard services necessary to permit remote support
of such applications. ISIT-compliant software applications are expected to
include new versions of the Company's Fleet Manager Series products, software
applications currently under development by other members of the ISIT Platform
Development Team (described below), which will not be competitive with the Fleet
Manager Series, and software applications which are expected to be developed by
third parties, some of which may be competitive with the Fleet Manager Series.
Second, the ISIT platform is designed to provide a common communication path for
any ISIT-compliant application using most available communication services. Of
the numerous new digital satellite services coming on the market, each will
require its own data protocols. The ISIT platform is intended to provide the
common communications interface for most satellite services, as well as an
optional shore-based hub to interface with various telephone networks and
services, including the Internet. Third, the ISIT platform is designed to allow
for the collection and storing of a ship's operating data in a common database
and in a common format. This data collection function provides an interface into
the various shipboard control systems on the bridge and the engine room that
operate with their own proprietary protocols. The ISIT platform is designed to
convert these different protocols into a common protocol and make the data
available for other applications, such as diagnostics. As a result of the
foregoing, the Company anticipates that the ISIT platform will address a number
of key maritime industry issues, including:
o The ability to provide a common, remotely-controllable environment for
any shipboard management system. This capability, the core of the ISIT
platform, is intended to allow shipowners/operators to manage the
increasingly complex shipboard information technology environment
aboard their world-wide fleet from a centralized shore location.
o The ability to capitalize on rapidly evolving wireless communications
technologies and to provide shipowners/operators tools to automatically
select wireless service providers.
o The ability to collect data from any of the traditionally closed
shipboard control systems (such as machinery control, navigation
control, or cargo control) for use by other shipboard systems or
analysis by management ashore.
<PAGE>
The Company's ISIT platform development project was chosen in July 1995 for
shared expense funding under the United States government's DARPA/MARITECH
program (a program formed to, among other things, promote the development and
application of technology to and for the maritime industry as part of the
government's effort to revitalize United States shipyards). The Company, as the
leader of the ISIT platform project, formed the ISIT Platform Development Team
(consisting of a group of the leading companies involved in various technologies
and services associated with international ship operations, design and
information technologies) to specifically address the problem of standards for
shipboard/shoreside data access, handling and communications. Pursuant to their
Cooperative Agreement with the government, the Company and certain other members
of the ISIT Platform Development Team (the "Project Participants") are
responsible for the ISIT platform development project. The Company is
responsible for the development of the ISIT platform itself while the other
Project Participants have responsibility for various related aspects of the
project. The costs relating to the ISIT platform project have been budgeted at
approximately $3.9 million, of which the Company's expenses have been estimated
at approximately $2 million (before giving effect to the government's
reimbursement funding). The government has agreed to reimburse the expenses of
the Project Participants in an amount equal to the lower of approximately $2
million and 50% of their actual expenses. The government makes payments upon the
completion of various defined project milestones, which payments are allocated
among the Project Participants by the Company, according to the project budget
and each participant's expenditures thereunder. Upon completion of the project,
the Company will retain the rights to the ISIT platform, subject to a value
added reseller agreement (and a sharing of a portion of any revenues derived
from the commercialization of the ISIT platform) with the other Project
Participants. Such agreement is currently under negotiation.
38
<PAGE>
The following is a list of the members of the ISIT Platform Development
Team and their specialized fields:
ISIT PLATFORM DEVELOPMENT TEAM
<TABLE>
<CAPTION>
<S> <C>
Marine Management Systems, Inc.*.................. ISIT Platform
Sperry Marine Inc................................. Integration of Bridge Control Systems
GE Marine Systems................................. Integration of Machinery Control Systems
Radix Systems, Inc.*.............................. System Integration and Project Management
Ultimateast Data Communications Limited*.......... Satellite Services and Communications Hub
ABS Marine Services, Inc.......................... Classification/Standards
M. Rosenblatt & Son, Inc.*........................ Naval Architects and Marine Engineers-Installation
Sinteff Marine Controls........................... Control System Interfaces
</TABLE>
- -----------------
*Also a Project Participant.
There is also an ISIT Platform Advisory Board which has been put in place
in order to advise the ISIT Platform Development Team on the developments and
implementation of the ISIT platform. The ISIT Platform Advisory Board includes
shipowners/operators, communication companies, shipyards, and classification
societies and government entities.
ISIT PLATFORM PROJECT ADVISORY BOARD
<TABLE>
<CAPTION>
<S> <C>
Shipowners/Operators Ship Builders
- -------------------- -------------
o Chevron Shipping Company o Alabama Shipbuilding
o Coscol Marine Corporation o Avondale Industries, Inc.
o Eletson Corporation o Bath Iron Works Corporation
o Marine Transport Lines, Inc. o Ingalls Shipbuilding
o Osprey-Acomarit Ship Management, Inc. o McDermott Shipbuilding, Inc.
o Sea-Land Service, Inc. o National Steel and Shipbuilding Company
o Stolt Parcel Tankers Inc. o Newport News Shipbuilding
o U.S. Military Sealift Command o Trinity Marine Group, Inc.
Communication Companies Classification Society/Government Entities
- ----------------------- ------------------------------------------
o American Mobile Satellite Corporation o American Bureau of Shipping
o COMSAT Mobile Corporation o Canadian Coast Guard
o Iridium, Inc. o Canadian Navy
o Mobile Datacom Corp. o Det Norske Veritas
o NewEast Wireless Telecom, Inc. o Lloyd's Register
o Orbital Communications Corporation o U.S. Coast Guard
o U.S. Military Sealift Command
</TABLE>
The Company expects to complete initial development and to begin initial
testing of the ISIT platform in the second quarter of 1997. This initial testing
of the ISIT platform is intended to validate its ability to connect shipboard
systems with each other and with management ashore. Thereafter, the Company
expects to commence initial marketing of the ISIT platform as well as
ISIT-complaint versions of its Windows-based Fleet Manager Series products by
the fourth quarter of 1997.
39
<PAGE>
Proposed Satellite Communications Services Business
The Company currently provides software solutions for ship-to-shore
communications, but shipowners/operators must still contract with another vendor
for the actual wireless communications services. The Company intends to contract
with communications service providers and to resell those communication services
to shipowners/operators as part of a bundled offering with the other products
and services of the Company. This will provide shipowners/operators with
one-stop shopping for their fleet management requirements, including application
software, platform software, hardware, systems integration and engineering
services, and associated communications services. The Company believes that
significant technical advantages to bundling the ISIT platform with the
associated communications services exist which will allow shipowners/operators
to improve the return from those communications expenses. The Company's system
could provide a least-cost-routing controller on the ship which would
automatically choose the lowest cost communications routing. In addition, the
Company could route the call through lower cost cellular services when in range.
When satellite usage is at a high enough level, the Company will have the
opportunity to implement a virtual earth station ("VES") or communications hub
that can link a ship's communications to terrestrial services. The Company
expects to expand this to other communication services using a VES developed
under the ISIT platform project.
Sales and Marketing
The Company's marketing efforts are primarily directed at broadening the
market for the Fleet Manager Series by increasing the awareness of the
importance of information systems for the efficient management of ship
operations. The Company's marketing is divided between advertising, seminars and
trade shows, and promotional presentations. The Company advertises primarily in
industry magazines.
The Company sells its Fleet Manager Series products both directly and
through the use of independent sales agents located in many of the largest
maritime centers in the world. Currently, the Company has approximately 25 sales
agents all of which are subject to written agreements, which generally are
non-exclusive and may be terminated by either party at the end of each year of
the agreement. Three of the Company's current sales agents, however, have
territorial exclusives (one in Greece, one in Singapore, Malaysia and Indonesia
and one in Hong Kong, each of which is a major territory in the maritime
industry). None of the Company's agents are subject to any minimum performance
levels. The Company supports its agents with product documentation, marketing
materials, demonstration software and training sessions.
In December 1996, the Company entered into the Sperry Agreement, a
five-year marketing and distribution agreement, with Sperry, a worldwide leader
in providing advanced electronic navigation and guidance systems to commercial
and military customers for marine and aircraft applications and a wholly-owned
subsidiary of Litton, a $3.6 billion aerospace, defense and commercial
electronics company publicly traded on the New York Stock Exchange. Sperry has
indicated to the Company that it intends to make its commercial marine
electronic navigation and guidance systems compliant with the Company's proposed
ISIT platform. Pursuant to the Sperry Agreement, Sperry has the sole right to
distribute to the United States Government, under Sperry's name or under the
Company's name, the Company's ISIT platform products, as part of and/or within a
related Sperry product or system ("Bundled"), and the Company's software
application products, whether or not they are Bundled. Sperry also has the sole
right to otherwise distribute the Company's ISIT platform and software
application products which are Bundled and sold under the Sperry name, provided,
however, that Sperry may not sell such software application products in Greece
until June 1997. Sperry is not required to make any minimum payments or sales
under the Sperry Agreement in order to retain such sole distribution rights. In
addition, Sperry has the non-exclusive right to otherwise distribute the
Company's software application and ISIT platform products which are Bundled and
sold under the Company's name, provided, however, that Sperry may not sell such
software application products in Greece, Singapore, Malaysia, Indonesia or Hong
Kong for various periods extending until January 1998. Sperry shall purchase the
software application products from the Company at a discount and will be
entitled to a commission if it introduces the Company to a customer that
purchases software application products from the Company. Sperry's discounts and
commissions relating to ISIT platform products will reflect the Company's most
favorable pricing terms then in effect.
40
<PAGE>
The sales cycle for the Company's Fleet Manager Series software products,
which generally commences at the time of the Company's or the agent's initial
contact with a prospective customer and ends upon the execution of a purchase
order with that customer, varies by customer but often extends for periods of
six months or more, depending on a number of factors, including the prospective
customer's familiarity with and acceptance of shipboard information technology
systems. (The sales cycle for existing customers, which customers have
historically represented over one-third of the Company's annual sales, is
typically much shorter.)
For the year ended December 31, 1995 and the nine months ended September
30, 1996, sales in the international market represented approximately 31.0% and
19.4%, respectively, of the Company's revenues. The Company believes that its
continued growth and future profitability will require expansion of its
international operations, and, accordingly, the Company intends to recruit
additional international sales agents and distributors.
Customers
The Company has installed over 1,500 software modules for over 60 active
companies with over 500 ship and shore-based operational sites. The Company's
target customers are primarily companies with ocean-going or "deep sea" vessels
weighing over 5,000 dead weight tons. These medium and large-sized vessels have
more sophisticated fleet operations and are more likely to employ information
technology systems than the smaller coastal and inland waterway vessels. The
Company's largest groups of customers are commercial vessels including oil and
chemical tankers, bulk carriers, container ships and passenger ships. The
following is a representative list of the Company's customers:
Algoma Central Marine Canada
Amerada Hess New York
Arco Marine California
Armada Shipping Denmark
BP Exploration England
BP Shipping Ohio
Canartic Shipping Canada
Chevron Shipping California
Coastal Corporation Texas
Cunard Line (Queen Elizabeth II) New York
Denholm Ship Management Scotland
Essar Shipping India
Esso Canada Canada
Inland Steel Indiana
Marine Transport Lines New Jersey
Maritrans GP Pennsylvania
Military Sealift Command Virginia
Mitsubishi Heavy Industries Japan
Mobil Shipping Company England
Navigo Management Company Cyprus
National Maritime Foundation Philippines
National Shipping Company Saudi Arabia
North West Shelf Shipping Services Australia
Pan Ocean Shipping Korea
P&O Bulk Carriers England
Princess Cruises California
Sea-Land Services New Jersey
Stolt Parcel Tankers Texas
Thraki Shipping Greece
Torm A/S Denmark
Transoceanic Cable (AT&T) New Jersey
United Arab Shipping Kuwait
Wilderness Cruises Washington
Yukong Line Korea
41
<PAGE>
During the fiscal years ended December 31, 1994 and 1995 and the nine
months ended September 30, 1996, three, two and two customers, respectively,
each accounted for over 10% of the Company's revenues in their respective
periods. In fiscal 1994, the Company's three principal customers accounted for
an aggregate of 45% of the Company's revenues, and, in fiscal 1995, two
different principal customers accounted for an aggregate of 23% of the Company's
revenues. For the first nine months of 1996, two different principal customers
accounted for an aggregate of 45% of the Company's revenues. Significant sales
of computer hardware to one of these customers (a non-industry customer)
generated 32% of the Company revenues.
Installation, Service and Support
The Company believes that superior customer service and support, including
system integration and engineering services, customer support and customer
training, are critical for achieving and maintaining customer satisfaction and
for assisting customers to utilize successfully the Company's software
applications. Due to the complexity of the implementation of the Company's
software products, the Company's service and support are vital to the growth in
customer satisfaction with the Company's products.
System Installation, Integration and Engineering Services
The Company offers installation, integration and engineering services for
customers who have purchased the Company's software and/or hardware products.
Such services facilitate the integration of the Company's systems with the
customer's shipboard operations (with an emphasis on the integration of
inventory and maintenance systems) and provide the customer with a turn-key
solution. These services provide a greater likelihood of success to the
Company's clients in the use of the Company's Fleet Manager Series software
products. Services include development of coding schemes for fleet-wide
equipment nameplates, spare parts and consumable inventory, onboard engineering
ship check and validation services, detailed data development for
equipment/inventory items, maintenance procedures/schedules and personnel
payroll.
Customer Support
The Company offers a full range of customer support services to ensure
proper and continuing operation of software and hardware systems. Customer
support includes initial warranty support which lasts one year and which
includes taking appropriate action to maintain software operation, and extended
warranty services for an additional annual fee. If an extended warranty is not
purchased, support is provided after the initial warranty period on a time and
materials basis. Hardware support is offered on an extended warranty basis or on
a time and materials basis.
Customer Training
The Company provides client personnel training sessions, including hands-on
training in the Company's training facility at its corporate offices. The
Company is committed to offering its customers a range of training courses and
materials. Customers may attend training sessions which include lectures,
demonstrations and extensive hands-on exercises in basic computer hardware and
operation of the Company's software.
Research and Development
Since its inception, the Company has made substantial investments in
product development, and the Company anticipates that it will continue to commit
substantial resources to product development in the future. The Company's
principal development projects include the development of the ISIT platform, the
complete reengineering of the Fleet Manager Series for integration into the ISIT
platform, the conversion of the DOS-based Fleet Manager Series to Microsoft
Windows and enhancements to the DOS-based Fleet Manager Series. The Fleet
Manager Series for Windows applications are being developed to feature a full
backend compatibility with the DOS-based product line, thereby providing clients
with a clear upgrade path where the two product lines can operate side by side
within the same corporate and network environment. The Company's goal is to have
all of its products ISIT-compliant while retaining simplicity and reliability of
operation, as well as retaining the capability of operating outside the ISIT
platform environment.
42
<PAGE>
The Company's product development activities are conducted at its Stamford,
Connecticut facility. As of December 31, 1996 the Company had a total of 24
employees and contractors in product development. The Company's product
development expenditures for fiscal 1994 and 1995 and the nine months ended
September 30, 1996 were $0.8 million, $0.7 million and $1.1 million,
respectively, net of grant revenues from CII and the federal government during
such periods in the aggregate amounts of $0, $390,757 and $820,402,
respectively. The Company expects that product development expenses will
continue to increase through 1997.
Competition
The Company has a number of significant competitors for its existing line
of Fleet Manager Series products, including SpecTec, a division of Visma ASA,
Marinor, Computer Expert Systems LTD and Nautical Technology Corporation. While
there are currently no dominant players in the marine systems markets, the
markets for the Company's Fleet Manager Series products are characterized by
intense competition. As markets for these products continue to develop,
additional companies, including companies in the computer hardware, software and
networking industries with significant market presence, may enter the markets in
which the Company competes and further intensify competition. Many of these
competitors and potential competitors have significantly greater financial,
technical, sales and marketing and other resources than the Company. Moreover,
some of the Company's competitors, including Marinor, Computer Expert Systems
LTD and Nautical Technology Corporation, currently offer some Windows-based
applications. While the Company is currently in the process of migrating its
Fleet Manager Series software products from DOS to Windows, all of its products
are currently DOS-based.
The Company believes that the most significant competitive factors of the
Fleet Manager Series software products include ease of use, performance to
industry standards, system functionality, product performance and quality,
customer support and price. The Company believes it presently competes favorably
with respect to each of these factors. However, the Company's market is still
evolving and there can be no assurance that the Company will be able to compete
successfully against current and future competitors and the failure to do so
successfully will have a material adverse effect upon the Company's business.
The Company is unaware of any company in this country or internationally
that is currently producing or marketing a standard shipboard computing platform
similar to the ISIT platform. However, there are numerous other companies that
could enter this new market, many of which have substantially greater financial,
technical, production, marketing and other resources than the Company. In the
case of an entity with such resources, the Company does not believe that there
currently are, or likely to be in the foreseeable future, prohibitive barriers
to entry into the business of developing and marketing a standard shipboard
computing platform.
The Company expects that competitors for its new satellite communications
services will include the same land-earth station providers with whom the
Company intends to enter into reseller agreements, including COMSAT, Teleglobe,
British Telecom, PLC and PTT Telecom Netherlands, among others. In addition, the
Company believes that it will face competition from other satellite
communications resellers. Many of these competitors have substantially greater
financial, technical, production, marketing and other resources than the
Company.
<PAGE>
There can be no assurance that existing or future competition will not have
a material adverse effect upon the Company's operations.
Intellectual Property
The Company has successfully applied for and obtained federal registration
for the service mark "MMS." The Company has also applied for federal
registration for the MMS design logo and the trademark "ISIT," which
applications are currently pending. The Company has no patents relating to
proprietary technology, but instead relies primarily on trade secret laws,
confidentiality procedures and contractual provisions, including confidentiality
and/or non-disclosure agreements with its employees and consultants, to protect
its proprietary rights. There can be no assurance that such measures will be
adequate to protect the Company from the infringement by others of its
technologies. Despite the Company's efforts to protect its proprietary rights,
it may be possible for, and attempts may be made by, unauthorized third parties
to copy aspects of the Company's products or to obtain and use information that
the Company regards as proprietary. In addition, the laws of some foreign
countries do not protect the Company's intellectual property to the same extent
as do the laws of the United States. The loss of any material service mark,
trademark, trade name, trade secret or copyright could have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, while the Company does not believe that its products infringe on
the rights of third parties, there can be no assurance that third parties will
not assert infringement claims against the Company in the future or that any
such assertion will not result in costly litigation and/or a determination
adverse to the Company's interests. In the event the Company's products are ever
deemed to infringe on the proprietary rights of others, the Company could be
required to modify the design of its products or obtain licenses from third
parties relating to technology used in its products. There can be no assurance
that the Company would be able to do either in a timely manner, upon acceptable
terms and conditions or at all, and the failure to do so could have a material
adverse effect on the Company's business, results of operations and financial
condition.
43
<PAGE>
While the Company's competitive position may be affected by its ability to
protect its proprietary information, the Company believes that because of the
rapid pace of technological change in the industry, factors such as technical
expertise, knowledge and innovative skill of the Company's management and
technical personnel, its strategic relationships, name recognition, the
timeliness and quality support services provided by the Company and its ability
to rapidly develop, enhance and market software products may be more significant
in maintaining the Company's competitive position.
The Company is dependent on third-party suppliers for certain software
included with certain of its products, such as the Cargomax System for ship
loading from Herbert Engineering Corp., the Orion and Polaris weather routing
software from Weathernews, Inc. and the SNAPS purchasing software product from
ShipNet AS. Although the Company believes that the functionality provided by
software which is licensed from third parties is obtainable from multiple
sources or could be developed by the Company, if any such third-party licenses
were terminated or not renewed or if these third parties fail to develop new
products in a timely manner, the Company could be required to develop an
alternative approach to developing its products which could require payment of
substantial fees to third parties, create internal development costs and delays
and which might not be successful in providing the same level of functionality.
Such delays, increased costs or reduced functionality could materially adversely
affect the Company's business, operating results and financial condition.
Employees
As of December 31, 1996, the Company had 54 full-time employees, all of
which were based in the United States. Of the total, 22 were engaged in
development, 14 were engaged in sales and marketing, 8 were engaged in support
and 10 were engaged in administration and finance. In addition, the Company
engages a number of temporary and contract personnel to augment departmental
employees and work on selected projects. The Company is not a party to any labor
agreements and none of its employees are represented by a labor union. The
Company believes its employee relations are good.
Facilities
The Company leases 13,355 square feet for its executive offices in
Stamford, Connecticut, for a base rent of approximately $13,000 per month. The
Company has an option for an additional 4,000 square feet at the same location.
The lease expires in 2002. The Company believes that its present facilities
including the option space are adequate for its current level of operations. The
Company will need to increase its space in the event of any substantial increase
in demand for its products. The Company believes that suitable additional or
alternative space will be available in the future on commercially reasonable
terms as needed. Nevertheless, any move to new facilities or expansion could be
disruptive and could have a material adverse effect on the Company's business,
results of operations and financial condition.
44
<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position
- ---- --- --------
Eugene D. Story 69 President, Chief Executive Officer and Director
Robert D. Ohmes 61 Executive Vice President, Chief Financial
Officer, Secretary and Director
Donald F. Logan, Jr. 42 Senior Vice President - Operations and
Director
Mark E. Story 41 Vice President - Technical and Director
Michael P. Barney 43 Vice President - Corporate Development and Marketing
Arie Slot 53 Vice President - Sales
Susan C. Rodricks 51 Controller
Donald W. Forster 58 Director
Lyman C. Hamilton, Jr. 70 Director
Michael C. Hughes 41 Director
</TABLE>
Eugene D. Story, a founder of the Company, has served as President and
Chief Executive Officer of the Company since 1970 and as a director since 1969.
Mr. Story has over 40 years of experience in the shipping business. His past
positions include Manager of Project Development and Design in the Marine
Transportation Department for Mobil Oil Corporation, President of Stal-Laval
Turbine Company, Supervisor of Marine Construction for California-Texas Oil
Corporation and Naval Architect at Gibbs and Cox, Inc. He has written over a
dozen papers on topics ranging from a 1974 paper entitled Advanced Applications
of Management Computers in the Marine Industry to a 1993 paper for INMARSAT
entitled Integrating the Shipboard and Shore Office Management Systems. Mr.
Story received a B.S. in Marine Engineering from the U.S. Merchant Marine
Academy and B.S. in Naval Architecture and Marine Engineering from the
University of Michigan. Mr. Story is the father of Mark E. Story, the Vice
President - Technical and a director of the Company.
Robert D. Ohmes, a founder of the Company, has served as Executive Vice
President and Chief Financial Officer of the Company since 1974 and as a
director since 1969. His past positions have included Vice President of W.R.
Grace, Director of Business Development of Olin Corporation, Director of
Investment Analysis at ITT Corporation, and attorney for the marine law division
of Mobil Oil Corporation. He has also authored papers including the four volumes
of Shipboard Management Information Systems Feasibility Study for the U.S.
Marine Administration. Mr. Ohmes received a B.A. from Williams College, an LLB
and J.D. from Fordham Law School and an M.B.A. from New York University. Mr.
Ohmes is the father of Scott R. Ohmes, a beneficial owner of 7.4% of the
Company's Common Stock upon the consummation of this offering.
Donald F. Logan, Jr. has served as Senior Vice President - Operations
since December 1996 and as a director since January 1987. From January 1995
through November 1996, Mr. Logan was Vice President - Marketing and Sales of
the Company. From January 1991 through December 1994, Mr. Logan was Vice
President - Marine Systems of the Company, and from January 1985 through
December 1990, he was Vice President - Microsystems of the Company. Prior to
joining the Company in 1979, Mr. Logan served in the Marine Department of Exxon
Company with responsibility for navigation and supervision of cargo operations.
Mr. Logan received a B.S. from the U.S. Merchant Marine Academy.
Mark E. Story has served as Vice President - Technical of the Company since
January 1995 and as a director since February 1994. From January 1992 through
December 1994, Mr. Story was Director of Software Services of the Company. From
April 1989 to December 1992, he was Manager, Technical Division of the Company.
Mr. Story is the principal architect of the Company's distributed management
system with satellite link between ship and shore offices, including the
communications data transfer protocols. Mr. Story received a B.S. in Computer
Science from the University of Vermont. Mr. Story is the son of Eugene D. Story,
the President, Chief Executive Officer and a director of the Company.
45
<PAGE>
Michael P. Barney has served as Vice President - Corporate Development and
Marketing since December 1996. From July 1995 through November 1996, Mr. Barney
was Vice President-Corporate Development of the Company. From March 1990 to May
1995, Mr. Barney was General Manager of Administration at Seer Technologies,
Inc., a high technology software/consulting firm. From June 1986 to February
1990, Mr. Barney was Vice President of Information Systems at First Boston
Corporation. Mr. Barney graduated summa cum laude from the University of
Connecticut with a B.S. in Finance and an MBA.
Arie Slot has served as Vice President - Sales of the Company since joining
the Company in January 1997. From May 1991 to December 1996, Mr. Slot was an
area sales director for Hyperion Software, a developer of enterprise-wide
financial software applications. From October 1989 to May 1991, Mr. Slot was a
regional director for Execucom Systems Corporation, a provider of decision
support software, and from September 1984 to October 1989 he held various sales
manager positions with Boeing Computer Services, a division of the Boeing
Company.
Susan C. Rodricks has served as Controller of the Company since July 1996.
Ms. Rodricks served as Director of Finance and Accounting of the Company from
September 1995 to July 1996. Prior to joining the Company, Ms. Rodricks was a
regional controller of Corporate Express, Inc., a supplier of office products,
from October 1994 to May 1995, and controller of International Marine Holdings,
Inc., a manufacturer and distributor of marine equipment, from September 1978 to
June 1994.
Donald W. Forster has served as a director of the Company since June 1995.
Mr. Forster has been President of Marine & Industrial Power, Inc., a consulting
company to the maritime industry, since March 1995. From February 1990 to March
1995, Mr. Forster was with General Electric Company as Manager - Navy and Marine
Sales with responsibility for General Electric's marine field sales force. Mr.
Forster is a member of the Board of Directors of the U.S. Merchant Marine
Academy Alumni Association.
Lyman C. Hamilton, Jr. has served as a director of the Company since
January 1990. Mr. Hamilton is currently an investment manager. From October 1994
to May 1995, he served as Chief Executive Officer of InterDigital Communications
Corporation, a specialized communications corporation. Previously, he served as
Chairman of Alpine PolyVision, Inc., a flat panel display manufacturer, during
1993, and as President and Chief Executive Officer from January 1991 to December
1992. He was Chairman and President of Imperial Corporation of America, a
financial services company, from July 1989 to February 1990, and Chairman and
President of Tamco Enterprises, Inc. a private investment company, from November
1979 to January 1989. Mr. Hamilton was employed by ITT Corporation from 1962
until 1979 in a number of executive positions, including as President and Chief
Operating Officer during 1977 and as President and Chief Executive Officer from
1978 until 1979. Mr. Hamilton is a director of ScanOptics, Inc.
Michael C. Hughes has served as a director of the Company since October
1995. Mr. Hughes has been Vice President of Finance and Planning for COMSAT
International Communications, a unit of COMSAT, a provider of satellite
communications, since June 1996. Mr. Hughes has been employed by COMSAT in
various financial capacities since 1980, including serving as controller of
COMSAT International Communications from September 1995 to June 1996. Mr. Hughes
is a C.P.A. and received a B.S.B.A. in Accounting from Georgetown University.
Mr. Hughes currently serves on the Board of Directors pursuant to the terms
of a certain Stock Purchase, Option and Shareholder Agreement (the "Shareholder
Agreement") dated as of June 20, 1990 by and among COMSAT Investments, Inc.
("COMSAT Investments"), the Company and Eugene D. Story, Robert D. Ohmes and
Donald F. Logan, Jr. COMSAT Investments is a subsidiary of COMSAT. This
agreement provides that so long as COMSAT Investments owns at least five percent
of the outstanding shares of Common Stock of the Company, COMSAT Investments has
the right to designate the number of members of the Board of Directors as is
proportionate to its holdings of Common Stock, with a minimum of one member.
Messrs. Story, Ohmes and Logan are obligated to vote their shares in favor of
the person or persons designated by COMSAT Investments. The Shareholder
Agreement has since been assigned to COMSAT Mobile Investments, Inc., another
subsidiary of COMSAT.
46
<PAGE>
All directors currently hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
Executive officers serve at the discretion of the Board of Directors.
Executive Compensation
The following table sets forth the compensation paid by the Company to
Eugene D. Story, the Company's President and Chief Executive Officer, and to the
Company's only other executive officer whose total salary and bonus exceeded
$100,000 for services rendered in all capacities to the Company during the
fiscal year ended December 31, 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------
All Other
Name and Principal Position Year Salary($) Compensation($)(1)
- --------------------------- ---- --------- ---------------
<S> <C> <C> <C>
Eugene D. Story, President and Chief Executive Officer............. 1996 $107,000 $3,325
Robert D. Ohmes, Executive Vice President, Chief Financial
Officer and Secretary........................................... 1996 $107,000 $3,325
- --------------------
</TABLE>
(1) Represents the Company's contribution under the Company's 401(k) Plan.
Employment Agreements
The Company has entered into employment agreements, effective upon the
consummation of this offering, with each of Eugene D. Story, Robert D. Ohmes,
Mark E. Story, Michael P. Barney and Donald F. Logan, Jr., pursuant to which
they will act as President, Executive Vice President, Vice President, Vice
President and Vice President of the Company, respectively. The agreements
provide for an annual base salary of $130,000 in the case of Eugene Story and
Mr. Ohmes and $105,000 in the case of Mark Story and Messrs. Barney and Logan,
subject to salary increases on an annual basis equal to the percentage increase,
if any, in the consumer price index for the Metropolitan New York area, and
bonus as may be determined by the Compensation Committee of the Board of
Directors from time to time, such bonus not to exceed 50% of the annual base
salary then in effect. The agreements expire on the earliest to occur of (i) the
second anniversary date of the consummation of this offering, (ii) the death of
the employee, and (iii) the termination of the employee for incapacity, upon
written notice from the Company and according to specified conditions, and are
subject to automatic renewal on an annual basis unless either party gives 90
days prior notice of termination with respect to any renewal. Under the terms of
the agreements, if the Company terminates the agreements at the end of any term
or terminates the employee for incapacity, the employee shall be entitled to
receive his annual base salary then in effect for a period of nine months after
termination in the case of Eugene Story and Mr. Ohmes and for a period of six
months after termination in the case of Mark Story and Messrs. Barney and Logan.
The agreements restrict each employee from competing with the Company during the
term of the agreement and for a period of one year following any termination of
the agreement; provided that if the agreements are terminated for any reason
other than for cause, the Company shall pay to each employee 60% of his annual
base salary then in effect for a period of two years following the termination
in consideration of such agreement not to compete.
Director Compensation
The Company's directors do not receive any cash compensation for service on
the Board of Directors or any committee thereof, but are reimbursed for expenses
actually incurred in connection with attending meetings of the Board of
Directors and any committee thereof.
47
<PAGE>
Limitation of Liability and Indemnification
The Company's Certificate of Incorporation provides that the personal
liability of the directors of the Company shall be limited to the fullest extent
permitted by the provisions of Section 102(b)(7) of the General Corporation Law
of the State of Delaware (the "DGCL"). Section 102(b)(7) of the DGCL generally
provides that no director shall be liable personally to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that the Certificate of Incorporation does not eliminate the liability
of a director for (i) any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; (iii) acts or
omissions in respect of certain unlawful dividend payments or stock redemptions
or repurchases; or (iv) any transaction from which such director derives
improper personal benefit. The effect of this provision is to eliminate the
rights of the Company and its stockholders (through stockholders' derivatives
suits on behalf of the Company) to recover monetary damages against a director
for breach of her or his fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The limitations
summarized above, however, do not affect the ability of the Company or its
stockholders to seek nonmonetary remedies, such as an injunction or rescission,
against a director for breach of her or his fiduciary duty. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
In addition, the Certificate of Incorporation provides that the Company
shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify all
persons whom it may indemnify pursuant to Section 145 of the DGCL. Section 145
of the DGCL permits a company to indemnify an officer or director who was or is
a party or is threatened to be made a party to any proceeding because of his or
her position, if the officer or director acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Stock Option Plan
In March 1996, the Company adopted the 1996 Key Employees' Stock Option
Plan (the "Stock Option Plan"). The purposes of the Stock Option Plan are to
encourage stock ownership by key employees of the Company, to provide an
incentive for such key employees to promote the financial interests of the
Company and to assist the Company in attracting and retaining key employees.
Under the terms of the Stock Option Plan, the Company is authorized to grant
non-qualified stock options to key employees of the Company (including employees
who are officers or directors) as determined by the Board of Directors. An
aggregate of 225,040 shares of Common Stock may be issued under the Stock Option
Plan. The Stock Option Plan provides that all options granted pursuant to the
Stock Option Plan shall vest 25% per year commencing one year after the date of
grant. As of the date of this Prospectus, options to purchase an aggregate of
71,290 shares of Common Stock at a purchase price of $3.38 per share are
outstanding under the Stock Option Plan, including options held by Susan C.
Rodricks, an executive officer of the Company, to purchase 5,555 shares of
Common Stock. None of the outstanding options are currently exercisable.
48
<PAGE>
Management Warrants
In April and June 1996, the Company issued to certain executive officers of
the Company and their affiliates warrants to purchase an aggregate of 222,219
shares of Common Stock at a purchase price of $3.38 per share (the "Management
Warrants"). The Management Warrants are exercisable for a ten-year period
commencing on the date of grant. The following table sets forth information
regarding the Management Warrants issued in April and June of 1996.
<TABLE>
<CAPTION>
Number of Shares
Name Underlying Warrants Expiration Date
---- ------------------- ---------------
<S> <C> <C> <C>
Eugene D. Story 19,259 6/3/06
Robert D. Ohmes 19,259 6/3/06
Donald F. Logan, Jr. 10,370 6/3/06
Mark E. Story 92,592 4/1/06
Mark E. Story 6,666 6/3/06
Michael P. Barney 18,518 4/1/06
Robert F. Ohmes (1) 18,518 4/1/06
Scott R. Ohmes (1) 37,037 4/1/06
- ---------
</TABLE>
(1) Robert F. Ohmes and Scott R. Ohmes are the sons of Robert D. Ohmes.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus (giving
effect to the Preferred Stock Conversion, the Sperry Note Conversion and the CII
Warrant Redemption), and as adjusted to reflect the sale of the 1,200,000 Shares
offered hereby, certain information known to the Company regarding the
beneficial ownership of the Company's Common Stock by: (i) each person known by
the Company to own beneficially more than 5% of the outstanding Common Stock of
the Company; (ii) each director of the Company; (iii) each executive officer of
the Company named in the Summary Compensation Table; and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Percentage of Outstanding Shares
Beneficially Owned (2)
-----------------------------------------
Name and Address of Number of Shares Before After
Beneficial Owner (1) Beneficially Owned Offering Offering
-------------------- ------------------ -------- --------
<S> <C> <C> <C>
Eugene D. Story........................... 887,883(3) 29.4% 21.0%
Robert D. Ohmes........................... 492,649(4) 16.3% 11.7%
Scott R. Ohmes
41 Briar Oak Drive
Weston, CT 06883.......................... 313,830(5) 10.3% 7.4%
Connecticut Innovations, Inc.
40 Cold Spring Road
Rocky Hill, CT 06067...................... 277,777 9.3% 6.6%
COMSAT Mobile Investments, Inc.
6560 Rock Spring Drive
Bethesda, MD 20817....................... 265,537(6) 8.8% 6.3%
Sperry Marine Inc.
1070 Seminole Trail
Charlottesville, VA 22901................. 225,000(7) 7.2% 5.2%
Donald F. Logan, Jr....................... 105,890(8) 3.5% 2.5%
Mark E. Story............................. 99,258(9) 3.2% 2.3%
Lyman C. Hamilton, Jr.
69 Byron Drive
Avon, CT 06001........................... 72,074 2.4% 1.7%
Donald W. Forster
192 Helena Street, Suite 2
Leominster, MA 01453..................... -- -- --
Michael C. Hughes
6560 Rock Spring Drive
Bethesda, MD 20817....................... -- (10) -- --
All directors and executive officers
as a group (10 persons)................... 1,688,770(11) 53.3% 38.7%
</TABLE>
- ----------------
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
the Company, 470 West Avenue, Stamford, CT 06902.
50
<PAGE>
(2) Except as indicated in the footnotes to this table, the Company
believes that all the persons named in the table have sole voting and
investment power with respect to all Common Stock shown as beneficially
owned by them, subject to community property laws where applicable. In
accordance with the rules of the Commission, a person or entity is
deemed to be the beneficial owner of Common Stock that can be acquired
by such person or entity within 60 days from the date of this
Prospectus upon the exercise of options or warrants or other rights to
acquire Common Stock. Each beneficial owner's percentage ownership is
determined by assuming that options and warrants that are held by such
person (but not those held by any other person) and which are
exercisable within 60 days of the date of this Prospectus have been
exercised. The inclusion herein of such shares listed as beneficially
owned does not constitute an admission of beneficial ownership.
Percentages herein assume a base of 3,001,120 shares of Common Stock
outstanding as of the date of this Prospectus and a base of 4,201,120
shares of Common Stock outstanding immediately after the consummation
of this offering.
(3) Includes 19,259 shares issuable upon the exercise of Management
Warrants.
(4) Includes 3,703 shares owned by Evelyn Ohmes, Robert D. Ohmes' wife, and
19,259 shares issuable upon the exercise of Management Warrants. Mr.
Ohmes disclaims beneficial ownership of the shares owned by his wife.
(5) Includes 37,037 shares issuable upon the exercise of Management
Warrants.
(6) Michael C. Hughes, a director of the Company, is the Vice President of
Finance and Planning for a unit of COMSAT, the parent corporation of
COMSAT Mobile Investments, Inc.
(7) Includes 125,000 shares issuable upon the exercise of the Sperry
Warrants.
(8) Includes 10,370 shares issuable upon the exercise of Management
Warrants.
(9) Consists of 99,258 shares issuable upon the exercise of Management
Warrants.
(10) Mr. Hughes disclaims beneficial ownership of the 265,537 shares owned
by COMSAT Mobile Investments, Inc.
(11) Includes 166,664 shares issuable to executive officers upon the
exercise of Management Warrants and 1,389 shares issuable to an
executive officer upon exercise of options that are exercisable within
60 days of the date of this Prospectus. Does not include 265,537 shares
as to which a director disclaims beneficial ownership (see footnote (6)
above).
CERTAIN TRANSACTIONS
On October 17, 1988, Christopher Story, the brother of Eugene D. Story, the
President, Chief Executive Officer and a director of the Company, loaned the
Company $25,000 in exchange for a convertible subordinated note of the Company
bearing interest at 1% over prime and convertible into 10,018 shares of Common
Stock. On June 30, 1996, Christopher Story exercised his right to convert such
note into 10,018 shares of Common Stock.
On July 1, 1994, Eugene D. Story loaned the Company $300,000 and Robert D.
Ohmes, the Executive Vice President, Chief Financial Officer and a director of
the Company, loaned the Company $200,000. In exchange, the Company issued to
Eugene D. Story and Robert D. Ohmes notes bearing interest at 2% over prime.
These notes were subordinated to other indebtedness of the Company existing at
the time of the loans.
On July 28, 1994, Scott R. Ohmes, son of Robert D. Ohmes, loaned the
Company $70,000 in exchange for a ten-year convertible subordinated debenture
bearing interest at 8% and convertible into 259,259 shares of Common Stock. On
June 30, 1996, Scott Ohmes converted the subordinated note into 259,259 shares
of Common Stock. Over the period from November 1994 through December 1995, Scott
Ohmes made loans to the Company totaling $150,000, which the Company agreed to
repay with interest accruing at approximately 12%. On June 1, 1996, Scott Ohmes
exchanged the $150,000 of loans for 44,444 shares of Common Stock.
51
<PAGE>
On January 3, 1995, Lyman C. Hamilton, Jr., a director of the Company,
exchanged two existing convertible subordinated notes in the amount of $50,000
(dated October 31, 1988) and $12,500 (dated April 1, 1989), including accrued
interest thereon, for a new convertible subordinated note bearing interest at
10% and convertible into 62,074 shares of Common Stock. On June 30, 1996, Mr.
Hamilton exercised his right to convert such note.
On December 5, 1995, Robert D. Ohmes loaned to the Company $75,000, which
the Company agreed to repay with interest accruing at approximately 12%. On June
1, 1996, Robert D. Ohmes exchanged the $75,000 of loans for 22,222 shares of
Common Stock.
In April and June 1996, the Company issued to certain executive officers
Management Warrants to purchase an aggregate of 222,219 shares of Common Stock
at a purchase price of $3.38 per share. At the request of Robert D. Ohmes,
Management Warrants to purchase 55,555 shares issuable to him were issued to his
sons, Robert F. Ohmes and Scott R. Ohmes. See "Management - Existing Warrants."
In May 1990, Eugene D. Story, Robert D. Ohmes and Donald F. Logan, Jr., a
Senior Vice President and director of the Company, received 840, 793, and 466
shares, respectively, of the Company's 6% Non-Cumulative Preferred Stock, par
value $100 per share, as part of their compensation for services rendered to the
Company. On June 1, 1996, Messrs. Story, Ohmes and Logan exchanged such shares
of 6% Non-Cumulative Preferred Stock for 25,337, 23,151 and 13,703 shares,
respectively, of Common Stock.
During the period from 1987 through 1994, the Company made loans to Eugene
D. Story, Robert D. Ohmes, Donald F. Logan, Jr. and Mark E. Story, a Vice
President and director of the Company. Interest accrued on such loans over the
period at rates ranging from 6% to 10%. The total outstanding loans and accrued
interest thereon as of September 30, 1996 was $135,426 for Eugene D. Story,
$134,550 for Robert D. Ohmes, $73,137 for Donald F. Logan, Jr. and $45,724 for
Mark E. Story. In connection with the Executive Stock Repurchase, the loans were
repaid in full immediately prior to the date of this Prospectus through the
return to the Company for cancellation of 27,085, 26,910, 14,627 and 9,145
shares of Common Stock by Eugene D. Story, Robert D. Ohmes, Donald F. Logan, Jr.
and Mark E. Story, respectively.
<PAGE>
In March 1995, the Company obtained a $500,000 loan from CII, currently a
principal stockholder of the Company, bearing interest at the rate of 10% per
annum evidenced by the Senior Note. In connection with this loan, the Company
issued warrants to CII to purchase an aggregate of 259,888 shares of its Common
Stock at an initial exercise price of $2.31 per share. In August 1996, the
Company sold 7,500 shares of its Preferred Stock to CII in exchange for (i)
CII's payment of $500,000 in cash, (ii) the cancellation of $236,924 of the
$473,848 principal amount of indebtedness then outstanding under the Senior
Note, and (iii) CII's relinquishment of one-half of its warrants, leaving CII
with the CII Warrants to purchase 129,944 shares of Common Stock. Immediately
prior to the consummation of this offering, the 7,500 shares of Preferred Stock
held by CII will be converted into an aggregate of 277,777 shares of Common
Stock, which shares will be subject to piggyback registration rights. In
addition, upon the consummation of this offering, the Company intends to use
proceeds from this offering to repay the balance of the Senior Note ($236,924
plus approximately $23,700 in accrued interest) and to redeem the CII Warrants
(approximately $75,000). See "Description of Securities."
In June 1996, Robert D. Ohmes acquired a $75,000 loan from a bank, the
proceeds of which he, in turn, loaned to the Company. Subsequently, in November
1996, such loans were amended to reflect the Company as the bank's borrower and
eliminating Mr. Ohmes as a lender.
In connection with the Fall 1996 Borrowings, on October 29, 1996, Lyman C.
Hamilton, Jr., a trust for the benefit of Donald F. Logan, Jr.'s mother,
Christopher Story, and Tiffany Story, the niece of Eugene D. Story, loaned the
Company $100,000, $50,000, $5,000 and $5,000 respectively. Each of these loans
bears interest at 10% per annum and is due and payable upon the earlier of the
consummation of this offering and April 29, 1997. All of such indebtedness is
subordinated to all other indebtedness of the Company except for an aggregate of
$500,000 payable to Eugene D. Story and Robert D. Ohmes.
In connection with the December 1996 Borrowings, the Company borrowed
$29,000 from Eugene D. Story, $10,000 from Robert D. Ohmes, $15,000 from Mark E.
Story, $22,000 from Donald F. Logan, Jr. and $90,000 from Scott R. Ohmes. All of
such indebtedness bears interest at the rate of 9% per annum and matures on
December 2, 1998. In addition, all of such indebtedness is subordinated to all
other indebtedness of the Company except for an aggregate of $500,000 payable to
Eugene D. Story and Robert D. Ohmes.
52
<PAGE>
In December 1996, the Company entered into the Sperry Agreement, a
five-year marketing and distribution agreement, with Sperry. In connection with
the Sperry Agreement, Sperry provided $500,000 in financing to the Company,
which financing consisted of the Sperry Convertible Note in the principal amount
of $250,000, the Sperry Non-Convertible Note in the principal amount of
$250,000, and the Sperry Warrants. As a result of this transaction, Sperry has
become a principal stockholder of the Company.
In connection with the January Bridge Financing, Eugene D. Story and Robert
D. Ohmes contributed 45,000 and 25,000 of their shares of Common Stock,
respectively, to the Company's treasury immediately prior to the closing of such
financing. Such 70,000 shares were then issued by the Company to the investors
in the January Bridge Financing as the Bridge Shares.
Eugene D. Story and his spouse have personally guaranteed the payment of
all indebtedness of the Company to the Company's bank. As of September 30, 1996,
the principal amount of such indebtedness (which does not include the $75,000
loan from Robert D. Ohmes which was converted to a bank loan in November 1996)
was approximately $616,667. Mr. Story's spouse has also executed an open-end
mortgage deed with respect to the residence of Mr. Story and his spouse, which
mortgage deed secures the payment of the guarantee up to a maximum of $225,000.
In addition, Robert D. Ohmes and his spouse have personally guaranteed the
payment of all indebtedness of the Company to the bank. Mr. Ohmes and his spouse
have also executed an open-end mortgage deed with respect to the residence of
Mr. Ohmes and his spouse, which mortgage deed secures the payment of the
guarantee up to a maximum of $100,000. Furthermore, Mr. Ohmes and his spouse
pledged $137,000 in securities as additional collateral for their guarantee.
DESCRIPTION OF SECURITIES
General
The Company is authorized to issue 9,000,000 shares of Common Stock, par
value $.002 per share, and 7,500 shares of Preferred Stock, par value $100 per
share. As of the date of this Prospectus, the Company has 2,623,343 shares of
Common Stock outstanding held by 52 stockholders and 7,500 shares of Preferred
Stock outstanding held by one stockholder. Upon the consummation of this
offering (assuming also the consummation of the Preferred Stock Conversion and
the Sperry Note Conversion), there will be 4,201,120 shares of Common Stock
outstanding and no shares of Preferred Stock outstanding.
Common Stock
The holders of the Common Stock are entitled to one vote for each share
held of record in the election of directors of the Company and in all other
matters to be voted on by the stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50% of the shares voting for the election of directors can elect all of the
directors. Subject to the rights of holders of Preferred Stock, holders of
Common Stock are entitled (i) to receive such dividends as may be declared from
time to time by the Board of Directors out of funds legally available therefor
and (ii) in the event of liquidation, dissolution or winding up of the Company,
to share ratably in all assets remaining after payment of liabilities. Holders
of Common Stock have no conversion rights and are not subject to further capital
calls or assessments. There are no redemption or sinking fund provisions
applicable to the Common Stock. The holders of Common Stock have no preemptive
rights. All of the outstanding shares of Common Stock are fully paid and
non-assessable.
Preferred Stock
The holder of the 7,500 shares of Preferred Stock is entitled to receive a
dividend on such shares of 8% payable quarterly in arrears. Each share of
Preferred Stock will be automatically converted into shares of Common Stock upon
the consummation of this offering. Based upon the current conversion price of
$2.70, the 7,500 outstanding shares of Preferred Stock will be converted into a
total of 277,777 shares of Common Stock. In addition, the holder of the
Preferred Stock is entitled to certain registration rights with respect to the
Common Stock into which the Preferred Stock is convertible. See "- Registration
Rights."
53
<PAGE>
Existing Warrants
There are currently outstanding warrants to purchase an aggregate of
477,163 shares of Common Stock, consisting of the Management Warrants which are
exercisable to purchase an aggregate of 222,219 shares of Common Stock, the CII
Warrants which are exercisable to purchase an aggregate of 129,944 shares of
Common Stock and the Sperry Warrants to purchase an aggregate of 125,000 shares
of Common Stock. Each Management Warrant entitles its holder to purchase one
share of Common Stock at an exercise price of $3.38 per share and expires in
2006. Each CII Warrant entitles its holder to purchase one share of Common Stock
at an exercise price of $2.31 per share and expires in 2005. In connection with
the CII Warrant Redemption which is to occur simultaneously with the
consummation of this offering, the Company will use approximately $75,000 of the
proceeds from this offering to purchase the CII Warrants back from CII. Each
Sperry Warrant entitles its holder to purchase one share of Common Stock at an
exercise price of $5.00 per share and expires in 2001. The holder of the Sperry
Warrants is also entitled to certain registration rights with respect to the
shares of Common Stock underlying the Sperry Warrants. See "- Registration
Rights."
Public Warrants
Each Warrant offered hereby will entitle the registered holder thereof to
purchase one share of Common Stock, at a price of $5.00, subject to adjustment
in certain circumstances, at any time during the four year period commencing on
, 1998. The Warrants will be separately transferable immediately
upon issuance.
The Warrants are redeemable by the Company, upon the consent of the
Underwriter, at any time commencing on , 1998, upon notice of
not less than 30 days, at a price of $.10 per Warrant, provided that the closing
bid quotation of the Common Stock for a period of 20 consecutive trading days
ending on the third day prior to the day on which the Company gives notice has
been at least 150% (currently $7.50, subject to adjustment) of the then
effective exercise price of the Warrants. The holders of the Warrants will have
the right to exercise their Warrants until the close of business on the date
fixed for redemption.
The Warrants will be issued in registered form under a warrant agreement by
and among the Company, American Stock Transfer & Trust Company, as warrant agent
(the "Warrant Agent"), and the Underwriter (the "Warrant Agreement"). The
exercise price and number of shares of Common Stock or other securities issuable
on exercise of the Warrants are subject to adjustment in certain circumstances,
including in the event of a stock dividend, recapitalization, reorganization,
merger or consolidation of the Company. However, the Warrants are not subject to
adjustment for issuances of Common Stock at prices below the exercise price of
the Warrants. Reference is made to the Warrant Agreement (which has been filed
as an exhibit to the Registration Statement of which the Prospectus forms a
part) for a complete description of the terms and conditions therein (the
description herein contained being qualified by reference thereto).
The Warrants may be exercised upon surrender of the warrant certificate on
or prior to the expiration date at the offices of the Warrant Agent, with the
exercise form on the reverse side of the warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check or bank draft payable to the Company) to the Warrant Agent for
the number of Warrants being exercised. The holders of Warrants do not have the
rights or privileges of holders of Common Stock.
No Warrant will be exercisable unless, at the time of exercise, the Company
has filed a current registration statement with the Commission covering the
shares of Common Stock issuable upon exercise of such Warrant and such shares
have been registered or qualified or deemed to be exempt from registration or
qualification under the securities laws of the state of residence of the holder
of such Warrant. The Company will use its best efforts to have all such shares
so registered or qualified and to maintain a current prospectus relating thereto
until the expiration of the Warrants, subject to the terms of the Warrant
Agreement. However, while it is the Company's intention to maintain such a
current prospectus for such time period, there can be no assurance that it will
be able to do so.
No fractional shares will be issued upon exercise of the Warrants. However,
if a warrantholder exercises all Warrants then owned of record by him, the
Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable, an amount in cash based on the
market value of the Common Stock on the last trading day prior to the exercise
date.
54
<PAGE>
Registration Rights
Upon the consummation of this offering, the holders of 946,640 shares of
Common Stock and 125,000 shares of Common Stock issuable upon the exercise of
warrants, or their assignees, will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. In particular, the
Company has granted certain demand and/or piggyback registration rights with
respect to the 233,326 shares of Common Stock issued in the 1996 Private
Placement, the 277,777 shares of Common Stock issuable upon conversion of the
Preferred Stock, the 100,000 shares issuable upon conversion of the Sperry
Convertible Note, the 125,000 shares issuable upon exercise of the Sperry
Warrants, the 265,537 shares of Common Stock owned by COMSAT Mobile
Investments, Inc. and the 70,000 Bridge Shares. The holders of all such
registration rights have waived their rights to have their securities included
in this registration statement or any registration statement for a period of
twelve months following the date of this Prospectus without the Underwriter's
prior written consent.
In connection with the January Bridge Financing, the Company has agreed to
include the 70,000 Bridge Shares in a registration statement which the Company
will prepare and file with, and use its best efforts to have declared effective
by, the Commission so as to permit the public trading of the Bridge Shares
pursuant thereto commencing no later than 15 months following the consummation
of this offering. If such registration statement is not declared effective by
the Commission within 15 months following the consummation of this offering,
then, commencing on the first day of the 16th month following the consummation
of this offering, the Company shall issue to each holder of Bridge Shares, on
the first day of each month a registration statement continues not to have been
declared effective by the Commission, such number of additional shares of Common
Stock (the "Additional Shares") as is equal to 10% of the number of the sum of
Bridge Shares and Additional Shares held by each holder thereof. Notwithstanding
the foregoing, in the event, and during such time as, the effectiveness of such
registration statement is delayed due to unforeseen reasons beyond the Company's
control, the Company shall not be obligated to issue Additional Shares to any
holder of Bridge Shares during any consecutive 12-month period commencing on the
16th month following the consummation of this offering which are equal to more
than 25% of such holder's original Bridge Shares. In the event the Company fails
to maintain the effectiveness of a registration statement with respect to the
Bridge Shares, the Company is obligated to issue, on one occasion only, other
added shares of Common Stock.
In connection with this offering, the Company has agreed to grant to the
Underwriter certain demand and piggyback registration rights in connection with
the 240,000 shares of Common Stock issuable upon exercise of the Underwriter's
Warrants and the warrants included therein. See "Underwriting."
Anti-Takeover Effect Provisions of Delaware Law and Certain Charter Provisions
Upon consummation of this offering, the Company will be subject to the
provisions of Section 203 of the DGCL. In general, such statute prohibits a
publicly traded Delaware corporation from engaging in various "business
combination" transactions with any "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless (i) the transaction in which the "interested
stockholder" obtained such status or the business combination is approved by the
Board of Directors prior to the date the "interested stockholder" obtained such
status; (ii) upon consummation of the transaction that resulted in the
stockholder becoming an "interested stockholder," the "interested stockholder"
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number
shares outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or (iii) on or subsequent to
such date the "business combination" is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock that is not owned by
the "interested stockholder." For purposes of Section 203, a "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to such interested stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's voting
stock.
55
<PAGE>
The Company's Certificate of Incorporation contains certain provisions
permitted under the DGCL relating to the liability of directors. To the extent
permitted by the DGCL, the provisions eliminate a director's personal liability
for monetary damages for a breach of fiduciary duty. The provisions also
indemnify directors and officers to the fullest extent permitted by the DGCL.
Transfer Agent and Registrar
The Company's Transfer Agent and Registrar is American Stock Transfer &
Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 4,201,120
shares of Common Stock outstanding (assuming no exercise of the Warrants or
other outstanding options or warrants), of which the 1,200,000 Shares offered
hereby will be freely tradeable without restriction or further registration
under the Securities Act.
The remaining 3,001,120 shares of Common Stock outstanding are "restricted
securities" as that term is defined in Rule 144 and may only be sold pursuant to
an effective registration under the Securities Act, in compliance with the
exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act. Subject to the contractual restrictions described below, 529,944
of such restricted shares will be freely tradeable without registration, under
Rule 144, commencing as of the date of this Prospectus, and the balance of such
shares will be eligible for sale without registration, under Rule 144, subject
to certain volume and manner of sale limitations prescribed by Rule 144, at
various times commencing 90 days following the date of this Prospectus. The
officers, directors and substantially all of the stockholders of the Company
who, in the aggregate, beneficially own 2,934,238 shares of Common Stock have
agreed not to sell their shares of Common Stock for a period of twelve months
following the date of this Prospectus without the Underwriter's prior written
consent.
In general, under Rule 144 a person (or persons whose shares are
aggregated), including persons who may be deemed "affiliates" of the Company as
that term is defined under the Securities Act, is entitled to sell, within any
three-month period, such number of restricted shares of Common Stock that have
been beneficially owned by such holder for at least two years which does not
exceed the greater of (i) 1% of the Company's then outstanding shares of Common
Stock or (ii) an amount equal to the average weekly trading volume in the Common
Stock during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice and
the availability of current public information about the Company. A person who
is not an affiliate, has not been an affiliate within three months prior to the
sale and has beneficially owned the restricted shares for at least three years
is entitled to sell such shares under Rule 144 without regard to any of the
limitations described above.
Prior to this offering, there has been no market for any of the securities
of the Company, and no predictions can be made as to the effect, if any, that
sales of Common Stock or the availability of Common Stock for sale will have on
the market price of the Company's securities prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock in the public market
may adversely affect prevailing market prices.
UNDERWRITING
Whale Securities Co., L.P. (the "Underwriter") has agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase the
1,200,000 Shares and 1,200,000 Warrants offered hereby from the Company. The
Underwriter is committed to purchase and pay for all of the Shares and Warrants
offered hereby if any of such securities are purchased. The Shares and Warrants
are being offered by the Underwriter subject to prior sale, when, as and if
delivered to and accepted by the Underwriter and subject to approval of certain
legal matters by counsel and to certain other conditions.
56
<PAGE>
The Underwriter has advised the Company that it proposes to offer the
Shares and Warrants to the public at the public offering prices set forth on the
cover page of this Prospectus. The Underwriter may allow to certain dealers who
are members of the National Association of Securities Dealers, Inc. (the "NASD")
concessions, not in excess of $ per Share and $ per Warrant, of which
not in excess of $ per Share and $ per Warrant may be reallowed to
other dealers who are members of the NASD.
The Company has granted to the Underwriter an option, exercisable for 45
days following the date of this Prospectus, to purchase up to 180,000 additional
Shares and/or 180,000 additional Warrants at the respective public offering
prices set forth on the cover page of this Prospectus, less the underwriting
discounts and commissions. The Underwriter may exercise this option in whole or,
from time to time, in part, solely for the purpose of covering over-allotments,
if any, made in connection with the sale of the Shares and/or Warrants offered
hereby.
The Company has agreed to pay to the Underwriter a nonaccountable expense
allowance equal to 3% of the gross proceeds of this offering, including the
gross proceeds from the sale of any Shares and Warrants sold pursuant to the
Underwriter's exercise of its over-allotment option, $50,000 of which has been
paid as of the date of this Prospectus. The Company has also agreed to pay all
expenses in connection with qualifying the Shares and Warrants offered hereby
for sale under the laws of such states as the Underwriter may designate,
including expenses of counsel retained for such purpose by the Underwriter.
The Company has agreed to issue to the Underwriter and its designees, for
an aggregate of $132, the Underwriter's Warrants to purchase up to 120,000
shares of Common Stock, at an exercise price of $7.25 per share (145% of the
public offering price per share), and/or up to 120,000 warrants (each to
purchase one share of Common Stock at $7.25 per share), at a purchase price of
$.145 per warrant (145% of the public offering price per Warrant). The
Underwriter's Warrants may not be transferred for one year following the date of
this Prospectus, except to the officers and partners of the Underwriter and
members of the selling group, and are exercisable at any time and from time to
time during the four-year period commencing one year following the date of this
Prospectus (the "Warrant Exercise Term"). During the Warrant Exercise Term, the
holders of the Underwriter's Warrants are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Company's Common
Stock. To the extent that the Underwriter's Warrants are exercised, dilution to
the interests of the Company's stockholders will occur. Further, the terms upon
which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of the Underwriter's Warrants can be
expected to exercise them at a time when the Company would, in all likelihood,
be able to obtain any needed capital on terms more favorable to the Company than
those provided in the Underwriter's Warrants. Any profit realized by the
Underwriter on the sale of the Underwriter's Warrants, the underlying shares of
Common Stock or the underlying warrants, or the shares of Common Stock issuable
upon exercise of such underlying warrants, may be deemed additional underwriter
compensation. Subject to certain limitations and exclusions, the Company has
agreed, at the request of the holders of a majority of the Underwriter's
Warrants, at the Company's expense, to register the Underwriter's Warrants and
the underlying securities under the Securities Act on one occasion during the
Warrant Exercise Term and to include such Underwriter's Warrants and such
underlying securities in any appropriate registration statement which is filed
by the Company during the seven years following the date of this Prospectus.
The Company has agreed, for a period of five years following the date of
this Prospectus, if so requested by the Underwriter, to nominate and use its
best efforts to elect a designee of the Underwriter as a director of the
Company, or, at the Underwriter's option, as a non-voting advisor to the
Company's Board of Directors. The Company's officers, directors and
substantially all of its stockholders have agreed to vote their shares of Common
Stock in favor of such designee. The Underwriter has not yet exercised its right
to designate such a person.
57
<PAGE>
The Company also has agreed, in connection with the exercise of the
Warrants pursuant to solicitation (commencing one year following the date of
this Prospectus), to pay to the Underwriter a fee of 5% of the exercise price
for each Warrant exercised; provided, however, that the Underwriter will not be
entitled to receive such compensation in Warrant exercise transactions in which
(i) the market price of Common Stock at the time of the exercise is lower than
the exercise price of the Warrants; (ii) the Warrants are held in any
discretionary account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in this Prospectus, in documents
provided to holders of the Warrants at the time of exercise; (iv) the holder of
the Warrants has not confirmed in writing that the Underwriter solicited such
exercise; or (v) the solicitation of exercise of the Warrants was in violation
of Rule 10b-6 promulgated under the Exchange Act.
The Company has granted the Underwriter a three-year right of first refusal
to underwrite or place any public or private sale of debt or equity securities
of the Company, or of any subsidiary or successor of the Company, offered for
sale by the Company or any of its subsidiaries, successors or securityholders.
In addition, the Company's officers, directors and substantially all of its
securityholders have granted the Underwriter a three-year right of first refusal
to purchase for the Underwriter's account or to sell for the account of the
Company's officers, directors or such securityholders, any securities of the
Company sold through a broker, agent or underwriter pursuant to Rule 144.
Rule 10b-6 may prohibit the Underwriter from engaging in any market making
activities with regard to the Company's securities for the period from nine
business days (or such other applicable period as Rule 10b-6 may provide) prior
to any solicitation by the Underwriter of the exercise of Warrants until the
later of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right that the Underwriter may have to receive a fee
for the exercise of Warrants following such solicitation. As a result, the
Underwriter may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable.
The Company has agreed to retain the Underwriter as a financial consultant
for a period of two years following the consummation of this offering at an
annual fee of $12,500, the entire $25,000 being payable in advance, upon the
consummation of this offering. The consulting agreement with the Underwriter
will not require it to devote a specific amount of time to the performance of
its duties thereunder. It is anticipated that these consulting services will be
provided by principals of the Underwriter and/or members of the Underwriter's
corporate finance department who, however, have not been designated as of the
date hereof. In addition, in the event that the Underwriter originates a
financing, merger, acquisition, joint venture or other transaction to which the
Company is a party, the Underwriter will be entitled to receive a finder's fee
in consideration for the origination of such transaction.
All of the Company's current directors and officers, and substantially all
of its current securityholders, have agreed that, without the Underwriter's
prior written consent, for the 12-month period following the date of this
Prospectus, they will not sell or otherwise dispose of any securities of the
Company in any public market transaction (including pursuant to Rule 144) or
exercise any rights held by them to cause the Company to register any shares of
Common Stock for sale pursuant to the Securities Act.
The Underwriter has informed the Company that it does not expect sales to
discretionary accounts to exceed 1% of the securities offered hereby.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
Prior to this offering, there has been no public market for the Shares or
Warrants. Consequently, the initial public offering prices for the Shares and
Warrants and the exercise price and terms of the Warrants have been determined
by negotiation between the Company and the Underwriter and are not necessarily
related to the Company's asset value, net worth or other established criteria of
value. Among the factors considered in determining such prices and terms are the
Company's financial condition and prospects, management, market prices of
similar securities of comparable publicly-traded companies, certain financial
and operating information of companies engaged in activities similar to those of
the Company and the general condition of the securities market.
58
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Shipman & Goodwin LLP, Hartford, Connecticut. Certain legal matters
will be passed upon for the Underwriter by Tenzer Greenblatt LLP, New York, New
York.
EXPERTS
The financial statements included in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the periods set forth in their report, which contains an explanatory
paragraph regarding substantial doubt as to the Company's ability to continue as
a going concern, appearing elsewhere herein and are included herein in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act with respect to the securities offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company and such securities, reference is made to the Registration Statement and
the exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any agreement or any other document referred to
are not necessarily complete, and, in each instance, if such agreement or
document is filed as an exhibit, reference is made to the copy of such agreement
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the principal office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional office
located at 7 World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference section of the Commission
located at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
In addition, the Company is required to file electronic versions of these
documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains a
World Wide Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
59
<PAGE>
- -------------------------------------------------------------------------------
Marine Management
Systems, Inc.
Contents
Report of independent certified public accountants F-2
Financial statements:
Balance sheets F-3
Statements of operations F-4
Statements of stockholders' equity (deficit) F-5
Statements of cash flows F-6
Notes to financial statements F-7 - F-22
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors of Marine
Management Systems, Inc.
We have audited the accompanying balance sheet of Marine Management Systems,
Inc. as of December 31, 1995, and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the two years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Marine Management Systems, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has suffered losses and has negative working
capital. These conditions raise substantial doubt as to the Company's ability to
continue as a going concern. While the Company plans to raise additional
capital, there can be no assurance that such efforts will be successful. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
BDO Seidman, LLP
Valhalla, New York
August 16, 1996, except for the waivers
discussed in Note 6 as to which the
date is January 10, 1997
F-2
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Marine Management
Systems, Inc.
Balance Sheets
September 30,
December 31, 1996
1995 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (Notes 4, 6 and 7)
Current:
Cash $ 15,350 $ 15,531
Accounts receivable, less allowance for possible losses of none and
$25,000 (Note 12) 891,540 628,853
Inventories 41,862 39,085
Prepaid expenses and other 32,972 114,196
- --------------------------------------------------------------------------------------------------------------------------------
Total current assets 981,724 797,665
Property and equipment, net (Note 2) 96,921 213,161
Computer software costs, net of accumulated amortization of $786,779 and
$915,451 1,288,201 1,969,530
Deferred registration costs - 148,070
Other 14,172 -
- --------------------------------------------------------------------------------------------------------------------------------
$ 2,381,018 $ 3,128,426
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Deficit
Current:
Short-term borrowings (Note 4) $ 375,000 $ 400,000
Accounts payable and accrued expenses 526,679 729,668
Advances payable - related parties (Note 3) 225,000 75,000
Billings in excess of costs on uncompleted contracts (Note 5) 107,391 -
Deferred revenue 82,026 65,715
Customer deposits 101,841 111,618
Current portion of long-term debt and capital lease obligations (Note 6) 178,374 307,333
- --------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,596,311 1,689,334
Long-term debt and capital lease obligations, less current portion (Note 6) 650,857 336,828
Advances payable - related party (Note 3) - 50,000
Subordinated debt - related parties (Notes 3 and 7) 657,500 500,000
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,904,668 2,576,162
- --------------------------------------------------------------------------------------------------------------------------------
Redeemable preferred stock, $100 par value, 8% cumulative, 7,500 shares
authorized, none and 7,500 shares issued and outstanding (Note 9) - 750,000
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 8, 13 and 15)
Stockholders' deficit (Notes 3, 6, 7, 9 and 15):
Preferred stock, $100 par value, 6% non-cumulative preferred, 7,500 shares
authorized, 2,099 shares issued and outstanding at December 31, 1995 209,900 -
Common stock, $.002 par value, 9,000,000 shares authorized, 2,007,593 and
2,701,110 issued and outstanding 4,015 5,402
Additional paid-in capital 3,759,587 5,083,475
Accumulated deficit (4,108,315) (4,897,776)
Loans receivable officers (388,837) (388,837)
- --------------------------------------------------------------------------------------------------------------------------------
Total stockholders' deficit (523,650) (197,736)
- --------------------------------------------------------------------------------------------------------------------------------
$ 2,381,018 $ 3,128,426
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
- -------------------------------------------------------------------------------
Marine Management
Systems, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Years ended Nine Months ended
---------------------------------------- ---------------------------------------------
September 30, September 30,
December 31, December 31, 1995 1996
1994 1995 (Unaudited) (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues (Note 12):
Hardware $ 689,298 $1,454,771 $1,196,098 $1,217,207
Software 1,696,245 2,874,499 1,801,413 2,287,824
- ---------------------------------------------------------------------------------------------------------------------------------
2,385,543 4,329,270 2,997,511 3,505,031
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of revenues:
Hardware 551,438 1,163,817 956,878 935,408
Software 568,838 1,792,760 1,170,506 1,417,786
Software amortization 198,481 258,682 194,474 189,839
- ---------------------------------------------------------------------------------------------------------------------------------
1,318,757 3,215,259 2,321,858 2,543,033
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 1,066,786 1,114,011 675,653 961,998
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 438,141 245,821 184,366 226,545
Selling and administrative 565,210 1,045,827 746,475 1,341,505
Depreciation and amortization 24,292 35,965 25,939 61,104
- ---------------------------------------------------------------------------------------------------------------------------------
1,027,643 1,327,613 956,780 1,629,154
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 39,143 (213,602) (281,127) (667,156)
- ---------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income - 24,561 - -
Interest expense (110,456) (136,659) (102,694) (122,305)
- ---------------------------------------------------------------------------------------------------------------------------------
(110,456) (112,098) (102,694) (122,305)
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss $ (71,313) $(325,700) $(383,821) $(789,461)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Loss per share of common and
common stock equivalents $ (.03) $ (.14) $ (.17) $ (.32)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares
outstanding 2,323,042 2,323,042 2,323,042 2,471,965
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
- --------------------------------------------------------------------------------
Marine Management
Systems, Inc.
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
-------------------------- -------------------------- Paid-in
Shares Amount Shares Amount Capital
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 2,099 $ 209,900 2,007,576 $4,015 $3,442,740
Officer's compensation contributed to capital - - - - 279,847
Net loss - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 2,099 209,900 2,007,576 4,015 3,722,587
Accrued interest contributed to capital - - - - 37,000
Loans receivable officers to be satisfied with stock - - - - -
Net loss - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1995 2,099 209,900 2,007,576 4,015 3,759,587
Sale of common stock for cash, net of offering cost,
(unaudited) - - 233,326 467 732,408
Conversion of stock, (unaudited) (2,099) (209,900) 62,191 124 209,776
Conversion of debt to common stock, (unaudited) - - 398,017 796 381,704
Net loss, (unaudited) - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1996, (unaudited) - $ - 2,701,110 $5,402 $5,083,475
- -----------------------------------------------------------------------------------------------------------------------------------
Loans Total
Accumulated Receivable Stockholders'
Deficit Officers Equity (Deficit)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 $(3,711,302) $ - $ (54,647)
Officer's compensation contributed to capital - - 279,847
Net loss (71,313) - (71,313)
- --------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 (3,782,615) - 153,887
Accrued interest contributed to capital - - 37,000
Loans receivable officers to be satisfied with stock - (388,837) (388,837)
Net loss (325,700) - (325,700)
- --------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1995 (4,108,315) (388,837) (523,650)
Sale of common stock for cash, net of offering cost,
(unaudited) - - 732,875
Conversion of stock, (unaudited) - - -
Conversion of debt to common stock, (unaudited) - - 382,500
Net loss, (unaudited) (789,461) - (789,461)
- --------------------------------------------------------------------------------------------------------------
Balance, September 30, 1996, (unaudited) $(4,897,776) $(388,837) $(197,736)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
- -------------------------------------------------------------------------------
Marine Management
Systems, Inc.
Statements of Cash Flows
Increase (Decrease) in Cash (Note 14)
<TABLE>
<CAPTION>
Years ended Nine months ended
- -------------------------------- ---------------------------------
September 30, September 30,
December 31, December 31, 1995 1996
1994 1995 (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (71,313) $(325,700) $(383,821) $ (789,461)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 222,773 294,647 220,413 250,943
Provision for losses on accounts receivable - - - 25,000
Discount on issuance of preferred stock - - - 13,076
Officer's compensation contributed to capital 279,847 - - -
Changes in assets and liabilities:
Accounts receivable (133,575) (487,466) (471,796) 237,687
Inventories (3,824) (435) - 2,777
Prepaid expenses and other 9,000 (46,718) (7,738) (81,224)
Loans receivable officers (135,564) 15,627 40,000 -
Deferred registration costs and other 606 - (30,507) (133,898)
Accounts payable and accrued expenses (55,011) 153,095 323,622 202,990
Billings in excess of costs on uncompleted
contracts - 107,391 124,060 (107,391)
Deferred revenue and deposits 40,625 38,799 - (6,534)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating
activities 153,564 (250,760) (185,767) (386,035)
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in capitalized computer software costs (397,178) (501,536) (274,641) (871,168)
Acquisitions of property and equipment (16,968) (15,545) (8,573) (31,153)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (414,146) (517,081) (283,214) (902,321)
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from short-term borrowings - net - 225,000 106,516 25,000
Proceeds from issuance of long-term debt 349,000 500,000 500,000 -
Proceeds from advances payable - 325,000 - 125,000
Payments of advances payable - (185,000) (85,000) -
Payments of long-term debt and capital lease obligations (83,393) (86,834) (48,791) (94,338)
Proceeds from sale of common stock - - - 732,875
Proceeds from sale of preferred stock - - - 500,000
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 265,607 778,166 472,725 1,288,537
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in cash 5,025 10,325 3,744 181
Cash, beginning of period - 5,025 5,025 15,350
- --------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 5,025 $ 15,350 $ 8,769 $ 15,531
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
1. Summary of Business Description
Significant Accounting
Policies
Marine Management Systems, Inc. (the
"Company") provides a variety of
products and services related to ship
operations and maintenance management.
The Company develops and sells computer
software programs, information systems
and computer equipment, as well as
providing support and engineering
services related to these products
throughout the world.
Inventories
Inventories, consisting primarily of
computer hardware are valued at the
lower of the cost or market. Cost is
determined using the first-in, first-out
(FIFO) method.
Property, Equipment, Depreciation and
Amortization
Property and equipment are stated at
cost, less accumulated depreciation.
Depreciation is computed over the
estimated useful lives of the assets
using the straight-line and accelerated
methods for both financial reporting and
income tax purposes. Leasehold
improvements are amortized using the
straight-line method over the estimated
useful life of the improvement or the
term of the lease, whichever is shorter.
For leasehold improvements, expected
renewal terms are included in the term
of the lease.
The following estimated useful lives are
applied in the computation of
depreciation and amortization.
Years
----------------------------------------
Computer equipment 5-7
Leasehold improvements 7-10
Equipment under capital leases 7
Furniture and fixtures 7-10
----------------------------------------
Upon retirement or sale, the cost and
related accumulated depreciation are
removed from the accounts and any
resulting gains or losses are included
in the statement of operations.
F-7
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
Computer Software Costs and Amortization
The Company capitalizes the direct costs
and allocated overhead associated with
the development and testing of software
programs after technological feasibility
has been established. The annual
amortization of the capitalized costs is
the greater of the amount computed using
the rates that current gross revenues
for a product or products bear to the
total of current and anticipated future
gross revenues for that product or
products or the straight-line method
over the remaining estimated economic
life of the product including the period
being presented. The establishment of
technological feasibility and the on
going assessment of recoverability of
capitalized computer software costs
require considerable judgment by
management with respect to certain
external factors, including, but not
limited to, anticipated future revenues,
estimated economic life and changes in
software and hardware technologies.
Research and development expenditures
are expensed in the period incurred.
Revenue and Cost Recognition
Hardware revenues are revenues which are
derived from the sale of hardware to
non-marine industry customers. Software
revenues are revenues which are derived
from the sale of software, hardware and
support services to the marine industry
customers. Revenues are recognized in
the period when the products are
delivered or the services are rendered.
For long-term contracts (in excess of
one year), revenues are recognized using
the percentage-of-completion method,
measured by percentage of costs incurred
to date to estimated total costs for
each contract. Revenues from the sales
of extended warranty contracts are
deferred and recognized on a
straight-line basis over the term of the
contract.
Contract costs include all direct costs
and those indirect costs related to
contract performance. Provisions for
estimated losses on uncompleted
contracts are made in the period in
which such losses are determined.
Changes in job performance, job
conditions, and estimated profitability
may result in revisions to costs and
income and are recognized in the period
in which the revisions are determined.
Billings in excess of costs and
estimated earnings on uncompleted
contracts represents billings in excess
of revenues recognized on contracts in
progress.
F-8
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
Credit Risk
Financial instruments which potentially
subject the Company to concentrations of
credit risk consist principally of
temporary cash investments and trade
accounts receivable. The Company's cash
investments are placed with high credit
quality financial institutions and may
exceed the amount of federal deposit
insurance. Concentrations of credit risk
with respect to trade receivables are
with other companies.
Income Taxes
Deferred income taxes are provided on
differences between the financial
reporting and income tax bases of assets
and liabilities based upon statutory tax
rates enacted for future periods.
Use of Estimates
In preparing the financial statements in
conformity with generally accepted
accounting principles, management is
required to make estimates and
assumptions that affect the reported
amounts of assets and liabilities and
the disclosure of contingent assets and
liabilities at the date of the financial
statements, and revenues and expenses
during the reporting period. Actual
results could differ from those
estimates.
Financial Instruments
The carrying amounts of financial
instruments including cash, accounts
receivable, accounts payable and
short-term debt approximated fair value
as of December 31, 1995 and September
30, 1996, because of the relatively
short maturity of these instruments. The
carrying value of long-term debt,
including the current portion,
approximated fair value as of December
31, 1995 and September 30, 1996, based
upon quoted market prices for similar
debt issues. The carrying value of
amounts due from and due to related
parties cannot be determined because of
the nature of the terms.
F-9
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
Loss Per Share of Common Stock
Loss per share of common stock is
calculated by dividing net loss by the
weighted average number of common stock
and common stock equivalents, if
dilutive, outstanding during each of the
periods presented after giving
retroactive effect to the 1 for 2.7
reverse stock split (See Note 9). In
addition, when an initial public
offering is contemplated, common stock
and common stock equivalents issued by
the Company at a price less than the
estimated initial public offering price
during the twelve months immediately
preceding the anticipated initial filing
of the offering are treated as
outstanding for all periods presented,
using the treasury stock method.
Deferred Registration Costs
Costs incurred in connection with the
Company's anticipated public offering
are deferred and will be charged against
stockholders' equity upon successful
completion of the offering. If the
offering is not consummated, deferred
costs will be charged to expense.
Long-Lived Assets
In March 1995, the Financial Accounting
Standards Board ("FASB") issued
Statement of Financial Accounting
Standard No. 121 "Accounting for
Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of"
("SFAS No. 121"). SFAS No. 121 requires,
among other things, impairment losses on
assets to be held and gains or losses
from assets that are expected to be
disposed of be included as a component
of income from continuing operations
before taxes on income. The Company
adopted SFAS No. 121 as of January 1,
1996 and its implementation did not have
an effect on the financial statements.
Stock-Based Compensation
In October 1995, FASB issued SFAS No.
123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes
a fair value method for accounting for
stock-based compensation plans either
through recognition or disclosure. The
Company will adopt the employee
stock-based compensation provisions of
SFAS No. 123 by disclosing the pro forma
net income and pro forma net income per
share amounts assuming the fair value
method as of January 1, 1996. The
adoption of this standard will not
impact the Company's results of
operations, financial position or cash
flows. Stock arrangements with
non-employees, if applicable, will be
recorded at fair value.
F-10
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
Transfers and servicing of Financial
Assets and Extinguishment of Liabilities
In June 1996, FASB issued SFAS No. 125,
"Accounting for Transfers and Servicing
of Financial Assets and Extinguishment
of Liabilities" ("SFAS No. 125"). SFAS
No. 125 provides accounting and
reporting standards for transfers and
servicing of financial assets and
extinguishment of liabilities. Those
standards are based on the financial
components approach, which focuses on
the entity's control of its financial
assets. If control of financial assets
is surrendered, a sale is recognized and
the asset is recognized. Liabilities are
recognized when they are extinguished.
The Company will prospectively adopt
SFAS No. 125 as of January 1, 1997 and
has not determined the effect, if any,
of its adoption on the future financial
statements.
Unaudited Interim Financial Statements
In the opinion of management, the
unaudited interim financial statements
as of September 30, 1996 and for the
nine months ended September 30, 1995 and
1996, are presented on a basis
consistent with the audited annual
financial statements and reflect all
adjustments, consisting only of normal
recurring accruals, necessary for fair
presentation of the results of such
periods. The results of operations for
the nine months ended September 30, 1996
are not necessarily indicative of the
results to be expected for the year.
2. Property and Property and equipment consist of the
Equipment following:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-------------------------------------------------------------------------
<S> <C> <C>
Computer equipment $387,521 $175,387
Leasehold improvements 141,299 10,642
Equipment under capital leases 160,149 176,050
Furniture and fixtures 52,229 21,770
-------------------------------------------------------------------------
741,198 383,849
Less accumulated depreciation and
amortization 644,277 170,688
-------------------------------------------------------------------------
Property and equipment, net $ 96,921 $213,161
-------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
3. Related Party The Company has outstanding loans to
Transactions certain officers and directors at
December 31, 1995 and September 30, 1996
in the aggregate of $388,837, including
interest, which bear interest at a
variable rate, 5.97% at September 30,
1996. These loans are unsecured and
payable on demand (See Note 15b).
The Company has advances payable to
related parties at December 31, 1995 and
September 30, 1996 in the amounts of
$225,000 and $75,000, respectively (See
Note 9). These advances had interest
rates ranging from 9-3/4% to 12%.
At September 30, 1996, the Company has
advances payable to a related party in
the amount of $50,000. In December 1996,
this advance was converted into a two
year note which bears interest at 9%.
(See Note 15d)
The Company has subordinated debt
payable to certain officers and related
parties at December 31, 1995 and
September 30, 1996 in the amounts of
$657,500 and $500,000, respectively (See
Note 7).
4. Short Term The Company has a demand line of credit
Borrowings with a bank for $400,000 with interest
at 1-1/2% over the bank's prime rate,
9-3/4% at September 30, 1996 and secured
by substantially all of the assets of
the Company and guaranteed by certain
officers/directors. The outstanding
balance on the line of credit as of
December 31, 1995 and September 30, 1996
was $375,000 and $400,000, respectively.
The line of credit agreement expires on
December 31, 1997.
In November 1996, the bank issued an
additional $75,000 note which bears
interest at 1-1/2% over the bank's prime
rate and is due on February 1, 1997. The
proceeds from the line were used to
satisfy $75,000 of advances to related
parties (See Note 3).
On January 3, 1997, the bank agreed to
extend the terms of the $400,000 line of
credit and the $75,000 note to April 1,
1998 subject to, among other things, the
completion of the anticipated initial
public offering by May 15, 1997.
The weighted average amounts outstanding
under the bank line of credit were
$175,274 and $397,252 for the year ended
December 31, 1995 and the nine months
ended September 30, 1996, respectively.
The weighted average interest rates were
10.36% and 9.77% for the year ended
December 31, 1995 and for the nine
months ended September 30, 1996,
respectively.
F-12
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
5. Billings in Excess of Billings and costs on uncompleted
Costs on Uncompleted contracts (See Note 12) are summarized as
Contracts follows:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-----------------------------------------------------------------------------------------
<S> <C> <C>
Billings to date $498,148 $1,211,159
Costs incurred on uncompleted contracts 390,757 855,004
Estimated earnings - 356,155
-----------------------------------------------------------------------------------------
Billings in excess of costs on uncompleted
contracts $107,391 $ -
-----------------------------------------------------------------------------------------
</TABLE>
6. Long-term Debt and Long-term debt and capital lease
Capital Lease obligations consist of the following:
Obligations
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-----------------------------------------------------------------------------------------
<S> <C> <C>
Long term debt:
Note payable, Bank, payable in monthly installments of
$5,833 plus interest at 1-1/2% over the bank's prime
rate, 9-3/4% as of September 30, 1996, secured by all
the assets of the Company and guaranteed by certain
officers/directors and matures June 1998 (a) $275,000 $216,667
Note payable, payable in monthly installments of $10,624
including interest at 10%, commencing January 1, 1996.
The note matures on January 1, 2001 and is secured by
substantially all of the Company's assets (See Note 9)(b) 500,000 236,924
-----------------------------------------------------------------------------------------
775,000 453,591
Capital lease obligations (See Note 8) 54,231 190,570
-----------------------------------------------------------------------------------------
829,231 644,161
Less current maturities of long term debt and capital lease
obligations 178,374 307,333
-----------------------------------------------------------------------------------------
$650,857 $336,828
=========================================================================================
</TABLE>
(a) The loan agreement requires,
among other things, maintenance
of a minimum tangible net worth,
minimum leverage ratio and
restrictions on the Company's
capital expenditures. At various
dates through January 3, 1997,
the Company received waivers of
default from the bank due to
certain covenant violations
through March 31, 1997 and as a
result the outstanding balance
at September 30, 1996 of
$216,667 is presented as a
current liability.
F-13
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
(b) The Company ceased payments of
principal and interest in April
1996. On January 10, 1997, the
Company received a waiver of
default based on the non payment
from the holder. Principal and
interest payments are due to
commence at the earlier of the
anticipated initial public
offering or May 15, 1997.
Maturities of long-term debt as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------------------------------
<S> <C>
1996 $151,154
1997 159,630
1998 234,015
1999 109,384
2000 120,817
-------------------------------------------------------------------------
$775,000
-------------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
7. Subordinated Debt - Subordinated debt consists of the
Related Parties following:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-----------------------------------------------------------------------------------------
<S> <C> <C>
Note payable, officer and director, interest payable
monthly at the prime rate plus 2%, 10-1/4% at
September 30, 1996 with no principal payment
provisions, secured by the general assets of the
Company (a). $300,000 $300,000
Note payable, officer and director, interest at the
prime rate plus 2%, 10-1/4% at September 30,
1996, with no principal payment provisions,
secured by the assets of the Company (a). 200,000 200,000
Note payable, director, interest at 10% payable
semi-annually, convertible into 62,074 shares of
the Company's common stock. The note matures
on January 1, 2001 and is secured by the assets
of the Company (a) and (b). 62,500 -
Note payable, interest at the prime rate plus 1%,
9-1/4% at September 30, 1996, payable monthly
with no principal payment provisions, is
convertible into 10,018 shares of the Company's
common stock and is secured by the assets of the
Company (a) and (b). 25,000 -
Note payable, interest at 8%, payable on demand,
convertible into 259,259 shares of the
Company's common stock and is secured by the
assets of the Company (a) and (b). 70,000 -
-----------------------------------------------------------------------------------------
$657,500 $500,000
-----------------------------------------------------------------------------------------
</TABLE>
------------------
(a) The subordinated debt has been
subordinated to the bank's note
and the principal cannot be
repaid without its approval or
until that debt has been
satisfied. The bank's note is
due in 1998. Therefore, for
maturity purposes, such debt has
been presented as if it would be
repaid in 1998.
(b) As of June 30, 1996, these notes
converted into an aggregate of
331,351 shares of the Company's
common stock based on the
original terms of the debt
agreements.
F-15
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
8. Commitments and The Company leases certain operating and
Contingencies data processing equipment under capital
leases expiring at various dates.
The Company also rents office space and
equipment under operating leases.
In most cases, management expects that
in the normal course of business, leases
will be renewed or replaced by other
leases.
On October 31, 1995, the Company entered
into a facility lease for seven years
with an option to extend the lease for
five years. The commencement date of the
lease was March 1, 1996. The agreement
calls for fixed rent to be paid in
monthly installments in advance
commencing on July 1, 1996 and on the
first day of each month thereafter. In
addition to the fixed rent, the lease
provides for escalation of the lease
payment as maintenance cost and taxes
increase. The Company received a rent
abatement from the period March 1, 1996
through June 30, 1996. In connection
with this lease, a bank has issued the
Company an unconditional letter of
credit of $150,000 expiring on December
31, 1997. The letter of credit is to be
used as security deposit to be reduced
by $7,500 per month starting May 31,
1996 until fully liquidated. The
Connecticut Development Authority has
issued a guarantee to a bank in the
amount of $150,000. The guarantee will
be reduced monthly as it relates to the
facilities lease entered into October
1995 by the Company.
Future net minimum lease payments under
capital leases, and future minimum
rental payments required under operating
leases as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Years ended December 31, Capital Operating
-----------------------------------------------------------------------------------------
<S> <C> <C>
1996 $27,220 $ 100,940
1997 27,220 188,154
1998 19,239 194,832
1999 - 201,509
2000 - 200,495
Later years - 380,618
-----------------------------------------------------------------------------------------
Total 73,679 $1,266,548
Less amounts representing interest 19,448
-----------------------------------------------------------------------------------------
Net $54,231
-----------------------------------------------------------------------------------------
</TABLE>
F-16
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
Total facilities rental expense charged
to operations was $102,937, $93,370,
$68,123 and $94,314 for the years ended
December 31, 1994 and 1995, and the nine
months ended September 30, 1995 and
1996, respectively.
The Company has entered into employment
agreements, which will become effective
upon the closing of the anticipated
public offering, with certain key
employees and shall expire two years
from that date. The minimum aggregate
annual compensation under these
agreements is $575,000. The annual
compensation is subject to annual
increases based upon the Consumer Price
Index. In addition, these employees are
eligible to receive a bonus at the
discretion of the Board of Directors,
not to exceed 50% of their annual
compensation.
9. Capital Transactions On February 20, 1996 the Company
completed a reorganization and
incorporated in the State of Delaware.
The Company authorized 9,000,000 shares
of common stock with a par value of
$.001 and 2,100 shares of preferred
stock with a par value of $.001. As a
result of the reorganization, each
previously issued and outstanding share
of common stock of the Company was
converted into fifty shares of common
stock. In addition, each issued and
outstanding share of preferred stock was
converted into one share of preferred
stock. As prescribed by their terms, the
holders of convertible notes and
warrants also had each share available
to them converted into fifty shares of
common stock. Effective August 21, 1996,
the Company completed a recapitalization
of its common shares by declaring a 1
for 2.7 reverse stock split. The Company
issued one share of $.002 par value
common stock for 2.7 shares of existing
$.001 par value common stock. In
connection with the August 21, 1996
recapitalization, the Company authorized
7,500 shares of 8% cumulative preferred
stock with a par value of $100 per
share. All references in the financial
statements have been given retroactive
effect for these actions.
During the year ended December 31, 1994,
certain officers elected to contribute
their accrued salaries totaling
$279,847, to additional paid-in capital
of the Company.
During the nine months ended September
30, 1996, the Company sold 233,326
shares of common stock for net proceeds
of $732,875 pursuant to a private
placement of its stock. At June 30,
1996, advances payable to related
parties of $225,000 were exchanged for
66,666 shares of common stock. In
addition, at June 30, 1996, all of the
Company's outstanding preferred stock
was converted into 62,191 shares of
common stock.
F-17
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
In connection with the original $500,000
note payable to Connecticut Innovations,
Inc. (CII) (See Note 6), the Company
issued a warrant to CII to purchase
259,888 shares of common stock at an
exercise price per share of $2.31. In
connection with the August 1996
transactions, described below, one half
of these warrants have been cancelled.
The remaining warrants, 129,944, have a
term of 10 years. If during the term of
the warrant, the Company issues shares
at amounts less than $2.31 then the
exercise price will be adjusted to that
amount. In connection with the warrant,
CII has the right to put the warrant to
the Company at the difference between
the fair market value of the warrant and
the exercise price. The put provision is
exercisable, among other occurrences, if
the Company closes a public offering of
its stock. In addition, the Company may
cancel the remaining warrants upon the
satisfaction of one half of the original
note and pay an amount sufficient to
provide a 25% return compounded annually
on the amount of the debt that was
satisfied.
In August 1996, the Company sold 7,500
shares of its 8% cumulative preferred
stock, $100 par value, to CII for cash
of $500,000 and the conversion of
indebtedness in the amount of $236,924.
The preferred stock is convertible into
277,777 shares of common stock and is
redeemable at the holders option, in
August 1999, at the greater of the par
value plus 25% compounded annually for
each year outstanding or the then fair
market value of the preferred stock.
Upon the conversion, the Company
recognized $13,076 of miscellaneous
expense representing the discounted
purchase price.
During the six months ended June 30,
1996, the Company issued warrants to key
employees to purchase 222,219 shares of
common stock at $3.375 per share.
In March 1996 and as amended in December
1996, the Board of Directors approved a
stock option plan for key employees and
reserved 225,040 shares for stock
options. The board retained the
authority to determine the individuals
to whom, and the times at which, stock
grants would be made, along with the
number of shares, vesting schedule and
other provisions relating to the stock
grants. During the nine months ended
September 30, 1996, the Company issued
stock options to purchase 71,290 shares
of common stock exercisable at $3.375
per share and vest at the rate of 25%
per year over four years from the date
of the grant.
F-18
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
As of September 30, 1996, the Company
has 854,980 shares of its common stock
reserved for issuance pursuant to
options, warrants and convertible
securities.
No options or warrants have been
exercised.
Certain of the outstanding indebtedness
and warrants either prohibit or restrict
the declaration or payment of dividends.
10. Going Concern The Company's financial statements have
been prepared assuming that the Company
will continue as a going concern. The
Company has suffered losses and has
negative working capital. The Company
has relied on its capital and related
party advances to sustain its working
capital needs. The predominant use of
cash has been capitalized computer
software costs. Management believes that
the proceeds of the offering
contemplated by this prospectus (See
Note 15a), will be sufficient to meet
its cash flow needs for the coming year.
However, there can be no assurance that
the offering will be completed. The
financial statements do not include any
adjustments that might result from the
outcome of this uncertainty.
11. Income Taxes No tax provision has been recognized due
to losses incurred during the periods
presented. At December 31, 1995, the
Company has net operating loss
carryforwards in the amount of
approximately $2,800,000 which expire
during the period 1999 to 2010. The
Company has deferred tax assets of
approximately $950,000 and approximately
$1,250,000 at December 31, 1995 and
September 30, 1996, respectively,
relating to the net operating loss
carryforwards. The Company has
recognized a valuation allowance for the
entire deferred tax asset. The need for
the valuation allowance is evaluated
periodically by the Company.
12. Revenues Three customers accounted for 19%, 16%
and 10% of revenues for the year ended
December 31, 1994. Two customers
accounted for 13% and 10% of revenues
for the year ended December 31, 1995.
Two customers accounted for 32% and 13%
of revenues for the nine months ended
September 30, 1996. One customer
accounted for 16% of accounts receivable
as of December 31, 1995. Two customers
accounted for 24% of accounts receivable
at September 30, 1996.
F-19
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 1994,
the Company had revenues from foreign
customers of approximately $1,050,000 of
which the Company had revenues from
customers located in Canada and the
United Kingdom of approximately $280,000
and $525,000, respectively. For the year
ended December 31, 1995 and the nine
months ended September 30, 1995, the
Company had revenues from foreign
customers of approximately $1,340,000
and $716,000, respectively, of which the
Company had revenues from customers
located in the Middle East and the
United Kingdom of approximately
$1,070,000 and $575,000, respectively.
For the nine months ended September 30,
1996, the Company had revenues from
foreign customers of approximately
$680,000 of which the Company had
revenues of approximately $200,000 from
Australia.
On July 11, 1995, the Company, as part
of the Integrated Shipboard Information
Technology (ISIT) Consortium, entered
into an agreement with the United
States, Department of Transportation,
Maritime Administration (the
"Government") to provide advanced
software, state of the art hardware and
standardized procedures, which together
provide the ability to collect, process
and store information electronically
from shipboard sub-systems, and
distribute that information throughout
the ship and to the ship's land-based
offices via seamless satellite
communications. The total estimated cost
to the consortium to complete this
project is approximately $3,900,000 over
an eighteen month period. The Company's
share of the project is approximately
$1,950,000 of which the Government will
fund approximately $975,000 of project
costs.
In addition, on July 31, 1995, the
Company entered into an agreement with
CII under which the Company will receive
a total grant of approximately $490,000
to be used to help fund the ISIT
project.
For the year ended December 31, 1995 and
for the nine months ended September 30,
1995 and 1996, $390,757, $207,758 and
$820,402, respectively, has been
recognized as software revenue based on
the percentage-of-completion of the
project measured by the cost-to-cost
method which is based on the completion
of certain milestones as defined in the
Government and CII agreements.
13.Profit Sharing Plan The Company sponsors a 401(K) profit
sharing plan which covers substantially
all employees. Company contributions to
the plan totaled none, $30,945, $23,724
and $33,519 for the years ended December
31, 1994 and 1995 and the nine months
ended September 30, 1995 and 1996,
respectively.
F-20
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
14. Statements of Cash Supplemental disclosure of cash flow
Flows - Supplemental information:
Disclosures
<TABLE>
<CAPTION>
Years ended Nine months ended
---------------------------- ----------------------------
December 31, December 31, September 30, September 30,
1994 1995 1995 1996
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash paid for interest $95,957 $136,659 $102,694 $122,305
Supplemental disclosure of non-
cash investing and financing
activities:
Accrued interest contributed to
capital - 37,000 37,000 -
Conversion of debt contributed
to capital - - - 382,500
Increase in capital lease
obligations - 60,750 60,750 146,192
-----------------------------------------------------------------------------------------
</TABLE>
15. Subsequent Events
(a) The Company has a letter of
intent with Whale Securities
Co., L.P. in connection with a
proposed offering and sale to
the public of one million two
hundred thousand shares of
common stock of the Company at a
price of $5 per share and one
million two hundred thousand
warrants at a price of $.10 per
warrant. Each warrant will be
exercisable to purchase one
share of common stock at $5 per
share.
(b) Immediately prior to
effectiveness of the Company's
anticipated public offering,
certain officers of the Company
have agreed to satisfy their
respective outstanding loan
balances in the aggregate amount
of $388,837 by selling to the
Company 77,767 shares of common
stock. As of December 31, 1995
and September 30, 1996, such
balances have been included as a
reduction of stockholders'
equity.
F-21
<PAGE>
Marine Management
Systems, Inc.
Notes to Financial Statements
(Information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited)
- --------------------------------------------------------------------------------
(c) On December 12, 1996, the
Company issued two promissory
notes each in the amount of
$250,000 which bear interest at
a rate of 9% per annum and
mature at the earlier of January
31, 1998 or the closing of an
initial public offering. One of
these notes is convertible into
the Company's common stock at a
rate of $2.50 per share. The
note and unpaid interest thereon
may be converted by the holder
at any time but automatically
convert upon the closing of an
initial public offering. In
addition, the Company issued a
warrant, to the holder of the
notes to purchase 125,000 shares
of its common stock at an
exercise price per share of
$5.00. If an initial public
offering is not consummated by
January 31, 1998 then the
exercise price per share shall
be reduced to the lesser of
$2.50 or the lowest price per
share that the Company issues
stock during the six month
period prior to January 31,
1998. The warrants expire on
December 12, 2001.
(d) In October and November 1996,
the Company borrowed an
aggregate of $410,000 from six
persons, including a director
and other related parties. The
debt bears interest at 10% and
is due at the earlier of six
months from the date of the note
or upon the closing of the
anticipated initial public
offering.
In December 1996, the Company
borrowed an aggregate of
$116,000 from four officers and
a related party. These notes and
$50,000 of previous advances
from a related party bear
interest at 9% and are due on
December 2, 1998.
(e) In January 1997, the Company
completed the sale of seven
investment units to six
investors at a price of $50,000
for each unit. Each investment
unit consists of a $50,000
promissory note which bears
interest at 9% and is due at the
earlier of one year or the
completion of the anticipated
initial public offering and
10,000 shares of common stock.
F-22
<PAGE>
===================================================
No dealer, salesperson or other person has been
authorized to give any information or make any
representation not contained in this Prospectus in
connection with the offer made by this Prospectus,
and if given or made, such information or
representation must not be relied upon as having
been authorized by the Company or the Underwriter.
This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any securities
other than the securities offered by this
Prospectus, or an offer to sell or a solicitation of
an offer to buy any securities by anyone in any
jurisdiction in which such offer or solicitation is
not authorized or would be unlawful. Neither the
delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any
implication that information contained herein is
correct as of any time subsequent to the date
hereof.
----------------
TABLE OF CONTENTS
Page
Prospectus Summary................................3
Risk Factors.....................................10
Use of Proceeds..................................21
Dividend Policy..................................22
Dilution.........................................23
Capitalization...................................24
Selected Financial Data..........................26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations....................................27
Business.........................................33
Management.......................................45
Principal Stockholders...........................50
Certain Transactions.............................51
Description of Securities........................53
Shares Eligible for Future Sale..................56
Underwriting.....................................56
Legal Matters....................................59
Experts..........................................59
Additional Information...........................59
Index to Financial Statements...................F-1
------------------
Until , 1997 (25 days after the date of
this Prospectus), all dealers effecting transactions
in the registered securities, whether or not
participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their
unsold allotments or subscriptions.
===================================================
<PAGE>
===================================================
Marine Management
Systems, Inc.
1,200,000 Shares of Common Stock
and
Redeemable Warrants to Purchase
1,200,000 Shares of Common Stock
-------------------
PROSPECTUS
-------------------
Whale Securities Co., L.P.
, 1997
===================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Company's Certificate of Incorporation provides that the personal
liability of the directors of the Registrant shall be limited to the fullest
extent permitted by the provisions of Section 102(b)(7) of the General
Corporation Law of the State of Delaware (the "DGCL"). Section 102(b)(7) of the
DGCL generally provides that no director shall be liable personally to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, provided that the Certificate of Incorporation does not eliminate
the liability of a director for (i) any breach of the director's duty of loyalty
to the Registrant or its stockholders; (ii) acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law; (iii) acts
or omissions in respect of certain unlawful dividend payments or stock
redemptions or repurchases; or (iv) any transaction from which such director
derives improper personal benefit. The effect of this provision is to eliminate
the rights of the Registrant and its stockholders (through stockholders'
derivatives suits on behalf of the Registrant) to recover monetary damages
against a director for breach of her or his fiduciary duty of care as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (i) through (iv) above. The
limitations summarized above, however, do not affect the ability of the
Registrant or its stockholders to seek nonmonetary remedies, such as an
injunction or rescission, against a director for breach of her or his fiduciary
duty. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers, or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the
Securities and Exchange Commission (the "Commission"), such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
In addition, the Certificate of Incorporation provides that the Registrant
shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify all
persons whom it may indemnify pursuant to Section 145 of the DGCL. Section 145
of the DGCL permits a company to indemnify an officer or director who was or is
a party or is threatened to be made a party to any proceeding because of his or
her position, if the officer or director acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of the Registrant to be incurred in connection with
the distribution of the shares of Common Stock registered hereby (other than
underwriting discounts and commissions and the Underwriter's nonaccountable
expense allowance) are as follows:
SEC registration fee................................. $ 4,756.19
NASD filing fee...................................... 2,069.55
Nasdaq listing fee................................... 10,000.00
Underwriter's consulting fee......................... 25,000.00
Printing expenses.................................... *
Fees and expenses of counsel for the Registrant...... *
Accounting fees and expenses......................... *
Blue sky fees and expenses
(including counsel fees and expenses)........... *
Fees and expenses of transfer agent and registrar ... *
Miscellaneous........................................ *
--------------
Total expenses.............................. $570,000.00
- ----------------
*To be filed by amendment
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities
Within the past three years, the Registrant has issued the following
securities without registration under the Securities Act:
a) On March 21, 1995, the Registrant issued a warrant to purchase 259,888
shares of its Common Stock to Connecticut Innovations, Incorporated ("CII") in
connection with the provision of financing to the Registrant. The exercise price
under the warrant is $2.31 per share, and the warrant is exercisable until March
21, 2005. On August 21, 1996, this warrant was cancelled and replaced with a
warrant to purchase 129,944 shares of the Registrant's Common Stock, under the
same terms and conditions as the warrant issued on March 21, 1995.
b) On a number of different dates between February and June 1996, the
Registrant issued and sold an aggregate of 233,326 shares of its Common Stock to
16 investors, each of whom qualified as an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act. The aggregate
consideration received by the Company for such shares was $787,500.
c) On March 22, 1996, the Registrant granted options to purchase a total
of 71,290 shares of its Common Stock to 12 employees of the Registrant pursuant
to its 1996 Key Employees' Stock Option Plan. These options have an exercise
price of $3.38 per share and are exercisable until March 22, 2006.
d) On April 1, 1996, the Registrant issued warrants to purchase an
aggregate of 166,665 shares of its Common Stock to Mark E. Story and Michael P.
Barney, each an executive officer of the Registrant, and to Robert F. Ohmes and
Scott R. Ohmes, sons of Robert D. Ohmes, an executive officer and director of
the Registrant. The exercise price under the warrants is $3.38 per share, and
the warrants are exercisable until April 1, 2006.
e) On June 1, 1996, Robert D. Ohmes and Scott R. Ohmes converted a total
of $225,000 of indebtedness from the Registrant into an aggregate of 66,666
shares of Common Stock of the Registrant.
f) One June 1, 1996, the Registrant issued an aggregate of 62,191 shares
of its Common Stock to Eugene D. Story, Robert D. Ohmes and Donald F. Logan,
Jr., each an executive officer and director of the Registrant, upon conversion
of 2,099 shares of its Preferred Stock held by such officers.
g) On June 3, 1996, the Registrant issued warrants to purchase an
aggregate of 55,554 shares of its Common Stock to Eugene D. Story, Robert D.
Ohmes, Donald F. Logan, Jr. and Mark E. Story. The exercise price under the
warrants is $3.38 per share, and the warrants are exercisable until June 3,
2006.
h) On June 30, 1996, Scott R. Ohmes converted a convertible subordinated
debenture in the principal amount of $70,000 into 259,259 shares of the
Registrant's Common Stock.
i) On June 30, 1996, Lyman C. Hamilton, Jr., a director of the Registrant,
converted a convertible subordinated note in the principal amount of $62,500
into 62,074 shares of the Registrant's Common Stock.
j) On June 30, 1996, Christopher Story, the brother of Eugene D. Story,
converted a convertible subordinated debenture in the principal amount of
$25,000 into 10,018 shares of the Registrant's Common Stock.
k) On August 21, 1996, the Registrant issued and sold 7,500 shares of its
Preferred Stock to CII for $500,000 in cash, the cancellation of $236,924 of
principal amount of indebtedness owed to CII by the Registrant and CII's
relinquishment of warrants to purchase 129,944 shares of Common Stock.
l) On December 12, 1996, the Registrant issued a promissory note in the
principal amount of $250,000, convertible into an aggregate of 100,000 shares of
its Common Stock, and a warrant to purchase 125,000 shares of its Common Stock
to Sperry Marine Inc. in connection with its provision of financing to the
Registrant. The exercise price under the warrant is $5.00 per share, and the
warrant is exercisable until December 12, 2001.
m) On January 29, 1997, the Registrant issued to six accredited investors
$350,000 in aggregate principal amount of promissory notes and an aggregate of
70,000 shares of Common Stock pursuant to a private placement (the "January
Bridge Financing"). The Registrant received total cash consideration in the
gross amount of $350,000. In connection with the January Bridge Financing, Whale
Securities Co., L.P. ("Whale") acted as placement agent whereby Whale received
an aggregate commission of $35,000 in cash.
II-2
<PAGE>
The securities issued in the foregoing transactions were not registered
under the Securities Act in reliance upon the exemption from registration set
forth in Section 4(2) relating to transactions by an issuer not involving any
public offering.
Item 27. Exhibits
The following is a list of exhibits filed as a part of this registration
statement:
Exhibit No. Description
- ----------- -----------
1.01 Form of Underwriting Agreement.
3.01(a) Amended and Restated Certificate of Incorporation of the
Registrant.
(b) Certificate of Amendment of Amended and Restated Certificate
of Incorporation of the Registrant.
3.02 Bylaws of the Registrant.
4.01 Specimen Certificate representing shares of Common Stock, par
value $.002 per share, of the Registrant.*
4.02 Specimen Certificate representing the Public Warrants of the
Registrant.*
4.03 Form of Public Warrant Agreement among the Registrant, Whale
Securities Co., L.P. as Underwriter and American Stock
Transfer & Trust Company as Warrant Agent.
4.04 Form of Underwriter's Warrant Agreement, including form of
warrant certificate.
4.05(a) Commercial Revolving Loan, Term Loan and Security Agreement
between People's Bank and the Registrant, dated June 4, 1993.
(b) Second Modification of Commercial Revolving Loan, Term Loan
and Security Agreement between People's Bank and the
Registrant, dated December 21, 1995.
(c) Letter from People's Bank to the Registrant (Third
Modification of Commercial Revolving Loan, Term Loan and
Security Agreement between People's Bank and the Registrant),
dated February 8, 1995.
(d) $450,000 Term Promissory Note from the Registrant to People's
Bank, dated June 4, 1993.
(e) $400,000 Amended and Restated Revolving Loan Note from the
Registrant to People's Bank, dated December 21, 1995.
(f) $150,000 Irrevocable Standby Letter of Credit in favor of
Seaboard Stamford Investors Associates LLC, between People's
Bank and the Registrant, dated January 25, 1996.
4.06 $75,000 Loan Note from the Registrant to People's Bank, dated
November 8, 1996.
5.01 Opinion and Consent of Shipman & Goodwin LLP as to the
legality of the shares to be registered.*
II-3
<PAGE>
9.01 Stock Purchase, Option and Shareholder Agreement among COMSAT
Investments, Inc., the Registrant, Eugene D. Story, Robert D.
Ohmes and Donald F. Logan, Jr., dated June 20, 1990.
10.01(a) Form of Purchase Warrant for the Purchase of Common Stock, par
value $.001 per share.
(b) Schedule of Warrant Holders.
10.02 $300,000 Subordinated Note from the Registrant to Eugene D.
Story, dated July 1, 1994.
10.03 $200,000 Subordinated Note from the Registrant to Robert D.
Ohmes, dated July 1, 1994.
10.04 $29,000 Subordinated Note from the Registrant to Eugene D.
Story, dated December 2, 1996.
10.05 $10,000 Subordinated Note from the Registrant to Robert D.
Ohmes, dated December 2, 1996.
10.06 $15,000 Subordinated Note from the Registrant to Mark E.
Story, dated December 2, 1996.
10.07 $90,000 Subordinated Note from the Registrant to Scott R.
Ohmes, dated December 2, 1996.
10.08 $22,000 Subordinated Note from the Registrant to Donald F.
Logan, Jr., dated December 2, 1996.
10.09 Key Employee Agreement between the Registrant and Eugene D.
Story.
10.10 Key Employee Agreement between the Registrant and Robert D.
Ohmes.
10.11 Form of Key Employee Agreement between the Registrant and each
of Michael P. Barney, Donald F. Logan, Jr. and Mark E. Story.
10.12 Marine Management Systems, Inc. 1996 Key Employees' Stock
Option Plan.
10.13(a) Agreement of Lease between Seaboard Stamford Investor
Associates, LLC and the Registrant, dated October 31, 1995
with respect to Premises located at 470 West Avenue, Stamford,
Connecticut 06902.
(b) Letter Amendment to Agreement of Lease, dated September 21,
1995.
(c) Letter Amendment to Agreement of Lease.
10.14(a) United States of America Department of Transportation Maritime
Administration Notification of Assistance Approval
(Cooperative Agreement), Project Number: DTMA91-95-H-00069,
Title: Integrated Shipboard Information Technology (ISIT)
Platform, Effective Date July 12, 1995.
(b) Modification 0001 to Project Number DTMA91-95-H-00069, dated
September 29, 1995.
(c) Modification 0002 to Project Number DTMA91-95-H-00069, dated
March 25, 1996.
(d) Modification 0003 to Project Number DTMA91-95-H-00069, dated
July 10, 1996.
(e) Clarification Letter from U.S. Department of Transportation
Maritime Administration to the Registrant, dated October 31,
1996.
10.15 Federal Technology Partnership Assistance Agreement between
the Registrant and Connecticut Innovations, Incorporated,
dated July 31, 1995.
II-4
<PAGE>
10.16 Marketing and Distribution Agreement between the Registrant
and Sperry Marine Inc., dated December 4, 1996.
10.17 Warrant for the Purchase of Common Stock, par value $.002 per
share, issued to Sperry Marine Inc., dated December 12, 1996.
10.18(a) Form of Registration Rights Agreement between the Registrant
and the Holder, dated as of January 29, 1997.
(b) Schedule of Holders.
10.19 Consulting Agreement between the Registrant and Whale
Securities Co., L.P.
23.01 Consent of BDO Seidman, LLP.
23.02 Consent of Shipman & Goodwin LLP, included in opinion filed as
Exhibit 5.01.*
24.01 Power of Attorney, included in the signature page of this
registration statement.
27.01 Financial Data Schedule
- --------------------------
*To be filed by amendment
Item 28. Undertakings
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act,
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high and
of the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price present no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement, and
(iii) Include any additional or changed material information
on the plan of distribution.
(b) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(c) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of this offering.
(2) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
II-5
<PAGE>
(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to the directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(4) The undersigned Registrant hereby undertakes that it will:
(a) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be a part of this registration
statement as of the time it was declared effective.
(b) For determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and the offering of such securities at that time as the initial bona fide
offering of those securities.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Stamford, State of Connecticut, on February 3, 1997.
MARINE MANAGEMENT SYSTEMS, INC.
By: /s/ Eugene D. Story
---------------------------------------
Eugene D. Story
President and Chief Executive Officer
POWER OF ATTORNEY
Know All Persons by These Presents, that each person whose signature
appears below constitutes and appoints Eugene D. Story and Robert D. Ohmes, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file same, with all exhibits
thereto, and other documents in connection therewith, with full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, of their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
-------------------
<PAGE>
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Eugene D. Story
- ------------------------------- President, Chief Executive Officer February 3, 1997
Eugene D. Story and Director
/s/ Robert D. Ohmes
- ------------------------------- Executive Vice President, Chief February 3, 1997
Robert D. Ohmes Financial Officer, Secretary and
Director (Principal Accounting
Officer)
/s/ Donald F. Logan, Jr.
- ------------------------------- Senior Vice President - Operations February 3, 1997
Donald F. Logan, Jr. and Director
/s/ Mark E. Story
- ------------------------------- Vice President - Technical and February 3, 1997
Mark E. Story Director
/s/ Donald W. Forster
- ------------------------------- Director February 3, 1997
Donald W. Forster
/s/ Lyman C. Hamilton, Jr.
- ------------------------------- Director February 3, 1997
Lyman C. Hamilton, Jr.
/s/ Michael C. Hughes
- ------------------------------- Director February 3, 1997
Michael C. Hughes
</TABLE>
II-7
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
<S> <C> <C>
Sequentially Numbered
Exhibit No. Description Page
- ----------- ----------- ---------------------
1.01 Form of Underwriting Agreement.
3.01(a) Amended and Restated Certificate of Incorporation of the
Registrant.
(b) Certificate of Amendment of Amended and Restated Certificate
of Incorporation of the Registrant.
3.02 Bylaws of the Registrant.
4.01 Specimen Certificate representing shares of Common Stock, par
value $.002 per share, of the Registrant.*
4.02 Specimen Certificate representing the Public Warrants of the
Registrant.*
4.03 Form of Public Warrant Agreement among the Registrant, Whale
Securities Co., L.P. as Underwriter and American Stock
Transfer & Trust Company as Warrant Agent.
4.04 Form of Underwriter's Warrant Agreement, including form of
warrant certificate.
4.05(a) Commercial Revolving Loan, Term Loan and Security Agreement
between People's Bank and the Registrant, dated June 4, 1993.
(b) Second Modification of Commercial Revolving Loan, Term Loan
and Security Agreement between People's Bank and the
Registrant, dated December 21, 1995.
(c) Letter from People's Bank to the Registrant (Third
Modification of Commercial Revolving Loan, Term Loan and
Security Agreement between People's Bank and the Registrant),
dated February 8, 1995.
(d) $450,000 Term Promissory Note from the Registrant to People's
Bank, dated June 4, 1993.
(e) $400,000 Amended and Restated Revolving Loan Note from the
Registrant to People's Bank, dated December 21, 1995.
(f) $150,000 Irrevocable Standby Letter of Credit in favor of
Seaboard Stamford Investors Associates LLC, between People's
Bank and the Registrant, dated January 25, 1996.
4.06 $75,000 Loan Note from the Registrant to People's Bank, dated
November 8, 1996.
5.01 Opinion and Consent of Shipman & Goodwin LLP as to the
legality of the shares to be registered.*
<PAGE>
9.01 Stock Purchase, Option and Shareholder Agreement among COMSAT
Investments, Inc., the Registrant, Eugene D. Story, Robert D.
Ohmes and Donald F. Logan, Jr., dated June 20, 1990.
10.01(a) Form of Purchase Warrant for the Purchase of Common Stock, par
value $.001 per share.
(b) Schedule of Warrant Holders.
10.02 $300,000 Subordinated Note from the Registrant to Eugene D.
Story, dated July 1, 1994.
10.03 $200,000 Subordinated Note from the Registrant to Robert D.
Ohmes, dated July 1, 1994.
10.04 $29,000 Subordinated Note from the Registrant to Eugene D.
Story, dated December 2, 1996.
10.05 $10,000 Subordinated Note from the Registrant to Robert D.
Ohmes, dated December 2, 1996.
10.06 $15,000 Subordinated Note from the Registrant to Mark E.
Story, dated December 2, 1996.
10.07 $90,000 Subordinated Note from the Registrant to Scott R.
Ohmes, dated December 2, 1996.
10.08 $22,000 Subordinated Note from the Registrant to Donald F.
Logan, Jr., dated December 2, 1996.
10.09 Key Employee Agreement between the Registrant and Eugene D.
Story.
10.10 Key Employee Agreement between the Registrant and Robert D.
Ohmes.
10.11 Form of Key Employee Agreement between the Registrant and each
of Michael P. Barney, Donald F. Logan, Jr. and Mark E. Story.
10.12 Marine Management Systems, Inc. 1996 Key Employees' Stock
Option Plan.
10.13(a) Agreement of Lease between Seaboard Stamford Investor
Associates, LLC and the Registrant, dated October 31, 1995
with respect to Premises located at 470 West Avenue, Stamford,
Connecticut 06902.
(b) Letter Amendment to Agreement of Lease, dated September 21,
1995.
(c) Letter Amendment to Agreement of Lease.
10.14(a) United States of America Department of Transportation Maritime
Administration Notification of Assistance Approval
(Cooperative Agreement), Project Number: DTMA91-95-H-00069,
Title: Integrated Shipboard Information Technology (ISIT)
Platform, Effective Date July 12, 1995.
(b) Modification 0001 to Project Number DTMA91-95-H-00069, dated
September 29, 1995.
(c) Modification 0002 to Project Number DTMA91-95-H-00069, dated
March 25, 1996.
(d) Modification 0003 to Project Number DTMA91-95-H-00069, dated
July 10, 1996.
(e) Clarification Letter from U.S. Department of Transportation
Maritime Administration to the Registrant, dated October 31,
1996.
10.15 Federal Technology Partnership Assistance Agreement between
the Registrant and Connecticut Innovations, Incorporated,
dated July 31, 1995.
<PAGE>
10.16 Marketing and Distribution Agreement between the Registrant
and Sperry Marine Inc., dated December 4, 1996.
10.17 Warrant for the Purchase of Common Stock, par value $.002 per
share, issued to Sperry Marine Inc., dated December 12, 1996.
10.18(a) Form of Registration Rights Agreement between the Registrant
and the Holder, dated as of January 29, 1997.
(b) Schedule of Holders.
10.19 Consulting Agreement between the Registrant and Whale
Securities Co., L.P.
23.01 Consent of BDO Seidman, LLP.
23.02 Consent of Shipman & Goodwin LLP, included in opinion filed as
Exhibit 5.01.*
24.01 Power of Attorney, included in the signature page of this
registration statement.
27.01 Financial Data Schedule
- --------------------------
*To be filed by amendment
</TABLE>
<PAGE>
EXHIBIT 1.01
MARINE MANAGEMENT SYSTEMS, INC.
1,200,000 Shares of Common Stock
(Par Value $.002 Per Share)
and
Warrants to Purchase 1,200,000 Shares of Common Stock
UNDERWRITING AGREEMENT
_________________________
_______________, 1997
Whale Securities Co., L.P.
650 Fifth Avenue
New York, New York 10019
Ladies and Gentlemen:
Marine Management Systems, Inc., a Delaware
corporation (the "Company"), proposes to issue and sell to Whale Securities Co.,
L.P. (the "Underwriter") an aggregate of 1,200,000 shares of common stock of the
Company, par value $.002 per share (the "Offered Shares"), which Offered Shares
are presently authorized but unissued shares of the common stock, par value
$.002 per share (individually, a "Common Share" and collectively the "Common
Shares"), of the Company, and 1,200,000 Common Share purchase warrants (the
"Offered Warrants"), entitling the holder of each Offered Warrant to purchase,
during the four (4) year period commencing _________, 1998, one Common Share, at
an exercise price of Five Dollars ($5.00) (subject to adjustment in certain
circumstances). The Company shall have the right, upon the consent of the
Underwriter, to call each Offered Warrant for redemption upon not less than
thirty (30) days' written notice at any time commencing twelve (12) months
following the Effective Date (as hereinafter defined) at a redemption price of
Ten Cents ($.10) per Offered Warrant, upon the prior written consent of the
Underwriter; provided, that the closing bid quotation of the Common Stock has
been at least 150% (currently $7.50, subject to adjustment) of the then
effective exercise price of the Warrants on all twenty (20) of the trading days
ending on the third day prior to the day on which the Company gives notice. In
addition, the Underwriter, in order to cover over-allotments in the sale of
<PAGE>
the Offered Shares and/or Offered Warrants, may purchase up to an aggregate of
180,000 Common Shares (the "Optional Shares") and/or 180,000 Common Share
purchase warrants (the "Optional Warrants") entitling the holder of each
Optional Warrant to purchase one Common Share on the same terms as the Offered
Warrants. The Offered Shares and the Optional Shares are hereinafter sometimes
collectively referred to as the "Shares"; and the Offered Warrants and the
Optional Warrants are hereinafter sometimes collectively referred to as the
"Warrants." The Warrants will be issued pursuant to a Warrant Agreement (the
"Warrant Agreement") to be dated as of the Closing Date (as hereinafter defined)
by and among the Company, the Underwriter and American Stock Transfer & Trust
Company, as warrant agent (the "Warrant Agent").
The Company also proposes to issue and sell to the
Underwriter, for its own account and the accounts of its designees, warrants
(the "Underwriter's Warrants") to purchase up to an aggregate of 120,000 Common
Shares (collectively, the "Underlying Shares") and/or 120,000 warrants, similar
but not identical to, the Warrants (collectively, the "Underlying Warrants"),
which sale will be consummated in accordance with the terms and conditions of
the form of Underwriter's Warrant Agreement filed as an exhibit to the
Registration Statement (as hereinafter defined). The Underlying Shares, the
Common Shares issuable upon exercise of the Warrants and the Common Shares
issuable upon exercise of the Underlying Warrants are hereinafter sometimes
referred to as the "Warrant Shares". The Shares, the Warrants, the Underwriter's
Warrants, the Underlying Warrants and the Warrant Shares (collectively, the
"Securities") are more fully described in the Registration Statement and the
Prospectus, as defined below.
The Company hereby confirms its agreement with the Underwriter
as follows:
1. Purchase and Sale of Offered Shares and Offered
Warrants. On the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, the Company hereby
agrees to sell the Offered Shares and Offered Warrants to the Underwriter, and
the Underwriter agrees to purchase the Offered Shares and Offered Warrants from
the Company, at a purchase price of $4.50 per Offered Share and $.09 per Offered
Warrant. The Underwriter plans to offer the Offered Shares and Offered Warrants
to the public at a public offering price of $5.00 per Offered Share and $.10 per
Offered Warrant.
-2-
<PAGE>
2. Payment and Delivery.
(a) Payment for the Offered Shares and Offered
Warrants will be made to the Company by wire transfer or certified or official
bank check or checks payable to its order in New York Clearing House funds, at
the offices of the Underwriter, 650 Fifth Avenue, New York, New York 10019,
against delivery of the Offered Shares and Offered Warrants to the Underwriter.
Such payment and delivery will be made at __________________________ , New York
City time, on the third business day following the Effective Date (the fourth
business day following the Effective Date in the event that trading of the
Offered Shares and Offered Warrants commences on the day following the Effective
Date), the date and time of such payment and delivery being herein called the
"Closing Date." The certificates representing the Offered Shares and Offered
Warrants to be delivered will be in such denominations and registered in such
names as the Underwriter may request not less than two full business days prior
to the Closing Date, and will be made available to the Underwriter for
inspection, checking and packaging at the office of the Company's transfer agent
or correspondent in New York City, American Stock Transfer & Trust Company, 40
Wall Street, New York, New York 10005 not less than one full business day prior
to the Closing Date.
(b) On the Closing Date, the Company will sell the
Underwriter's Warrants to the Underwriter or to the Underwriter's designees,
limited to officers, directors and partners of the Underwriter and/or members of
the selling group and/or their officers, directors or partners (collectively,
the "Underwriter's Designees"). The Underwriter's Warrants will be in the form
of, and in accordance with, the provisions of the Underwriter's Warrant
Agreement attached as an exhibit to the Registration Statement. The aggregate
purchase price for the Underwriter's Warrants is $132. The Underwriter's
Warrants will be restricted from sale, transfer, assignment or hypothecation for
a period of one (1) year from the Effective Date, except to the Underwriter's
Designees. Payment for the Underwriter's Warrants will be made to the Company by
check or checks payable to its order on the Closing Date against delivery of the
certificates representing the Underwriter's Warrants. The certificates
representing the Underwriter's Warrants will be in such denominations and such
names as the Underwriter may request prior to the Closing Date.
3. Option to Purchase Optional Shares and/or Optional
Warrants.
(a) For the purposes of covering any over-allotments
in connection with the distribution and sale of the
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Offered Shares and Offered Warrants as contemplated by the Prospectus, the
Underwriter is hereby granted an option to purchase all or any part of the
Optional Shares and/or Optional Warrants from the Company. The purchase price to
be paid for the Optional Shares and Optional Warrants will be the same price per
Optional Share and Optional Warrant as the price per Offered Share or Offered
Warrant, as the case may be, set forth in Section 1 hereof. The option granted
hereby may be exercised by the Underwriter as to all or any part of the Optional
Shares and/or the Optional Warrants at any time within 45 days after the
Effective Date. The Underwriter will not be under any obligation to purchase any
Optional Shares or Optional Warrants prior to the exercise of such option.
(b) The option granted hereby may be exercised by the
Underwriter by giving oral notice to the Company, which must be confirmed by a
letter, telex or telegraph setting forth the number of Optional Shares and
Optional Warrants to be purchased, the date and time for delivery of and payment
for the Optional Shares and Optional Warrants to be purchased and stating that
the Optional Shares and Optional Warrants referred to therein are to be used for
the purpose of covering over-allotments in connection with the distribution and
sale of the Offered Shares and Offered Warrants. If such notice is given prior
to the Closing Date, the date set forth therein for such delivery and payment
will not be earlier than either two full business days thereafter or the Closing
Date, whichever occurs later. If such notice is given on or after the Closing
Date, the date set forth therein for such delivery and payment will not be
earlier than two full business days thereafter. In either event, the date so set
forth will not be more than 15 full business days after the date of such notice.
The date and time set forth in such notice is herein called the "Option Closing
Date." Upon exercise of such option, the Company will become obligated to convey
to the Underwriter, and, subject to the terms and conditions set forth in
Section 3(d) hereof, the Underwriter will become obligated to purchase, the
number of Optional Shares and Optional Warrants specified in such notice.
(c) Payment for any Optional Shares and Optional
Warrants purchased will be made to the Company by wire transfer or certified or
official bank check or checks payable to its order in New York Clearing House
funds, at the office of the Underwriter, against delivery of the Optional Shares
and Optional Warrants purchased to the Underwriter. The certificates
representing the Optional Shares and Optional Warrants to be delivered will be
in such denominations and registered in such names as the Underwriter requests
not less than two full business days prior to the Option Closing Date, and will
be made available to the Underwriter for inspection, checking and packaging at
the aforesaid office of the Company's transfer agent or correspondent
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<PAGE>
not less than one full business day prior to the Option Closing Date.
(d) The obligation of the Underwriter to purchase and
pay for any of the Optional Shares or Optional Warrants is subject to the
accuracy and completeness (as of the date hereof and as of the Option Closing
Date) of and compliance in all material respects with the representations and
warranties of the Company herein, to the accuracy and completeness of the
statements of the Company or its officers made in any certificate or other
document to be delivered by the Company pursuant to this Agreement, to the
performance in all material respects by the Company of its obligations
hereunder, to the satisfaction by the Company of the conditions, as of the date
hereof and as of the Option Closing Date, set forth in Section 3(b) hereof, and
to the delivery to the Underwriter of opinions, certificates and letters dated
the Option Closing Date substantially similar in scope to those specified in
Section 5, 6(b), (c), (d) and (e) hereof, but with each reference to "Offered
Shares," "Offered Warrants" and "Closing Date" to be, respectively, to the
Optional Shares, Optional Warrants and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full power and authority, corporate and other, to own or lease, as the case
may be, and operate its properties, whether tangible or intangible, and to
conduct its business as described in the Registration Statement and to execute,
deliver and perform this Agreement, the Warrant Agreement and the Underwriter's
Warrant Agreement and to consummate the transactions contemplated hereby and
thereby. The Company is duly qualified to do business as a foreign corporation
and is in good standing in all jurisdictions wherein such qualification is
necessary and failure so to qualify could have a material adverse effect on the
financial condition, results of operations, business or properties of the
Company. The Company has no subsidiaries.
(b) This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, and each of the Warrant Agreement, the Underwriter's Warrant Agreement
and the Consulting Agreement described in Section 5(t) hereof (the "Consulting
Agreement"), when executed and delivered by the Company on the Closing Date,
will be the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms. The execution, delivery
and performance of
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<PAGE>
this Agreement, the Consulting Agreement, the Warrant Agreement and the
Underwriter's Warrant Agreement by the Company, the consummation by the Company
of the transactions herein and therein contemplated and the compliance by the
Company with the terms of this Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriter's Warrant Agreement have been duly authorized by
all necessary corporate action and do not and will not, with or without the
giving of notice or the lapse of time, or both, (i) result in any violation of
the Certificate of Incorporation or By-Laws, each as amended, of the Company;
(ii) result in a breach of or conflict with any of the terms or provisions of,
or constitute a default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company pursuant to
any indenture, mortgage, note, contract, commitment or other agreement or
instrument to which the Company is a party or by which the Company or any of its
properties or assets is or may be bound or affected; (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business; or (iv) have any effect on any permit,
certification, registration, approval, consent, order, license, franchise or
other authorization (collectively, "Permits") necessary for the Company to own
or lease and operate its properties and to conduct its business or the ability
of the Company to make use thereof.
(c) No Permits of any court or governmental agency or
body, other than under the Securities Act of 1933, as amended (the "Act"), the
Regulations (as hereinafter defined) and applicable state securities or Blue Sky
laws, are required for (i) the valid authorization, issuance, sale and delivery
of the Shares and Warrants to the Underwriter, or (ii) the consummation by the
Company of the transactions contemplated by this Agreement, the Consulting
Agreement, the Warrant Agreement or the Underwriter's Warrant Agreement.
(d) The conditions for use of a registration
statement on Form SB-2 set forth in the General Instructions to Form SB-2 have
been satisfied with respect to the Company, the transactions contemplated herein
and in the Registration Statement. The Company has prepared in conformity with
the requirements of the Act and the rules and regulations (the "Regulations") of
the Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333- ) on Form SB-2 and has filed
one or more amendments thereto, covering the registration of the Securities
under the Act, including the related preliminary prospectus or preliminary
prospectuses (each thereof being herein
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<PAGE>
called a "Preliminary Prospectus") and a proposed final prospectus. Each
Preliminary Prospectus was endorsed with the legend required by Item 501(a)(5)
of Regulation S-B of the Regulations and, if applicable, Rule 430A of the
Regulations. Such registration statement including any documents incorporated by
reference therein and all financial schedules and exhibits thereto, as amended
at the time it becomes effective, and the final prospectus included therein are
herein, respectively, called the "Registration Statement" and the "Prospectus,"
except that, (i) if the prospectus filed by the Company pursuant to Rule 424(b)
of the Regulations differs from the Prospectus, the term "Prospectus" will also
include the prospectus filed pursuant to Rule 424(b), and (ii) if the
Registration Statement is amended or such Prospectus is supplemented after the
date the Registration Statement is declared effective by the Commission (the
"Effective Date") and prior to the Option Closing Date, the terms "Registration
Statement" and "Prospectus" shall include the Registration Statement as amended
or supplemented.
(e) Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
(f) The Registration Statement when it becomes
effective, the Prospectus (and any amendment or supplement thereto) when it is
filed with the Commission pursuant to Rule 424(b), and both documents as of the
Closing Date and the Option Closing Date, referred to below, will contain all
statements which are required to be stated therein in accordance with the Act
and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company in connection with the Registration
Statement or Prospectus or any amendment or supplement thereto by the
Underwriter expressly for use therein.
(g) The Company had at the date or dates indicated in
the Prospectus a duly authorized and outstanding capitalization as set forth in
the Registration Statement and the Prospectus. Based on the assumptions stated
in the Registration
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<PAGE>
Statement and the Prospectus, the Company will have on the Closing Date the
adjusted stock capitalization set forth therein. Except as set forth in the
Registration Statement or the Prospectus, on the Effective Date and on the
Closing Date, there will be no options to purchase, warrants or other rights to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell shares of the Company's capital stock
or any such warrants, convertible securities or obligations. Except as set forth
in the Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
(h) The descriptions in the Registration Statement
and the Prospectus of contracts and other documents are accurate and present
fairly the information required to be disclosed, and there are no contracts or
other documents required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement under the
Act or the Regulations which have not been so described or filed as required.
(i) BDO Seidman, LLP, the accountants who have
certified certain of the financial statements filed and to be filed with the
Commission as part of the Registration Statement and the Prospectus, are
independent public accountants within the meaning of the Act and Regulations.
The financial statements and schedules and the notes thereto filed as part of
the Registration Statement and included in the Prospectus are complete, correct
and present fairly the financial position of the Company as of the dates
thereof, and the results of operations and changes in financial position of the
Company for the periods indicated therein, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved except as otherwise stated in the Registration Statement and
the Prospectus. The selected financial data set forth in the Registration
Statement and the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited and unaudited
financial statements included in the Registration Statement and the Prospectus.
(j) The Company has filed with the appropriate
federal, state and local governmental agencies, and all appropriate foreign
countries and political subdivisions thereof, all tax returns, including
franchise tax returns, which are required to be filed or has duly obtained
extensions of time for the filing thereof and has paid all taxes shown on such
returns and all assessments received by it to the extent that the same have
become due; and the provisions for income taxes payable, if
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<PAGE>
any, shown on the financial statements filed with or as part of the Registration
Statement are sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the dates of such
financial statements. Except as disclosed in writing to the Underwriter, the
Company has executed or filed with any taxing authority, foreign or domestic,
any agreement extending the period for assessment or collection of any income
taxes and is not a party to any pending action or proceeding by any foreign or
domestic governmental agency for assessment or collection of taxes; and no
claims for assessment or collection of taxes have been asserted against the
Company.
(k) The outstanding Common Shares and outstanding
options and warrants to purchase Common Shares have been duly authorized and
validly issued. The outstanding Common Shares are fully paid and nonassessable.
The outstanding options and warrants to purchase Common Shares constitute the
valid and binding obligations of the Company, enforceable in accordance with
their terms. None of the outstanding Common Shares or options or warrants to
purchase Common Shares has been issued in violation of the preemptive rights of
any shareholder of the Company. None of the holders of the outstanding Common
Shares is subject to personal liability solely by reason of being such a holder.
The offers and sales of the outstanding Common Shares and outstanding options
and warrants to purchase Common Shares were at all relevant times either
registered under the Act and the applicable state securities or Blue Sky laws or
exempt from such registration requirements. The authorized Common Shares and
outstanding options and warrants to purchase Common Shares conform to the
descriptions thereof contained in the Registration Statement and Prospectus.
Except as set forth in the Registration Statement and the Prospectus, on the
Effective Date and the Closing Date, there will be no outstanding options or
warrants for the purchase of, or other outstanding rights to purchase, Common
Shares or securities convertible into Common Shares.
(l) No securities of the Company have been sold by
the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company within the
three years prior to the date hereof, except as disclosed in the Registration
Statement.
(m) The issuance and sale of the Shares and the
Warrant Shares have been duly authorized and, when the Shares and the Warrant
Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement, the Underwriter's Warrant Agreement or the
Warrant Agreement, as the case may be, the Shares and the Warrant Shares will be
validly issued, fully paid and nonassessable. The holders of the
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<PAGE>
Securities will not be subject to personal liability solely by reason of being
such holders and none of the Securities will be subject to preemptive rights of
any shareholder of the Company.
(n) The issuance and sale of the Warrants, the
Underwriter's Warrants and the Underlying Warrants have been duly authorized
and, when issued, paid for and delivered pursuant to the terms of this
Agreement, the Underwriter's Warrant Agreement or the Warrant Agreement, as the
case may be, the Warrants, the Underwriter's Warrants and the Underlying
Warrants will constitute valid and binding obligations of the Company,
enforceable as to the Company in accordance with their terms. The Warrant Shares
have been duly reserved for issuance upon exercise of the Warrants, the
Underwriter's Warrants and the Underlying Warrants in accordance with the
provisions of the Warrant Agreement and the Underwriter's Warrant Agreement. The
Warrants, Underwriter's Warrants and Underlying Warrants will conform to the
descriptions thereof contained in the Registration Statement and the Prospectus.
(o) The Company is not in violation of, or in default
under, (i) any term or provision of its Certificate of Incorporation or By-Laws,
each as amended; (ii) any material term or provision or any financial covenants
of any indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party or by which it or any of its property or
business is or may be bound or affected; or (iii) any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of the
Company's properties or business. The Company owns, possesses or has obtained
all governmental and other (including those obtainable from third parties)
Permits necessary to own or lease, as the case may be, and to operate its
properties, whether tangible or intangible, and to conduct any of the business
or operations of the Company as presently conducted, and all such Permits are
outstanding and in good standing, and there are no proceedings pending or, to
the best of the Company's knowledge, threatened (nor, to the best of the
Company's knowledge, is there any basis therefor), which seeking to cancel,
terminate or limit such Permits.
(p) Except as set forth in the Prospectus, there are
no claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, pending, or, to the best of
the Company's knowledge, threatened against the Company or involving the
Company's properties or business which, if determined adversely to the Company,
would, individually or in the aggregate, result in any material adverse change
in the financial position, shareholders'
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<PAGE>
equity, results of operations, properties, business, management or affairs or
business prospects of the Company or which question the validity of the capital
stock of the Company or this Agreement or of any action taken or to be taken by
the Company pursuant to, or in connection with, this Agreement; nor, to the best
of the Company's knowledge, is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There are no outstanding
orders, judgments or decrees of any court, governmental agency or other tribunal
naming the Company and enjoining the Company from taking, or requiring the
Company to take, any action, or to which the Company, or the Company's
properties or business, is bound or subject.
(q) Neither the Company nor any of its affiliates has
incurred any liability for any finder's fees or similar payments in connection
with the transactions herein contemplated.
(r) The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks, service
marks, copyrights, rights, trade secrets, confidential information, processes
and formulations used or proposed to be used in the conduct of its business as
described in the Prospectus (collectively the "Intangibles"); to the best of the
Company's knowledge, the Company has not infringed and is not infringing upon
the rights of others with respect to the Intangibles; and the Company has not
received any notice of conflict with the asserted rights of others with respect
to the Intangibles which could, singly or in the aggregate, materially adversely
affect its business as presently conducted or the prospects, financial condition
or results of operations of the Company, and the Company knows of no basis
therefor; and, to the best of the Company's knowledge, no others have infringed
upon the Intangibles of the Company.
(s) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus and the
Company's latest financial statements, the Company has not incurred any material
liability or obligation, direct or contingent, or entered into any material
transaction, whether or not incurred in the ordinary course of business, and has
not sustained any material loss or interference with its business from fire,
storm, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree; and
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there have not been, and prior to the Closing Date
referred to below there will not be, any changes in the capital stock or any
material increases in the long-term debt of the Company or any material adverse
change in or affecting the general affairs, management, financial condi-
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<PAGE>
tion, shareholders' equity, results of operations or prospects of the Company,
otherwise than as set forth or contemplated in the Prospectus.
(t) The Company does not own any real property. The
Company has good title to all personal property (tangible and intangible) owned
by it, free and clear of all security interests, charges, mortgages, liens,
encumbrances and defects, except such as are described in the Registration
Statement and Prospectus or such as do not materially affect the value or
transferability of such property and do not interfere with the use of such
property made, or proposed to be made, by the Company. The leases, licenses or
other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of such property made, or proposed to be made, by the Company, and
all rentals, royalties or other payments accruing thereunder which became due
prior to the date of this Agreement have been duly paid, and neither the
Company, nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default thereunder. The Company has not received notice of any
violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. The Company has adequately insured
its properties against loss or damage by fire or other casualty and maintains,
in adequate amounts, such other insurance as is usually maintained by companies
engaged in the same or similar businesses located in its geographic area.
(u) Each contract or other instrument (however
characterized or described) to which the Company is a party or by which its
property or business is or may be bound or affected and to which reference is
made in the Prospectus has been duly and validly executed, is in full force and
effect in all material respects and is enforceable against the parties thereto
in accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and neither the Company, nor, to the best of the
Company's knowledge, any other party, is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder.
None of the material provisions of such contracts or
instruments violates any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court having jurisdiction over the
Company or any of its assets or businesses.
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<PAGE>
(v) The employment, consulting, confidentiality and
non-competition agreements between the Company and its officers, employees and
consultants, described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(w) Except as set forth in the Prospectus, the
Company has no employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement Income Security Act of
1974.
(x) To the best of the Company's knowledge, no labor
problem exists with any of the Company's employees or is imminent which could
adversely affect the Company.
(y) The Company has not, directly or indirectly, at
any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(z) The Shares and Warrants have been approved for
listing on the Nasdaq SmallCap Market of the National Association of Securities
Dealers, Inc. ("Nasdaq").
(aa) The Company's response to the Corporate Review
Memorandum of Tenzer Greenblatt LLP, counsel to the Underwriter ("Underwriter's
Counsel") dated July 15, 1996, is true, completed and accurate in all material
respects as of the date hereof.
Any certificate signed by an officer of the Company
and delivered to the Underwriter or to Underwriter's Counsel shall be deemed to
be a representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
5. Certain Covenants of the Company. The Company covenants
with the Underwriter as follows:
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(a) The Company will not at any time, whether before
the Effective Date or thereafter during such period as the Prospectus is
required by law to be delivered in connection with the sales of the Shares and
Warrants by the Underwriter or a dealer, file or publish any amendment or
supplement to the Registration Statement or Prospectus of which the Underwriter
has not been previously advised and furnished a copy, or to which the
Underwriter shall object in writing.
(b) The Company will use its best efforts to cause
the Registration Statement to become effective and will advise the Underwriter
immediately, and, if requested by the Underwriter, confirm such advice in
writing, (i) when the Registration Statement, or any post-effective amendment to
the Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information; and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any Preliminary Prospectus, or of the suspension of the qualification of the
Shares and/or the Warrants for offering or sale in any jurisdiction, or of the
initiation of any proceedings for any of such purposes. The Company will use its
best efforts to prevent the issuance of any such stop order or of any order
preventing or suspending such use and to obtain as soon as possible the lifting
thereof, if any such order is issued.
(c) The Company will deliver to the Underwriter,
without charge, from time to time until the Effective Date, as many copies of
each Preliminary Prospectus as the Underwriter may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by the
Act. The Company will deliver to the Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as the Underwriter may
reasonably request. The Company has furnished or will furnish to the Underwriter
two signed copies of the Registration Statement as originally filed and of all
amendments thereto, whether filed before or after the Registration Statement
becomes effective, two copies of all exhibits filed therewith and two signed
copies of all consents and certificates of experts.
(d) The Company will comply with the Act, the
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder so as to permit the continuance
of sales of and dealings in the Offered
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Shares and Offered Warrants, in any Optional Shares and Optional Warrants which
may be issued and sold, and in the Warrant Shares underlying such Warrants. If,
at any time when a prospectus relating to any of the Securities is required to
be delivered under the Act, any event occurs as a result of which the
Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it shall be necessary to amend or
supplement the Registration Statement and Prospectus to comply with the Act or
the regulations thereunder, the Company will promptly file with the Commission,
subject to Section 5(a) hereof, an amendment or supplement which will correct
such statement or omission or which will effect such compliance.
(e) The Company will furnish such proper information
as may be required and otherwise cooperate in qualifying the Securities for
offering and sale under the securities or Blue Sky laws relating to the offering
in such jurisdictions as the Underwriter may reasonably designate, provided that
no such qualification will be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to service of general process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction.
(f) The Company will make generally available to its
security holders, in the manner specified in Rule 158(b) under the Act, and
deliver to the Underwriter and Underwriter's Counsel as soon as practicable and
in any event not later than 45 days after the end of its fiscal quarter in which
the first anniversary date of the effective date of the Registration Statement
occurs, an earning statement meeting the requirements of Rule 158(a) under the
Act covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement.
(g) For a period of five years from the Effective
Date, the Company will deliver to the Underwriter and to Underwriter's Counsel
on a timely basis (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-KSB (or 10-K), 10-QSB (or 10-Q) and 10-C
and exhibits thereto, filed or furnished to the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. (the " NASD")
on the date each such report or document is so filed or furnished; (ii) as soon
as practicable, copies of any reports or communications (financial or other) of
the Company mailed to its security holders; (iii) as soon as practicable, a copy
of any Schedule 13D, 13G, 14D-1 or 13E-3 received or prepared by the Company
from time to time; (iv) monthly statements setting forth
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such information regarding the Company's results of operations and financial
position (including balance sheet, profit and loss statements and data regarding
outstanding purchase orders) as is regularly prepared by management of the
Company; and (v) such additional information concerning the business and
financial condition of the Company as the Underwriter may from time to time
reasonably request and which can be prepared or obtained by the Company without
unreasonable effort or expense. The Company will furnish to its shareholders
annual reports containing audited financial statements and such other periodic
reports as it may determine to be appropriate or as may be required by law.
(h) Neither the Company nor any person that controls,
is controlled by or is under common control with the Company will take any
action designed to or which might be reasonably expected to cause or result in
the stabilization or manipulation of the price of the Common Shares or Warrants.
(i) If the transactions contemplated by this
Agreement are consummated, the Underwriter shall retain the $50,000 previously
paid to it, and the Company will pay or cause to be paid the following: all
costs and expenses incident to the performance of the obligations of the Company
under this Agreement, including, but not limited to, the fees and expenses of
accountants and counsel for the Company; the preparation, printing, mailing and
filing of the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto; the printing and mailing of the Selected Dealer Agreement;
the issuance and delivery of the Shares and Warrants to the Underwriter; all
taxes, if any, on the issuance of the Shares and Warrants; the fees, expenses
and other costs of qualifying the Shares and Warrants for sale under the Blue
Sky or securities laws of those states in which the Shares and Warrants are to
be offered or sold, including the fees and disbursements of Underwriter's
Counsel in connection therewith, and including those of such local counsel as
may have been retained for such purpose; the cost of printing and mailing the
"Blue Sky Survey;" and the filing fees incident to securing any required review
by the NASD and either the Boston Stock Exchange or Pacific Stock Exchange; the
cost of furnishing to the Underwriter copies of the Registration Statement,
Preliminary Prospectuses and the Prospectus as herein provided; the costs of
placing "tombstone advertisements" in any publications which may be selected by
the Underwriter; and all other costs and expenses incident to the performance of
the Company's obligations hereunder which are not otherwise specifically
provided for in this Section 5(i).
In addition, at the Closing Date or the Option
Closing Date, as the case may be, the Underwriter will deduct
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from the payment for the Offered Shares and Offered Warrants or any Optional
Shares and/or Optional Warrants purchased three percent (3%) of the gross
proceeds of the offering (less the sum of $50,000 previously paid to the
Underwriter), as payment for the Underwriter's nonaccountable expense allowance
relating to the transactions contemplated hereby, which amount will include the
fees and expenses of Underwriter's Counsel (other than the fees and expenses of
Underwriter's Counsel relating to Blue Sky qualifications and registrations,
which, as provided for above, shall be in addition to the three percent (3%)
nonaccountable expense allowance and shall be payable directly by the Company to
Underwriter's Counsel on or prior to the Closing Date).
(j) If the Company decides not to proceed with the
transactions contemplated by this Agreement for any reason at a time when the
Underwriter is ready, willing and able to proceed with the transactions
contemplated by this Agreement on the terms set forth herein, or if the
Underwriter decides not to proceed with such transactions because of a breach by
the Company of its representations, warranties, or covenants in this letter or
in the Underwriting Agreement or as a result of material adverse changes in the
affairs of the Company, the Company will be obligated to reimburse the
Underwriter for its accountable expenses up to the sum of Seventy Five Thousand
Dollars ($75,000), inclusive of $50,000 previously paid to the Underwriter. If
the transactions contemplated by this Agreement are aborted or terminated for
any other reason the Company will only be obligated to reimburse the Underwriter
for its accountable expenses up to the sum of Fifty Thousand Dollars ($50,000),
inclusive of $50,000 previously paid to the Underwriter. In addition, if the
Company elects not to proceed with the transactions contemplated by this
Agreement for any reason at a time when the Underwriter is ready, willing and
able to proceed with the transactions contemplated by this Agreement on the
terms set forth herein and subsequently consummates any public offering, private
placement, merger, acquisition of securities, joint venture or other similar
transaction within twelve (12) months following the Company's election not to
proceed, then the Underwriter shall have the right to act as an investment
banker for the Company in connection with such transaction and to receive a fee
in connection therewith equal to five percent (5%) of the consideration paid or
received in such transaction.
(k) The Company intends to apply the net proceeds
from the sale of the Shares and Warrants for the purposes set forth in the
Prospectus. No portion of the net proceeds from the sale of the Shares and
Warrants will be used to repay any indebtedness other than (i) $410,000
principal amount of indebtedness due under the Fall 1996 Borrowings (as defined
in the Registration Statement), (ii) $250,000 principal amount of
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outstanding indebtedness due under the Sperry Non-Convertible Note (as defined
in the Registration Statement), (iii) $350,000 principal amount Bridge Notes (as
defined in the Registration Statement), (iv) $236,924 principal amount of
outstanding indebtedness due under the Senior Note (as defined in the
Registration Statement), (v) accrued and unpaid interest through and until the
estimated date of repayment of the indebtedness referred to in clauses (i)
through (iv), and (vi) $75,000 for the retirement of the CII Warrants in
connection with the CII Warrant Redemption (each as defined in the Registration
Statement). The Company will file with the Commission all required reports on
Form S-R in accordance with the provisions of Rule 463 promulgated under the Act
and will provide a copy of each such report to the Underwriter and its counsel.
(l) During the period of twelve (12) months from the
date hereof, neither the Company nor any of the Company's officers, directors or
securityholders will offer for sale or sell or otherwise dispose of, directly or
indirectly, any securities of the Company, in any manner whatsoever, whether
pursuant to Rule 144 of the Regulations or otherwise, and no holder of
registration rights relating to any securities of the Company will exercise any
such registration rights, in either case, without the prior written consent of
the Underwriter.
(m) The Company will not file any registration
statement relating to the offer or sale of any of the Company's securities,
including any registration statement on Form S-8, during the twelve (12) months
from the Effective Date, without the Underwriter's prior written consent.
(n) The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(o) The Company will use its best efforts to maintain
the listing of the Shares and Warrants on Nasdq and, if so qualified, list the
Shares and Warrants and maintain such listing for as long as so qualified, on
the Nasdaq National Market.
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(p) The Company will, concurrently with the Effective
Date, register the class of equity securities of which the Shares are a part
under Section 12(g) of the Exchange Act and the Company will maintain such
registration for a minimum of five (5) years from the Effective Date.
(q) Subject to the sale of the Offered Shares and
Offered Warrants, the Underwriter and its successors will have the right to
designate a nominee for election, at its or their option, either as a member of
or a non-voting advisor to the Board of Directors of the Company, and the
Company will use its best efforts to cause such nominee to be elected and
continued in office as a director of the Company or as such advisor until the
expiration of five (5) years from the Effective Date. Each of the Company's
current officers, directors and shareholders agrees to vote all of the Common
Shares owned by such person or entity so as to elect and continue in office such
nominee of the Underwriter. Following the election of such nominee as a director
or advisor, such person shall receive no more or less compensation than is paid
to other non-officer directors of the Company for attendance at meetings of the
Board of Directors of the Company and shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings including, but not
limited to, food, lodging and transportation. The Company agrees to indemnify
and hold such director or advisor harmless, to the maximum extent permitted by
law, against any and all claims, actions, awards and judgments arising out of
his service as a director or advisor and, in the event the Company maintains a
liability insurance policy affording coverage for the acts of its officers and
directors, to include such director or advisor as an insured under such policy.
The rights and benefits of such indemnification and the benefits of such
insurance shall, to the extent possible, extend to the Underwriter insofar as it
may be or may be alleged to be responsible for such director or advisor.
If the Underwriter does not exercise its option to
designate a member of or advisor to the Company's Board of Directors, the
Underwriter shall nonetheless have the right to send a representative (who need
not be the same individual from meeting to meeting) to observe each meeting of
the Board of Directors. The Company agrees to give the Underwriter notice of
each such meeting and to provide the Underwriter with an agenda and minutes of
the meeting no later than it gives such notice and provides such items to the
directors.
(r) During the three (3)-year period from the
Effective Date, the Underwriter will have the right of first refusal (the "Right
of First Refusal") to act as underwriter or agent for any and all public or
private offerings of the debt or
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equity securities of the Company, or any successor to or any current or future
subsidiary of the Company (collectively referred to in this section 5(r) as the
"Company") by the Company (the "Subsequent Company Offering") or any secondary
offering (the "Secondary Offering") of the Company's securities by any of the
Company's officers, directors or security holders. Accordingly, if during such
period the Company intends to make a Subsequent Company Offering or the Company
receives notification from any of its officers, directors or security holders of
such holder's intention to make a Secondary Offering, the Company shall notify
the Underwriter in writing of such intention and of the proposed terms of the
offering. The Company shall thereafter promptly furnish the Underwriter with
such information concerning the business, condition and prospects of the Company
as the Underwriter may reasonably request. If, within 30 business days of the
receipt of such notice of intention and statement of terms, the Underwriter does
not accept in writing such offer to act as underwriter or agent with respect to
such offering upon the terms proposed, the Company and each of its officers,
directors and security holders shall be free to negotiate terms with other
underwriters with respect to such offering and to effect such offering on such
proposed terms within six months after the end of such 30 business days. Before
the Company and/or any of its officers, directors or security holders shall
accept any modified proposal from such other underwriter, the Underwriter's
preferential right shall be reinstated and the same procedure with respect to
such modified proposal as provided above shall be adopted. The failure by the
Underwriter to exercise its Right of First Refusal in any particular instance
shall not affect in any way such right with respect to any other Subsequent
Company Offering or Secondary Offering.
(s) The Underwriter and its successors will have a
right of first refusal for a period of three (3) years from the Effective Date
to purchase for the Underwriter's account and/or to sell for the account of the
Company's officers, directors and security holders any securities sold pursuant
to Rule 144 under the Act. Each of the Company's officers, directors and
security holders agrees to consult with the Underwriter with regard to any such
sales and will offer the Underwriter the exclusive opportunity to purchase or
sell such securities on terms at least as favorable to such holders as they can
secure elsewhere. If the Underwriter fails to accept in writing any such
proposal for sale by such holders within three business days after receipt of a
notice containing such proposal, then the Underwriter shall have no claim or
right with respect to any such sales contained in any such notice. If,
thereafter, such proposal is modified in any material respect, such holders
shall adopt the same procedure as with respect to the original proposal.
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(t) The Company agrees to employ the Underwriter or a
designee of the Underwriter as a financial consultant on a non-exclusive basis
for a period of two (2) years from the Closing Date, pursuant to a separate
written consulting agreement between the Company and the Underwriter and/or such
designee (the "Consulting Agreement"), at an annual rate of Twelve Thousand Five
Hundred Dollars ($12,500) (exclusive of any accountable out-of-pocket expenses),
payable in full, in advance on the Closing Date. In addition, the Consulting
Agreement shall provide that the Company will pay the Underwriter a finder's fee
in the event that the Underwriter originates a merger, acquisition, joint
venture or other transaction to which the Company is a party. The Company
further agrees to deliver a duly and validly executed copy of said Consulting
Agreement, in form and substance acceptable to the Underwriter, on the Closing
Date.
(u) Subject to the provisions of applicable law, the
Underwriter shall be entitled to receive a warrant solicitation fee of five
percent (5%) of the aggregate exercise price of the Warrants for each Warrant
exercised during the period commencing one year after the Effective Date;
provided, however, that the Underwriter will not be entitled to receive such
compensation in Warrant exercise transactions in which (i) the market price of
the Common Shares at the time of exercise is lower than the exercise price of
the Warrants; (ii) the Warrants are held in any discretionary account; (iii)
disclosure of compensation arrangements is not made in the Registration
Statement and in documents provided to holders of Warrants at the time of
exercise; (iv) the holder thereof has not confirmed in writing that the
Underwriter solicited the exercise of the Warrants; or (v) the solicitation or
exercise of the Warrants was in violation of Rule 10b-6 promulgated under the
Exchange Act.
(v) The Company shall retain a transfer agent for the
Common Shares and Warrants, reasonably acceptable to the Underwriter, for a
period of five (5) years from the Effective Date. In addition, for a period of
five (5) years from the Effective Date, the Company, at its own expense, shall
cause such transfer agent to provide the Underwriter with copies of the
Company's daily transfer sheets, and, when requested by the Underwriter, a
current list of the Company's securityholders, including a list of the
beneficial owners of securities held by a depository trust company and other
nominees.
(w) The Company hereby agrees, at its sole cost and
expense, to supply and deliver to the Underwriter and Underwriter's Counsel,
within a reasonable period from the date hereof, four bound volumes, including
the Registration Statement, as amended or supplemented, all exhibits to the
Registration Statement, the Prospectus and all other underwriting documents.
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(x) The Company shall, as of the date hereof, have
applied for listing in Standard & Poor's Corporation Records Service (including
annual report information) or Moody's Industrial Manual (Moody's OTC Industrial
Manual not being sufficient for these purposes) and shall use its best efforts
to have the Company listed in such manual and shall maintain such listing for a
period of five (5) years from the Effective Date.
(y) For a period of five (5) years from the Effective
Date, the Company shall provide the Underwriter, on a not less than annual
basis, with internal forecasts setting forth projected results of operations for
each quarterly and annual period in the two (2) fiscal years following the
respective dates of such forecasts. Such forecasts shall be provided to the
Underwriter more frequently than annually if prepared more frequently by
management, and revised forecasts shall be prepared and provided to the
Underwriter when required to reflect more current information, revised
assumptions or actual results that differ materially from those set forth in the
forecasts.
(z) For a period of five (5) years from the Effective
Date, or until such earlier time as the Common Shares and Warrants are listed on
the New York Stock Exchange or the American Stock Exchange, the Company shall
cause its legal counsel to provide the Underwriter with a list, to be updated at
least annually, of those states in which the Common Shares and Warrants may be
traded in non-issuer transactions under the Blue Sky laws of the 50 states.
(aa) For a period of five (5) years from the
Effective Date, the Company shall continue to retain BDO Seidman, LLP (or such
other nationally recognized accounting firm as is acceptable to the Underwriter)
as the Company's independent public accountants.
(ab) For a period of five (5) years from the
Effective Date, the Company, at its expense, shall cause its then independent
certified public accountants, as described in Section 5(aa) above, to review
(but not audit) the Company's financial statements for each of the first three
fiscal quarters prior to the announcement of quarterly financial information,
the filing of the Company's 10-Q (or 10-QSB) quarterly report (or other
equivalent report) and the mailing of quarterly financial information to
shareholders.
(ac) So long as any Warrants are outstanding, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act as shall
be necessary to enable the sale of the Common Shares underlying the Warrants and
cause a copy of
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each Prospectus, as then amended, to be delivered to each holder of record of a
Warrant as they request and as otherwise required by law and, to furnish to the
Underwriter and dealers as many copies of each such Prospectus as the
Underwriter or dealer may reasonably request. In addition, for so long as any
Warrant is outstanding, the Company will promptly notify the Underwriter of any
material change in the financial condition, business, results of operations or
properties of the Company.
(ad) For a period of twenty-five (25) days from the
Effective Date, the Company will not issue press releases or engage in any other
publicity without the Underwriter's prior written consent, other than normal and
customary releases issued in the ordinary course of the Company's business or
those releases required by law.
(ae) The Company will not increase or authorize an
increase in the cash compensation of its five (5) most highly paid employees
greater than those increases provided in their employment agreements in effect
as of the Effective Date and disclosed in the Registration Statement for a
period of two (2) years from the Effective Date, without the prior written
consent of the Underwriter.
(af) For a period of five (5) years from the
Effective Date, the Company will promptly submit to the Underwriter copies of
accountant's management reports and similar correspondence between the Company's
accountants and the Company.
(ag) For a period of three (3) years from the
Effective Date, the Company will not offer or sell any of its securities
pursuant to Regulation S promulgated under the Act without the prior written
consent of the Underwriter.
(ah) For a period of five (5) years from the
Effective Date, the Company will provide to the Underwriter ten day's written
notice prior to any issuance by the Company or its subsidiaries of any equity
securities or securities exchangeable for or convertible into equity securities
of the Company, except for (i) shares of Common Stock issuable upon exercise of
currently outstanding options and warrants or conversion of currently
outstanding convertible securities and (ii) options (and shares issuable upon
exercise of such options) available for future grant pursuant to any stock
option plan in effect on the Effective Date and the issuance of shares of Common
Stock upon the exercise of such options.
(ai) For a period of three (3) years from the
Effective Date, the Company will retain a financial public relations firm
reasonably acceptable to the Underwriter.
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(aj) For a period of three (3) years from the
Effective Date, the Company will cause its Board of Directors to meet, either in
person or telephonically, a minimum of four (4) times per year and will hold a
shareholder's meeting at least once per annum.
6. Conditions of the Underwriter's Obligation to Purchase the
Offered Shares and Offered Warrants from the Company. The obligation of the
Underwriter to purchase and pay for the Offered Shares and Offered Warrants
which it has agreed to purchase from the Company is subject (as of the date
hereof and the Closing Date) to the accuracy of and compliance in all material
respects with the representations and warranties of the Company herein, to the
accuracy of the statements of the Company or its officers made pursuant hereto,
to the performance in all material respects by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement will have become
effective not later than .M., New York City time, on the day following the date
of this Agreement, or at such later time or on such later date as the
Underwriter may agree to in writing; prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement will have been issued
and no proceedings for that purpose will have been initiated or will be pending
or, to the best of the Underwriter's or the Company's knowledge, will be
contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Underwriter's Counsel.
(b) At the time that this Agreement is executed and
at the Closing Date, there will have been delivered to the Underwriter a signed
opinion of Shipman & Goodwin LLP, counsel for the Company ("Company Counsel"),
dated as of the date hereof or the Closing Date, as the case may be (and any
other opinions of counsel referred to in such opinion of Company Counsel or
relied upon by Company Counsel in rendering their opinion), reasonably
satisfactory to Underwriter's Counsel, to the effect that:
(i) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full power and authority, corporate and other, and with all
Permits necessary to own or lease, as the case may be, and operate its
properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement. The Company is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
wherein such qualification is necessary and
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failure so to qualify could have a material adverse effect on the financial
condition, results of operations, business or properties of the Company. To the
best of Company Counsel's knowledge, the Company has no subsidiaries.
(ii) The Company has full power and authority,
corporate and other, to execute, deliver and perform this Agreement, the
Consulting Agreement, the Warrant Agreement and the Underwriter's Warrant
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement, the Consulting
Agreement, the Warrant Agreement and the Underwriter's Warrant Agreement by the
Company, the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this Agreement,
the Consulting Agreement, the Warrant Agreement and the Underwriter's Warrant
Agreement have been duly authorized by all necessary corporate action, and this
Agreement [Note: for Closing Date opinion add: and each of the Consulting
Agreement, the Warrant Agreement and the Underwriter's Warrant Agreement] has
been duly executed and delivered by the Company. This Agreement is (assuming for
the purposes of this opinion that it is valid and binding upon the other party
thereto), and each of the Warrant Agreement, the Underwriter's Warrant Agreement
and the Consulting Agreement, when executed and delivered by the Company on the
Closing Date, will be, valid and binding obligations of the Company, enforceable
in accordance with their respective terms, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and the discretion of
courts in granting equitable remedies and except that enforceability of the
indemnification provisions set forth in Section 7 hereof and the contribution
provisions set forth in Section 8 hereof may be limited by the federal
securities laws or public policy underlying such laws.
(iii) The execution, delivery and performance
of this Agreement, the Consulting Agreement, the Warrant Agreement and the
Underwriter's Warrant Agreement by the Company, the consummation by the Company
of the transactions herein and therein contemplated and the compliance by the
Company with the terms of this Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriter's Warrant Agreement do not, and will not, with or
without the giving of notice or the lapse of time, or both, (A) result in a
violation of the Certificate of Incorporation or By-Laws, each as amended, of
the Company, (B) result in a breach of or conflict with any terms or provisions
of, or constitute a default under, or result in the modification or termination
of, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the
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properties or assets of the Company pursuant to any indenture, mortgage, note,
contract, commitment or other material agreement or instrument to which the
Company is a party or by which the Company or any of the Company's properties or
assets are or may be bound or affected; (C) violate any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of the
Company's properties or business; or (D) have any effect on any Permit necessary
for the Company to own or lease and operate its properties or conduct its
business or the ability of the Company to make use thereof.
(iv) To the best of Company Counsel's
knowledge, no Permits of any court or governmental agency or body (other than
under the Act, the Regulations and applicable state securities or Blue Sky laws)
are required for the valid authorization, issuance, sale and delivery of the
Shares and Warrants or the Underwriter's Warrants to the Underwriter, and the
consummation by the Company of the transactions contemplated by this Agreement,
the Consulting Agreement, the Warrant Agreement or the Underwriter's Warrant
Agreement.
(v) The Registration Statement has become
effective under the Act; to the best of Company Counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act or applicable state securities laws.
(vi) The Registration Statement and the
Prospectus, as of the Effective Date, and each amendment or supplement thereto
as of its effective or issue date (except for the financial statements and other
financial data included therein or omitted therefrom, as to which Company
Counsel need not express an opinion) comply as to form in all material respects
with the requirements of the Act and Regulations and the conditions for use of a
registration statement on Form SB-2 have been satisfied by the Company.
(vii) The descriptions in the Registration
Statement and the Prospectus of statutes, regulations, government
classifications, contracts and other documents (including opinions of such
counsel); and the response to Item 13 of Form SB-2 have been reviewed by Company
Counsel, and, based upon such review, are accurate in all material respects and
present fairly the information required to be disclosed, and there are no
material statutes, regulations or government classifications, or, to the best of
Company Counsel's knowledge, material contracts or documents, of a character
required to be described in the Registration Statement or the
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Prospectus or to be filed as exhibits to the Registration Statement, which are
not so described or filed as required.
None of the material provisions of the contracts or
instruments described above violates any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court having
jurisdiction over the Company or any of its assets or business.
(viii) The outstanding Common Shares and
outstanding options and warrants to purchase Common Shares have been duly
authorized and validly issued. The outstanding Common Shares are fully paid and
nonassessable. The outstanding options and warrants to purchase Common Shares
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms. None of the outstanding Common Shares or options or
warrants to purchase Common Shares has been issued in violation of the
preemptive rights of any shareholder of the Company. None of the holders of the
outstanding Common Shares is subject to personal liability solely by reason of
being such a holder. The offers and sales of the outstanding Common Shares and
outstanding options and warrants to purchase Common Shares were at all relevant
times either registered under the Act and the applicable state securities or
Blue Sky laws or exempt from such registration requirements. The authorized
Common Shares and outstanding options and warrants to purchase Common Shares
conform to the descriptions thereof contained in the Registration Statement and
Prospectus. To the best of Company Counsel's knowledge, except as set forth in
the Prospectus, no holders of any of the Company's securities has any rights,
"demand", "piggyback" or otherwise, to have such securities registered under the
Act.
(ix) The issuance and sale of the Shares and
the Warrant Shares have been duly authorized and, when the Shares and the
Warrant Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement, the Underwriter's Warrant Agreement or the
Warrant Agreement, as the case may be, the Shares and the Warrant Shares will be
validly issued, fully paid and nonassessable, and the holders thereof will not
be subject to personal liability solely by reason of being such holders. Neither
the Shares nor the Warrant Shares are subject to preemptive rights of any
shareholder of the Company. The certificates representing the Securities are in
proper legal form.
(x) The issuance and sale of the Warrants, the
Underwriter's Warrants and the Underlying Warrants have been duly authorized
and, when paid for, issued and delivered pursuant to the terms of this
Agreement, the
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Underwriter's Warrant Agreement and the Warrant Agreement, as the case may be,
the Warrants, the Underwriter's Warrants and the Underlying Warrants will
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms, to issue and sell the Warrant Shares and/or
Underlying Warrants. The Warrant Shares have been duly reserved for issuance
upon exercise of the Underwriter's Warrants and the Warrants in accordance with
the provisions of the Underwriter's Warrant Agreement and the Warrant Agreement,
as the case may be. The Warrants, Underwriter's Warrants and Underlying Warrants
conform to the descriptions thereof contained in the Registration Statement and
Prospectus.
(xi) Upon delivery of the Offered Shares and
Offered Warrants to the Underwriter against payment therefor as provided in this
Agreement, the Underwriter (assuming it is a bona fide purchaser within the
meaning of the Uniform Commercial Code) will acquire good title to the Offered
Shares and Offered Warrants, free and clear of all liens, encumbrances,
equities, security interests and claims.
(xii) Assuming that the Underwriter exercises
the over-allotment option to purchase any of the Optional Shares and Offered
Warrants and makes payment therefor in accordance with the terms of this
Agreement, upon delivery of the Optional Shares and Optional Warrants so
purchased to the Underwriter hereunder, the Underwriter (assuming it is a bona
fide purchaser within the meaning of the Uniform Commercial Code) will acquire
good title to such Optional Shares and Optional Warrants, free and clear of any
liens, encumbrances, equities, security interests and claims.
(xiii) To the best of Company Counsel's
knowledge, there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any governmental agency, court or tribunal,
foreign or domestic, or before any private arbitration tribunal, pending or
threatened against the Company, or involving its properties or business, other
than as described in the Prospectus, such description being accurate, and other
than litigation incident to the kind of business conducted by the Company which,
individually and in the aggregate, is not material.
(xiv) The Company owns or possesses adequate
and enforceable rights to use all patents, patent applications, trademarks,
service marks, copyrights, rights, trade secrets, confidential information,
processes and formulations used or proposed to be used in the conduct of its
business as described in the Prospectus (collectively the "Intangibles"); to the
best of Company Counsel's knowledge, the Company
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<PAGE>
has not infringed and is not infringing upon the rights of others with respect
to the Intangibles; and, to the best of Company Counsel's knowledge, neither the
Company has received any notice that it has or may have infringed, is infringing
upon or is conflicting with the asserted rights of others with respect to the
Intangibles which might, singly or in the aggregate, materially adversely affect
its business, results of operations or financial condition and such counsel is
not aware of any licenses with respect to the Intangibles which are required to
be obtained by the Company. The opinions described in this Section 6(b)(xiv) may
be given by Company Counsel in reliance on the opinion of an attorney,
reasonably acceptable to Underwriter's Counsel, practicing in the patent area.
(xv) Company Counsel has participated in
reviews and discussions in connection with the preparation of the Registration
Statement and the Prospectus, and in the course of such reviews and discussions
and such other investigation as Company Counsel deemed necessary, no facts came
to its attention which lead it to believe that (A) the Registration Statement
(except as to the financial statements and other financial data contained
therein, as to which Company Counsel need not express an opinion), on the
Effective Date, contained any untrue statement of a material fact required to be
stated therein or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which Company Counsel need not express an opinion)
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering its opinion pursuant to this Section
6(b), Company Counsel may rely upon the certificates of government officials and
officers of the Company as to matters of fact, provided that Company Counsel
shall state that they have no reason to believe, and do not believe, that they
are not justified in relying upon such opinions or such certificates of
government officials and officers of the Company as to matters of fact, as the
case may be.
The opinion letter delivered pursuant to this Section
6(b) shall state that any opinion given therein qualified by the phrase "to the
best of our knowledge" is being given by Company Counsel after due investigation
of the matters therein discussed.
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<PAGE>
(c) At the Closing Date, there will have been
delivered to the Underwriter a signed opinion of Underwriter's Counsel, dated as
of the Closing Date, to the effect that the opinions delivered pursuant to
Section 6(b) hereof appear on their face to be appropriately responsive to the
requirements of this Agreement, except to the extent waived by the Underwriter,
specifying the same, and with respect to such related matters as the Underwriter
may require.
(d) At the Closing Date (i) the Registration
Statement and the Prospectus and any amendments or supplements thereto will
contain all material statements which are required to be stated therein in
accordance with the Act and the Regulations and will conform in all material
respects to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there will not have been any
material adverse change in the financial condition, results of operations or
general affairs of the Company from that set forth or contemplated in the
Registration Statement and the Prospectus, except changes which the Registration
Statement and the Prospectus indicate might occur after the Effective Date;
(iii) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no material
transaction, contract or agreement entered into by the Company, other than in
the ordinary course of business, which would be required to be set forth in the
Registration Statement and the Prospectus, other than as set forth therein; and
(iv) no action, suit or proceeding at law or in equity will be pending or, to
the best of the Company's knowledge, threatened against the Company which is
required to be set forth in the Registration Statement and the Prospectus, other
than as set forth therein, and no proceedings will be pending or, to the best of
the Company's knowledge, threatened against the Company before or by any
federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially adversely affect the
business, property, financial condition or results of operations of the Company,
other than as set forth in the Registration Statement and the Prospectus. At the
Closing Date, there will be delivered to the Underwriter a certificate signed by
the Chairman of the Board or the President or a Vice President of the Company,
dated the Closing Date, evidencing compliance with the provisions of this
Section 6(d) and stating that the representations and warranties of the Company
set forth in Section 4 hereof were accurate and complete
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in all material respects when made on the date hereof and are accurate and
complete in all material respects on the Closing Date as if then made; that the
Company has performed all covenants and complied with all conditions required by
this Agreement to be performed or complied with by the Company prior to or as of
the Closing Date; and that, as of the Closing Date, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or, to the best of his knowledge, are
contemplated or threatened. In addition, the Underwriter will have received such
other and further certificates of officers of the Company as the Underwriter or
Underwriter's Counsel may reasonably request.
(e) At the time that this Agreement is executed and
at the Closing Date, the Underwriter will have received a signed letter from BDO
Seidman, LLP, dated the date such letter is to be received by the Underwriter
and addressed to it, confirming that it is a firm of independent public
accountants within the meaning of the Act and Regulations and stating that: (i)
insofar as reported on by them, in their opinion, the financial statements of
the Company included in the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration Statement
and Prospectus, inquiries of officers of the Company responsible for financial
and accounting matters as to the transactions and events subsequent to the date
of the latest audited financial statements of the Company, and a reading of the
minutes of meetings of the shareholders, the Board of Directors of the Company
and any committees of the Board of Directors, as set forth in the minute books
of the Company, nothing has come to their attention which, in their judgment,
would indicate that (A) during the period from the date of the latest financial
statements of the Company appearing in the Registration Statement and Prospectus
to a specified date not more than three business days prior to the date of such
letter, there have been any decreases in net current assets or net assets as
compared with amounts shown in such financial statements or decreases in net
sales or decreases [increases] in total or per share net income [loss] compared
with the corresponding period in the preceding year or any change in the
capitalization or long-term debt of the Company, except in all cases as set
forth in or contemplated by the Registration Statement and the Prospectus, and
(B) the unaudited interim
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<PAGE>
financial statements of the Company, if any, appearing in the Registration
Statement and the Prospectus, do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Regulations or
are not fairly presented in conformity with generally accepted accounting
principles and practices on a basis substantially consistent with the audited
financial statements included in the Registration Statement or the Prospectus;
and (iii) they have compared specific dollar amounts, numbers of shares,
numerical data, percentages of revenues and earnings, and other financial
information pertaining to the Company set forth in the Prospectus (with respect
to all dollar amounts, numbers of shares, percentages and other financial
information contained in the Prospectus, to the extent that such amounts,
numbers, percentages and information may be derived from the general accounting
records of the Company, and excluding any questions requiring an interpretation
by legal counsel) with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter, and found them to be in agreement.
(f) There shall have been duly tendered to the
Underwriter certificates representing the Offered Shares and the Offered
Warrants to be sold on the Closing Date.
(g) The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of the Shares
and Warrants by the Underwriter.
(h) No action shall have been taken by the Commission
or the NASD the effect of which would make it improper, at any time prior to the
Closing Date or the Option Closing Date, as the case may be, for any member firm
of the NASD to execute transactions (as principal or as agent) in the Shares or
Warrants, and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the best of the Underwriter's or the
Company's knowledge, shall be contemplated by the Commission or the NASD. The
Company represents at the date hereof, and shall represent as of the Closing
Date or Option Closing Date, as the case may be, that it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD.
(i) The Company meets the current and any existing
and proposed criteria for inclusion of the Shares and Warrants in Nasdaq.
(j) All proceedings taken at or prior to the Closing
Date or the Option Closing Date, as the case may be, in
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<PAGE>
connection with the authorization, issuance and sale of the Shares or Warrants
shall be reasonably satisfactory in form and substance to the Underwriter and to
Underwriter's Counsel, and such counsel shall have been furnished with all such
documents, certificates and opinions as they may request for the purpose of
enabling them to pass upon the matters referred to in Section 6(c) hereof and in
order to evidence the accuracy and completeness of any of the representations,
warranties or statements of the Company, the performance of any covenants of the
Company, or the compliance by the Company with any of the conditions herein
contained.
(k) As of the date hereof, the Company will have
delivered to the Underwriter the written undertakings of its officers, directors
and security holders and/or registration rights holders, as the case may be, to
the effect of the matters set forth in Sections 5(l), (q), (r) and (s).
If any of the conditions specified in this Section 6
have not been fulfilled, this Agreement may be terminated by the Underwriter on
notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Underwriter, each officer, director, partner, employee and agent of the
Underwriter, and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several (and actions in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Underwriter
and each such person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in the Registration Statement, in any Preliminary Prospectus or in the
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented) or (ii) in any application or other document executed
by the Company, or based upon written information furnished by or on behalf of
the Company, filed in any jurisdiction in order to qualify the Shares and
Warrants under the securities laws thereof (hereinafter "application"), or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements
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<PAGE>
therein not misleading, in light of the circumstances under which they were
made, unless such untrue statement or omission was made in such Registration
Statement, Preliminary Prospectus, Prospectus or application in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by the Underwriter or any such person through the
Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 7(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 7(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares and/or Warrants which are the subject thereof
from the Underwriter or other indemnified person; (B) the Underwriter or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares and/or
Warrants to such person; and (C) the Prospectus did not contain any untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such cause, claim, damage, expense or liability.
(b) The Underwriter agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), to which they or
any of them may become subject under the Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse the
Company and each such director, officer or controlling person for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application (including any application for registration of the Shares and
Warrants under state securities or Blue Sky laws), or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with
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<PAGE>
information furnished in writing to the Company in connection therewith by the
Underwriter expressly for use therein.
(c) Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought against
any indemnifying party under this Section 7, the indemnified party will notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party will, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel satisfactory to
the indemnified party and the payment of expenses) insofar as such action
relates to an alleged liability in respect of which indemnity may be sought
against the indemnifying party. After notice from the indemnifying party of its
election to assume the defense of such claim or action, the indemnifying party
shall no longer be liable to the indemnified party under this Section 7 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable judgment of the
indemnified party or parties, it is advisable for the indemnified party or
parties to be represented by separate counsel, the indemnified party or parties
shall have the right to employ a single counsel to represent the indemnified
parties who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified parties thereof against the
indemnifying party, in which event the fees and expenses of such separate
counsel shall be borne by the indemnifying party. Any party against whom
indemnification may be sought under this Section 7 shall not be liable to
indemnify any person that might otherwise be indemnified pursuant hereto for any
settlement of any action effected without such indemnifying party's consent,
which consent shall not be unreasonably withheld.
8. Contribution. To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 7 hereof (subject to the limitations thereof) and it is
finally determined, by a judgment, order or decree not subject to further
appeal, that such claim for indemnification may not be enforced, even though
this Agreement expressly provides for indemnification in such case; or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including, for this purpose, any
contribution made by or on behalf of any director of the Company, any officer of
the Company who signed the Registration Statement and any controlling person of
the Company) as one entity and the Underwriter (including, for this purpose, any
contribution by or on behalf of each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and each officer, director, partner, employee and agent of the
Underwriter) as a second entity, shall contribute to the losses, liabilities,
claims, damages and expenses whatsoever to which any
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<PAGE>
of them may be subject, so that the Underwriter is responsible for the
proportion thereof equal to the percentage which the underwriting discount per
Share and per Warrant set forth on the cover page of the Prospectus represents
of the initial public offering price per Share and per Warrant set forth on the
cover page of the Prospectus and the Company is responsible for the remaining
portion; provided, however, that if applicable law does not permit such
allocation, then, if applicable law permits, other relevant equitable
considerations such as the relative fault of the Company and the Underwriter in
connection with the facts which resulted in such losses, liabilities, claims,
damages and expenses shall also be considered. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission or alleged omission,
shall be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by the
Company or by the Underwriter, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the Underwriter
agree that it would be unjust and inequitable if the respective obligations of
the Company and the Underwriter for contribution were determined by pro rata or
per capita allocation of the aggregate losses, liabilities, claims, damages and
expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 8. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee
and agent of the Under-writer will have the same rights to contribution as the
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf
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<PAGE>
of the Underwriter, the Company or any of its directors and officers, or any
controlling person referred to in said Sections, and shall survive the delivery
of, and payment for, the Shares and the Warrants.
10. Termination of Agreement.
(a) The Company, by written or telegraphic notice to
the Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Offered Shares and Offered Warrants for public offering.
The time when the Underwriter "releases the Offered Shares and Offered Warrants
for public offering" for the purposes of this Section 10 means the time when the
Underwriter releases for publication the first newspaper advertisement, which is
subsequently published, relating to the Offered Shares and Offered Warrants, or
the time when the Underwriter releases for delivery to members of a selling
group copies of the Prospectus and an offering letter or an offering telegram
relating to the Offered Shares and Offered Warrants, whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Offered Shares and the Offered Warrants and the
obligation to purchase the Optional Shares and/or Optional Warrants after
exercise of the option referred to in Section 3 hereof, are subject to
termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Offered Shares and
Offered Warrants or such Optional Shares and Optional Warrants, as the case may
be, if, prior to such time, any of the following shall have occurred: (i) the
Company withdraws the Registration Statement from the Commission or the Company
does not or cannot expeditiously proceed with the public offering; (ii) the
representations and warranties in Section 4 hereof are not materially correct or
cannot be complied with; (iii) trading in securities generally on the New York
Stock Exchange or the American Stock Exchange will have been suspended; (iv)
limited or minimum prices will have been established on either such Exchange;
(v) a banking moratorium will have been declared either by federal or New York
State authorities; (vi) any other restrictions on transactions in securities
materially affecting the free market for securities or the payment for such
securities, including the Offered Shares and Offered Warrants or the Optional
Shares and Optional Warrants, will be established by either of such Exchanges,
by the Commission, by any other federal or state agency, by action of the
Congress or by Executive Order; (vii) trading in any securities of the Company
shall have been suspended or halted by any national securities exchange, the
NASD or the Commission; (viii) there has been a materially adverse
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<PAGE>
change in the condition (financial or otherwise), prospects or obligations of
the Company; (ix) the Company will have sustained a material loss, whether or
not insured, by reason of fire, flood, accident or other calamity; (x) any
action has been taken by the government of the United States or any department
or agency thereof which, in the judgment of the Underwriter, has had a material
adverse effect upon the market or potential market for securities in general; or
(xi) the market for securities in general or political, financial or economic
conditions will have so materially adversely changed that, in the judgment of
the Underwriter, it will be impracticable to offer for sale, or to enforce
contracts made by the Underwriter for the resale of, the Offered Shares and
Offered Warrants or the Optional Shares and Offered Warrants, as the case may
be.
(c) If this Agreement is terminated pursuant to
Section 6 hereof or this Section 10 or if the purchases provided for herein are
not consummated because any condition of the Underwriter's obligations hereunder
is not satisfied or because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be unable to or does
not perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 9 of this
Agreement.
11. Information Furnished by the Underwriter to the Company.
It is hereby acknowledged and agreed by the parties hereto that for the purposes
of this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and
8 hereof, the only information given by the Underwriter to the Company for use
in the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement appearing in the last paragraph on
page __ with respect to stabilizing the market price of Shares and Warrants, the
information in the __ paragraph on page __ with respect to concessions and
reallowances, and the information in the ___ paragraph on page ___ with respect
to the determination of the public offering price, as such information appears
in any Preliminary Prospectus and in the Prospectus.
12. Notices and Governing Law. All communications hereunder
will be in writing and, except as otherwise provided, will be delivered at, or
mailed by certified mail, return receipt requested, or telegraphed to, the
following addresses: if to the Underwriter, to 650 Fifth Avenue, New York, New
York 10019 with a copy to Tenzer, Greenblatt LLP, Attention: Robert J. Mittman,
Esq., 405 Lexington Avenue, New York, New York 10174; if to the Company,
addressed to it at 470 West Avenue, Stamford, Connecticut 06902 with a copy to
Shipman & Goodwin LLP,
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Attention: Frank J. Marco, Esq., One American Row, Hartford, Connecticut 06103.
This Agreement shall be deemed to have been made and
delivered in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (2) waives any objection
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (3) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company mailed by certified mail to the Company's address shall
be deemed in every respect effective service of process upon the Company, in any
such suit, action or proceeding.
13. Parties in Interest. This Agreement is made solely for the
benefit of the Underwriter, the Company and, to the extent expressed, any person
controlling the Company or the Underwriter, each officer, director, partner,
employee and agent of the Underwriter, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Shares or
Warrants from the Underwriter, as such purchaser.
If the foregoing is in accordance with your
understanding of our agreement, kindly sign and return to us the enclosed
duplicates hereof, whereupon it will become a binding agreement between the
Company and the Underwriter in accordance with its terms.
Very truly yours,
MARINE MANAGEMENT SYSTEMS, INC.
By:___________________________
Name:
Title:
Confirmed and accepted in
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New York, N.Y., as of the date first above written:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.
General Partner
By:______________________________________
Name:
Title:
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EXHIBIT 3.01(a)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MARINE MANAGEMENT SYSTEMS, INC.
Marine Management Systems, Inc., a corporation incorporated under the
General Corporation Law of the State of Delaware, hereby amends and restates its
Certificate of Incorporation, which was originally filed with the Secretary of
State on December 4, 1995, in order to give effect to all amendments and to
restate all of the provisions now in effect that are not amended, so that the
same shall read, in its entirety, as follows:
FIRST: The name of the corporation (hereinafter called the "Corporation")
is Marine Management Systems, Inc.
SECOND: The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle 19805; and the name of the
registered agent of the Corporation in the State of Delaware at such address is
The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issues is nine million seven thousand five hundred
(9,007,500), consisting of (a) nine million (9,000,000) shares of Common Stock
with a par value of $.002 per share (the "Common Stock") and (b) seven thousand
five hundred (7,500) shares of Preferred Stock with a par value of $100 per
share (the "Preferred Stock"). The number of the authorized shares of any such
class or classes may be increased or decreased (but not below the number of
shares then outstanding) by the affirmative vote of the holders of a majority of
the outstanding shares of the Corporation on the basis specified in Part B,
Section 3 of this Article FOURTH.
A COMMON STOCK
1. Voting Rights. The holders of shares of Common Stock shall be entitled
to one vote for each share held with respect to all matters voted on by the
stockholders of the Corporation.
<PAGE>
2. Liquidation Rights. Subject to the prior and superior right of the
Preferred Stock, upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of Common Stock and
the holders of Preferred Stock shall be entitled to receive the remaining funds
to be distributed on the basis of the number of shares of Common Stock held by
each of them and the number of shares of Common Stock into which each share of
Preferred Stock is then convertible.
3. Dividends. Dividends may be paid on the Common Stock as and when
declared by the Board of Directors, provided, however, no such dividends may be
declared or paid if dividends are not simultaneously declared or paid,
respectively, on the Preferred Stock.
B. PREFERRED STOCK
The rights, preferences, privileges and restrictions granted to and imposed
upon the Preferred Stock are as follows:
1. Liquidation Rights.
(a) Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, each holder of shares of
Preferred Stock shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the Corporation
to the holders of the Common Stock, by reason of his ownership thereof, an
amount per share of the Preferred Stock equal to $100 per share, plus any
dividends which, pursuant to Section 5 hereof, have accrued but remain
unpaid at such time.
(b) Pro Rata Distribution. If the assets or surplus funds to be
distributed to the holders of the Preferred Stock under subparagraph (a) of
this Section 1 are not sufficient to permit the payment to such holders of
their full preferential amount, the assets and surplus funds legally
available for distribution shall be distributed ratably among the holders
to the Preferred Stock.
(c) Preferred Stock Priority. All of the preferential amounts to be
paid to the holders of the Preferred Stock under this Section 1 shall be
paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any assets of the
Corporation to, the holders of the Common Stock in connection with such
liquidation, dissolution or winding up. After the payment or the setting
apart of payment of the preferential amounts payable to the holders of the
Preferred Stock, the holders of Common Stock and the holders of Preferred
Stock shall be entitled to receive all remaining assets of this
Corporation.
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2. Conversion. The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible, without the payment of any additional consideration by the
holder thereof, at the option of the holder thereof, at the office of the
Corporation or any transfer agent for the Preferred Stock, into such number
of fully paid and nonassessable shares of Common Stock, as is determined by
following: by dividing $100 by the Applicable Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. Each share of
Preferred Stock shall be so convertible at any time after the date of
issuance of such share. The price at which shares of Common Stock shall be
deliverable upon conversion of Preferred Stock without the payment of any
additional consideration by the holder thereof (the "Applicable Conversion
Price") shall initially be $1.99774 per share of Common Stock . Such
initial Applicable Conversion Price shall be subject to adjustment, in
order to adjust the number of shares of Common Stock into which the
Preferred Stock is convertible, as hereinafter provided.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then
effective Applicable Conversion Price upon the closing of a public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the
account of the Corporation to the public (an "IPO"). In the event of such
an IPO, persons entitled to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted
that Preferred Stock until immediately prior to the closing of such
offering. Each person who holds of record Preferred Stock at the time of
any automatic conversion shall be entitled to any dividends which, pursuant
to Section 4 hereof, have accrued but remain unpaid at such time. Such
dividends shall be paid to all such holders within thirty (30) days of the
automatic conversion.
(c) Mechanics of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of the Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by $2.00.
Except in the case of an automatic conversion pursuant to Section 2(b),
before any holder of Preferred Stock shall be entitled to convert the same
into full shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Preferred Stock, and shall give written
notice to the Corporation at such office that he elects to convert the
same. Upon the date of an automatic conversion pursuant to Section 2(b),
any person entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder of
such shares of Common Stock on such date, whether or not such holder
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has surrendered the certificate or certificates for such holder's shares of
Preferred Stock. A holder surrendering his certificate or certificates
shall notify the Corporation of his name or the name or names of his
nominees in which he wishes the certificate or certificates for shares of
Common Stock to be issued. The Corporation shall, as soon as practicable
thereafter (and, in any event, within 10 days of such surrender), issue and
deliver at such office to such holder of Preferred Stock, or to his nominee
or nominees, a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled, together with cash in lieu of
any fraction of a share. Except in the case of an automatic conversion
pursuant to Section 2(b), such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted, and the persons entitled to
receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.
(d) Adjustments to Applicable Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section 2(d), the
following definitions shall apply:
(1) "Option" shall mean options, warrants or other rights to
subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(2) "Original Issue Date" shall mean, for any series of the
Preferred Stock, the first date on which a share of such series
shall have been issued.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock and Preferred
Stock) of capital stock or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean any or
all shares of Common Stock issued (or, pursuant to Section
2(d)(iii), deemed to be issued) by the Corporation after the
Original Issue Date, other than shares of Common Stock issued or
issuable upon conversion of shares of Preferred Stock.
(ii) No Adjustment of Applicable Conversion Price. Subject to the
provisions of Section 2(d)(iii)(2) and Section 2(d)(vi) below, no
adjustment in the number of shares of Common Stock into which the
Preferred Stock is convertible shall be made, by adjustment in
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the Applicable Conversion Price of the Preferred Stock in respect of
the issuance of Additional Shares of Common Stock or otherwise, unless
the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the
Applicable Conversion Price in effect on the date of, and immediately
prior to, the issue of such Additional Share of Common Stock.
(iii) Issues of Securities Deemed to Be Issues of Additional
Shares of Common Stock.
(1) Options and Convertible Securities. If the Corporation
at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in
the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the
time of such issue or, in case such a record date shall have been
fixed, as of the close of business on such record date, provided
that such Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration Per share
(determined pursuant to Section 2(d)(v) hereof) of such
Additional Shares of Common Stock would be less than the
Conversion Price in effect on the date of and immediately prior
to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares
of Common Stock are deemed to be issued:
(A) no further adjustment in the Applicable Conversion
Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible
Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time, pursuant to any
provisions designed to protect against dilution, or
otherwise, for any increase or decrease in the consideration
payable to the Corporation, or increase or decrease in the
number of shares of Common Stock issuable, upon the
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exercise, conversion or exchange thereof, the Applicable
Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon,
shall, upon any such increase's or decrease's becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the
Applicable Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if
such Options or Convertible Securities, as the case may be,
were never issued;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Applicable
Conversion Price to an amount that exceeds the lower of (i)
the Applicable Conversion Price on the original date on
which an adjustment was made pursuant to this Section
2(d)(iii)(1), and (ii) the Applicable Conversion Price that
would have resulted from any issuance of Additional Shares
of Common Stock between such Original adjustment date and
the date on which a readjustment is made pursuant to clause
(B) or (C) above;
(E) in the case of any Options expiring by their terms
not more than 30 days after the date of issue thereof, no
adjustment of the Applicable Conversion Price shall be made
until the expiration or exercise of all such Options,
whereupon such adjustment shall be made in the same manner
provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the
Applicable Conversion Price that became effective on such
record date shall be canceled as of the close of business on
such record date, and thereafter the Applicable Conversion
Price shall be adjusted pursuant to this Section 2(d)(iii)
as of the actual date of their issuance.
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(2) Stock Dividends, Stock Distributions and Subdivisions. If the
Corporation at any time or from time to time after the original Issue
Date for the Preferred Stock shall declare or pay any dividend or make
any other distribution on the Common Stock payable in Common Stock, or
effect a subdivision of the outstanding shares of Common Stock by
reclassification or otherwise than by payment of a dividend in Common
Stock), then and in any such event, Additional Shares of Common Stock
shall be deemed to have been issued:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for
the determination of holders of any class of securities entitled
to receive such dividend or distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which
such corporate action becomes effective.
If such record date shall have been fixed and such dividend shall
not have been fully paid on the date fixed for the payment
thereof, the adjustment previously made in the Applicable
Conversion Price that became effective on such record date shall
be canceled as of the close of business on such record date, and
thereafter the Applicable Conversion Price shall be adjusted
pursuant to this Section 2(d)(iii) as of the time of actual
payment of such dividend.
(iv) Adjustment of Applicable Conversion Price Upon Issuance of
Additional Shares of Common Stock. If the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 2(d)(iii)(l), but
excluding Additional Shares of Common Stock deemed to be issued
pursuant to Section 2(d)(iii)(2), which is dealt with in Section
2(d)(vi) below) without consideration or for a consideration per share
less than the Applicable Conversion price in effect on the date of and
immediately prior to such issue, then such Applicable Conversion Price
shall be reduced, concurrently with such issue, to a price equal to
the price at which such Additional Shares of Common Stock are so
issued.
(v) Determination of Consideration. For purposes of this Section
2(d), the consideration received by the Corporation for the
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issue of any Additional Shares of Common Stock shall be computed as
follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be the aggregate
amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such
issue, as determined in good faith by the Board of
Directors; and
(C) If Additional Shares of Common Stock are issued
together with other shares of securities or other assets of
the Corporation for a single undivided consideration, be the
proportion of such consideration so received allocable to
such Additional Shares of Common Stock, computed as provided
in clauses (A) and (B) above, as determined in good faith by
the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to Section 2(d)(iii)(1) shall be determined by
dividing
(x) the total amount, if any, received or receivable
by the Corporation as consideration for the
issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities, or in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto,
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without regard to any provision contained therein
for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
(vi) Adjustment for Stock Dividends, Stock Distributions,
Subdivisions, Combinations or Consolidations of Common Stock.
(1) Stock Dividends, Stock Distributions or Subdivisions. If the
Corporation shall issue additional shares of Common Stock (or any
options or rights therefor or any securities convertible or
exchangeable therefor) in a stock dividend, other stock distribution
or subdivision, the Applicable Conversion Price in effect immediately
prior to such stock dividend, stock distribution or subdivision shall,
concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately increased to adjust
equitably for such dividend, distribution or subdivision so that each
share of Preferred Stock shall thereafter be convertible into the
number of shares of Common Stock that the holder of such share of
Preferred Stock would have owned and to which the holder would be
entitled had the holder converted such share of Preferred Stock
immediately prior to such stock dividend, stock distribution or
subdivision.
(2) Combinations or Consolidations. If the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the
Applicable Conversion Price in effect immediately prior to such
combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
decreased to adjust equitably for such combination or consolidation so
that each share of Preferred Stock shall thereafter be convertible
into the number of shares of Common Stock that the holder of such
share of Preferred Stock would have owned and to which the holder
would have been entitled had the holder converted such share of
Preferred Stock immediately prior to such combination or
consolidation.
(vii) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation
or the conveyance of all or substantially all of the assets of the
Corporation to another corporation, or any proposed
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reorganization or reclassification of the Corporation (except a transaction
for which provision for adjustment is otherwise made in this Section 2),
each share of Preferred Stock shall thereafter be convertible into the
number of shares of stock or other securities or property to which a holder
of the number of shares of Common Stock of the Corporation deliverable upon
conversion of such Preferred Stock would have been entitled upon such
consolidation, merger, conveyance, reorganization or reclassification; and,
in any such case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holders of
the Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of
the Applicable Conversion Price) shall thereafter be applicable, as nearly
as reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the Preferred Stock. The
Company shall not effect any such consolidation, merger or sale unless
prior to or simultaneously with the consummation thereof the successor
corporation or purchaser, as the case may be, shall assume by written
instrument the obligation to deliver to the holder of the Preferred Stock
such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder is entitled to receive.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation but will at all times in good faith assist in the carrying
out of all the provisions of this Section 2 and in the taking of all such
action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
Without limiting the generality of the foregoing, before taking any action
which would result in any adjustment to the Applicable Conversion Price
then in effect below the par value of the Common Stock, the Corporation
will take or cause to be taken any and all necessary corporate or other
action that may be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of such Common Stock upon
conversion. The taking of such corporate or other action shall be a
condition precedent to the Corporation's taking the action which would
result in such adjustment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Applicable Conversion Price pursuant to
this Section 2, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish
to each holder of Preferred Stock a certificate setting forth such
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adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i)
all such adjustments and readjustments theretofore made, (ii) the
Applicable Conversion Price at the time in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which at
such time would be received upon the conversion of Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is in the same amount per share
as cash dividends paid in previous quarters) or other distribution, the
Corporation shall mail to each holder of Preferred Stock at least 10 days
prior to the date thereof, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall reserve and at all
times keep available out of its authorized but unissued Common Stock, free
from preemptive or other preferential rights, restrictions, reservations,
dedications, allocations, options, other warrants and other rights under
any stock option, conversion option or similar agreement, such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the Preferred Stock.
3. Voting Rights. Except as otherwise required by law, the holders of
Preferred Stock and the holders of the Common Stock shall be entitled to notice
of any stockholders' meeting and to vote together as a single class of capital
stock upon any matter submitted to a stockholder for a vote, on the following
basis:
(i) Holders of Common Stock shall have one vote per share; and
(ii) Holders of Preferred Stock shall have that number of votes per
share that is equal to the number of shares of Common Stock into which each
such share of Preferred Stock held by such holder is convertible at the
time of such vote.
4. Dividend Rights. The holders of Preferred Stock shall be entitled to
receive each year out of any assets of the Corporation available for dividends
pursuant to the laws of the Sate of Delaware, preferential dividends at the rate
of 8% of the par value thereof per annum, and no more, payable quarterly in
arrears, before any dividends shall be declared or paid upon or set apart for
any other capital stock of the Corporation for such fiscal year of the
Corporation. Such dividends shall be cumulative.
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5. Redemption of Preferred Stock
(a) Conditions. The shares of Preferred Stock may be redeemed as follows:
(i) any holder of Preferred Stock shall have the right, on or after a
Redemption Event (as hereinafter defined), to compel the Corporation to
redeem any or all of the shares of Preferred Stock held by such holder; and
(ii) the original holder of Preferred Stock shall have the right, at
any time on or after August 21, 1999, to compel the Corporation to redeem
any or all of the shares of Preferred Stock held by such original holder.
The redeeming holder or the Corporation shall give written notice to the
Corporation or the holder, as the case may be, at least thirty (30) days prior
to the requested date of redemption (the "Redemption Date").
Redemption shall only be permitted to the extent that it is permitted under
the General Corporation Law of the State of Delaware. A notice of redemption
shall state the number of shares of Preferred Stock to be redeemed. The
Corporation shall, to the fullest extent permitted by law, do all things
necessary to redeem the Preferred Stock and make the payments therefor required
by this Section 5.
If in any given year in which redemption is requested sufficient funds are
not legally available for such redemption on the Redemption Date to redeem all
of the shares of Preferred Stock then due to be redeemed, any and all such
unredeemed shares shall be carried forward and redeemed together with other
shares of Preferred Stock that are due to be redeemed, at such time and to the
extent that funds of the Corporation are legally available therefor. The shares
of Preferred Stock that are subject to redemption but that have not been
redeemed and as to which the Redemption Price is not paid or set aside due to
insufficient legally available funds shall continue to be entitled to the
dividend, conversion and other rights, preferences and privileges of the
Preferred Stock until such shares have been redeemed and the Redemption Price
has been paid or otherwise set aside with respect thereto. The number of shares
to be redeemed by any holder which has requested redemption on a Redemption Date
or as to which the Corporation has given a notice of redemption shall be
determined by multiplying such amount requested to be redeemed by a fraction,
the numerator of which is the aggregate number of shares to be
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redeemed on such Redemption Date by all holders and the denominator of which is
the aggregate number of shares requested to be redeemed on such Redemption Date
by all holders or the Corporation, as the case may be.
(b) Redemption Price. The price at which such shares shall be redeemed
(the "Redemption Price") shall be the price equal to the greater of (i)
$100 per share plus twenty-five percent (25%), compounded annually, for
each year or part thereof between the Original Issue Date (as defined in
Section 2(d)(i)(2)) and the Redemption Date, or (ii) the fair market value
of such shares being redeemed as determined in a manner that is mutually
agreed as acceptable by the Corporation and the holder or holders of more
than fifty percent (50%) of the shares of Preferred being redeemed or, if
no agreement is reached as to an acceptable manner within thirty (30) days
of such Redemption Date, by a nationally recognized investment banking firm
that is mutually agreed to by the corporation and the holder or holders of
more than fifty percent (50%) of the shares of Preferred being redeemed
plus, in each case, an amount equal to all unpaid dividends payable in
accordance with Section 5 on each share of Preferred Stock to be redeemed.
(c) Notice. Notice of any requested redemption shall be given by
certified or registered mail (return receipt requested), postage prepaid.
Any notice given by the Corporation shall be addressed to each holder at
the address as it appears on the stock transfer books of the Corporation
and shall specify the Redemption Date and the number of shares requested to
be redeemed. On or after the Redemption Date as specified in any notice,
the holder shall surrender his certificate for the number of shares to be
redeemed as stated in the notice to or from the Corporation. If less than
all of the shares represented by such certificates are redeemed, a new
certificate shall forthwith be issued for the unredeemed shares.
(d) Dividends and Conversion After Redemption. From and after the
Redemption Date, no shares of the Preferred Stock to be redeemed on the
Redemption Date shall be entitled to any further accrual of any dividends
pursuant to Section 4 or to the conversion provisions set forth in Section
2.
(e) Redemption Event. The term "Redemption Event" as used herein shall
mean the occurrence of any of the following events:
(i) If the Corporation at any time during which the original
holder holds any equity securities issued by the Corporation that are
not registered and freely saleable to the public, fails to maintain a
Connecticut Presence (defined below); or
(ii) If, at any time before the closing of a public offering
registered under the Securities Act of 1933, as amended, and the
trading of securities issued by the Corporation on any United States
securities exchange or the
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quotation of such securities on the National Association of Securities
Dealers automated quotation system
(1) a Change of Control (defined below) occurs; or
(2) the Corporation sells a substantial part of its assets
or business to a third party (whether by a sale of assets,
exclusive license or otherwise.
(iii) The term "Connecticut Presence" shall mean the
Corporation's (or its successor's) and each of the Corporation's
subsidiaries':
(1) maintaining its principal place of business in
Connecticut,
(2) basing a majority of its employees in Connecticut,
(3) conducting a majority of its operations in Connecticut,
and
(4) maintaining its principal bank accounts in the State of
Connecticut.
(iv) The term "Change in Control" shall mean if (1) the
Corporation consolidates or merges with or into another corporation,
or conveys all or substantially all of its assets to another
corporation, unless, upon consummation of any consolidation or merger
or sale of assets, the holders of voting securities of the Corporation
are directly or indirectly greater than 50% of the voting power to
elect directors of the consolidated or surviving or acquiring
corporation, or (2) another person or entity not a stockholder of the
Corporation on July 31, 1996 acquires Common Stock (or securities
convertible into Common Stock or exercisable therefor) representing
more than 50% of the Corporation's outstanding Common Stock (on a
fully diluted basis), or (3) exclusively licenses its principal
intellectual property to another person.
6. Residual Rights. All rights accruing to the outstanding shares of
capital stock of the Corporation not expressly provided for to the contrary
herein shall be vested in the Common Stock.
FIFTH: The name and the mailing address of the incorporator are as follows:
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Name Mailing Address
---- ---------------
Brian O'Connor One Atlantic Street
Stamford, CT 06901
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of creditors, and/or of
the stockholders or class of creditors, and/or the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of directors
need be by written ballot.
2. After the original or other Bylaws of the Corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the Corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
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<PAGE>
Corporation may be exercised by the Board of Directors of the Corporation;
provided, however, that any provision for the classification of directors
of the Corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by
the stockholders entitled to vote of the Corporation unless provisions for
such classification shall be set forth in this Certificate of
Incorporation.
3. Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the Corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the Certificate of Incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of Section 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented.
TENTH: The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
ELEVENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article ELEVENTH.
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TWELFTH: This amended and restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware, as amended and the
undersigned hereby certifies that the amendments contained herein have been duly
adopted by a majority of the stockholders of the Corporation and the unanimous
vote of the Board of Directors of the Corporation, and written notice has been
given as provided in Section 228 of the General Corporation Law of Delaware, as
amended.
Signed under the penalties of perjury this 19th day of August, 1996.
/s/ Eugene D. Story
--------------------------
Eugene D. Story, President
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EXHIBIT 3.01(b)
CERTIFICATE OF AMENDMENT
of
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
of
MARINE MANAGEMENT SYSTEMS, INC.
Adopted in accordance with the
provisions of Section 242 of the
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Marine Management Systems, Inc.
2. The Amended and Restated Certificate of Incorporation of the Corporation
is hereby amended as follows:
(a) In Article Fourth B(2)(a), delete $1.99714 in the fourth line on page 3
and insert instead $2.70.
(b) In Article Fourth B(2)(c), delete $2.00 in the fourth line on page 3
and insert instead $2.70.
3. This amendment of the amended and restated certificate of incorporation
herein certified has been duly adopted in accordance with the provisions of
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware and the undersigned hereby certifies that this amendment has been duly
adopted by the unanimous written consent of the Board of Directors and by
written consent of the majority of Stockholders of the Corporation and notice
has been given as provided for in Section 228 of the General Corporation Law of
the State of Delaware as amended.
Signed under the penalties of perjury this 11th day of December, 1996.
/s/ Robert D. Ohmes
------------------------
Robert D. Ohmes
Executive Vice President
EXHIBIT 3.02
BYLAWS
OF
MARINE MANAGEMENT SYSTEMS, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
1. Certificates Representing Stock. Certificates representing stock in the
Corporation shall be signed by, or in the name of, the Corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation. Any or all of the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, and whenever the
Corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The Corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen or destroyed certificate, or his legal representative,
to give the Corporation a bond sufficient to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new certificate
or uncertificated shares.
2. Uncertificated Shares. Subject to any conditions imposed by the General
Corporation Law, the Board of Directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the Corporation shall be uncertificated shares. Within a reasonable
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time after the issuance or transfer of any uncertificated shares, the
Corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
3. Fractional Share Interests. The Corporation may, but shall not be
required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the Corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the condition that
they shall become void if not exchanged for certificates representing the full
shares or uncertificated full shares before a specified date, or subject to the
conditions that the shares for which scrip or warrants are exchangeable may be
sold by the Corporation and the proceeds thereof distributed to the holders of
scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. Stock Transfers. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the Corporation shall be made
only on the stock ledger of the Corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. Record Date for Stockholders. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
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on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by the General Corporation Law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion, or
exchange of stock, or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. If no record date
is fixed, the record date for determining stockholders of any such purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
6. Meaning of Certain Terms. As used herein in respect to the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the Corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
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<PAGE>
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the Certificate of Incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the Certificate of Incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the Certificate of Incorporation, except as any provision of law
may otherwise require.
7. Stockholder Meetings.
Time. The annual meeting shall be held on the date and at the time fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
Corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
Place. Annual meetings and special meetings shall be held at such place,
within or without the State of Delaware, as the directors may, from time to
time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the Corporation in the State of
Delaware.
Call. Annual meetings and special meetings may be called by the directors
or by any officer instructed by the directors to call the meeting.
Notice or Waiver of Notice. Written notice of all meetings shall be given,
stating the place, date, and hour of the meeting and stating the place within
the city or other municipality or community at which the list of stockholders of
the Corporation may be examined. The notice of an annual meeting shall state
that the meeting is called for the election of directors and for the transaction
of other business which may properly come before the meeting, and shall (if any
other action which could be taken at a special meeting is to be taken at such
annual meeting) state the purpose or purposes. The notice of a special meeting
shall in all instances state the purpose or purposes for which the meeting is
called. The notice of any meeting shall also include, or be accompanied by, any
additional statements, information, or documents prescribed by the General
Corporation Law. Except as otherwise provided by the General Corporation Law, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten days nor more than sixty days before the date of the meeting,
unless the lapse of the prescribed period of time shall have been waived, and
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<PAGE>
directed to each stockholder at his record address or at such other address
which he may have furnished by request in writing to the Secretary of the
Corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
Stockholder List. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote at any meeting of
stockholders.
Conduct of Meeting. Meetings of the stockholders shall be presided over by
one of the following officers in the order of seniority and if present and
acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
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Proxy Representation. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the Corporation generally.
Inspectors. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them.
Quorum. The holders of a majority of the outstanding shares of stock shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. The stockholders present may adjourn the meeting despite the absence
of a quorum.
Voting. Each share of stock shall entitle the holders thereof to one vote.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. Any other action shall be authorized by a majority of the
votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
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may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. Stockholder Action Without Meetings. Any action required by the General
Corporation Law to be taken at any annual or special meeting of stockholders, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Action taken pursuant to this paragraph shall be subject to the provisions of
Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. Functions and Definition. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors of the
Corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the Corporation would have if
there were no vacancies.
2. Qualifications and Number. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of seven persons. Thereafter, the
number of directors constituting the whole board shall be at least one. Subject
to the foregoing limitation and except for the first Board of Directors, such
number may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be nine. The number
of directors may be increased or decreased by action of the stockholders of the
Corporation.
3. Election and Term. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the Corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
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in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. Meetings.
Time. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
Place. Meetings shall be held at such place within or without the State of
Delaware as shall be fixed by the Board.
Call. No call shall be required for regular meetings for which the time and
place have been fixed. Special meetings may be called by or at the direction of
the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, or
the President, or of a majority of the directors in the office.
Notice or Actual or Constructive Waiver. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
Quorum and Action. A majority of the whole Board shall constitute a quorum
except when a vacancy or vacancies prevents such majority, whereupon a majority
of the directors in office shall constitute a quorum, provided, that such
majority shall constitute at least one-third of the whole Board. A majority of
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the directors is present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
Chairman of the Meeting. The Chairman of the Board, if any, and if present
and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the
Board, if any, and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. Removal of Directors. Except as may otherwise be provided by the General
Corporation Law, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors.
6. Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the Corporation to be
affixed to all papers which may require it.
7. Written Action. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
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ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a President, a Secretary,
a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers with such
titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the Corporation shall have such authority and perform such
duties in the management and operation of the Corporation as shall be prescribed
in the resolutions of the Board of Directors designating and choosing such
officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the Corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall
prescribe.
ARTICLE V
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FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of the
Bylaws of Marine Management Systems, Inc., a Delaware corporation, as in effect
on the date hereof.
Dated: November 30, 1995
/s/ Robert D. Ohmes
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Secretary
(SEAL)
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Exhibit 4.03
MARINE MANAGEMENT SYSTEMS, INC.
a Delaware corporation
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Warrant Agent
and
WHALE SECURITIES CO., L.P.
Underwriter
WARRANT AGREEMENT
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Table of Contents
Section Page
1 Appointment of Warrant Agent ................... 1
2 Form of Warrant ............................... 2
3 Countersignature and Registration .............. 3
4 Transfers and Exchanges ........................ 3
5 Exercise of Warrants; Payment of Warrant
Solicitation Fee ............................ 4
6 Payment of Taxes ............................... 8
7 Mutilated or Missing Warrants .................. 9
8 Reservation of Common Stock .................... 9
9 Warrant Price; Adjustments ..................... 11
10 Fractional Interest ............................ 18
11 Notices to Warrantholders ...................... 18
12 Disposition of Proceeds on Exercise of
Warrants ....................................... 20
13 Redemption of Warrants ......................... 21
14 Merger or Consolidation or Change of Name
of Warrant Agent ............................... 21
15 Duties of Warrant Agent ........................ 22
16 Change of Warrant Agent ........................ 26
17 Identity of Transfer Agent ..................... 27
18 Notices ........................................ 27
19 Supplements and Amendments ..................... 29
20 New York Contract .............................. 29
21 Benefits of this Agreement ..................... 30
22 Successors ..................................... 30
Exhibit A - Form of Warrant ....................
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WARRANT AGENT AGREEMENT dated as of____, 1997, by and among
Marine Management Systems, Inc., a Delaware corporation (the "Company"), Whale
Securities Co., L.P. (the "Underwriter") and American Stock Transfer & Trust
Company, as warrant agent (hereinafter called the "Warrant Agent").
WHEREAS, the Company proposes to issue and sell to the public
up to 1,380,000 shares of the common stock of the Company, par value $.002 per
share (hereinafter, together with the stock of any other class to which such
shares may hereafter have been changed, called "Common Stock"), and up to
1,380,000 Common Stock Purchase Warrants (the "Warrants");
WHEREAS, each Warrant will entitle the holder to pur-
chase one share of Common Stock;
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, registration, transfer, exchange and exercise of the
Warrants;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as Warrant Agent for the Company in accordance
with the instructions hereinafter set forth in this Agreement, and the Warrant
Agent hereby accepts such appointment.
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Section 2. Form of Warrant. The text of the Warrants and of
the form of election to purchase Common Stock to be printed on the reverse
thereof shall be substantially as set forth in Exhibit A attached hereto. Each
Warrant shall entitle the registered holder thereof to purchase one share of
Common Stock at a purchase price of Five Dollars ($5.00), at any time from
___________, 1998 until 5:00 p.m. Eastern time, on __________, 2002 (the
"Warrant Exercise Period"). The warrant price and the number of shares of Common
Stock issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chief Executive Officer, President or Vice President of
the Company, attested to by the manual or facsimile signature of the present or
any future Secretary or Assistant Secretary of the Company.
Warrants shall be dated as of the issuance by the Warrant
Agent either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration dates of the Warrants
fall on a Saturday or Sunday, or on a legal holiday on which the New York Stock
Exchange is closed, then the Warrants shall expire at 5:00 p.m. Eastern time on
the next succeeding business day.
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Section 3. Countersignature and Registration. The Warrant
Agent shall maintain books for the transfer and registration of the Warrants.
Upon the initial issuance of the Warrants, the Warrant Agent shall issue and
register the Warrants in the names of the respective holders thereof. The
Warrants shall be countersigned manually or by facsimile by the Warrant Agent
(or by any successor to the Warrant Agent then acting as warrant agent under
this Agreement) and shall not be valid for any purpose unless so countersigned.
Warrants may, however, be so countersigned by the Warrant Agent (or by its
successor as Warrant Agent) and be delivered by the Warrant Agent,
notwithstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature or delivery.
Section 4. Transfers and Exchanges. The Warrant Agent shall
transfer, from time to time, any outstanding Warrants upon the books to be
maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant shall be issued to the
transferee and the surrendered Warrant shall be cancelled by the Warrant Agent.
Warrants so cancelled shall be delivered by the Warrant Agent to the Company
from time to time upon request. Warrants may be exchanged at the option of the
holder thereof, when sur-
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rendered at the office of the Warrant Agent, for another Warrant, or other
Warrants of different denominations of like tenor and representing in the
aggregate the right to purchase a like number of shares of Common Stock.
Section 5. Exercise of Warrants; Payment of Warrant
Solicitation Fee.
(a) Subject to the provisions of this Agreement, each
registered holder of Warrants shall have the right, which may be exercised
commencing at the opening of business on the first day of the Warrant Exercise
Period, to purchase from the Company (and the Company shall issue and sell to
such registered holder of Warrants) the number of fully paid and non-assessable
shares of Common Stock specified in such Warrants upon surrender of such
Warrants to the Company at the office of the Warrant Agent, with the form of
election to purchase on the reverse thereof duly filled in and signed, and upon
payment to the Company of the warrant price, determined in accordance with the
provisions of Sections 9 and 10 of this Agreement, for the number of shares of
Common Stock in respect of which such Warrants are then exercised. Payment of
such warrant price shall be made in cash or by certified check or bank draft to
the order of the Company. Subject to Section 6, upon such surrender of Warrants
and payment of the warrant price, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
registered holder of
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such Warrants and in such name or names as such registered holder may designate,
a certificate or certificates for the number of full shares of Common Stock so
purchased upon the exercise of such Warrants. Such certificate or certificates
shall be deemed to have been issued, and any person so designated to be named
therein shall be deemed to have become a holder of record of such shares of
Common Stock, as of the date of the surrender of such Warrants and payment of
the warrant price as aforesaid. The rights of purchase represented by the
Warrants shall be exercisable, at the election of the registered holders
thereof, either as an entirety or from time to time for a portion of the shares
specified therein and, in the event that any Warrant is exercised in respect of
less than all of the shares of Common Stock specified therein at any time prior
to the date of expiration of the Warrants, a new Warrant or Warrants will be
issued to the registered holder for the remaining number of shares of Common
Stock specified in the Warrant so surrendered, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrants
pursuant to the provisions of this Section and of Section 3 of this Agreement
and the Company, whenever requested by the Warrant Agent, will supply the
Warrant Agent with Warrants duly executed on behalf of the Company for such
purpose. Anything in the foregoing to the contrary notwithstanding, no Warrant
will be exercisable unless at the time of exercise the Company has filed with
the Securities
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and Exchange Commission a registration statement under the Securities Act of
1933, as amended (the "Act"), covering the shares of Common Stock issuable upon
exercise of such Warrant and such shares have been so registered or qualified or
deemed to be exempt under the securities laws of the state of residence of the
holder of such Warrant. The Company shall use its best efforts to have all
shares so registered or qualified on or before the date on which the Warrants
become exercisable.
(b) If at the time of exercise of any Warrant after
________, 1998 (i) the market price of the Company's Common Stock is equal to or
greater than the then purchase price of the Warrant, (ii) the exercise of the
Warrant is solicited by the Underwriter at such time while the Underwriter is a
member of the National Association of Securities Dealers, Inc. ("NASD"), (iii)
the Warrant is not held in a discretionary account, (iv) disclosure of the
compensation arrangement is made in documents provided to the holders of the
Warrants; and (v) the solicitation of the exercise of the Warrant is not in
violation of Rule 10b-6 (as such rule or any successor rule may be in effect as
of such time of exercise) promulgated under the Securities Exchange Act of 1934,
then the Underwriter shall be entitled to receive from the Company upon exercise
of each of the Warrant(s) so exercised a fee of five percent (5%) of the
aggregate price of the Warrants so exercised (the "Exercise
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Fee"). The procedures for payment of the warrant solicitation fee are set forth
in Section 5(c) below.
(c) (i) Within five (5) days of the last day of each month
commencing with _______, 1998, the Warrant Agent will notify the Underwriter of
each Warrant Certificate which has been properly completed for exercise by
holders of Warrants during the last month. The Company and Warrant Agent shall
determine, in their sole and absolute discretion, whether a Warrant Certificate
has been properly completed. The Warrant Agent will provide the Underwriter with
such information, in connection with the exercise of each Warrant, as the
Underwriter shall reasonably request.
(ii) The Company hereby authorizes and instructs the
Warrant Agent to deliver to the Underwriter the Exercise Fee promptly after
receipt by the Warrant Agent from the Company of a check payable to the order of
the Underwriter in the amount of the Exercise Fee. In the event that an Exercise
Fee is paid to the Underwriter with respect to a Warrant which the Company or
the Warrant agent determines is not properly completed for exercise or in
respect of which the Underwriter is not entitled to an Exercise Fee, the
Underwriter will promptly return such Exercise Fee to the Warrant Agent which
shall forthwith return such fee to the Company.
The Underwriter and the Company may at any time, after
____________, 1998, and during business hours, examine the
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records of the Warrant Agent, including its ledger of original Warrant
certificates returned to the Warrant Agent upon exercise of Warrants.
Notwithstanding any provision to the contrary, the provisions of paragraphs 5(b)
and 5(c) may not be modified, amended or deleted without the prior written
consent of the Underwriter.
Section 6. Payment of Taxes. The Company will pay any
documentary stamp taxes attributable to the initial issuance of Common Stock
issuable upon the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of any certificates of shares of
Common Stock in a name other than that of the registered holder of Warrants in
respect of which such shares are issued, and in such case neither the Company
nor the Warrant Agent shall be required to issue or deliver any certificate for
shares of Common Stock or any Warrant until the person requesting the same has
paid to the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid.
Section 7. Mutilated or Missing Warrants. In case any of the
Warrants shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the Warrant lost, stolen or
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destroyed, a new Warrant of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to the Company and the
Warrant Agent of such loss, theft or destruction and, in case of a lost, stolen
or destroyed Warrant, indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrants shall also comply with such other
reasonable regulations and pay such reasonable charges as the Company or the
Warrant Agent may prescribe.
Section 8. Reservation of Common Stock. There have been
reserved, and the Company shall at all times keep reserved, out of the
authorized and unissued shares of Common Stock, a number of shares of Common
Stock sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the transfer agent for the shares of Common
Stock and every subsequent transfer agent for any shares of the Company's Common
Stock issuable upon the exercise of any of the rights of purchase aforesaid are
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares of Common Stock as shall be required for such
purpose. The Company agrees that all shares of Common Stock issued upon exercise
of the Warrants shall be, at the time of delivery of the certificates of such
shares, validly issued and outstanding, fully paid and non-assessable and listed
on any national securities exchange upon which the other shares of Common Stock
are then listed. So long as any unexpired Warrants remain outstanding, the
Company will
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file such post-effective amendments to the registration statement (Form SB-2,
Registration No. 333-________) (the "Registration Statement") filed pursuant to
the Act with respect to the Warrants (or other appropriate registration
statements or post-effective amendment or supplements) as may be necessary to
permit it to deliver to each person exercising a Warrant, a prospectus meeting
the requirements of Section 10(a)(3) of the Act and otherwise complying
therewith, and will deliver such a prospectus to each such person. To the extent
that during any period it is not reasonably likely that the Warrants will be
exercised, due to market price or otherwise, the Company need not file such a
post-effective amendment during such period. The Company will keep a copy of
this Agreement on file with the transfer agent for the shares of Common Stock
and with every subsequent transfer agent for any shares of the Company's Common
Stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is irrevocably authorized to requisition from time
to time from such transfer agent stock certificates required to honor
outstanding Warrants. The Company will supply such transfer agent with duly
executed stock certificates for that purpose. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be cancelled by the Warrant Agent
and shall thereafter be delivered to the Company, and such cancelled Warrants
shall constitute sufficient evidence of the number of shares of Common Stock
which have been issued upon the exercise
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of such Warrants. Promptly after the date of expiration of the Warrants, the
Warrant Agent shall certify to the Company the total aggregate amount of
Warrants then outstanding, and thereafter no shares of Common Stock shall be
subject to reservation in respect of such Warrants which shall have expired.
Section 9. Warrant Price; Adjustments.
(a) The warrant price at which Common Stock shall
be purchasable upon the exercise of the Warrants shall be $5.00 per share or
after adjustment, as provided in this Section, shall be such price as so
adjusted (the "Warrant Price").
(b) The Warrant Price shall be subject to adjust-
ment from time to time as follows:
(i) In case the Company shall at any time
after the date hereof pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock, then upon such dividend or distribution
the Warrant Price in effect immediately prior to such dividend or distribution
shall forthwith be reduced to a price determined by dividing:
(A) an amount equal to the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution multiplied by the Warrant Price in effect immediately prior to
such dividend or distribution, by
(B) the total number of shares of
Common Stock outstanding immediately after such issuance or sale.
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For the purposes of any computation to be
made in accordance with the provisions of this Section 9(b)(i), the following
provisions shall be applicable: Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive such dividend or
other distribution.
(ii) In case the Company shall at any time
subdivide or combine the outstanding Common Stock, the Warrant Price shall
forthwith be proportionately decreased in the case of subdivision or increased
in the case of combination to the nearest one cent. Any such adjustment shall
become effective at the time such subdivision or combination shall become
effective.
(iii) Within a reasonable time after the
close of each quarterly fiscal period of the Company during which the Warrant
Price has been adjusted as herein provided, the Company shall:
(A) file with the Warrant Agent a
certificate signed by the Chief Executive Officer, President or Vice President
of the Company and by the Treasurer or Assistant Treasurer or the Secretary or
an Assistant Secretary of the Company, showing in detail the facts requiring all
such adjustments occurring during such period and the Warrant Price after each
such adjustment; and
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(B) the Warrant Agent shall have no
duty with respect to any such certificate filed with it except to keep the same
on file and available for inspection by holders of Warrants during reasonable
business hours, and the Warrant Agent may conclusively rely upon the latest
certificate furnished to it hereunder. The Warrant Agent shall not at any time
be under any duty or responsibility to any holder of a Warrant to determine
whether any facts exist which may require any adjustment of the Warrant Price,
or with respect to the nature or extent of any adjustment of the Warrant Price
when made, or with respect to the method employed in making any such adjustment,
or with respect to the nature or extent of the property or securities
deliverable hereunder. In the absence of a certificate having been furnished,
the Warrant Agent may conclusively rely upon the provisions of the Warrants with
respect to the Common Stock deliverable upon the exercise of the Warrants and
the applicable Warrant Price thereof.
(iv) Notwithstanding anything contained herein to the
contrary, no adjustment of the Warrant Price shall be made if the amount of such
adjustment shall be less than $.05, but in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time and together with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount to not less than $.02.
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(v) In the event that the number of outstanding
shares of Common Stock is increased by a stock dividend payable in Common Stock
or by a subdivision of the outstanding Common Stock, then, from and after the
time at which the adjusted Warrant Price becomes effective pursuant to
Subsection (b) of this Section by reason of such dividend or subdivision, the
number of shares of Common Stock issuable upon the exercise of each Warrant
shall be increased in proportion to such increase in outstanding shares. In the
event that the number of shares of Common Stock outstanding is decreased by a
combination of the outstanding Common Stock, then, from and after the time at
which the adjusted Warrant Price becomes effective pursuant to this Section 9(b)
by reason of such combination, the number of shares of Common Stock issuable
upon the exercise of each Warrant shall be decreased in proportion to such
decrease in the outstanding shares of Common Stock.
(vi) In case of any reorganization or reclassifi-
cation of the outstanding Common Stock (other than a change in par value, or
from par value to no par value, or as a result of a subdivision or combination),
or in case of any consolidation of the Company with, or merger of the Company
into, another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding Common Stock), or in case of any sale or
conveyance to another corporation of the property of
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the Company as an entirety or substantially as an entirety, the holder of each
Warrant then outstanding shall thereafter have the right to purchase the kind
and amount of shares of Common Stock and other securities and property
receivable upon such reorganization, reclassification, consolidation, merger,
sale or conveyance by a holder of the number of shares of Common Stock which the
holder of such Warrant shall then be entitled to purchase; such adjustments
shall apply with respect to all such changes occurring between the date of this
Warrant Agreement and the date of exercise of such Warrant.
(vii) Subject to the provisions of this Section 9, in
case the Company shall, at any time prior to the exercise of the Warrants, make
any distribution of its assets to holders of its Common Stock as a liquidating
or a partial liquidating dividend, then the holder of Warrants who exercises its
Warrants after the record date for the determination of those holders of Common
Stock entitled to such distribution of assets as a liquidating or partial
liquidating dividend shall be entitled to receive for the Warrant Price per
Warrant, in addition to each share of Common Stock, the amount of such
distribution (or, at the option of the Company, a sum equal to the value of any
such assets at the time of such distribution as determined by the Board of
Directors of the Company in good faith), which would have been payable to such
holder had he been the holder of record of the Common Stock receivable upon
exercise of its Warrant on
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the record date for the determination of those entitled to such distribution.
(viii) In case of the dissolution, liquidation or
winding up of the Company, all rights under the Warrants shall terminate on a
date fixed by the Company, such date to be no earlier than ten (10) days prior
to the effectiveness of such dissolution, liquidation or winding up and not
later than five (5) days prior to such effectiveness. Notice of such termination
of purchase rights shall be given to the last registered holder of the Warrants,
as the same shall appear on the books of the Company maintained by the Warrant
Agent, by registered mail at least thirty (30) days prior to such termination
date.
(ix) In case the Company shall, at any time prior to
the expiration of the Warrants and prior to the exercise thereof, offer to the
holders of its Common Stock any rights to subscribe for additional shares of any
class of the Company, then the Company shall give written notice thereof to the
last registered holder thereof not less than thirty (30) days prior to the date
on which the books of the Company are closed or a record date is fixed for the
determination of the stockholders entitled to such subscription rights. Such
notice shall specify the date as to which the books shall be closed or record
date fixed with respect to such offer of subscription and the right of the
holder thereof to participate in such offer of subscription shall termi-
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nate if the Warrant shall not be exercised on or before the date of such closing
of the books or such record date.
(x) Any adjustment pursuant to the aforesaid pro-
visions of this Section 9 shall be made on the basis of the number of shares of
Common Stock which the holder thereof would have been entitled to acquire by the
exercise of the Warrant immediately prior to the event giving rise to such
adjustment.
(xi) Irrespective of any adjustments in the
Warrant Price or the number or kind of shares purchasable upon exercise of the
Warrants, Warrants previously or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Warrant Agreement.
(xii) The Company may retain a firm of
independent public accountants (who may be any such firm regularly employed by
the Company) to make any computation required under this Section 9, and any
certificate setting forth such computation signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section 9.
(xiii) If at any time, as a result of an
adjustment made pursuant to Section 9(b)(vi) above, the holders of a Warrant or
Warrants shall become entitled to purchase any securities other than shares of
Common Stock, thereafter the number of such securities so purchasable upon
exercise of each Warrant and the Warrant Price for such shares shall be subject
to
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adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Sections 9(b)(ii) through (v).
Section 10. Fractional Interest. The Warrants may only be
exercised to purchase full shares of Common Stock and the Company shall not be
required to issue fractions of shares of Common Stock on the exercise of
Warrants. However, if a Warrant holder exercises all Warrants then owned of
record by it and such exercise would result in the issuance of a fractional
share, the Company will pay to such Warrant holder, in lieu of the issuance of
any fractional share otherwise issuable, an amount of cash based on the market
value of the Common Stock of the Company on the last trading day prior to the
exercise date.
Section 11. Notices to Warrantholders.
(a) Upon any adjustment of the Warrant Price and
the number of shares of Common Stock issuable upon exercise of a Warrant, then
and in each such case the Company shall give written notice thereof to the
Warrant Agent, which notice shall state the Warrant Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of a Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company shall also mail such notice to the holders of
the Warrants at their addresses appearing in the
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Warrant register. Failure to give or mail such notice, or any defect therein,
shall not affect the validity of the adjustments.
(b) In case at any time:
(i) the Company shall pay dividends payable
in stock upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock; or
(ii) the Company shall offer for subscrip-
tion pro rata to the holders of its Common Stock any additional
shares of stock of any class or other rights; or
(iii) there shall be any capital reorgani-
zation or reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale or substantially all of its assets to,
another corporation; or
(iv) there shall be a voluntary or involun-
tary dissolution, liquidation or winding up of the Company; then in any one or
more of such cases, the Company shall give written notice in the manner set
forth in Section 11(a) of the date on which (A) a record shall be taken for such
dividend, distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their
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Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up as the case may be. Such notice shall be given at
least thirty (30) days prior to the action in question and not less than thirty
(30) days prior to the record date in respect thereof. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of any
of the matters set forth in this Section 11(b).
(c) The Company shall cause copies of all financial
statements and reports, proxy statements and other documents that are sent to
its stockholders to be sent by first-class mail, postage prepaid, on the date of
mailing to such stockholders, to each registered holder of Warrants at his
address appearing in the warrant register as of the record date for the
determination of the stockholders entitled to such documents.
Section 12. Disposition of Proceeds on Exercise of Warrants.
(i) The Warrant Agent shall promptly forward to
the Company all monies received by the Warrant Agent for the purchase of shares
of Common Stock through the exercise of such Warrants; provided, however, that
the Warrant Agent may retain an amount equal to the Exercise Fee, if any, until
the Company has satisfied its obligations under Section 5(c)(ii).
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(ii) The Warrant Agent shall keep copies of this
Agreement available for inspection by holders of Warrants during normal business
hours.
Section 13. Redemption of Warrants. The Warrants are
redeemable by the Company upon the consent of the Underwriter, in whole or in
part, on not less than thirty (30) days' prior written notice at a redemption
price of $.10 per Warrant at any time commencing _________, 1998; provided that
(i) the closing bid quotation of the Common Stock on all twenty (20) trading
days ending on the third day prior to the day on which the Company gives notice
of redemption has been at least 150% of the then effective exercise price of the
Warrants (the "Target Redemption Price") and (ii) the Warrants are currently
exercisable. The redemption notice shall be mailed to the holders of the
Warrants at their addresses appearing in the Warrant register. Holders of the
Warrants will have exercise rights until the close of business on the date fixed
for redemption.
Section 14. Merger or Consolidation or Change of Name of
Warrant Agent. Any corporation or company which may succeed to the corporate
trust business of the Warrant Agent by any merger or consolidation or otherwise
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible to serve as a successor Warrant
Agent under the provisions of Section 16
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of this Agreement. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, any of the Warrants shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent and deliver such
Warrants so countersigned.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned. In all such cases such Warrants
shall have the full force provided in the Warrants and in the Agreement.
Section 15. Duties of Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Warrants, by their acceptance thereof, shall be bound:
(a) The statements of fact and recitals contained
herein and in the Warrants shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except such as describe the Warrant Agent or action taken or to be taken by it.
The Warrant Agent assumes no responsibility with respect to the distribution of
the Warrants except as herein expressly provided.
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<PAGE>
(b) The Warrant Agent shall not be responsible
for any failure of the Company to comply with any of the covenants in this
Agreement or in the Warrants to be complied with by the Company.
(c) The Warrant Agent may consult at any time
with counsel satisfactory to it (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any holder of any Warrant in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order, certificate
or other instrument believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant
Agent reasonable compensation for all services rendered by the Warrant Agent in
the execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done
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or omitted by the Warrant Agent in the execution of this Agreement except as a
result of the Warrant Agent's negligence, willful misconduct or bad faith.
(f) The Warrant Agent shall be under no obliga-
tion to institute any action, suit or legal proceeding or to take any other
action likely to involve expenses unless the Company or one or more registered
holders of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Warrants, as their respective
rights and interests may appear.
(g) The Warrant Agent and any stockholder, direc-
tor, officer, partner or employee of the Warrant Agent may buy, sell or deal in
any of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend
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money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as
agent and its duties shall be determined solely by the provisions hereof.
(i) The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys, agents or employees, and the
Warrant Agent shall not be answerable or accountable for any such attorneys,
agents or employees or for any loss to the Company resulting from such neglect
or misconduct, provided reasonable care had been exercised in the selection and
continued employment thereof.
(j) Any request, direction, election, order or
demand of the Company shall be sufficiently evidenced by an instrument signed in
the name of the Company by its Chief Executive Officer, President or a Vice
President or its Secretary or an Assistant Secretary or its Treasurer or an
Assistant Treasurer (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors may be
evidenced to the Warrant Agent by a copy thereof certified by the Secretary or
an Assistant Secretary of the Company.
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<PAGE>
Section 16. Change of Warrant Agent. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving to the
Company notice in writing, and to the holders of the Warrants notice by mailing
such notice to the holders at their addresses appearing on the Warrant register,
of such resignation, specifying a date when such resignation shall take effect.
The Warrant Agent may be removed by like notice to the Warrant Agent from the
Company and the like mailing of notice to the holders of the Warrants. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after such removal or after it has been notified in writing of such resignation
or incapacity by the resigning or incapacitated Warrant Agent or after the
Company has received such notice from a registered holder of a Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then
the registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under New York
or federal law. After appointment, the successor Warrant Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant
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Agent without further act or deed and the former Warrant Agent shall deliver and
transfer to the successor Warrant Agent all cancelled Warrants, records and
property at the time held by it hereunder, and execute and deliver any further
assurance or conveyance necessary for the purpose. Failure to file or mail any
notice provided for in this Section, however, or any defect therein, shall not
affect the validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
Section 17. Identity of Transfer Agent. Forthwith upon the
appointment of any transfer agent for the shares of Common Stock or of any
subsequent transfer agent for the shares of Common Stock or other shares of the
Company's Common Stock issuable upon the exercise of the rights of purchase
represented by the Warrants, the Company will file with the Warrant Agent a
statement setting forth the name and address of such transfer agent.
Section 18. Notices. Any notice pursuant to this Agreement to
be given by the Warrant Agent, or by the registered holder of any Warrant to the
Company, shall be sufficiently given if sent by first-class mail, postage
prepaid, addressed (until another is filed in writing by the Company with the
Warrant Agent) as follows:
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<PAGE>
Marine Management Systems, Inc.
470 West Avenue
Stamford, CT 06902
Attention: Eugene Story
and a copy thereof to:
Shipman & Goodwin LLP
One American Row
Hartford, CT 06103
Attention: Frank Marco, Esq.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder of any Warrant to the Warrant Agent shall be
sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Susan Silber
Any notice pursuant to this Agreement to be given by the
Warrant Agent or by the Company to the Underwriter shall be sufficiently given
if sent by first-class mail, postage prepaid, addressed (until another address
if filed in writing with the Warrant agent) as follows:
Whale Securities Co., L.P.
650 Fifth Avenue
New York, New York 10019
Attention: William G. Walters
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<PAGE>
and a copy thereof to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Robert J. Mittman, Esq.
Section 19. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement in order
to cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Agent may deem necessary or desirable and
which shall not be inconsistent with the provisions of the Warrants and which
shall not adversely affect the interest of the holders of Warrants.
Section 20. New York Contract. This Agreement and each Warrant
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and shall be construed in accordance with the laws of New York
applicable to agreements to be performed wholly within New York.
Section 21. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Warrant Agent and the registered holders of the Warrants any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be
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for the sole and exclusive benefit of the Company, the Warrant
Agent and the registered holders of the Warrants.
Section 22. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company, the Warrant Agent or the
Underwriter shall bind and inure to the benefit of their respective successors
and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
MARINE MANAGEMENT SYSTEMS, INC.
By:____________________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:____________________________________
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:___________________________________
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<PAGE>
EXHIBIT 4.04
WARRANT AGREEMENT dated as of __________, 1997 between Marine
Management Systems, Inc., a Delaware corporation (the "Company"), and Whale
Securities Co., L.P. (hereinafter referred to as the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter
120,000 warrants (the "Warrants") to purchase up to 120,000 (as such number may
be adjusted from time to time pursuant to Article 8 of this Warrant Agreement)
shares (the "Shares") of the common stock, par value $.002 per share, of the
Company (the "Common Stock") and up to 120,000 (as such number may be adjusted
from time to time pursuant to Article 8 of this Warrant Agreement) Common Stock
purchase warrants (the "Underlying Warrants"); and
WHEREAS, the Underwriter has agreed, pursuant to the
underwriting agreement (the "Underwriting Agreement") dated _____________, 1997
between the Underwriter and the Company, to act as the underwriter in connection
with the Company's proposed public offering (the "Public Offering") of 1,200,000
shares of Common Stock (the "Public Shares") at an initial public offering price
of $5.00 per Public Share and 1,200,000 warrants (the "Public Warrants") at an
initial public offering price of $.10 per Public Warrant; and
WHEREAS, the Warrants issued pursuant to this Agreement are
being issued by the Company to the Underwriter or to its designees who are
officers and partners of the Underwriter or to
<PAGE>
members of the selling group participating in the distribution of the Public
Shares and Public Warrants to the public in the Public Offering and/or their
respective directors, officers or partners (collectively, the "Designees"), in
consideration for, and as part of the Underwriter's compensation in connection
with, the Underwriter acting as the Underwriter pursuant to the Underwriting
Agreement;
NOW, THEREFORE, in consideration of the premises, the payment
by the Underwriter or its designees to the Company of One Hundred Thirty-Two
Dollars ($132.00), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant. The Underwriter and/or the Designees are hereby
granted the right to purchase, at any time until 5:00 P.M., New York City time,
on _________, 2002 (the "Warrant Exercise Term"), up to 120,000 fully-paid and
non-assessable Shares at an initial exercise price (subject to adjustment as
provided in Article 6 hereof) of $7.25 per Share and up to 120,000 Underlying
Warrants at an initial exercise price (subject to adjustment as provided in
Article 6 hereof) of $.145 per Underlying Warrant. The Underlying Warrants are
each exercisable to purchase one fully-paid and non-assessable share of Common
Stock (collectively, the "Underlying Warrant Shares") at a price of $7.25 per
Underlying Warrant Shares. The Underlying Warrants are exercisable at any time
commencing _________, 1998 until 5:00 P.M., Eastern time on ________, 2002. The
Holder (defined
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<PAGE>
hereafter) may purchase, upon exercise of the Warrants, either all or part of
the Shares or all or part of the Underlying Warrants or all or part of both. The
Shares and, except as provided in Article 13 hereof, the Underlying Warrants are
in all respects identical to the Public Shares and Public Warrants,
respectively, being sold to the public pursuant to the terms and provisions of
the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates delivered
and to be delivered pursuant to this Agreement (the "Warrant Certificates")
shall be, for the Warrants exercisable for the purchase of Underlying Shares, in
the form set forth in Exhibit A attached hereto and made a part hereof, and, for
the Warrants exercisable for the purchase of Underlying Warrants, in the form of
Exhibit B attached hereto and made a part hereof, each with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. Exercise of Warrants.
3.1. Cash Exercise. The Warrants initially are exercisable
at a price of $7.25 per Share purchased and $.145 per Underlying Warrant
purchased, payable in cash or by check to the order of the Company, or any
combination thereof, subject to adjustment as provided in Article 8 hereof. Upon
surrender of the Warrant Certificate(s) with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Shares and Underlying Warrants purchased, at the
Company's principal offices in Connecticut (currently located at 470 West
Avenue, Stamford,
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<PAGE>
Connecticut 06902) the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
Shares so purchased and/or a certificate or certificates for the Underlying
Warrants so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part (but not as to fractional Shares or fractional Underlying Warrants). In the
case of the purchase of less than all Shares or Underlying Warrants purchasable
under any Warrant Certificate, the Company shall cancel said Warrant Certificate
upon the surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the Shares or Underlying Warrants
purchasable thereunder.
3.2. Cashless Exercise. At any time during the
Warrant Exercise Term, the Holder may, at the Holder's option, exchange, in
whole or in part, the Warrants represented by such Holder's Warrant Certificate
which are exercisable for the purchase of Shares (a "Warrant Exchange"), into
the number of Shares determined in accordance with this Section 3.2, by
surrendering such Warrant Certificate at the principal office of the Company or
at the office of its transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrants to be so
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange
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<PAGE>
Date"). Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant Certificate of like tenor representing the Warrants
which were subject to the surrendered Warrant Certificate and not included in
the Warrant Exchange, shall be issued as of the Exchange Date and delivered to
the Holder within three (3) days following the Exchange Date. In connection with
any Warrant Exchange, the Holder shall be entitled to subscribe for and acquire
(i) the number of Shares (rounded to the next highest integer) which would, but
for such Warrant Exchange, than be issuable pursuant to the provisions of
Section 3.1 above upon the exercise of the Warrants specified by the Holder in
its Notice of Exchange (the "Total Share Number") less (ii) the number of Shares
equal to the quotient obtained by dividing (a) the product of the Total Share
Number and the existing Exercise Price per Share (as hereinafter defined) by (b)
the Market Price (as hereinafter defined) of a Public Share on the day preceding
the Warrant Exchange. "Market Price" at any date shall be deemed to be the last
reported sale price, or, in case no such reported sales takes place on such day,
the average of the last reported sale prices for the last three (3) trading
days, in either case as officially reported by the principal securities exchange
on which the Common Stock is listed or admitted to trading or as reported on the
Nasdaq National Market, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted in the Nasdaq National
Market, the closing bid price as furnished by (i) the National Association of
Securities Dealers, Inc. (the "NASD") through the
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<PAGE>
Nasdaq Stock Market Inc. ("NASDAQ") or (ii) a similar organization if NASDAQ is
no longer reporting such information.
4. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of
certificates for the Shares purchased and certificates for the Underlying
Warrants purchased, and upon the exercise of the Underlying Warrants, the
issuance of certificates for the Underlying Warrant Shares purchased, shall be
made forthwith (and in any event within three (3) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall (subject to the provisions of Article 5 hereof) be issued in the name of,
or in such names as may be directed by, the Holder thereof; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the Holder and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
The Warrant Certificates and the certificates representing the
Shares and the Underlying Warrants shall be executed on behalf of the Company by
the manual or facsimile signature of the present or any future Chairman or Vice
Chairman of the Board of Directors or Chief Executive Officer, President or Vice
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<PAGE>
President of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the present or any future Secretary
or Assistant Secretary of the Company. Warrant Certificates and certificates
representing the Underlying Warrants shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants,
certificates representing the Shares and the Underlying Warrants purchased, and
upon exercise, in whole or in part, of the Underlying Warrants, certificates
representing the Underlying Warrant Shares purchased (collectively, the "Warrant
Securities"), shall bear a legend substantially similar to the following:
"The securities represented by this certificate and the other
securities issuable upon exercise thereof have not been
registered for purposes of public distribution under the
Securities Act of 1933, as amended (the "Act"), and may not be
offered or sold except (i) pursuant to an effective
registration statement under the Act, (ii) to the extent
applicable, pursuant to Rule 144 under the Act (or any similar
rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Warrants. The Holder of a
Warrant Certificate, by the Holder's acceptance thereof, covenants and agrees
that the Warrants are
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<PAGE>
being acquired as an investment and not with a view to the distribution thereof,
and that the Warrants may not be sold, transferred, assigned, hypothecated or
otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to the Underwriter or to the Designees.
6. Price.
6.1. Initial and Adjusted Exercise Price. The initial
exercise price of each Warrant shall be $7.25 per Share and $.145 per Underlying
Warrant. The adjusted exercise price per Share and the adjusted exercise price
per Underlying Warrant shall be the prices which shall result from time to time
from any and all adjustments of the initial exercise price per Share or per
Underlying Warrant, as the case may be, in accordance with the provisions of
Article 8 hereof.
6.2. Exercise Price. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise price, depending
upon the context.
7. Registration Rights.
7.1. Registration Under the Securities Act of 1933. None
of the Warrants, the Shares, the Underlying Warrants, or the Underlying Warrant
Shares have been registered for purposes of public distribution under the
Securities Act of 1933, as amended (the "Act").
7.2. Registrable Securities. As used herein the term
"Registrable Security" means each of the Warrants, the Shares, the Underlying
Warrants, the Underlying Warrant Shares and any shares of Common Stock issued
upon any stock split or
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<PAGE>
stock dividend in respect of such Shares or Underlying Warrant Shares; provided,
however, that with respect to any particular Registrable Security, such security
shall cease to be a Registrable Security when, as of the date of determination,
(i) it has been effectively registered under the Act and disposed of pursuant
thereto, (ii) registration under the Act is no longer required for subsequent
public distribution of such security, or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Article 7.
7.3. Piggyback Registration. If, at any time during the
seven years following the effective date of the Public Offering, the Company
proposes to prepare and file one or more post-effective amendments to the
registration statement filed in connection with the Public Offering or any new
registration statement or post-effective amendments thereto covering equity or
debt securities of the Company, or any such securities of the Company held by
its shareholders (in any such case, other than in connection with a merger,
acquisition or pursuant to Form S-8 or successor form) (for purposes of this
Article 7, collectively, the "Registration Statement"), it will give written
notice of its
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<PAGE>
intention to do so by registered mail ("Notice"), at least thirty (30) business
days prior to the filing of each such Registration Statement, to all holders of
the Registrable Securities. Upon the written request of such a holder (a
"Requesting Holder"), made within twenty (20) business days after receipt of the
Notice, that the Company include any of the Requesting Holder's Registrable
Securities in the proposed Registration Statement, the Company shall, as to each
such Requesting Holder, use its best efforts to effect the registration under
the Act of the Registrable Securities which it has been so requested to register
("Piggyback Registration"), at the Company's sole cost and expense and at no
cost or expense to the Requesting Holders (except as provided in Section 7.5(b)
hereof).
Notwithstanding the provisions of this Section 7.3, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.3 (irrespective of whether any written request
for inclusion of Registrable Securities shall have already been made) to elect
not to file any such proposed Registration Statement, or to withdraw the same
after the filing but prior to the effective date thereof.
7.4. Demand Registration.
(a) At any time during the Warrant Exercise Term, any
"Majority Holder" (as such term is defined in Section 7.4(c) below) of the
Registrable Securities shall have the right (which right is in addition to the
piggyback registration rights provided for under Section 7.3 hereof),
exercisable by written notice to the Company (the "Demand Registration
Request"), to
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<PAGE>
have the Company prepare and file with the Securities and Exchange Commission
(the "Commission") on one occasion, at the sole expense of the Company (except
as provided in Section 7.5(b) hereof), a Registration Statement and such other
documents, including a prospectus, as may be necessary (in the opinion of both
counsel for the Company and counsel for such Majority Holder) in order to comply
with the provisions of the Act, so as to permit a public offering and sale of
the Registrable Securities by the holders thereof. The Company shall use its
best efforts to cause the Registration Statement to become effective under the
Act, so as to permit a public offering and sale of the Registrable Securities by
the holders thereof. Once effective, the Company will use its best efforts to
maintain the effectiveness of the Registration Statement until the earlier of
(i) the date that all of the Registrable Securities have been sold or (ii) the
date the holders thereof receive an opinion of counsel to the Company that all
of the Registrable Securities may be freely traded without registration under
the Act, under Rule 144(k) promulgated under the Act or otherwise.
(b) The Company covenants and agrees to give written
notice of any Demand Registration Request to all holders of the Registrable
Securities within ten (10) business days from the date of the Company's receipt
of any such Demand Registration Request. After receiving notice from the Company
as provided in this Section 7.4(b), holders of Registrable Securities may
request the Company to include their Registrable Securities in the Registration
Statement to be filed pursuant to
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<PAGE>
Section 7.4(a) hereof by notifying the Company of their decision to have such
securities included within ten (10) days of their receipt of the Company's
notice.
(c) The term "Majority Holder" as used in Section 7.4
hereof shall mean any holder or any combination of holders of Registrable
Securities, if included in such holders' Registrable Securities are that
aggregate number of shares of Common Stock (including Shares already issued,
Shares issuable pursuant to the exercise of outstanding Warrants, Underlying
Warrant Shares already issued and Underlying Warrant Shares issuable pursuant to
the exercise of outstanding Underlying Warrants) as would constitute a majority
of the aggregate number of shares of Common Stock (including Shares already
issued, Shares issuable pursuant to the exercise of outstanding Warrants,
Underlying Warrant Shares already issued and Underlying Warrant Shares issuable
pursuant to the exercise of outstanding Underlying Warrants) included in all the
Registrable Securities.
7.5. Covenants of the Company With Respect to Registration.
The Company covenants and agrees as follows:
(a) In connection with any registration under Section
7.4 hereof, the Company shall file the Registration Statement as expeditiously
as possible, but in any event no later than twenty (20) days following receipt
of any demand therefor, shall use its best efforts to have any such Registration
Statement declared effective at the earliest possible time, and shall furnish
each holder of Registrable Securities such number of prospectuses as shall
reasonably be requested.
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<PAGE>
(b) The Company shall pay all costs, fees and expenses
(other than underwriting fees, discounts and nonaccountable expense allowance
applicable to the Registrable Securities and fees and expenses of counsel
retained by the holders of Registrable Securities) in connection with all
Registration Statements filed pursuant to Sections 7.3 and 7.4(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, and blue sky fees and expenses.
(c) The Company will take all necessary action which
may be required in qualifying or registering the Registrable Securities included
in the Registration Statement, for offering and sale under the securities or
blue sky laws of such states as are reasonably requested by the holders of such
securities.
(d) The Company shall indemnify any holder of the
Registrable Securities to be sold pursuant to any Registration Statement and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such holder or underwriter or person deemed to be an
underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such
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<PAGE>
registration statement to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify the Underwriter
as set forth in Section 7 of the Underwriting Agreement and to provide for just
and equitable contribution as set forth in Section 8 of the Underwriting
Agreement.
(e) Any holder of Registrable Securities to be sold
pursuant to a registration statement, and such holder's successors and assigns,
shall severally, and not jointly, indemnify, the Company, its officers and
directors and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such holder, or such
holder's successors or assigns, for specific inclusion in such Registration
Statement to the same extent and with the same effect as the provisions pursuant
to which the Underwriter has agreed to indemnify the Company as set forth in
Section 7 of the Underwriting Agreement and to provide for just and equitable
contribution as set forth in Section 8 of the Underwriting Agreement.
(f) Nothing contained in this Agreement shall be
construed as requiring any holder to exercise the Warrants or the Underlying
Warrants held by such holder prior to
-14-
<PAGE>
the initial filing of any registration statement or the effectiveness thereof.
(g) If the Company shall fail to comply with the
provisions of this Article 7, the Company shall, in addition to any other
equitable or other relief available to the holders of Registrable Securities, be
liable for any or all incidental, special and consequential damages sustained by
the holders of Registrable Securities, requesting registration of their
Registrable Securities.
(h) The Company shall not permit the inclusion of any
securities other than the Registrable Securities to be included in any
Registration Statement filed pursuant to Section 7.4 hereof, without the prior
written consent of the Majority Holders, which consent shall not be unreasonably
withheld.
(i) The Company shall promptly deliver copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the Registration Statement to each holder of Registrable Securities
included for such registration in such Registration Statement pursuant to
Section 7.3 hereof or Section 7.4 hereof requesting such correspondence and
memoranda and to the managing underwriter, if any, of the offering in connection
with which such Holder's Registrable Securities are being registered and shall
permit each holder of Registrable Securities and such underwriter to do such
reasonable investigation, upon reasonable
-15-
<PAGE>
advance notice, with respect to information contained in or omitted from the
Registration Statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such holder
of Registrable Securities or underwriter shall reasonably request.
8. Adjustments of Exercise Price and Number of Securities.
The following adjustments apply to the Exercise Price of the Warrants with
respect to the Shares and the number of Shares purchasable upon exercise of the
Warrants. In the event the Exercise Price per Share and/or the number of Shares
so purchasable is adjusted, then the Exercise Price of the Warrants relating to
the Underlying Warrants and the number of Underlying Warrants purchasable
thereunder shall be adjusted in the same proportion.
8.1. Computation of Adjusted Price. In case the Company
shall at any time after the date hereof pay a dividend in shares of Common Stock
or make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such
-16-
<PAGE>
dividend or distribution multiplied by the Exercise Price in effect
immediately prior to such dividend or distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in
accordance with the provisions of this Section 8.1, the Common Stock issuable by
way of dividend or other distribution on any stock of the Company shall be
deemed to have been issued immediately after the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
8.2. Subdivision and Combination. In case the Company shall
at any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.3. Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Article 8,
the number of Shares issuable upon the exercise of each Warrant shall be
adjusted to the nearest full number by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number of
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
Notwithstanding the foregoing, in the case of adjustments to the exercise price
of the Warrants with respect to the Underlying Warrants and/or the number of
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<PAGE>
Underlying Warrants purchaseable upon exercise of the Warrants, if an event
occurs that results in an adjustment of the number and/or price of the shares of
Common Stock issuable upon exercise of the Public Warrants pursuant to Section 9
of the Warrant Agreement by and among the Company, the Underwriter and American
Stock Transfer & Trust Company dated as of ___________, 1997 ("Public Warrant
Agreement"), resulting in automatic adjustment in the number and/or price of the
Underlying Warrant Shares issuable upon exercise of the Underlying Warrants
pursuant to Section 8.6 hereof, then the adjustment provided for in this Section
8.3 shall not, in such instance, result in any further adjustment in the
aggregate number of shares of Common Stock ultimately issuable upon exercise of
the Underlying Warrants.
8.4. Reclassification, Consolidation, Merger, etc. In case
of any reclassification or change of the outstanding shares of Common Stock
(other than a change in par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holders shall thereafter have the
right to purchase the kind and number
-18-
<PAGE>
of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance as if the
Holders were the owners of both the Shares and the Underlying Warrant Shares
immediately prior to any such events, at a price equal to the product of (x) the
number of shares of Common Stock issuable upon exercise of the Holders' Warrants
and the Underlying Warrants and (y) the exercise prices for the Warrants and the
Underlying Warrants in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance as if such
Holders had exercised the Warrants and the Underlying Warrants.
8.5. Determination of Outstanding Common Shares. The number
of Common Shares at any one time outstanding shall include the aggregate number
of shares issued and the aggregate number of shares issuable upon the exercise
of options, rights, warrants and upon the conversion or exchange of convertible
or exchangeable securities.
8.6. Adjustment of Underlying Warrants' Exercise Price and
Securities Issuable Upon Exercise of Underlying Warrants. With respect to any of
the Underlying Warrants, whether or not the Warrants have been exercised and
whether or not the Warrants are issued and outstanding, the exercise price for,
and the number of, Underlying Warrant Shares issuable upon exercise of the
Underlying Warrants shall automatically be proportionately adjusted in
accordance with Section 9 of the Public Warrant Agreement, upon the occurrence
of any of the events described therein. Thereafter, until the next such
-19-
<PAGE>
adjustment or until otherwise adjusted in accordance with this Section 8, the
Underlying Warrants shall be exercisable at such adjusted exercise price and for
such adjusted number of Underlying Warrant Shares.
8.7. Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time prior to
the exercise of all Warrants make any distribution of its assets to holders of
its Common Stock as a liquidating or a partial liquidating dividend, then the
holder of Warrants who exercises its Warrants after the record date for the
determination of those holders of Common Stock entitled to such distribution of
assets as a liquidating or partial liquidating dividend shall be entitled to
receive for the Warrant Price per Warrant, in addition to each share of Common
Stock, the amount of such distribution (or, at the option of the Company, a sum
equal to the value of any such assets at the time of such distribution as
determined by the Board of Directors of the Company in good faith) which would
have been payable to such holder had he been the holder of record of the Common
Stock receivable upon exercise of his Warrant on the record date for the
determination of those entitled to such distribution. At the time of any such
dividend or distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this Subsection 8.7.
8.8. Subscription Rights for Shares of Common Stock or
Other Securities. In the case that the Company or an affiliate of the Company
shall at any time after the date hereof
-20-
<PAGE>
and prior to the exercise of all the Warrants issue any rights, warrants or
options to subscribe for shares of Common Stock or any other securities of the
Company or of such affiliate to all the shareholders of the Company, the Holders
of unexercised Warrants on the record date set by the Company or such affiliate
in connection with such issuance of rights, warrants or options shall be
entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise of the Warrants, to receive such rights, warrants
or options shall be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise of the Warrants, to receive such rights
at the time such rights, warrants or options that such Holders would have been
entitled to receive had they been, on such record date, the holders of record of
the number of whole shares of Common Stock then issuable upon exercise of their
outstanding Warrants (assuming for purposes of this Section 8.8), that the
exercise of the Warrants is permissible immediately upon issuance).
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense,
upon the surrender thereof by the registered Holder at the principal executive
office of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
securities in such denominations as shall be designated by the Holder thereof at
the time of such surrender.
-21-
<PAGE>
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant Certificate, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares or fractions of Underlying Warrants upon the
exercise of the Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Shares and Underlying Warrants.
11. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available
out of its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrants and the Underlying Warrants, such number of
shares of Common Stock as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefor, all Shares issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any share-
-22-
<PAGE>
holder. The Company further covenants and agrees that upon exercise of the
Underlying Warrants and payment of the respective Underlying Warrant exercise
price therefor, all Underlying Warrant Shares issuable upon such exercise shall
be duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder. As long as the Warrants shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Warrants and the Underlying
Warrants and all Underlying Warrants to be listed on or quoted by NASDAQ or
listed on such national securities exchange, in the event the Common Stock is
listed on a national securities exchange.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder or Holders the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling
them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting
-23-
<PAGE>
treatment of such dividend or distribution on the books
of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of
the Company or securities convertible into or
exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation
or merger) or a sale of all or substantially all of its
property, assets and business as an entirety shall be
proposed; or
(d) reclassification or change of the outstanding
shares of Common Stock (other than a change in par
value to no par value, or from no par value to par
value, or as a result of a subdivision or combination),
consolidation of the Company with, or merger of the
Company into, another corporation (other than a
consolidation or merger in which the Company is the
surviving corporation and which does not result in any
reclassification or change of the outstanding shares of
Common Stock, except a change as a result of a
subdivision or combination of such shares or a change
in par value, as aforesaid), or a sale or conveyance to
another corporation of the property of the Company as
an entirety is proposed; or
-24-
<PAGE>
(e) The Company or an affiliate of the Company shall
propose to issue any rights to subscribe for shares of
Common Stock or any other securities of the Company or
of such affiliate to all the shareholders of the
Company;
then, in any one or more of said events, the Company shall give written notice
to the Holder or Holders of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Underlying Warrants.
The form of the certificates representing the Underlying
Warrants (and the form of election to purchase shares of Common Stock upon the
exercise of the Underlying Warrants and the form of assignment printed on the
reverse thereof) shall be substantially as set forth in Exhibit "A" to the
Public Warrant Agreement; provided, however, (i) each Underlying Warrant
-25-
<PAGE>
issuable upon exercise of the Warrants shall evidence the right to initially
purchase one fully paid and non-assessable share of Common Stock in respect of
the Underlying Warrant at an initial purchase price of $7.25 per share any time
commencing _________, 1998 until __________, 2002 and (ii) the Target Redemption
Price (as defined in the Public Warrant Agreement) of the Underlying Warrants is
150% of the then effective exercise price of the Underlying Warrants. As set
forth in Section 8.5 of this Agreement, the exercise price of the Underlying
Warrants and the number of shares of Common Stock issuable upon the exercise of
the Underlying Warrants are subject to adjustment, whether or not the Warrants
have been exercised and the Underlying Warrants have been issued, in the manner
and upon the occurrence of the events set forth in Section 9 of the Public
Warrant Agreement, which is hereby incorporated herein by reference and made a
part hereof as if set forth in its entirety herein. Subject to the provisions of
this Agreement and upon issuance of the Underlying Warrants, each registered
holder of such Underlying Warrants shall have the right to purchase from the
Company (and the Company shall issue to such registered holders) up to the
number of fully paid and non-assessable Underlying Warrant Shares (subject to
adjustment as provided herein and in the Public Warrant Agreement), free and
clear of all preemptive rights of shareholders, provided that such registered
holder complies, in connection with the exercise of such holders' Underlying
Warrants, with the terms governing exercise of the Public Warrants set forth in
the Public Warrant Agreement, and pays the applicable exercise price, determined
in
-26-
<PAGE>
accordance with the terms of the Public Warrant Agreement. Upon exercise of the
Underlying Warrants, the Company shall forthwith issue to the registered holder
of any such Underlying Warrants, in such holder's name or in such name as may be
directed by such holder, certificates for the number of Underlying Warrant
Shares so purchased. The Underlying Warrants shall be transferable in the manner
provided in the Public Warrant Agreement, and upon any such transfer, a new
Underlying Warrant shall be issued promptly to the transferee. The Company
covenants to, and agrees with, each Holder that without the prior written
consent of all the Holders, the Public Warrant Agreement will not be modified,
amended, cancelled, altered or superseded, and that the Company will send to
each Holder, irrespective of whether or not the Warrants have been exercised,
any and all notices required by the Public Warrant Agreement to be sent to
holders of the Public Warrants.
14. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the
Company may designate by notice to the Holders.
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<PAGE>
15. Supplements and Amendments.
The Company and the Underwriter may from time to time
supplement or amend this Agreement without the approval of any Holders of the
Warrants and/or Warrant Securities in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem not to
adversely affect the interests of the Holders of Warrant Certificates.
16. Successors.
All the covenants and provisions of this Agreement by or
for the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
17. Termination.
This Agreement shall terminate at the close of business on
_________, 2005. Notwithstanding the foregoing, this Agreement will terminate on
any earlier date when all Warrants and Underlying Warrants have been exercised
and all Warrant Securities have been resold to the public; provided, however,
that the provisions of Section 7 shall survive any termination pursuant to this
Section 17 until the close of business on __________, 2008.
18. Governing Law.
This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of
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<PAGE>
the State of New York and for all purposes shall be construed in accordance with
the laws of said State.
19. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and the Underwriter and any other
registered holder or holders of the Warrant Certificates or Warrant Securities
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Underwriter and any other holder or holders of the Warrant Certificates or
Warrant Securities.
20. Counterparts.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] MARINE MANAGEMENT SYSTEMS, INC.
By:__________________________________
Name:
Title:
Attest:
- -----------------------
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:__________________________________
Name:
Title:
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<PAGE>
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _______, 2002
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ________
_____________________________ or registered assigns, is the registered holder of
__________ Warrants to purchase, at any time until 5:00 P.M. New York City time
on _______, 2002 ("Expiration Date"), up to _______ fully-paid and
non-assessable shares (the "Shares") of the common stock, par value $.002 per
share (the "Common Stock"), of Marine Management Systems, Inc., a Delaware
corporation (the "Company"), at an initial exercise price, subject to adjustment
in certain events (the "Exercise Price"), of $7.25 per Share, upon surrender of
this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
warrant agreement dated as of _______, 1997 between the Company and Whale
Securities Co., L.P. (the "Warrant Agreement"). Payment of the Exercise Price
may be made in cash, or by certified or official bank check in New York Clearing
House funds payable to the order of the Company, or any combination thereof.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorpo-
<PAGE>
rated by reference in and made a part of this instrument and is hereby referred
to in a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: _______, 1997 MARINE MANAGEMENT SYSTEMS, INC.
[SEAL] By:____________________________
Name:
Title:
Attest:
- ----------------------
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Shares of
Common Stock and herewith tenders in payment for such securities, cash or a
certified or official bank check payable in New York Clearing House Funds to the
order of Marine Management Systems, Inc. in the amount of $__________________ ,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such securities be registered in the name of , whose address is
______________________ , and that such Certificate be delivered to ____________,
whose address is _____________.
Dated: Signature:___________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
- --------------------------------
- --------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED____________________________________________
hereby sells, assigns and transfers unto
____________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:___________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate)
- -------------------------------
- -------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE>
EXHIBIT B
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE AT ANY TIME COMMENCING _________, 1998 UNTIL
5:00 P.M., NEW YORK TIME, _______, 2002
No. W- _________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________
____________________, or registered assigns, is the registered holder of
___________________________ (_______) Warrants to purchase, at any time until
5:00 P.M. New York City time on _______, 2002 ("Expiration Date"), an aggregate
of up to ___________________________ (_______) common stock purchase warrants,
each common stock purchase warrant entitling the holder thereof to purchase one
share of common stock, par value $.002 per share (collectively, the "Underlying
Warrants"), of Marine Management Systems, Inc., a Delaware corporation (the
"Company"), at an initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $.145 per Underlying Warrant, upon surrender
of this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
warrant agreement dated as of _______, 1997 between the Company and Whale
Securities Co., L.P. (the "Warrant Agreement"). Payment of the Exercise Price
may be made in cash, or by certified or official bank check in New York Clearing
House funds payable to the order of the Company, or any combination thereof.
The Underlying Warrants issuable upon exercise of the Warrants
will be exercisable at any time from _______, 1998 until 5:00 P.M. Eastern time
_______, 2002 each Underlying Warrant entitling the holder thereof to purchase
one fully-paid and non-assessable share of common stock of the Company, at an
initial exercise price, subject to adjustment in certain events,
<PAGE>
of $7.25 per share. The Underlying Warrants are issuable pursuant to the terms
and provisions of a certain agreement dated as of _______, 1997 by and among the
Company, Whale Securities Co., L.P. and America Stock Transfer & Trust Company
(the "Public Warrant Agreement"). The Public Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to (except as otherwise provided in the Warrant Agreement) for a
description of the rights, limitations of rights, manner of exercise,
anti-dilution provisions and other provisions with respect to the Underlying
Warrants.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that, upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate
<PAGE>
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated:_______, 1997 MARINE MANAGEMENT SYSTEMS, INC.
[SEAL] By:____________________________
Name:
Title:
Attest:
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<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Underlying
Warrants and herewith tenders, in payment for such securities, cash or a
certified or official bank check payable in New York Clearing House Funds to the
order of Marine Management Systems, Inc. in the amount of $___________ , all in
accordance with the terms hereof. The undersigned requests that a certificate
for such securities be registered in the name of______________________________,
whose address is_______________________________ , and that such Certificate be
delivered to___________________________ , whose address is _____________.
Dated: Signature:___________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
- --------------------------------
- --------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder
if such holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED__________________________________
hereby sells, assigns and transfers unto
____________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:___________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate)
- --------------------------------
- --------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
EXHIBIT 4.05(a)
COMMERCIAL REVOLVING LOAN, TERM LOAN
AND SECURITY AGREEMENT
WITH
MARINE MANAGEMENT SYSTEMS, INC.
The Commercial Revolving Loan, Term Loan and Security Agreement dated as of
June 4, 1993 by and between MARINE MANAGEMENT SYSTEMS, INC., an Ohio corporation
authorized to do business in the State of Connecticut, having an address of 102
Hamilton Avenue, Stamford, Connecticut 06902 (hereinafter "Company"), and
PEOPLE'S BANK, a Connecticut Banking corporation with an address at 350 Bedford
Street, Stamford, Connecticut 06901 referred to herein as (the "Bank").
ARTICLE I
WHEREAS, the Company has requested the Bank to make a Revolving Loan in the
amount of $150,000.00 (the "Revolving Loan"), and a term loan in the amount of
$450,000.00 (the "Term Loan") to the Company; and
WHEREAS, the Bank has agreed to make the Revolving Loan and the Term Loan
to the Company subject to the condition precedent, among others, that the
Company enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
Company and the Bank do each hereby respectively covenant and agree with and
represent to each other as follows:
Section 1.01. Accounting Terms; Definitions. Unless otherwise defined, all
accounting terms shall be construed, and all computations or classifications of
assets and liabilities and of income and expenses shall be made or determined,
on a consolidated basis in accordance with generally accepted accounting
principles as consistently applied. As used herein, in the Notes, or in any
certificate, document or report delivered pursuant to this Agreement or any
other Financing Agreement, the following terms shall have the following
meanings:
(a) "Acceptable Receivables" means a Receivable or Receivables due not
<PAGE>
more than ninety (90) days from the date set forth on the original invoice
evidencing such Receivable, arising from the performance of services by the
Company in the ordinary Course of its business, which conforms to the
warranties set forth in Section 6.01 hereof, and which:
(i) is a Receivable upon which the Company's right to receive
payment is absolute and not contingent upon the fulfillment of any
condition whatsoever;
(ii) does not arise from a Provision of Services to an affiliate,
parent, or subsidiary of the Company;
(iii) does not arise from the exchange or barter of any services;
(iv) does not arise from a contract containing a prohibition
against assigning or granting a security interest therein;
(v) is not a Receivable of a Receivable Debtor which has
suspended business, made a general assignment for the benefit of
creditors, committed any act of insolvency, filed or have had filed
against it any petition against the Receivable Debtor under any
bankruptcy law or any law or laws for the relief of debtors;
(vi) is not the Receivable of a Receivable Debtor which shall
have objected, in any material respect, to the quality or quantity of
the services of the Company, or shall have rejected, or refused to
accept such services; and
(vii) is not a Receivable which is, in the Bank's reasonable
judgment, the Receivable of a Receivable Debtor which is an undue
credit risk or otherwise unacceptable to the Bank in its sole
discretion.
(b) "Agreement" shall mean this Commercial Revolving Loan, Term Loan
and Security Agreement as the same may from time to time be amended,
supplemented or otherwise modified.
(c) "Bank" shall mean People's Bank, a Connecticut banking
corporation.
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<PAGE>
(d) "Borrowing Base" means an amount equal to the lesser of: (i) ONE
HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($150,000.00), or (ii) Seventy
percent (70%) of the net balance due on Acceptable Receivables.
(e) "Business Day" shall mean any day other than a day on which
commercial banks in Connecticut are required or permitted by law to close.
(f) "Collateral" means the property of the Company described in
Section 9.01 hereof.
(g) "Dollar" and the sign "$" shall mean lawful money of the United
States of America.
(h) "Event of Default" shall have the meaning assigned in Section
10.01 hereof.
(i) "Financing Agreement" or "Financing Agreements" shall mean this
Agreement, the Notes, the Guaranties, the Guarantor Mortgages and any other
agreements or documents executed in connection herewith or related hereto,
together with any amendments, supplements or modifications hereto or
thereto.
(j) "Fixed Assets" means equipment and other assets of the Company
which, by generally accepted accounting principles must be treated as fixed
assets in financial statements of the Company.
(k) "Guarantor" shall have the definition assigned in Section 7.01
(f).
(l) "Guaranty" shall have the definition assigned in "Section 7.01 (f)
hereof.
(m) "Inventory" shall have the definition assigned in Section 9.01 (e)
hereof.
(n) "Loan" shall mean either the Revolving Loan or the Term Loan, and
"Loans" shall mean the Revolving Loan and the Term Loan.
(o) "Mortgage" or "Mortgages" shall have the definition assigned in
Section 7.01 (g) hereof.
(p) "Note" shall mean the Revolving Loan Note or the Term Note, and
"Notes" shall mean the Revolving Loan Note and the Term Note.
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<PAGE>
(q) "Obligations" means and includes all loans, advances, interest,
indebtedness, liabilities, obligations, guaranties, covenants and duties at
any time owing by the Company to the Bank of every kind and description,
whether or not evidenced by any note or other instrument, whether or not
for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
including, but not limited to, the indebtedness, liabilities and
obligations arising under this Agreement and the other Financing
Agreements, and all reasonable costs, expenses, fees, charges, expenses and
attorneys', paralegals' and professional fees incurred in connection with
any of the foregoing, or in any way connected with, involving or related to
the preservation, enforcement, protection or defense of this Agreement, the
Notes, the other Financing Agreements, any related agreement, document or
instrument, the Collateral and the rights and remedies hereunder or
thereunder.
(r) "Prime Rate" shall mean the interest rate announced by the Bank
from time to time as its Prime Rate. The Prime Rate may not necessarily be
the Bank's lowest or most favorable rate.
(s) "Receivables" shall have the meaning assigned in section 9.01 (a)
hereof.
(t) "Receivable Debtor" and "Receivable Debtors" means the person or
entity or persons or entities obligated to the Company upon the
Receivables.
(u) "Revolving Loan" shall have the meaning assigned in Section 2.01
(a) hereof.
(v) "Revolving Loan Account" and "Revolving Loan Accounts" shall have
the meanings assigned in Section 2.03 hereof.
(w) "Revolving Loan Note" shall have the meaning assigned in section
2.03 hereof.
(x) "Term Loan" and "Term Note" shall have the meaning assigned in
section 3.01 hereof.
ARTICLE II
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<PAGE>
REVOLVING LOANS
Section 2.01. Amounts.
(a) Subject to the terms and conditions contained in this Agreement,
the Bank agrees to make loans (the "Revolving Loans" and, individually a
"Revolving Loan") to the Company from time to time until demand has been
made by the Bank or until terminated as provided in Section 14.01(a) hereof
in principal amounts not exceeding at any one time outstanding the
Borrowing Base, it being agreed and understood that at no time shall the
maximum aggregate principal amount of the Revolving Loans made by the Bank
exceed the Borrowing Base.
Section 2.02. ALL OBLIGATIONS OF THE COMPANY ARISING UNDER THE REVOLVING
LOANS SHALL BE PAID BY THE COMPANY IN FULL UPON DEMAND BY THE BANK,
NOTWITHSTANDING THE BANK'S RIGHTS UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AS
SET FORTH BELOW AND WHETHER OR NOT SUCH EVENT OF DEFAULT HAS OCCURRED.
Section 2.03. Procedure for Advances, Notices of Borrowing, Notes, Etc.
Within the limits of the Borrowing Base and subject to the terms and conditions
contained in Section 7.02, so long as demand has not been made by the Bank and
the Company is in compliance with all of the terms and conditions of this
Agreement and no Event of Default has occurred and no condition exists which
would constitute an Event of Default but for the giving of notice or passage of
time, or both, the Company may borrow, repay and re-borrow Revolving Loans.
Requests for Revolving Loan advances may be made in compliance with the Bank's
existing cash management procedures. The Revolving Loan shall be evidenced by a
promissory note payable to the Bank substantially in the form of, and in the
amount of, $150,000.00, as set forth in Exhibit A attached hereto ("Revolving
Note"). Insofar as the Company may request and the Bank shall make Revolving
Loans hereunder, the Bank shall enter such advances as debits on a revolving
loan account maintained by the Company with the Bank ("Revolving Loan Account").
The Bank shall also record in its Revolving Loan Account, in accordance with
customary accounting procedures, all other charges, expenses and other liens
properly chargeable to the Company; all payments made by the Company on account
of indebtedness evidenced by the Revolving Loan Account; all proceeds of
collateral which are finally paid to the Bank in its own office in cash or
solvent credits; and other appropriate debits and credits. The Revolving Loan
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<PAGE>
Account shall reflect the amount of the Company's indebtedness to the Bank from
time to time by reason of the Revolving Loans made by the Bank and other
appropriate charges hereunder. On a monthly basis, the Bank shall render a
statement for the Revolving Loan account, which statement shall be considered
correct and accepted by the Company and conclusively binding upon the Company.
The Bank shall have the right at its option, to debit the Revolving Loan Account
for any principal due under the Term Note and, on the 4th day of each and every
month commencing July 4, 1993, for all interest charges on the Loans for the
previous month if not otherwise paid by the Company.
Section 2.04. Bank Discretion. Nothing herein shall be construed to require
the Bank to make Revolving Loans, it being agreed that all loans and advances
shall be at the Bank's sole discretion and shall not establish a pattern or
custom binding upon the Bank.
Section 2.05. Use of Proceeds. The Company represents that the proceeds of
the (i) Term Loan shall be used by it to satisfy Company's indebtedness to
Shawmut Bank and the remainder, if any, shall be used for working capital; and
(ii) Revolving Loans shall be used for working capital purposes and trading
assets and subject to the terms of Section 7.02.
ARTICLE III
TERM LOAN
Section 3.01. Amounts. Subject to the terms and conditions contained in
this Agreement, the Bank agrees to make to the Company contemporaneously
herewith a five (5) year term loan (the "Term Loan") as evidenced by a
promissory note payable to the Bank substantially in the form of, and in the
amount of $450,000.00 (the "Term Note") and as set forth on Exhibit B.
ARTICLE IV
INTEREST, PREPAYMENTS, AND COMMITMENT FEES
Section 4.01. Interest.
(a) (i) Revolving Loans. Each Revolving Loan shall bear interest (from
6
<PAGE>
the date made through and including the date of payment in full) at a
floating rate per annum equal to one and one-half percentage points (1.5%)
above the Prime Rate.
(ii) Term Loan. The Term Loan shall bear interest at a per annum
floating rate equal to one and one-half percentage points (1.5%) above
the Prime Rate.
(b) Default Interest. Notwithstanding the foregoing, interest on all
Loans, at any time after the occurrence of an Event of Default, shall
accrue, from the date of such Event of Default, so long as an Event of
Default continues, at a rate per annum equal to Three (3.0%) percentage
points above the rate otherwise in effect under the Notes from time to
time. Notwithstanding anything contrary herein, Bank shall have no
obligation to reinstate the Loans after an Event of Default.
(c) Calculation. Interest on the Loans shall be calculated on the
basis of a 360 day year and the actual number of days elapsed, and shall
change effective immediately upon any change in the Prime Rate, without
notice or demand to or upon the Company.
(d) Payment of Interest. Interest on the Loans shall be payable
monthly in arrears beginning on July 4, 1993 and continuing on the 4th day
of each and every month thereafter without notice or demand so long as any
of the Obligations remains outstanding.
(e) Lawful Interest. It being the intent of the parties that the rate
of interest and all other charges to the Company be lawful, if for any
reason the payment of a portion of interest fees or charges as required by
this Agreement would exceed the limit established by applicable law which a
commercial lender such as the Bank may charge to a commercial borrower such
as the Company, then the obligation to pay interest or charges shall
automatically be reduced to such limit and, if any amounts in excess of
such limits shall have been paid, then such amounts shall be applied to the
unpaid principal amount of the Obligations of the Company to the Bank or
refunded so that under no circumstances shall interest or charges required
hereunder exceed the maximum rate allowed by law, as aforesaid.
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<PAGE>
Section 4.02. Prepayments. The Company may, at its option, prepay without
premium or penalty the Revolving Loan and/or the Term Loan in whole or in part
on the following conditions: (i) the Company shall pay all accrued interest on
the principal being paid to the date of the prepayment, and (ii) in the case of
prepayments in full, all fees, charges, costs, expenses and other amounts then
due under the Loan or Loans being prepaid, shall be applied in the inverse order
of maturity.
ARTICLE V
YIELD PROTECTION
Section 5.01. Increased Costs. In the event that applicable law, treaty or
regulation or directive from any government, governmental agency or regulatory
authority, or any change therein or in the interpretation or application
thereof, or compliance by the Bank with any request or directive (whether or not
having the force of law) from any central bank or government, governmental
agency or regulatory authority, shall:
(a) subject the Bank to any tax of any kind whatsoever with respect to
this Agreement or any of the Loans (except taxes on the overall net income
of the Bank) or change the basis of taxation of payments to the Bank of
principal, interest or any other amount payable hereunder (except for
changes in the rate of tax on the overall net income of the Bank);
(b) impose, modify or hold applicable any reserve, special deposit or
similar requirements against assets held by, or deposits in or for the
account of, advances or loans by, or other credit extended by, any office
of the Bank, including (without limitation) pursuant to Regulations of the
Board of Governors of the Federal Reserve System; or
(c) impose on the Bank any other condition with respect to this
Agreement, any Note or any of the Loans hereunder; and the result of any of
the foregoing is to increase the cost to the Bank of making, renewing or
maintaining its Loans (or any part thereof) by an amount that the Bank
reasonably deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any of the
Loans by an amount that the Bank reasonably deems to be material, then, in
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<PAGE>
any case, the Company shall promptly pay the Bank, upon its demand, such
additional amount as will compensate the Bank for such additional costs or
such reduction as the case may be (collectively the "Additional Costs").
The Bank shall certify the amount of such Additional Costs to the Company,
and such certification, absent manifest error, shall be deemed conclusive.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. Representations and Warranties. The Company represents and
warrants to the Bank that:
(a) Good Standing and Qualification. The Company is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has all requisite corporate power and authority
to own and operate its properties and to carry on its business as presently
conducted and is qualified to do business in the State of Connecticut and
all jurisdictions in which it conducts its business.
(b) Corporate Authority. The Company has full power and authority to
enter into this Financing Agreement, to make the borrowing contemplated
herein, to execute and deliver the Notes and to incur the obligations
provided for herein, all of which have been duly authorized by all
necessary and proper corporate action. No other consent or approval or the
taking of any other action in respect of shareholders or of any public
authority is required as a condition to the validity or enforceability of
this Agreement, the Notes, or any other instrument delivered in connection
herewith or therewith.
(c) Binding Agreements. This Agreement constitutes, and the Notes, and
any of the other Financing Agreements executed and/or delivered in
connection herewith or therewith, when issued and delivered pursuant hereto
for value received shall constitute, the valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except as enforcement may be limited by principles of equity,
bankruptcy, insolvency, or other laws affecting the enforcement of
creditors' rights generally.
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<PAGE>
(d) Litigation. There are no actions, suits or proceedings pending
against the Company or the Guarantors before any court or administrative
agency, nor are any actions, suits or proceedings threatened, which, either
in any case or in the aggregate, would materially and adversely affect the
financial condition, assets or operations of the Company or the Guarantors,
nor are there any such actions, suits or proceedings which question the
validity of this Agreement, the Notes, any of the other Financing
Agreements, or any action to be taken in connection with the transactions
contemplated hereby or thereby.
(e) No Conflicting Law or Agreements. The execution, delivery and
performance by the Company and Guarantors of this Agreement, the Notes and
the other Agreements: (i) do not violate any provision of the Certificate
of Incorporation or By-laws of the Company, (ii) do not violate any order,
decree or judgment, or any provision of any statute, rule or regulation,
(iii) do not violate or conflict with, result in a breach of or constitute
(with notice or lapse of time, or both) a default under any shareholder
agreement, stock preference agreement, mortgage, indenture or contract to
which the Company is a party, or by which any of its respective properties
are bound, and (iv) do not result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any property or
assets of the Company or Guarantors except for the liens granted hereunder.
(f) Taxes. With respect to all taxable periods of the Company, the
Company has filed all tax returns which are required to be filed and all
federal, state, municipal, franchise and other taxes shown on such filed
returns have been paid or are being diligently contested by appropriate
proceedings and have been reserved against, as required by generally
accepted accounting principles, consistently applied.
(g) Financial Statements. The Company has heretofore delivered to the
Bank financial statements of the Company as of December 31, 1992, and the
related statements of income, retained earnings and sources and uses of
funds for the fiscal year or period then ended. Such statement is complete
and correct in all material respects and fairly presents the consolidated
financial condition of the Company as of the date and for the periods
referred to and has been prepared in accordance with generally accepted
accounting principles consistently applied by the Company throughout the
periods involved. There are no liabilities, direct or indirect, fixed or
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contingent, of the Company as of the date of said balance sheet which are
not reflected in such statements or in the notes thereto, other than
liabilities or obligations not material in amount which are not required to
be reflected in corporate balance sheet prepared in accordance with
generally accepted accounting principles. Company shall deliver an audited
financial statement for the year ending December 31, 1992 post closing,
which statement shall show no material adverse change in the financial
condition of the Company from that shown on the financial statement.
(h) Adverse Developments. Since December 31, 1992 there has been no
material adverse change in the financial condition, business, operations,
affairs or prospects of the Company when taken as a whole or of the
Guarantors or in any of the properties or assets of the Company when taken
as a whole or of the Guarantors.
(i) Existence of Assets and Title Thereto. The Company and Guarantors
have good and marketable title to their respective properties and assets,
including the properties and assets reflected in the financial statements
referred to above. Such properties and assets are not subject to any
mortgage, pledge, lien, lease, encumbrance or charge except those permitted
under the terms of this Agreement or as set forth in Exhibit C as to the
Collateral and Exhibit D as to the Mortgages.
(j) Regulations G, T, U and X. The proceeds of the borrowing hereunder
are not being used and will not be used, directly or indirectly, for the
purposes of purchasing or carrying any margin stock in contravention, or
which would cause the Bank to be in violation, of Regulations G, T, U or X
promulgated by the Board of Governors of the Federal Reserve System.
(k) Compliance. The Company is not in default with respect to any
order, writ, injunction or decree of any court or of any federal, state,
municipal or other governmental department, commission, board, bureau,
agency, authority or Official, or in violation of any law, statute, rule or
regulation to which it or its properties is or are subject, where such
default or violation would materially and adversely affect the financial
condition of the Company when taken as a whole. The Company represents that
it has not received notice of any such default from any party. The Company
or Guarantors are not in default in the payment or performance of any of
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its obligations to any third parties or in the performance of any mortgage,
indenture, lease, contract or other agreement to which it is a party or by
which any of its assets or properties are bound.
(l) Leases. The Company enjoys quiet and undisturbed possession under
all leases under which it is operating, and all of such leases are valid
and subsisting and not in default.
(m) Deferred Compensation Arrangements. The Company has neither
entered into employment contracts or deferred compensation plans, incentive
compensation plans, executive compensation plans, arrangements or
commitments not required to be disclosed pursuant to Section 6.01 (m)
hereof (other than normal policies regarding holidays, vacations and salary
continuation during short periods of illness).
(n) Office. The chief executive office and principal place of business
of the Company, and the office where its records concerning Collateral are
kept, is at 102 Hamilton Avenue, Stamford, Connecticut.
(o) Places of Business. The Company has no other place of business and
locates no Collateral, specifically including books and records, at any
location other than 102 Hamilton Avenue, Stamford, Connecticut. The Company
shall locate a full and complete set of its books and records in its
offices at 102 Hamilton Avenue, Stamford, Connecticut.
(p) Contingent Liabilities. Neither the Company nor the Guarantors are
a party to any suretyship, guarantyship, or other similar type agreement;
nor has it offered its endorsement to any individual, concern, corporation
or other entity or acted or failed to act in any manner which would in any
way create a contingent liability that does not appear in the financial
statements referred to hereinbefore, except for a Letter of Credit issued
by Shawmut Bank, formerly known as Connecticut National Bank, for the
benefit of the National Shipping Company of Saudi Arabia in the amount of
Twenty-Six Thousand ($26,000.00) Dollars, which Letter of Credit shall
expire on January 1, 1994, and the personal guaranties of office equipment
leases.
(q) Contracts. No contract, governmental or otherwise, to which the
Company is a party, is subject to renegotiation of any material terms, nor
is the Company in default of any material contract.
(r) Unions and Pensions. The Company is not a party to any collective
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bargaining, union or pension plan agreement except as set forth herein. The
union contracts, if any, are in full force and effect and are not currently
subject to renegotiation. The Company is in full compliance with the terms
and conditions of all such union contracts and knows of no threatened work
stoppage by any union members.
(s) Licenses. The Company has all licenses, permits and other
permissions required by any government, agency or subdivision thereof, or
from any licensing entity necessary for the conduct of its business, all of
which the Company represents to be in good standing and in full force and
effect.
(t) Collateral. The Company is and shall continue to be the sole owner
of the collateral free and clear of all liens, encumbrances, security
interests and claims except the liens granted to the Bank hereunder and as
set forth on Exhibit C, and with respect to the mortgages of Guarantors
except as specifically set forth in Exhibit D; the Company is fully
authorized to sell, transfer, pledge and/or grant a security interest in
each and every item of the Collateral to the Bank; all documents and
agreements related to the Collateral shall be true and correct and in all
respects what they purport to be; all signatures and endorsements that
appear thereon shall be genuine and all signatories and endorsers shall
have full capacity to contract; none of the transactions underlying or
giving rise to the Collateral shall violate any applicable state or federal
laws or regulations; all documents relating to the Collateral shall be
legally sufficient under such laws or regulations and shall be legally
enforceable in accordance with their terms; and the Company agrees to
defend the Collateral against the claims of all persons other than the
Bank.
(u) Receivables. (i) Each Receivable is or, at the time it comes into
existence, will be a true and correct statement of: (A) the bona fide
indebtedness of each Receivable Debtor; and (B) the amount of the account
for services performed for and accepted by, such Receivable Debtor, net of
any charges, adjustments, discounts or other reductions whatsoever; and
(ii) At the time of each borrowing hereunder, there are and, to the best of
the Company's knowledge after due investigation, will be no defenses,
counterclaims, discounts or setoffs that may be asserted against Acceptable
Receivables.
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<PAGE>
(v) Financial Information. All financial information including, but
not limited to, information relating to the Receivables, submitted by the
Company to the Bank, whether previously or in the future, is and will be
true and correct in all material respects, and is and will be complete
insofar as may be necessary to give the Bank a true and accurate knowledge
or the subject matter.
(w) Parent, Affiliate or Subsidiary Corporations. The Company has no
parent corporation and has no affiliate or subsidiary corporations.
(x) The Company acknowledges that it is legally and validly indebted
to the Bank as of this date by virtue of the Term Note and the Revolving
Loan Note, plus interest accrued and accruing thereon; and costs and
expenses of collection, if any, including without limitation, attorney's
fees, and that it has no defense, counterclaim or offset with respect to
any of the foregoing;
(y) The Company further acknowledges that all indebtedness,
liabilities and obligations of the Company to the Bank, whenever and
however arising, are and continue to be secured by, among other things, a
blanket first lien security interest except as set forth in Exhibit C in
all of the Company's accounts, accounts receivable, equipment, general
intangibles, and all other Collateral.
(z) ERISA. The Company shall be in full compliance with all terms of
the Employment Retirement Security Act ("ERISA") or similar laws.
ARTICLE VII
REVOLVING LOAN CONDITIONS OF LENDING
Section 7.01. Conditions of the Initial Loan. Subject to the terms of
Section 7.02 hereof, the obligation of the Bank to make the first Revolving Loan
under this Financing Agreement is subject to the fulfillment of the following
conditions precedent at the time of the execution of this Financing Agreement:
(a) Notes. The Bank shall have received a duly executed Term Note, and
Revolving Note drawn to its order;
(b) Evidence of Corporate Action. The Bank shall have received
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certified copies of all corporate action in form and substance satisfactory
to the Bank taken by the Company to authorize the execution, delivery and
performance of this Agreement, the Notes, and the other Financing
Agreements to which it is a party, and the borrowing to be made hereunder,
together with true copies of the Company's Certificate of Incorporation and
By-laws and such other papers as the Bank or its counsel may reasonably
require;
(c) Opinion of Counsel. The Bank shall have received favorable written
opinion of Brian O'Connor, counsel for the Company and the Guarantors and
accompanied by such supporting documents as the Bank or its counsel may
reasonably require.
(d) Guaranty. The Bank shall have received the duly executed guaranty
(the "Guaranty") from Eugene D. Story, Mary G. Story, Robert D. Ohmes and
Evelyn J. Ohmes (the "Guarantors") pursuant to which they shall have
unconditionally guaranteed the payment and performance of all liabilities
and obligations of the Company to the Bank. The Guaranty shall be in form,
scope and substance satisfactory to the Bank.
(e) Mortgages. As additional security under this Financing Agreement,
Guarantors shall have granted to the Bank duly executed mortgages each
securing the sum of Two Hundred Twenty-Five Thousand ($225,000.00) Dollars
on real property owned by "Guarantors Ohmes" located at 41 Briar Oak Drive,
Weston, Connecticut ("Weston Property"), and on real property owned by
"Guarantors Story" located at 22 Brush Island Road, Darien, Connecticut
("Darien Property"), which shall be in form, scope and substance
satisfactory to the Bank (collectively, the "Mortgages"), and subject only
to those encumbrances specifically set forth on the Mortgage title
insurance policies referred to in Section 7.01 (h) hereto, as the case may
be, which are acceptable to the Bank. Upon written notice to and consent of
Bank, Bank may permit Guarantors to substitute collateral for the Mortgages
securing the Guaranties.
(f) Mortgage Title Insurance. The Bank shall have received mortgagee
title insurance policies from an ALTA Insurance Company in form, scope and
substance satisfactory to the Bank and its counsel, which shall insure the
Bank's valid third mortgage on the Weston Property and which shall insure
Bank's valid third mortgage on the Darien Property.
(g) Hazard, Liability and Flood Insurance. Guarantors shall provide
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Bank with Certificates of Hazard and Liability Insurance and flood
insurance, if required, for the Weston Property and the Darien Property
naming Bank as a loss payee thereunder.
(h) UCC-l Financing Statements. The Bank shall have received from the
Company, duly executed UCC-l financing statements and such other documents
as the Bank deem necessary or proper to perfect the security interest in
the Collateral, all of which shall be in form, scope and substance
satisfactory to the Bank and its counsel.
(i) Checking Account and Depository Account. Company shall have
established its primary checking account with Bank under the conditions in
Section 11.01 herein. In the event of default, Bank in its discretion may
require other depository accounts ("Depository Account") such as a
"Lockbox" account.
(j) Further Documents. The Bank shall have received such further
documents, instruments and agreements as the Bank may reasonably request,
including without limitation, insurance policies and certificates
evidencing adequate insurance and coverage on the Company's assets which
insurance policies will name the Bank as loss payee, mortgagee or
additional insured, as the case may be, all in form and substance
satisfactory to the Bank and its counsel.
Section 7.02. Conditions of Additional Revolving Loans. In addition to the
conditions in Section 7.01, the Bank shall make no further Revolving Loans
unless the following conditions shall exist or have been satisfied by the
Company at the time any further Revolving Loan is requested.
(a) Essence of Demand, Termination or Default. The Bank shall not have
demanded payment of, nor shall the Bank nor the Company have terminated,
the Revolving Loans, nor shall an Event of Default have occurred but for
the giving of notice or the passage of time.
(b) Compliance Certificates. Requests for advances under the line may
be made via facsimile transmission, courier, hand delivery or U.S. Mail by
Eugene D. Story or Robert D. Ohmes. Borrower waives liability for
unauthorized advances. On the date of each Revolving Loan hereunder and
after giving effect, at Bank's request the Company shall have delivered to
the Bank a certificate executed by its President or Executive Vice
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President which shall state, among other things, that: (i) the Company has
complied, and is then in compliance, with all the terms, covenants and
conditions of this Agreement and the other Financing Agreements which are
binding upon it; (ii) there exists no Event of Default as defined in this
Agreement and no event which, but for the giving of notice or passage of
time or both, would constitute such an Event of Default; and (iii) the
representations and warranties contained herein and in the other Agreements
are true and correct with the same effect as though such representations
and warranties had been made at the time of each Revolving Loan.
Additionally, within ten (10) business days of the close of each month,
such officer shall submit a similar certificate to the Bank certifying to
all of the foregoing and, without limiting the generality of the foregoing,
certifying particularly that the Company is in full compliance with the
financial covenants set forth in Article VIII hereof or indicating the
extent of such non-compliance.
(c) Borrowing Base. The indebtedness of the Company by virtue of the
making of any Revolving Loan shall not exceed the amount of the Bank's
commitment, individually, or the amount permitted by the Borrowing Base, in
the aggregate. The Company shall not request any Revolving Loan if the
effect of such Revolving Loan shall be to cause the balance of all
Revolving Loans to exceed the Borrowing Base. If at any time the balance of
all Revolving Loans exceeds the Borrowing Base, the Company shall
immediately pay to the Bank the amount necessary to reduce the balance of
all Revolving Loans to an amount not to exceed the Borrowing Base.
(d) Annual Cleanup. The outstanding balance on the Revolving Loan
shall be paid to zero for a period of thirty (30) consecutive days
annually.
ARTICLE VIII
COVENANTS
A. Affirmative Covenants.
The Company covenants and agrees that from the date hereof until payment
and performance in full of all Obligations, and until the termination of this
Agreement, unless the Bank otherwise consents in writing, the Company shall:
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Section 8.01. Financial Statements. Deliver to the Bank (a) within sixty
(60) days after the close of each quarter of each fiscal year of the Company, a
management prepared balance sheet and income statement for that portion of the
fiscal year-to-date then ended, and certified by the President of the Company as
being accurate; (b) within one hundred twenty (120) days after the close of each
fiscal year of Company, financial statements including a balance sheet as of the
close of such fiscal year and statements of income and retained earnings and
source and application of funds for the year then ended, prepared in conformity
with generally accepted accounting principles, applied on a basis consistent
with that of the preceding year or containing disclosure of the effect on
financial position or results of operations of any change in the application of
accounting principles during the year prepared on an audit basis by an
independent certified public accounting firm acceptable to Bank, in accordance
with generally accepted accounting principles, and also accompanied by a written
statement from such accountants stating that they have reviewed such financial
statements and the Financial Covenants set forth in Article VIII hereof and have
found no evidence of an Event of Default having occurred or of an event which
with passage of time and/or giving of notice would constitute an Event of
Default having occurred; (c) together with the statements referred to in
sub-paragraphs (a) and (b) above, a written statement from the President of the
Company certifying that there exists no Event of Default by the Company in the
performance of any of its obligations to the Bank under any of the Financing
Agreements; and (d) within one hundred twenty (120) days after the close of each
calendar year, the annual personal financial statements and tax returns of
Guarantors. Promptly upon the Bank's written request, such other information
about the financial condition and operations of Company or Guarantors, as the
Bank may, from time to time, reasonably request; and promptly upon becoming
aware of any Event of Default, or any occurrence which with the giving of notice
and/or the passage of time would constitute an Event of Default, notice thereof
in writing.
Section 8.02. Certificate of Aging/Certificate of Borrowing Base. Deliver
to the Bank on a monthly basis no later than the fifteenth (15th) day following
months end, a certificate in form and content acceptable to the Bank, setting
forth the amount of the Receivables, Acceptable Receivables of the Company and
an aging report by customer of all Receivables of the Company, and adding with
each request for advance on the Revolving Loan a certificate in form and content
acceptable to Bank, setting forth the Borrowing Base. A Certificate of Borrowing
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Base is attached as Exhibit E. Borrowers determination of Acceptable Receivables
is not binding on Bank.
Section 8.03. Insurance and Endorsements. (a) Keep its properties insured
against fire and other hazards (so-called "All Risk" coverage) in amounts and
with companies satisfactory to the Bank to the same extent and covering such
risks as is customary in the same or a similar business; maintain public
liability including without limitation, against claims for personal injuries or
death; and maintain all worker's compensation, employment or similar insurance
as may be required by applicable law; (b) All insurance shall contain such
terms, be in such form, and be for such periods reasonably satisfactory to the
Bank, and be written by such carriers duly licensed by the appropriate states
where any Collateral is located and reasonably satisfactory to the Bank. Without
limiting the generality of the foregoing, such insurance must provide that it
may not be canceled without thirty (30) days prior written notice to Bank or
such lesser time as insurer in the ordinary course of its business provides.
Bank to be endorsed as loss payee with a long form Loss Payable Clause, in form
and substance acceptable to the Bank on all such insurance. In the event of
failure to provide and maintain insurance as herein provided, the Bank may, at
its option, provide such insurance and charge the amount thereof to its
Revolving Loans. The Company shall furnish to the Bank certificates or other
satisfactory evidence of compliance with the foregoing insurance provisions. The
Company hereby irrevocably appoints the Bank as its attorney-in-fact, coupled
with an interest, to receive payments of the insurance and execute and endorse
all documents, checks and drafts in connection with payment of the insurance.
Any proceeds received by the Bank shall be applied to the Obligations in such
order and manner as the Bank shall determine in its sole discretion, or shall be
remitted to the Company, in either event at the Bank's sole discretion.
Notwithstanding the foregoing, prior to Bank's application of such proceeds it
shall discuss application of the proceeds with the Company.
Section 8.04. Tax and Other Liens. Comply with all statutes and government
regulations and pay all taxes, assessments, governmental charges or levies, or
claims for labor, supplies, rent and other obligations made against it or its
property which, if unpaid, might become a lien or charge against the Company or
its properties, except for these items described in Exhibits B and C and
liabilities being contested in good faith and against which, if requested by the
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Bank, the Company shall set up reserves in amounts and in form reasonably
satisfactory to the Bank.
Section 8.05. Place of Business. Maintain its chief place of business and
chief executive offices at 102 Hamilton Avenue, Stamford, Connecticut, unless
the Company shall have given the Bank thirty (30) days prior written notice of
any change in such places of business.
Section 8.06. Inspections. Allow the Bank by or through any of its
officers, attorneys, or personnel designated by them, for the purpose of
ascertaining whether or not each and every provision hereof and of any related
agreement, instrument and document, is being performed, to enter the offices of
the Company to examine or inspect any of the properties, books and records or
extracts therefrom, to make copies of such books and records or extracts
therefrom, and to discuss the affairs, finances and accounts thereof with the
Company all at such reasonable times, upon reasonable notice and as often as the
Bank or any representative of the Bank may reasonably request. The Bank shall be
entitled to conduct periodic field examination of Company's premises, Collateral
and books and records.
Section 8.07. Litigation. Promptly advise the Bank of the commencement or
threat of litigation, including arbitration proceedings and any proceedings
before any governmental agency but excluding product liability claims fully
covered by insurance (collectively, "Litigation"), which is instituted against
the Company and is reasonably likely to have a materially adverse effect upon
the condition, financial, operating or otherwise, of the Company.
Section 8.08. Maintenance of Existence. Maintain its corporate existence
and comply with all valid and applicable statutes, rules and regulations, and
maintain its properties in good repair, working order and operating condition.
The Company shall immediately notify the Bank of any event causing material loss
in the value of its assets.
Section 8.09. Notice of Certain Events. Give prompt written notice to the
Bank of:
(a) every occasion that the Collateral is subject to or has sustained
permanent or substantial damage in excess of $5,000.00 together with such
remedial action that Company proposes to take or has taken in response
thereto;
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(b) any material dispute that may arise between the Company and any
governmental regulatory body or law enforcement agency;
(c) any labor controversy resulting or likely to result in a strike or
work stoppage against the Company;
(d) any proposal by any public authority to acquire the assets or
business of the Company;
(e) the location of any Collateral other than at the Company's place
of business disclosed in this Agreement other than Collateral in transit in
the ordinary course of the Company's business;
(f) any proposed or actual change of the name, identity or corporate
structure of the Company, including without limitation, the termination of
employment of a Guarantor with the Company for any reason whatsoever;
(g) any circumstance or event by virtue of which or in connection with
which the Company may have or may incur any liability, expense or
responsibility under any environmental law or regulation;
(h) any other matter which has resulted or is reasonably likely to
result in a material adverse change in the financial condition or
operations of the Company; and
(i) any information received by the Company with respect to
Receivables that may materially affect the value thereof or the rights and
remedies of the Bank with respect thereto.
Section 8.10. Defaults. Upon the occurrence of any Event of Default or of
any event which, but for giving of notice or passage of time or both, would
constitute an Event of Default, give prompt written notice of such occurrence to
the Bank signed by the president of the Company describing such occurrence and
the steps, if any, being taken to cure the Event of Default.
Section 8.11. Receivable Duties. The Company has complied and will continue
to comply with any and all federal, state and local laws affecting its business,
including, but not limited to, payment of all federal and state taxes with
respect to the sales by the Company and disclosures in connection therewith. The
Company agrees to indemnify the Bank against and hold the Bank harmless from,
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all claims, actions and losses, including reasonable attorney's fees and costs
incurred by such Bank arising from any contention, whether well founded or
otherwise, that there has been a failure to comply with such laws.
Section 8.12. Collateral Duties. Do whatever the Bank may request from time
to time by way of obtaining, executing, delivering and filing financing
statements, assignments, landlord's or mortgagee's waivers, and other notices
and amendments and renewals thereof, and the Company will take any and all steps
and observe such formalities as the Bank may request, in order to create and
maintain a valid and enforceable lien upon, pledge of, and first priority
security interest in intangible collateral and a valid lien in all other
Collateral. The Bank is authorized to file financing statements without the
signature of the Company and to execute and file such financing statements on
behalf of the Company as specified by the Uniform Commercial Code to perfect or
maintain its security interest in all of the Collateral. All reasonable charges,
expenses and fees the Bank may incur in filing any of the foregoing, together
with reasonable costs and expenses of any lien search required by the Bank, and
any taxes relating thereto, shall be charged to the balance of the Revolving
Loans and added to the Obligations.
Section 8.13. Audit and Appraisals by Bank; Fees. Permit the Bank to audit
the books and records of the Company and to conduct or cause to be conducted
appraisals of the Company's assets at such times, upon reasonable notice, and in
such manner and detail as the Bank deems reasonable. Without limiting the
generality of the foregoing, the Bank shall be allowed to verify the Receivables
of the Company and to confirm with Receivable Debtors the validity and amount of
Receivables. The Company shall promptly pay to the Bank reasonable audit fees
per man per day and any out of pocket expenses incurred in connection with any
such audit. In addition, the Company shall promptly pay or reimburse the Bank
for the costs of any such investigations, as described in Section 8.06 herein,
conducted by or for the Bank. The Bank may charge any such audit fees and
out-of-pocket expenses to the Company's Revolving Loan Account. Company agrees
to pay the expense of one audit annually and in the event of default, such other
audits as Bank in its discretion shall require. Company shall bear the
reasonable expense of such audit and appraisals.
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Section 8.14. Receivables Aging. Not less than once each month as more
particularly set forth in Section 8.01 hereof, the Company shall submit to the
Bank an aging of its Receivables, all in form and substance acceptable to the
Bank.
B. Negative Covenants.
The Company covenants and agrees that from the date hereof until payment
and performance in full of all Obligations, and until the termination of this
Financing Agreement, unless the Bank otherwise consents in writing, which
consent shall not be unreasonably withheld, the Company shall not:
Section 8.15. Encumbrances. Incur or permit to exist any lien, mortgage,
charge or other encumbrance against any of its properties or assets, whether now
owned or hereafter acquired, except: (a) liens required or expressly permitted
by this Agreement; (b) pledges or deposits in connection with or to secure
worker's compensation, unemployment or liability insurance; (c) tax liens which
are being contested in good faith and in compliance with this Agreement.
Section 8.16. Limitation on Indebtedness. Create, incur and guarantee any
indebtedness or obligation for borrowed money from, or issue or sell any of its
obligations to any lender without the express written consent of Bank except for
trade debt incurred in the ordinary course of business.
Section 8.17. Contingent Liabilities. Assume, guarantee, endorse or
otherwise become liable upon the obligations of any person, firm or corporation,
or enter into any purchase or option agreement or other arrangement having
substantially the same effect as such a guarantee, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.
Section 8.18. Consolidation or Merger. Merge into or consolidate with or
into any corporation.
Section 8.19. Loans, Advances, Investments. Use the proceeds of any Loans,
either directly or indirectly, to make or permit to exist any loans or advances
to, or purchase any stock, other securities or evidences of indebtedness of, or
make or permit to exist any investment (including without limitation the
<PAGE>
acquisition of stock of a corporation), or acquire any interest whatsoever in,
any other person.
Section 8.20. Acquisition of Stock of the Company; Dividends. Purchase,
acquire, redeem or retire, or make any commitment to purchase, acquire, redeem
or retire any of the capital stock of the Company, whether now or hereafter
outstanding, or declare or pay any dividend, or make any distribution to any of
its stockholders.
Section 8.21. Sale and Lease of Assets. Sell, lease or otherwise dispose of
any of its assets, unless the Company shall have replaced or substituted any
such assets with like assets of equal or greater value.
Section 8.22. Name Changes. Change its corporate name or conduct its
business under any trade name or style other than as set forth in this
Agreement.
Section 8.23. Capital Expenditures. In any fiscal year, may not make any
expenditure for any asset which would be a Fixed Asset, or any expenditures for
any leases, including but without limitation capitalized or conditional sales
contract in the excess of $25,000.00 per annum in the aggregate, without written
consent of the Bank. For the purpose of this covenant, the entire amount paid
over the life of any capitalized lease or conditional sales contract shall be
deemed to be paid in the first year of such lease or sales contract.
Section 8.24. Prohibited Transfers. Transfer, in any manner, either
directly or indirectly, any cash, property, or other assets to any of its
affiliates, other than those made in the ordinary course of business and for
fair consideration on terms no less favorable than if such transfer has been an
arms-length transaction between the Company and an unaffiliated entity.
Section 8.25. No Management/Ownership Change. Suffer any change in its
management or ownership which the Bank deems, in its sole discretion, to be a
material change.
Section 8.26. Leasebacks. Lease any real estate or other capital asset from
any lessor who shall have acquired such property from the Company.
Section 8.27. No Violation. The Company shall not (i) take any action or
(ii) fail to take any action which would invalidate or limit the coverage of the
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Certificate of Guarantee.
C. Financial Covenants.
The Company agrees and covenants that from the date hereof until the
payment and performance in full of all Obligations, and until the termination of
this Agreement, the Company shall not, on a consolidated basis:
Section 8.28. Net Worth. Permit ratio of unsubordinated liabilities to net
worth plus subordinated liabilities to exceed 3.25:1. Net Worth shall be defined
as book net worth plus loans subordinated to Lender's debt.
Section 8.29. Leverage Ratio. Permit minimum cash flow on an annual basis
to be less than 1.20 times the scheduled principal and interest payments. The
annual period to determine minimum cash flow shall commence January 1 and end on
December 31, in each year. Cash flow shall mean profit less taxes plus interest
expense plus depreciation and amortization.
Section 8.30. Officer and Shareholder Loans/Advances. Make any loans or
advances to any officer, employee, shareholder or director of Company without
the express written consent of Bank.
Section 8.31. Dividends. Declare or pay dividends to its shareholders
without Bank's prior review and written consent.
Section 8.32. Working Capital. Net Working Capital shall not fall below
zero. For purposes herein, net Working Capital shall mean current assets minus
current liabilities.
ARTICLE IX
COLLATERAL
Section 9.01. Grant. To secure the prompt payment and performance of each
and all of the Obligations, the Company pledges, assigns, transfers and grants
to the Bank, a continuing, lien and security interest in the following property
of the Company (herein called the "Collateral") :
(a) All accounts, bank accounts, accounts receivable, contracts,
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contract rights, general intangibles related to or arising from any
account, notes, documents, chattel paper, instruments, acceptances, drafts
or other forms of obligations and receivables of the Company arising from
the rendition of services by Company in the ordinary course of its business
or otherwise (all of, the foregoing being herein collectively called
"Receivables" or "Accounts"), whether or not the same are listed on any
schedules, assignments or reports furnished to Bank from time to time, and
whether such Accounts are now existing or are created at any time
hereafter;
(b) All documents, instruments, documents of title, patents,
trademarks or licenses, general intangibles, policies and certificates of
insurance, guaranties, securities, chattel paper, deposits, tax returns,
proceeds of insurance, cash, liens or other property, which are now or may
hereinafter be in the possession of the Company or as to which the Company
may now or hereafter control possession by documents of title or otherwise;
(c) All books, records, customer lists, ledgers, evidence, invoices,
and all other evidences of the Company's business records, including all
cabinets, drawers, etc. that may hold the same; computer records; lists,
software, programs, wherever located all whether now existing or hereafter
arising or acquired;
(d) All general intangibles, including without limitation; tax
refunds, proceeds of insurance, tradenames, trademarks, applications
therefor, that the Company now owns, has the right to use or may hereafter
own or acquire the right to use;
(e) All inventory, equipment, appliances, and furniture and fixtures,
now existing or hereafter arising, wherever located, and all contracts,
contract rights and chattel paper arising out of any lease of any of the
foregoing;
(f) All other collateral in which the Company may hereafter grant to
the Bank a security interest; and
(g) All renewals, substitutions, replacements, additions, accessions,
proceeds, and products of any and all of the foregoing.
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ARTICLE X
EVENT OF DEFAULT
Section 10.01. Events of Default. Without limiting the demand nature of
the Revolving Loans, which at all times shall be payable on DEMAND, any and all
obligations including, without limitation, the Obligations arising pursuant to
or in connection with the Revolving Loans and the Term Loan, shall, at the
option of the Bank and notwithstanding any time or credit allowed by any note or
agreement, become immediately due and payable without notice if any one or more
of the following events (herein called "Events of Default" and individually, an
"Event of Default") shall occur: (a) failure of the Company to pay principal,
interest or any other sum due hereunder or under the Notes when due and payable,
and upon the expiration of any applicable grace period; (b) failure to pay or
perform when due any other Obligation arising under this Agreement, the Notes or
the other Financing Agreements, by any guarantor or surety for any Obligation of
the Company to the Bank, and upon the expiration of any applicable grace period;
(c) any event of default under any other agreement under which the Company or
any Guarantors are a party or by which the Company or any of its properties may
be bound; (d) breach of any covenant or agreement contained in, or failure by
the Company to perform any act, duty or obligation as required by, this
Agreement specifically including, without limitation, breach of any Financial
Covenants set forth in Article VIII hereof, upon the expiration of any
applicable grace period; (e) the making by the Company of any misrepresentation
of a material fact to the Bank; (f) except as permitted in Sections 8.15 and
8.24 hereof, the sale of other disposition or encumbrance of any of the
Collateral, or the filing, making or issuance of any levy, seizure, attachment,
judgment or injunction upon or against the Company, the Collateral, or any other
property or assets of the Company which remains in existence for more than 45
days; (g) insolvency of the Company or any guarantor for any Obligation of the
Company to the Bank, or business failure, appointment of a receiver or
custodian, or assignment for the benefit of creditors or the commencement of any
proceedings under any bankruptcy or insolvency law by or against the Company or
any guarantor for any Obligation of the Company to the Bank; (h) calling of a
meeting or creditors, appointment of a committee of creditors or liquidating
banks, or offering of a composition extension to creditors by, for or of the
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Company or any of its subsidiaries; (i) failure on the part of the Company to
keep the Collateral insured against loss by fire or otherwise for the full
insurable value thereof with companies and for coverages (including Bank's Long
Form Loss Payable Endorsement) acceptable to the Bank making the loss, if any,
payable to the Bank; (j) the loss, revocation or failure to renew any license
and/or permit now held or hereafter acquired by the Company which materially
affects the ability of the Company to continue its operations as presently
conducted; (k) occurrence of a default or event of default under any other
agreements between the Bank and the Company and/or the Bank and any Guarantor,
upon the expiration of any applicable grace period; (1) the declaration of an
event of default by any other lender to or creditor of the Company, or any
Guarantors, which is not cured within the applicable grace period; or (m) if
there shall be any material adverse changes from the present condition or
affairs (financial or otherwise) of the Company or any of the Guarantors of the
Obligations of the Company, that in the reasonable opinion of the Bank impairs
its security or increases its risk. Upon the happening of any one or more of the
foregoing Events of Default, any requirement upon the Bank to make further
Revolving Loans hereunder shall, at the option of the Bank, terminate. The
Company expressly waives any presentment, demand, protest, notice of protest or
other notice of any kind. The Bank may proceed to enforce the rights of the Bank
whether by suit in equity or by action at law, whether for specific performance
of any covenant or agreement contained in this agreement, the Notes or the other
Financing Agreements, or in aid of the exercise of any power granted in either
this Agreement or the Notes or any other relief whatsoever appropriate to the
enforcement of such rights, or proceed to enforce any legal or equitable right
which the Bank may have by reason of the occurrence of any Event of Default
hereunder.
ARTICLE XI
COLLECTION OF RECEIVABLES
Section 11.01. Deposits. Until the Bank exercises its rights to collect the
Receivables as provided for in this Agreement, the Company shall continue direct
collection of all Receivables whether or not such Receivables are deemed to be
Acceptable Receivables. Upon the occurrence of any Event of Default, all
collections and other proceeds of Receivables the Company receives shall be
received in trust for the Bank and the Company shall: keep all such collections
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separate and apart from all of their other funds and property; identify such
collections and proceeds as the property of the Bank; and deposit immediately
such collections in an Account established at Bank in the identical form
received. The Company shall not change or transfer the Depository Account
without the Bank's prior consent.
Section 11.02. Schedule. All collections of Receivables shall be set forth
on a schedule in form and substance satisfactory to the Bank. In the event the
Bank exercises its right to collect the Receivables as set forth in Section
11.01 above, collections of Receivables shall be credited to the Obligations of
the Company on the day of actual receipt by the Bank; provided, however, that
all credits shall be conditional credits subject to collection and that returned
items, at the Bank's option may be charged to the Company; and further provided
that for purposes of the computation of interest, items shall not be deemed to
be collected until such items are collected in accordance with the normal custom
of the Bank.
ARTICLE XII
ADJUSTMENTS
Section 12.01. Procedures. Until the Bank exercises its rights to collect
the Receivables as provided for in this Agreement, the Company may continue its
present policies for adjustments, but shall promptly notify the Bank of any
material credits, adjustments or disputes arising about the services represented
by Receivables. In any event, the Company will immediately pay the Bank from its
own funds (and not from the proceeds of Receivables), for application to the
Revolving Loans, an amount equal to any credit or adjustment made to any
Acceptable Receivables; provided, however, that so long as the Company is not in
default hereunder, such payment need not be made if the Company shall have,
after making such credit or adjustment, sufficient Acceptable Receivables to
maintain the aggregate outstanding balance of the Revolving Loans under the
Borrowing Base.
ARTICLE XIII
RIGHTS AND REMEDIES OF BANK
Section 13.01. Remedies of Bank. Upon the Company's failure to pay or
demand any or all of the Revolving Loans, or upon the occurrence of any Event of
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Default, the Bank shall have in any jurisdiction where enforcement hereof is
sought, in addition to all other rights and remedies which the Bank may have
under law and equity, the following rights and remedies, all of which may be
exercised with or without further demand or notice to the Company and without a
prior judicial or administrative hearing or notice, which notice and hearing are
expressly waived: to enforce or foreclose the liens and security interests
created under this Agreement or under any other agreement relating to Collateral
by any available judicial procedure or without judicial process; to enter any
premises where any Collateral may be located for the purpose of taking
possession or removing the same; to sell, assign, or otherwise dispose of
Collateral or any part thereof, either at public or private sale, for cash, on
credit or otherwise, with or without representations or warranties, and upon
such terms as shall be acceptable to the Bank, all at Bank's sole option and as
the Bank in its sole discretion may deem advisable; to bid or become purchaser
at any such sale if public; and, at the option of the Bank, to apply or be
credited with the amount of all or any part of the Obligations owing to the Bank
against the purchase price bid by the Bank at any such sale.
Section 13.02. Specific Powers. The Bank may at any time, after the
occurrence of an Event of Default, at the Bank's sole discretion: (i) give
notice of assignment to any Receivable Debtor; (ii) collect Receivables directly
and charge, or cause to be charged, the collection costs and expenses to the
Bank's Revolving Loan Account; (iii) collect receivables submitted by the
Company to the Bank for collection and charge, or cause to be charged, the
reasonable collection costs and expenses to the Bank's Revolving Loan Account;
(iv) settle or adjust disputes and claims directly with Receivable Debtors for
amounts and upon terms which the Bank considers advisable, and credit, or cause
to be credited, the Bank's Revolving Loan Account with the net amounts received
in payment of Receivables; (v) exercise all other rights granted in this
Agreement and the other Financing Agreements; (vi) receive, open and dispose of
all mail addressed to the Company and notify the Post Office authorities to
change the address for delivery of the Company's mail to an address designated
by the Bank; (vii) endorse the name of the Company on any checks or other
evidence of payment that may come into possession of the Bank and on any
invoice, or other document; (viii) in the name of the Company or otherwise,
demand, sue for, collect and give acquittance for any and all monies due or to
become due on Receivables; (ix) compromise, prosecute or defend any action,
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claim or proceeding concerning receivables; and (x) do any and all things
necessary and proper to carry out the purposes contemplated in this Agreement,
other Financing Agreements and any other agreement between the parties. In the
event that the Bank takes any such action before the occurrence of an Event of
Default, such action shall be taken in good faith. Neither the Bank nor any
person acting as its attorney hereunder shall be liable for any acts or
omissions or for any error of judgment or mistake of fact or law, except for bad
faith, gross negligence and willful misconduct. The Company agrees that the
powers granted hereunder, being coupled with an interest, shall be irrevocable
so long as any Obligation remains unsatisfied. Notwithstanding the foregoing, it
is understood that the Bank is under no duty to take any of the foregoing
actions and that after having made demand upon the Receivable Debtors for
payment, the Bank shall have no further duty as to the collection or protection
of Receivables or any income therefrom and no further duty to preserve any
rights pertaining thereto, other than the safe custody thereof.
Section 13.03. Duties After Default. The Company will, at the Bank's
request, assemble all tangible Collateral and make it available to the Bank at
places which the Bank may reasonably select, whether at the premises of the
Company or elsewhere and will make available to the Bank all premises and
facilities of the Company for the purpose of the Bank taking possession of
Collateral. The net cash proceeds resulting from the collection, liquidation,
sale, or other disposition of Collateral shall be applied first to the expenses
(including all reasonable attorney's and professional fees) of retaking,
holding, processing and preparing for sale, selling, collecting, liquidating and
the like and then to the satisfaction of all Obligations, application as to
particular Obligations or against principal or interest to be at the Bank's sole
discretion. The Company shall be liable to the Bank and shall pay to the Bank on
demand any deficiency which may remain after such sale, disposition, collection
or liquidation of Collateral.
Section 13.04. Cumulative Remedies. The enumeration of the Bank's rights
and remedies set forth in this Article is not intended to be exhaustive and the
exercise by the Bank of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative and shall be in
addition to any other right or remedy given hereunder or under any other
agreement between the parties or which may now or hereafter exist in law or at
equity or by suit or otherwise. No delay or failure to take action on the part
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of the Bank in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or shall be construed to be a waiver of any
event of default. No course of dealing between the Company and either the Bank
or their employees shall be effective to change, modify or discharge any
provision of this Agreement or to constitute a waiver of any default.
ARTICLE XIV
Section 14.01. Term and Termination. (a) Revolving Loan. Unless sooner
terminated by a demand by the Bank or as a result of the occurrence of an Event
of Default, the obligation of the Bank to make Revolving Loans shall terminate
on June 4, 1994 (the "Term"). The Bank and the Company may extend the Term for
one or more renewal terms which shall consist of periods of time to be
determined by the Bank but in any way not to exceed one year each (each being a
"Renewal Term") by executing a written agreement to do so prior to the end of
the Term (or prior to the end of a Renewal Term, if applicable). At the end of
the Term hereof (or at the end of a Renewal Term, if applicable), and in the
event Company has not received notice from Bank confirming renewal of the term
then in that event, the Company shall pay the entire balance of the Revolving
Loans. Further, upon termination of the Revolving Loans, all of the rights,
interest and remedies of the Bank and Obligations of the Company shall survive
and the Company shall have no right to receive, and the Bank shall have no
obligation to make, any further Revolving Loans.
(b) Term Loans. Unless payment is accelerated as a result of occurrence of
an Event of Default or demand by the Bank of the Revolving Loans, the Term Loan
shall be repaid over a period of five (5) years as set forth in the Term Note.
ARTICLE XV
Section 15.01. Expenses. Whether or not the transactions herein
contemplated shall be consummated, the Company agrees to pay all reasonable
out-of-pocket expenses (including reasonable fees and expenses of the Bank's
counsel) of the Bank incurred in connection with the preparation of this
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Agreement, the Notes, the other Financing Agreements and any amendments or
supplements hereto and thereto, and all expense (including reasonable fees and
expenses of the Bank's counsel and the Four Thousand Five Hundred and 00/100
($4,500.00) Dollar commitment fee for the Term Loan) incidental to the
collection of monies due hereunder or under the Notes or the other Financing
Agreements and/or the enforcement of the rights (including the protection
thereof) of the Bank under any provisions of this Agreement and the Notes and
the other Financing Agreements.
ARTICLE XVI
MISCELLANEOUS
Section 16.01. Set-off. The Company hereby gives the Bank a lien and right
of setoff for all its liabilities to such Bank upon and against all its
deposits, credits, collateral and property now or hereafter in the possession or
control of such Bank or in transit to it. The Bank may, upon the occurrence of
any Event of Default or upon the occurrence of any event or condition which
would constitute such an Event of Default but for the requirement that notice be
given or time elapse or both, apply or set off the same, or any part thereof, to
any liability of the Company to such Bank, even though unmatured.
Section 16.02. Covenants to Survive, Binding Agreement. All covenants,
agreements, warranties and representations made herein, in the Notes, in the
other Financing Agreements, and in all certificates or other documents of the
Company shall survive the advances of money made by the Bank to the Company
hereunder and the delivery of the Notes, and the other Financing Agreements and
all such covenants, agreements, warranties and representations shall be binding
upon and inure to the benefit of the Bank, and its successors and assigns.
Section 16.03. Cross-Collateralization. All collateral which the Bank may
at any time acquire on behalf of the Bank from the Company or from any other
source in connection with Obligations arising under this Agreement and the other
Financing Agreements shall constitute collateral for each and every Obligation,
without apportionment or designation as to particular Obligations and that all
Obligations, however and whenever incurred, shall be secured by all Collateral
however and whenever acquired, and the Bank shall have the right, in its sole
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discretion, to determine the order in which the Bank's rights in or remedies
against any Collateral are to be exercised and which type of Collateral or which
portions of Collateral are to be proceeded against and the order of application
of proceeds of Collateral as against particular Obligations.
Section 16.04. Amendments and Waivers. Neither this Agreement, the Notes,
the other Financing Agreements, nor any term, covenant or condition hereof or
thereof may be changed, waived, discharged, modified or terminated except by a
writing executed by the parties hereto or thereto. No failure on the part of
Bank to exercise, and no delay in exercising, any right, remedy or power
hereunder or under the Notes or the other Financing Agreements shall preclude
any other or future exercise thereof, or the exercise of any other right, remedy
or power.
Section 16.05. Notices. All notices, requests, consents, demands and other
communications hereunder shall be in writing and shall be mailed by first class
mail to the respective parties to this Agreement as follows:
(a) If to the Company:
MARINE MANAGEMENT SYSTEMS, INC.
c/o Eugene D. Story
102 Hamilton Avenue
Stamford, Connecticut 06902
cc: Attorney Brian T. O'Connor
Diserio, Martin, O'Connor, et al.
One Atlantic Street
Stamford, CT 06901-2402
(b) if to the Bank:
William R. Caporale
Assistant Vice President
PEOPLE'S BANK
350 Bedford Street
Stamford, CT 06901
Section 16.06. Transfer of Bank's Interest. The Company hereby agrees that
the Bank, in its sole discretion, may freely sell, assign or otherwise transfer
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participation, portions, co-lender interests or other interests in all or any
portion of the indebtedness, liabilities or obligations arising in connection
with or in any way related to the financing transactions of which this Agreement
is a part. In the event of any such transfer, the transferee may, in the Bank' s
sole discretion, have and enforce all the rights, remedies and privileges of the
Bank. The Company consents to the release by the Bank to any potential
transferee (so long as such transferee is a financial institution) of any and
all information (including, without limitation, financial information)
pertaining to the Company as the Bank, in its sole discretion, may deem
appropriate. If such transferee so participates with the Bank in making loans or
advances hereunder or under any other agreement between the Bank and the
Company, the Company hereby grants to such transferee and such transferee shall
have and is hereby given a continuing lien and security interest in any money,
securities or other property of the Company in the custody or possession of such
transferee, including the right of set off under circumstances consistent with
this Agreement, to the extent of such transferee's participation in the
Obligations of the Company to the Bank.
Section 16.07. Succession. This Agreement shall bind the respective
successors and assigns of the Company and inure to the benefit of the Bank and
its respective successors and assigns. The Company acknowledges that in the
event of such assignment, any such Assignee shall be able to pursue all of its
remedies available to it under the Agreement as an assignee of Bank.
Section 16.07. Prejudgment Remedy Waiver; Waivers. The COMPANY ACKNOWLEDGES
THAT THE LOANS EVIDENCED HEREBY ARE COMMERCIAL TRANSACTIONS AND WAIVES ITS RIGHT
TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH THE BANK MAY DESIRE TO USE, AND FURTHER WAIVES DILIGENCE, DEMAND,
PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF ANY
RENEWALS OR EXTENSIONS. INCLUDING WITHOUT LIMITATION, TORT CLAIMS. THE COMPANY
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND
ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS.
Section 16.08. Jury Waiver. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY
COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH
OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A
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PART AND/OR THE ENFORCEMENT OF ANY OF THE BANK'S RIGHTS, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS. THE COMPANY ACKNOWLEDGES THAT IT MAKES THIS WAIVER
KNOWINGLY, WILLINGLY AND VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF
THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEY.
Section 16.09. Section Headings, Severability, Entire Agreement. Section
and subsection headings have been inserted herein for convenience only and shall
not be construed as part of this Agreement. Every provision of this Agreement,
the Notes and the other Financing Agreements is intended to be severable; if
provision of this Agreement, the Notes, Financing Agreements, or any other
document delivered in connection herewith shall be invalid, illegal or
unenforceable for any reason whatsoever, the validity, legality and
enforceability of the remaining provisions hereof or thereof shall not in any
way be affected or impaired thereby. All exhibits and schedules to this
Agreement shall be annexed hereto and shall be deemed to be part of this
Agreement. This Agreement, the other Financing Agreements, and the Exhibits and
Schedules attached hereto and thereto embody the entire agreement and
understanding between the Company and the Bank and supersede all prior
agreements and understandings relating to the subject matter hereof unless
otherwise specifically reaffirmed and restated herein.
Section 16.10. Governing Law. This Agreement and the other financing
agreements, and all transactions, assignments and transfers hereunder and
thereunder, and all the rights of the parties, shall be governed as to validity,
construction, enforcement and in all other respects by the laws of the State of
Connecticut. The Company agrees that the Superior Court for the Judicial
District of New Haven or the United States District Court for the District of
Connecticut at New Haven shall have jurisdiction to hear and determine any
claims or disputes pertaining to the financing transactions of which this
Agreement is a part and/or to any matter arising or in any way related to this
Agreement or any other agreement between the Bank and the Company expressly
submits and consents in advance to such jurisdiction in any action or
proceeding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first written above.
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WITNESSED: MARINE MANAGEMENT SYSTEMS,
INC.
/s/ [Illegible] BY: /s/ Eugene D. Story
- --------------------------- ----------------------------
EUGENE D. STORY
Its President
/s/ Brian O'Connor Duly Authorized
- ---------------------------
WITNESSED: PEOPLE'S BANK
/s/ [Illegible] BY: /s/ William R. Caporale
- --------------------------- ----------------------------
WILLIAM R. CAPORALE
Its Asst.Vice President
Duly Authorized
/s/ [Illegible]
- ---------------------------
STATE OF CONNECTICUT)
) ss. Stamford June 4, 1993
COUNTY OF FAIRFIELD )
Personally appeared EUGENE D. STORY, known to me to be the President of
Marine Management Systems, Inc., and as such signer and sealer of the foregoing
instrument, acknowledged the same to be his free act and deed as such President,
and the free act and deed of said corporation before me.
/s/ Brian O'Connor
----------------------------
Commissioner of the Superior
Court
Notary Public
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<PAGE>
STATE OF CONNECTICUT)
) ss. Stamford June 4, 1993
COUNTY OF FAIRFIELD )
Personally appeared WILLIAM R. CAPORALE, known to me to be the Assistant
Vice President of PEOPLE'S BANK and that he as such officer, signer and sealer
of the foregoing instrument, acknowledged the execution of the same to be his
free act and deed individually and as such officer, and the free act and deed of
said corporation.
In Witness Whereof, I hereunto set my hand.
/s/ Rita A/ Steinberger
----------------------------
Commissioner of the Superior
Court
Notary Public
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EXHIBIT A
TERM PROMISSORY NOTE
$450,000.00 June 4, 1993
For value received, the undersigned MARINE MANAGEMENT SYSTEMS, INC., an
Ohio Corporation authorized to do business in the State of Connecticut,
(hereinafter "Maker") with a business address at 102 Hamilton Avenue, Stamford,
Connecticut, does hereby promise to pay PEOPLE'S BANK, a Connecticut Banking
Corporation, or order, ("Lender") at its office at 350 Bedford Street, Stamford,
Connecticut, or at such other place as the holder hereof, (including Lender,
hereinafter referred to as "Holder") may designate, the sum of FOUR HUNDRED AND
FIFTY THOUSAND AND 00/100 ($450,000.00) DOLLARS, together with interest on the
unpaid balance of this Note beginning as of the date hereof, before or after
maturity or judgment (subject to the default rate set forth below), at the rate
of one and one-half percentage points (1.50%) percent per annum above the
Holder's Prime Rate (defined below) on a floating basis, which rate shall be
computed and payable monthly in arrears on the basis of a Three Hundred Sixty
(360) day year and actual days elapsed, together with all taxes levied or
assessed on this Note or the debt evidenced hereby against the Holder (excluding
taxes on the net income of the Holder, and together with all reasonable costs,
expenses and attorneys' and other professional fees incurred in any action to
collect this Note or to enforce, protect, preserve, defend or sustain or
foreclose the lien of any mortgage, security agreement or other agreement or in
any litigation or controversy arising from or connected with said mortgage,
security agreement or other agreement or this Note. The term "Prime Rate" as
used herein shall mean the interest rate which Lender announces from time to
time as its Prime Rate. The Prime Rate may not be Lender's lowest or most
favorable rate. Any change in the interest rate because of a change in the Prime
Rate shall become effective immediately, without notice or demand.
Interest shall be due and payable monthly in arrears on the first day of
each and every month commencing on July 4, 1993 and continuing until the
obligations evidenced by this Note are fully and finally paid. Principal shall
be due and payable in: (1) Fifty-nine (59) equal monthly installments of FIVE
<PAGE>
THOUSAND EIGHT HUNDRED AND THIRTY-THREE 33/100 ($5,833.33) DOLLARS plus
interest, commencing on July 4, 1993 and continuing on the first day of each
every month thereafter through and including May 4, 1998; and (ii) one final
payment of all outstanding principal together with outstanding interest thereon
on June 4, 1998. Notwithstanding the foregoing, Maker shall make such other
payments on account of principal as may be necessary to insure that the
outstanding principal balance shall not exceed the Funding Formula as more fully
described in the Commercial Revolving Loan, Term Loan and Security Agreement
("CRLTLSA") of even date herewith which is incorporated herein by reference
thereto. Such payments of principal as may be required to insure compliance with
the funding formula, shall not reduce the monthly payments of principal as set
forth in this note, but shall reduce the term accordingly.
Maker agrees that: (i) if any installment of principal or interest or any
other sum due hereunder is not paid within ten (10) days of the date such
payment is due and payable; or (ii) if any demand indebtedness of Maker to
Holder is not paid on demand; or (iii) if any installment of interest or other
sums due under that certain Promissory Note of even date herewith in the
original principal amount of $150,000.00 ("Revolving Note") is not paid when due
and payable; (iv) If Maker or any endorser hereof or any guarantor or surety of
any obligation of Maker hereunder shall suffer or permit the filing by or
against it of any petition for adjudication, arrangement, reorganization or the
like under any bankruptcy or insolvency law, make an assignment for the benefit
of creditors or suffer or permit the appointment of a receiver for any part of
its property and in the case of an involuntary petition which is not released or
dismissed within thirty (30) days; or (v) if Maker shall be in default under the
CRLTLSA, the Revolving Note, or under any other security agreement or any other
agreement securing this Note, or in the payment of performance of any other
obligation to Holder or any material obligation of any other person; then, upon
the happening of any such event, an event of default shall have occurred
hereunder and the entire indebtedness with accrued interest thereon due under
this Note shall, at the option of the Holder, become immediately due and payable
without notice. Failure to exercise such option shall not constitute a waiver of
the right to exercise the same in the event of any subsequent default. Maker
shall have a thirty (30) day grace period to cure a default except for a default
in payment of installments of principal and/or interest due hereunder pursuant
to (i), (ii) and (iv) hereinabove set forth. Notwithstanding the foregoing, the
<PAGE>
30 day period herein provided shall not be in addition to other grace periods
set forth in the Loan documents and the CRLTLSA, which Loan documents and
CRLTLSA at all times shall control. Upon the occurrence of such an event of
default, the interest rate on this Note shall automatically increase without
notice to a floating per annum rate equal to three percentage points (3.0%)
above the interest rate otherwise in effect hereunder at the time of such
default.
In the event of Maker's failure to pay any installment of principal,
interest and/or any other sum due hereunder or under the CRLTLSA (collectively
the "Sum") for more than ten (10) days from the date it is due and payable,
without in any way affecting Holder's right to make demand hereunder or to
declare an event of default to have occurred, Holder may collect a late charge
equal to five (5.0%) percent of the sum due to cure the extra expense involved
in handling such delinquent payment. The minimum late charge shall be $50.00.
Maker may prepay this Note in whole or in part at any time without penalty.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of the Maker and Holder (and any guarantors of Maker's liabilities)
that the maximum rate of interest to be paid by Maker (or guarantors of Maker's
liabilities) to the Holder shall not exceed the highest or the maximum rate of
interest permissible to be charged by a commercial lender such as Lender to a
commercial borrower such as Maker under the laws of the State of Connecticut.
Any amount paid in excess of such rate shall be considered to have been payments
in reduction of principal.
Maker, and each and all guarantors of this Note hereby give the Holder a
lien and right of setoff after default for all Maker's liabilities upon and
against all the deposits, credits, collateral and property of Maker and
guarantors, now or hereafter in the possession or control of the Holder or in
transit to it. Holder may, upon the occurrence of an event of default hereunder,
apply or setoff the same, or any part thereof, to any liability of the Maker,
even though unmatured.
Notwithstanding the foregoing, if the proceeds from an insurance policy is
paid to the Holder pursuant to the mortgage or any security or other agreement
securing this Note, the Holder, at its option, may apply all or part of such
proceeds to the outstanding principal balance of this Note, interest thereon and
<PAGE>
other obligations of Maker hereunder or otherwise in such order as Holder, in
its sole discretion, deems proper.
Failure by the Holder to insist upon the strict performance by Maker of any
terms and provisions herein shall not deemed to be a waiver of any terms and
provisions herein, and the Holder shall retain the right thereafter to insist
upon strict performance by the Maker of any and all terms and provisions of this
Note or any document securing the repayment of this Note.
THE MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT
OF ANY OF THE HOLDER'S RIGHTS AND REMEDIES, INCLUDING, WITHOUT LIMITATION, TORT
CLAIMS. THE MAKER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY
AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH
ITS ATTORNEYS.
MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE LOAN
EVIDENCED BY THE NOTE IS A COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS TO
NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER MAY DESIRE TO USE, AND further, waive diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
and notice of any renewals or extensions of this Note, and all guarantors agree
that the time for payment of this Note may be extended at Holder's sole
discretion, without impairing their liability thereon, and further consent to
the release of all or any part of the security for the payment hereof, at the
discretion of Holder, or the release of any party liable for this obligation
without affecting the liability of the other parties hereto. THE MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
This Note shall be governed by and construed in accordance with the laws of
the State of Connecticut.
MARINE MANAGEMENT SYSTEMS, INC.
<PAGE>
BY:____________________________
EUGENE D. STORY
Its President
Duly Authorized
<PAGE>
EXHIBIT B
REVOLVING LOAN NOTE
$150,000.00 June 4, 1993
ON DEMAND, for value received, the undersigned MARINE MANAGEMENT SYSTEMS,
INC., an Ohio Corporation authorized to do business in the State of Connecticut,
(hereinafter "Maker") with a business address at 102 Hamilton Avenue, Stamford,
Connecticut, does hereby promise to pay PEOPLE'S BANK, a Connecticut Banking
Corporation, or order, ("Lender") at its office at 350 Bedford Street, Stamford,
Connecticut, or at such other place as the holder hereof, (including Lender,
hereinafter referred to as "Holder") may designate, the sum of ONE HUNDRED FIFTY
THOUSAND AND 00/100 ($150,000.00) DOLLARS, together with interest on the unpaid
balance of this Note beginning as of the date hereof, before or after maturity
or judgment (subject to the default rate set forth below), at the rate of one
and one-half (1.50%) percent per annum above the Holder's Prime Rate (defined
below) on a floating basis, which rate shall be computed and payable monthly in
arrears on the basis of a Three Hundred Sixty (360) day year and actual days
elapsed, together with all taxes levied or assessed on this Note or the debt
evidenced hereby against the Holder (excluding taxes on the net income of the
Holder, and together with all reasonable costs, expenses and attorneys' and
other professional fees incurred in any action to collect this Note or to
enforce, protect, preserve, defend or sustain or foreclose the lien of any
mortgage, security agreement or other agreement or in any litigation or
controversy arising from or connected with said mortgage, security agreement or
other agreement or this Note. The term "Prime Rate" as used herein shall mean
the interest rate which Lender announces from time to time as its Prime Rate.
The Prime Rate may not be Lender's lowest or most favorable rate. Any change in
the interest rate because of a change in the Prime Rate shall become effective
immediately, without notice or demand.
The principal amount of this Note shall be advanced, at the discretion of
Holder, pursuant to a Commercial Revolving Loan, Term Loan and Security
Agreement (the "CRLTLSA") among Maker and Lender dated of even date herewith and
is subject in all respects to the terms and conditions of said CRLTLSA,
including without limitation, the repayment terms and the termination date set
forth in the CRLTLSA. Advances and payments on this Note may be evidenced by
<PAGE>
borrowing certificates, a grid (if any) attached to this Note or similar
certificates or documents, or by an internal ledger account of Holder which
shall set forth, among other things, the principal amount of any advances and
payments therefor.
Maker shall pay interest, principal and all other sums due hereunder ON
DEMAND, and if demand is not sooner made, interest shall be due and payable
monthly in arrears on the 4th day of each and every month commencing on July 4,
1993 and continuing until the obligations evidenced by this Note are fully and
finally paid. Holder may, in its sole discretion, charge any amounts due
hereunder to Maker's revolving loan account maintained with the Holder pursuant
to the CRLTLSA.
Without in any way limiting the demand nature of the indebtedness due
hereunder, which shall at all times be payable ON DEMAND, Maker agrees that: (i)
if any installment of interest or any other sum due hereunder is not paid within
ten (10) days of the date such payment is due and payable; or (ii) if any
indebtedness evidenced by this Note is not paid on demand; or (iii) if Maker or
Holder shall terminate the revolving Loan facility made pursuant to the CRLTLSA;
or (iv) if any installment of principal or interest or any other sums due under
that certain Promissory Note of even date herewith from Maker to Holder in the
original principal amount of $450,000.00 (the "Term Note") is not paid when due
and payable; (v) If Maker or any endorser hereof or any guarantor or surety of
any obligation of Maker hereunder shall suffer or permit the filing by or
against it of any petition for adjudication, arrangement, reorganization or the
like under any bankruptcy or insolvency law, make an assignment for the benefit
of creditors or suffer or permit the appointment of a receiver for any part of
its property; or (vi) If Maker shall be in default under the CRLTLSA, the Term
Note, or under any security agreement or any other agreement securing this Note,
or in the payment or performance of any other obligation to any other person;
then, upon the happening of any such event, an event of default shall have
occurred hereunder and the entire indebtedness with accrued interest thereon due
under this Note shall, at the option of the Holder, become immediately due and
payable without notice. Failure to exercise such option shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default.
Maker shall have a thirty (30) day grace period to cure a default except for a
<PAGE>
default in payment of installments of principal and/or interest due hereunder
pursuant to (i), (ii) and (iv) hereinabove set forth. Notwithstanding the
foregoing, the 30 day period herein provided shall not be in addition to other
grace periods set forth in the Loan documents and the CRLTLSA, which Loan
documents and CRLTLSA at all times shall control. Upon the occurrence of such an
event of default, the interest rate on this Note shall automatically increase
without notice to a floating per annum rate equal to three percentage points
(3.0%) above the interest rate otherwise in effect hereunder from time to time.
In the event of Maker's failure to pay any installment of interest and/or
any other sum due hereunder or under the CRLTLSA for more than ten (10) days
from the date it is due and payable, without in any way affecting Holder's right
to make demand hereunder or to declare an event of default to have occurred, a
late charge equal to five (5.0%) percent of such late payment shall be assessed
against Maker and shall be due and payable immediately.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of the Maker and Holder (and any guarantor of Maker's liabilities)
that the maximum rate of interest to be paid by Maker (or guarantor of Maker's
liabilities) to the Holder shall not exceed the highest or the maximum rate of
interest permissible to be charged by a commercial lender such as Lender to a
commercial borrower such as Maker under the laws of the State of Connecticut.
Any amount paid in excess of such rate shall be considered to have been payments
in reduction of principal.
Maker, and each guarantor of this Note hereby give the Holder a lien and
right of setoff after default for all Maker's liabilities upon and against all
the deposits, credits, collateral and property of Maker and guarantor, now or
hereafter in the possession or control of the Holder or in transit to it. Holder
may, upon the occurrence of an event of default hereunder, apply or setoff the
same, or any part thereof, to any liability of the Maker, even though unmatured.
Notwithstanding the foregoing, if the proceeds from an insurance policy
award is paid to the Holder pursuant to the mortgage or any security or other
agreement securing this Note, the Holder, at its option, may apply all or part
of such proceeds to the outstanding principal balance of this Note, interest
thereon and other obligations of Maker or otherwise in such order as Holder, in
its sole discretion, deems proper.
<PAGE>
Failure by the Holder to insist upon the strict performance by Maker of any
terms and provisions herein shall not deemed to be a waiver of any terms and
provisions herein, and the Holder shall retain the right thereafter to insist
upon strict performance by the Maker of any and all terms and provisions of this
Note or any document securing the repayment of this Note.
THE MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT
OF ANY OF THE HOLDER'S RIGHTS AND REMEDIES, INCLUDING, WITHOUT LIMITATION, TORT
CLAIMS.
MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE LOAN
EVIDENCED BY THE NOTE IS A COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS TO
NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER MAY DESIRE TO USE, AND further, waive diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
and notice of any renewals or extensions of this Note, and all guarantors agree
that the time for payment of this Note may be extended at Holder's sole
discretion, without impairing their liability thereon, and further consent to
the release of all or any part of the security for the payment hereof, at the
discretion of Holder, or the release of any party liable for this obligation
without affecting the liability of the other parties hereto. THE MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
This Note shall be governed by the laws of the State of Connecticut.
MARINE MANAGEMENT SYSTEMS, INC.
BY:__________________________
EUGENE D. STORY
Its President
Duly Authorized
<PAGE>
EXHIBIT C
1. File No. 816237
ZENITH DATA SYSTEMS CORPORATION
Hilltop Road
St. Joseph, MI 49085
All inventory of goods and merchandise bearing
tradename/trademark "Zenith Data Systems".
2. File No. 888632
BONBARDIER CAPITAL INC.
Seven Burlington Square
P. O. Box 5309
Burlington, VT 05402-5309
All inventory financed or floor-planned by Secured Party.
3. File No. 898092/909531
JPW CREDIT CORP.
2975 Westchester Avenue
Purchase, NY 10577
Assigned to: PITNEY BOWES CREDIT CORPORATION
201 Merrit Seven
Norwalk, CT 06856-5151
Leased equipment.
4. File No. 0998437
ACTIVE CAPITAL CORP.
1 Huntington Quad.
Suite 4, South 5
Melville, NY 11747
Specific Listed Equipment
5. File No. 0988821
LEASCO
152 Madison Avenue
New York, NY 10016
Assigned to: FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
20 North 9th Street
Richmond, IN 47375
Specifically listed equipment.
<PAGE>
EXHIBIT D
AS TO BRIAR OAK DRIVE, WESTON, CONNECTICUT
A first Mortgage from Robert D. Ohmes and Evelyn J. Ohmes to Fairfield
County Savings Bank in the original principal amount of $100,000.00 dated
October 1, 1976 and recorded in Book 104 at Page 594 in the Weston Land Records.
A second Mortgage from Robert D. Ohmes and Evelyn J. Ohmes to PBT Mortgage
Corporation in the original principal amount of $155,000.00 dated September 28,
1990 and recorded October 5, 1990 in Book 184 at Page 637 of the Weston Land
Records. Said mortgage was subordinated to the lien of the Connecticut National
Bank mortgage recorded in Book 156 at Page 509 by Subordination Agreement dated
September 25, 1990 and recorded in Book 184 at Page 635 of the Weston Land
Records.
AS TO BRUSH ISLAND ROAD, DARIEN, CONNECTICUT
A first Mortgage from Mary G. Story to People's Savings Bank-Bridgeport
(now People's Bank) in the original amount of $75,000.00 dated July 1, 1974 and
recorded in Book 345 at Page 73 in the Darien Land Records.
A second Mortgage from Mary G. Story and Eugene D. Story to Merrill Lynch
Equity Management, Inc. in the original principal amount of $250,000.00 dated
January 21, 1985 and recorded in Book 507 at Page 38 in the Darien Land Records.
Exhibit 4.05(b)
SECOND MODIFICATION
COMMERCIAL REVOLVING LOAN, TERM LOAN
AND SECURITY AGREEMENT
WITH
MARINE MANAGEMENT SYSTEMS, INC.
The Commercial Revolving Loan, Term Loan and Security Agreement dated as of
June 4, 1993 ("CRLTLSA") by and between MARINE MANAGEMENT SYSTEMS, INC., an Ohio
corporation authorized to do business in the State of Connecticut, having an
address at 102 Hamilton Avenue, Stamford, Connecticut, 06902 ("Company"), and
PEOPLE'S BANK, a Connecticut banking corporation with an office at 360 Bedford
Street, Stamford, Connecticut, 06901 ("Bank"), as modified by a Modification of
Commercial Revolving Loan, Term Loan and Security Agreement with Marine
Management Systems, Inc. dated September 22, 1993 ("First Modification"), is
further modified as hereinafter set forth:
1. ARTICLE I, Section 1.01 shall be amended as follows:
(d) "Borrowing Base" means an amount equal to the lesser of: (i) FOUR
HUNDRED THOUSAND and 00/100 ($400,000.00) Dollars, or (ii) Seventy (70%)
percent the net balance due on Acceptable Receivables.
(y) "Letter of Credit" shall have the meaning assigned in Section IVa
hereof.
(z) "CDA" means Connecticut Development Authority.
(aa) "CDA Advance Commitment" means CDA's Commitment executed and
delivered contemporaneously herewith to Bank guarantying a 27.3 percent
first loss in an amount not to exceed One Hundred Fifty Thousand and 00/100
($150,000.00) Dollars.
<PAGE>
(bb) "Loan Guarantee Certificate" means the contract of Guaranty
executed and delivered or to be executed and delivered by CDA to the Bank
with respect to the Amended and Restated Revolving Loan and Letter of
Credit under the provisions of Public Act 92-236, as amended.
2. ARTICLE II, Section 2.03 shall be amended as follows:
Procedure for Advances, Notices of Borrowing, Notes, Etc. Within the limits
of the Borrowing Base and subject to the terms and conditions contained in
Section 7.02, so long as demand has not been made by the Bank and the Company is
in compliance with all of the terms and conditions of this Agreement and no
Event of Default has occurred and no condition exists which would constitute an
Event of Default but for the giving of notice or passage of time, or both, the
Company may borrow, repay and re-borrow Revolving Loans. Requests for Revolving
Loan advances may be made in compliance with the Bank's existing cash management
procedures. The Revolving Loan shall be evidenced by a promissory note payable
to the Bank substantially in the form of, and in the amount of, FOUR HUNDRED
THOUSAND ($400,000.00) DOLLARS, as set forth in Exhibit A attached hereto
("Revolving Note"). Insofar as the Company may request and the Bank shall make
Revolving Loans hereunder, the Bank shall enter such advances as debits on a
revolving loan account maintained by the Company with the Bank ("Revolving Loan
Account"). The Bank shall also record in its Revolving Loan Account, in
accordance with customary accounting procedures, all other charges, expenses and
other liens properly chargeable to the Company; all payments made by the Company
on account of indebtedness evidenced by the Revolving Loan Account; all proceeds
of collateral which are finally paid to the Bank in its own office in cash or
solvent credits; and other appropriate debits and credits. The Revolving Loan
Account shall reflect the amount of the Company's indebtedness to the Bank from
time to time by reason of the Revolving Loans made by the Bank and other
appropriate charges hereunder. On a monthly basis, the Bank shall render a
statement for the Revolving Loan account, which statement shall be considered
correct and accepted by the Company and conclusively binding upon the Company.
The Bank shall have the right at its option, to debit the Revolving Loan Account
-2-
<PAGE>
for any principal due under the Term Note and, on the 4th day of each and every
month commencing January 4, 1996, for all interest charges on the Loans for the
previous month if not otherwise paid by the Company.
3. ARTICLE IVa, LETTER OF CREDIT shall be added to the document as follows:
ARTICLE IVa
4a.01 Issuance Letter of Credit. The Bank shall issue its Irrevocable
Letter of Credit in the maximum amount of One Hundred Fifty Thousand and 00/100
($150,000.00) Dollars in favor of Seaboard Stamford Investors Associates, LLC.
The sums evidenced by the Letter Credit shall decline at the rate of Seven
Thousand Five Hundred ($7,500.00) Dollars per month commencing on May 31, 1996
and continuing on the 31st day of each succeeding month thereafter until the
expiration date as hereinafter defined.
4a.02 Term. The Letter of Credit shall expire on December 31, 1997
("Expiration") and shall provide that it shall not be subject to any extension
thereof.
4a.03 Interest and Fees. (a) In the event the beneficiary draws upon the
Letter of Credit in accordance with its terms, the amounts so drawn will bear
interest, until repaid to Bank by Company, at a rate equal to Two and One Half
(2.5%) percent per annum in excess of People's Bank Prime Rate. (b) During the
term of the Letter of Credit, Company shall pay an annual fee equal to One and
One Half (1.5%) percent of the amount then available under the Letter of Credit
subject to a minimum annual payment of One Hundred Twenty Five and 00/100
($125.00) Dollars.
4. ARTICLE VI Section 6.01 shall be amended as follows:
(aa) CDA Requirements. The Company represents and warrants that it is
aware that the Bank is making the Revolving Loan and the Letter of Credit
on the condition, among others, that the Amended and Restated Revolving
Loan Note and Letter of Credit shall be guaranteed in part by the CDA and
that the requirements of the Contract of Guaranty and the CDA Advance
Commitment may require the Bank to act or not act if a default in either of
the aforesaid instruments occurs in order to preserve the Bank's rights and
benefits under the Loan Guaranty Certificate and the CDA Advance
-3-
<PAGE>
Commitment. The Company represents and warrants further that it has
reviewed, with its attorneys, all documents evidencing the Loan Guaranty
Certificate and the CDA Advance Commitment, all applicable statutes and
regulations governing the issuance of the Loan Guaranty Certificate and/or
the CDA Advance Commitment including without limitation Public Act 92-236
as amended (the "Act") and is aware of the requirements requisite both to
such issuance and keeping of the Contract of Guaranty and the CDA Advance
Commitment in force (the "Requirements"). The Company shall, at all times,
comply with the affirmative action requirements of the CDA. The Company
consents to the Bank's compliance with the Act and acknowledges that the
Bank's actions taken in compliance with the Act will be reasonable when
taken and will not subject the Bank to any claim or damages for being
unreasonable or for so called "Lender Liability" claims. The Company shall
not take any action which shall invalidate or limit the Contract of
Guaranty or the CDA Advance Commitment.
5. ARTICLE VII, Section 7.01 shall be amended as follows:
(a) Notes. The Bank shall have received a duly executed Term Note and
Amended and Restated Revolving Loan Note drawn to its Order;
(a1) Letter of Credit. The Bank shall received a duly executed
Application and Reimbursement Agreement for Irrevocable Standby Letter of
Credit;
(a2) Loan Guaranty Certificate. The CDA shall have executed and
delivered to the Bank a Loan Guaranty Certificate with respect to the
Revolving Loan and the Letter of Credit containing terms and conditions
acceptable to the Bank at its sole discretion;
(a3) CDA Commitment. The CDA has issued and delivered to the Bank the
CDA Advance Commitment containing terms of conditions acceptable to the
Bank in its sole discretion;
-4-
<PAGE>
(d) The Bank shall have received a duly executed Amended and Restated
Guaranty ("the Guaranty") from Eugene D. Story, Mary G. Story, Robert D.
Ohmes and Evelyn J. Ohmes (the "Guarantors") pursuant to which they shall
have unconditionally guaranteed the payment and performance of all
liabilities and obligations of the Company to the Bank. The Amended and
Restated Guaranty shall be in form and scope and substance satisfactory to
Bank.
6. ARTICLE VIII, A Affirmative Covenants shall be amended as follows:
Section 8.03 (1) Guarantee Certificate. On the date of the issuance of each
Certificate of Guarantee, Company shall prepay to CDA one (1) year's premium on
the Loan Guarantee Certificate. At Bank's option, Company shall add to each
payment due in connection with the guaranteed loan and Letter of Credit an
amount sufficient to accumulate in the hands of the Bank, one (1) payment period
prior to its due date, the next actual premium on the Certificate of Guaranty.
Such payment shall be held by Bank for the purpose of paying such premiums for
the same become delinquent.
Section 8.03 (2) The CDA Advance Commitment. The Company shall take all
steps necessary to cause the CDA to issue a Guarantee Certificate guaranteeing
Twenty Seven and Three (27.3%) percent of the Letter of Credit and Revolving
Loan as amended and restated.
7. ARTICLE X, Section 10.01 shall be amended as follows:
(c) Any event of default under any document, instrument or agreement
with the CDA or relating to the Contracts of Guarantee for the CDA Advance
Commitment or any other Agreement for borrowed money;
8. ARTICLE XIV, Section 14.01 is amended as follows:
Term and Termination. (a) Amended and Restated Revolving Loan. Unless
sooner terminated by a demand by the Bank or as a result of the occurrence of an
Event of Default, the obligation of the Bank to make Revolving Loans shall
-5-
<PAGE>
terminate on December 31, 1997 (the "Term"). The Bank and the Company may extend
the Term for one or more renewal terms which shall consist of periods of time to
be determined by the Bank but in any way not to exceed one year each (each being
a "Renewal Term") by executing a written agreement to do so prior to the end of
the Term (or prior to the end of a Renewal Term, if applicable). At the end of
the Term hereof (or at the end of a Renewal Term, if applicable), and in the
event Company has not received notice from Bank confirming renewal of the term
then in that event, the Company shall pay the entire balance of the Revolving
Loans. Further, upon termination of the Revolving Loans, all of the rights,
interest and remedies of the Bank and Obligations of the Company shall survive
and the Company shall have no right to receive, and the Bank shall have no
obligation to make, any further Revolving Loans.
(c) Letter of Credit. Unless sooner drawn, the Letter of Credit shall
be reviewed, prior to June 1, 1996 and shall expire on December 31, 1997.
9. ARTICLE XV, Section 15.01 is amended as follows:
Section 15.02 Additional Costs and Fees. Company agrees to pay all
reasonable transactional costs related to any modification of this Agreement and
shall pay a closing fee. Letter of Credit fees will be paid in accordance with
the terms and conditions of the Application and Reimbursement Agreement for
Irrevocable Standby Letter of Credit. CDA fees will be paid in accordance with
the terms of the CDA Commitment.
10. Except as expressly modified by this Second Modification, Commercial
Revolving Loan, Term Loan and Security Agreement as modified shall remain in
full force and effect.
IN WITNESS WHEREOF I hereunto set my hand.
WITNESSED: MARINE MANAGEMENT SYSTEMS, INC.
-6-
<PAGE>
/s/ Brian O'Connor By: /s/ Eugene D. Story
- ------------------------------- -------------------------------
Eugene Story
Its President,
/s/ Rita A. Steinberger Duly Authorized
- -------------------------------
WITNESSED: PEOPLE'S BANK
/s/ Brian O'Connor By: /s/ Jonathan Q. Mills
- ------------------------------- -------------------------------
Jonathan Q. Mills
Its Vice President,
/s/ Rita A. Steinberger Duly Authorized
- -------------------------------
STATE OF CONNECTICUT :
: ss. Stamford
COUNTY OF FAIRFIELD :
On this 21 day of December, 1995, before me, personally appeared Eugene D.
Story, who acknowledged himself to be the President of Marine Management
Systems, Inc., a Connecticut Corporation, and that he, as such President, being
authorized so to do, executed the foregoing instrument, as his free act and
deed, and the free act and deed of said corporation, for the purposes therein
contained, by signing the name of Eugene D. Story as said President.
/s/ Brian O'Connor
----------------------------
Brian T. O'Connor
Commissioner of the Superior
Court
STATE OF CONNECTICUT :
: ss. Stamford
COUNTY OF FAIRFIELD :
On this 21 day of December, 1995, before me, personally appeared Jonathan
Q. Mills, who acknowledged himself to be the Vice President of Peoples Bank, a
Connecticut Banking Corporation, and that he, as such Vice President, being
authorized so to do, executed the foregoing instrument, as his free act and
deed, and the free act and deed of said banking corporation, for the purposes
therein contained, by signing the name of Jonathan Q. Mills as said Vice
President.
/s/ Rita A. Steinberger
----------------------------
Rita A. Steinberger
Commissioner of the Superior
Court
EXHIBIT 4.05(c)
Jonathan Q. Mills
Vice President
Commercial Banking
PEOPLE'S BANK
People's Bank
350 Bedford Street
Stamford, Connecticut 06901-1741
203.359.6148
Fax: 203.359.6028
February 8, 1995
Mr. Robert D. Ohmes
Executive Vice President
Marine Management Systems, Inc.
102 Hamilton Avenue
Stamford, CT 06902
Dear Bob:
Reference is made to the Commercial Revolving Loan, Term Loan and Security
Agreement dated as of June 4, 1993 (the "Loan Agreements") between Marine
Management Systems Inc. (the "Borrower") and People's Bank (the "Lender").
Lender acknowledges that certain acts or conditions have occurred which
constitutes events of default for periods ending June 30, 1993, September 30,
1993, December 31, 1993, March 31, 1994, June 30, 1994, September 30, 1994, and
December 31, 1994 under, and or defined in, the Loan Agreements; specifically:
Section #7.02 (d) Failure by Borrower to cleanup the outstanding balance for
30 days
Section #8.01 Failure by Borrower to deliver audited financial statements
Section #8.30 During 1994 the Borrower made advances to certain
officers without the express written consent of the Bank.
Section #8.32 During 1994 the Borrower's Net Working Capital fell below zero
<PAGE>
Lender hereby waives each of the defaults specified above. Nothing herein shall
be deemed to constitute a waiver of any condition or event constituting an Event
of Default not specifically listed herein or of any condition existing on the
date hereof which would otherwise constitute an Event of Default; and provided,
further, that nothing herein shall be construed as a commitment or undertaking
of any nature to waive any Event of Default which may exist or arise on or after
the date hereof, whether or not included arising from facts similar or identical
to those specified above.
Lender consents to Borrower's request that as of the date hereof, the Loan
Agreements be amended as follows:
(a) Minimum Working Capital
Section #8.32 is hereby deleted
(b) Officer and Shareholder Loans/Advances
Section #8.30 is hereby deleted and the following is substituted in
lieu thereof: "Make or allow to exist any loans or advances in
excess of $463,000 to any officer, employee, shareholder or director
of Company without the express written consent of Bank.
(c) Capital Expenditures
Section #8.23 is hereby deleted and the following is substituted in
lieu thereof: "In any fiscal year, may not make any expenditure for
any asset which would be a Fixed Asset, or any expenditures for any
leases, including but without limitation capitalized or conditional
sales contract in the excess of $25,000.00 per annum in the
aggregate, or for any asset which would be an Intangible Asset in
the excess of $400,000.00 per annum in the aggregate, without
written consent of the Bank. For the purposes of this covenant, the
entire amount paid over the life of any capitalized lease or
conditional sales contract shall be deemed to be paid in the first
year of such lease or sales contract.
(d) Financial Statement
Section #8.01 (b) is hereby changed to delete the word "audit" and
substitute the word "review" therefor.
Except as specifically amended by the terms of this letter, all terms and
conditions set forth in the Financing Agreements (together with all Schedules
and Exhibits thereto) shall remain in full force and effect.
PEOPLE'S BANK
<PAGE>
BY:/s/ Jonathan Q. Mills
------------------------------------
Jonathan Q. Mills, Vice President
Signed, sealed and delivered AGREED:
in the presence of:
Marine Management Systems, Inc.
/s/ [Illegible] By:/s/ Eugene D. Story
- ---------------------------- ------------------------------------
Eugene D. Story, President
/s/ Robert D. Ohmes Date: 2/14/95
- ---------------------------- ------------------------------------
<PAGE>
/s/ [Illegible] /s/ Eugene D. Story
- ---------------------------- ------------------------------------
Eugene D. Story, Guarantor
Date: 2/14/95
/s/ [Illegible] /s/ Mary G. Story
- ---------------------------- ------------------------------------
Mary G. Story, Guarantor
Date: 2/14/95
/s/ [Illegible] /s/ Robert D. Ohmes
- ---------------------------- ------------------------------------
Robert D. Ohmes, Guarantor
Date: 2/14/95
/s/ Mark E. Story /s/ Evelyn J. Ohmes
- ---------------------------- ------------------------------------
Evelyn J. Ohmes, Guarantor
Date: 2/14/95
EXHIBIT 4.05(d)
TERM PROMISSORY NOTE
$450,000.00 June 4, 1993
For value received, the undersigned MARINE MANAGEMENT SYSTEMS, INC., an
Ohio Corporation authorized to do business in the State of Connecticut,
(hereinafter "Maker") with a business address at 102 Hamilton Avenue, Stamford,
Connecticut, does hereby promise to pay PEOPLE'S BANK, a Connecticut Banking
Corporation, or order, ("Lender") at its office at 350 Bedford Street, Stamford,
Connecticut, or at such other place as the holder hereof, (including Lender,
hereinafter referred to as "Holder") may designate, the sum of FOUR HUNDRED AND
FIFTY THOUSAND AND 00/100 ($450,000.00) DOLLARS, together with interest on the
unpaid balance of this Note beginning as of the date hereof, before or after
maturity or judgment (subject to the default rate set forth below), at the rate
of one and one-half percentage points (1.50%) percent per annum above the
Holder's Prime Rate (defined below) on a floating basis, which rate shall be
computed and payable monthly in arrears on the basis of a Three Hundred Sixty
(360) day year and actual days elapsed, together with all taxes levied or
assessed on this Note or the debt evidenced hereby against the Holder (excluding
taxes on the net income of the Holder, and together with all reasonable costs,
expenses and attorneys' and other professional fees incurred in any action to
collect this Note or to enforce, protect, preserve, defend or sustain or
foreclose the lien of any mortgage, security agreement or other agreement or in
any litigation or controversy arising from or connected with said mortgage,
security agreement or other agreement or this Note. The term "Prime Rate" as
used herein shall mean the interest rate which Lender announces from time to
time as its Prime Rate. The Prime Rate may not be Lender's lowest or most
favorable rate. Any change in the interest rate because of a change in the Prime
Rate shall become effective immediately, without notice or demand.
Interest shall be due and payable monthly in arrears on the first day of
each and every month commencing on July 4, 1993 and continuing until the
obligations evidenced by this Note are fully and finally paid. Principal shall
be due and payable in: (1) Fifty-nine (59) equal monthly installments of FIVE
THOUSAND EIGHT HUNDRED AND THIRTY-THREE 33/100 ($5,833.33) DOLLARS plus
interest, commencing on July 4, 1993 and continuing on the first day of each
<PAGE>
every month thereafter through and including May 4, 1998; and (ii) one final
payment of all outstanding principal together with outstanding interest thereon
on June 4, 1998. Notwithstanding the foregoing, Maker shall make such other
payments on account of principal as may be necessary to insure that the
outstanding principal balance shall not exceed the Funding Formula as more fully
described in the Commercial Revolving Loan, Term Loan and Security Agreement
("CRLTLSA") of even date herewith which is incorporated herein by reference
thereto. Such payments of principal as may be required to insure compliance with
the funding formula, shall not reduce the monthly payments of principal as set
forth in this note, but shall reduce the term accordingly.
Maker agrees that: (i) if any installment of principal or interest or any
other sum due hereunder is not paid within ten (10) days of the date such
payment is due and payable; or (ii) if any demand indebtedness of Maker to
Holder is not paid on demand; or (iii) if any installment of interest or other
sums due under that certain Promissory Note of even date herewith in the
original principal amount of $150,000.00 ("Revolving Note") is not paid when due
and payable; (iv) If Maker or any endorser hereof or any guarantor or surety of
any obligation of Maker hereunder shall suffer or permit the filing by or
against it of any petition for adjudication, arrangement, reorganization or the
like under any bankruptcy or insolvency law, make an assignment for the benefit
of creditors or suffer or permit the appointment of a receiver for any part of
its property and in the case of an involuntary petition which is not released or
dismissed within thirty (30) days; or (v) if Maker shall be in default under the
CRLTLSA, the Revolving Note, or under any other security agreement or any other
agreement securing this Note, or in the payment of performance of any other
obligation to Holder or any material obligation of any other person; then, upon
the happening of any such event, an event of default shall have occurred
hereunder and the entire indebtedness with accrued interest thereon due under
this Note shall, at the option of the Holder, become immediately due and payable
without notice. Failure to exercise such option shall not constitute a waiver of
the right to exercise the same in the event of any subsequent default. Maker
shall have a thirty (30) day grace period to cure a default except for a default
in payment of installments of principal and/or interest due hereunder pursuant
to (i), (ii) and (iv) hereinabove set forth. Notwithstanding the foregoing, the
30 day period herein provided shall not be in addition to other grace periods
set forth in the Loan documents and the CRLTLSA, which Loan documents and
CRLTLSA at all times shall control. Upon the occurrence of such an event of
-2-
<PAGE>
default, the interest rate on this Note shall automatically increase without
notice to a floating per annum rate equal to three percentage points (3.0%)
above the interest rate otherwise in effect hereunder at the time of such
default.
In the event of Maker's failure to pay any installment of principal,
interest and/or any other sum due hereunder or under the CRLTLSA (collectively
the "Sum") for more than ten (10) days from the date it is due and payable,
without in any way affecting Holder's right to make demand hereunder or to
declare an event of default to have occurred, Holder may collect a late charge
equal to five (5.0%) percent of the sum due to cure the extra expense involved
in handling such delinquent payment. The minimum late charge shall be $50.00.
Maker may prepay this Note in whole or in part at any time without penalty.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of the Maker and Holder (and any guarantors of Maker's liabilities)
that the maximum rate of interest to be paid by Maker (or guarantors of Maker's
liabilities) to the Holder shall not exceed the highest or the maximum rate of
interest permissible to be charged by a commercial lender such as Lender to a
commercial borrower such as Maker under the laws of the State of Connecticut.
Any amount paid in excess of such rate shall be considered to have been payments
in reduction of principal.
Maker, and each and all guarantors of this Note hereby give the Holder a
lien and right of setoff after default for all Maker's liabilities upon and
against all the deposits, credits, collateral and property of Maker and
guarantors, now or hereafter in the possession or control of the Holder or in
transit to it. Holder may, upon the occurrence of an event of default hereunder,
apply or setoff the same, or any part thereof, to any liability of the Maker,
even though unmatured.
Notwithstanding the foregoing, if the proceeds from an insurance policy is
paid to the Holder pursuant to the mortgage or any security or other agreement
securing this Note, the Holder, at its option, may apply all or part of such
proceeds to the outstanding principal balance of this Note, interest thereon and
other obligations of Maker hereunder or otherwise in such order as Holder, in
its sole discretion, deems proper.
-3-
<PAGE>
Failure by the Holder to insist upon the strict performance by Maker of any
terms and provisions herein shall not deemed to be a waiver of any terms and
provisions herein, and the Holder shall retain the right thereafter to insist
upon strict performance by the Maker of any and all terms and provisions of this
Note or any document securing the repayment of this Note.
THE MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT
OF ANY OF THE HOLDER'S RIGHTS AND REMEDIES, INCLUDING, WITHOUT LIMITATION, TORT
CLAIMS. THE MAKER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY
AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH
ITS ATTORNEYS.
MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE LOAN
EVIDENCED BY THE NOTE IS A COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS TO
NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER MAY DESIRE TO USE, AND further, waive diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
and notice of any renewals or extensions of this Note, and all guarantors agree
that the time for payment of this Note may be extended at Holder's sole
discretion, without impairing their liability thereon, and further consent to
the release of all or any part of the security for the payment hereof, at the
discretion of Holder, or the release of any party liable for this obligation
without affecting the liability of the other parties hereto. THE MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
This Note shall be governed by and construed in accordance with the laws of
the State of Connecticut.
MARINE MANAGEMENT SYSTEMS,INC.
BY: /s/ Eugene D. Story
--------------------------
EUGENE D. STORY
Its President
Duly Authorized
-4-
EXHIBIT 4.05(e)
AMENDED AND RESTATED
REVOLVING LOAN NOTE
$400,000.00 December 21, 1995
ON DEMAND, for value received, the undersigned MARINE MANAGEMENT SYSTEMS,
INC., an Ohio Corporation authorized to do business in the State of Connecticut,
(hereinafter "Maker") with a business address at 102 Hamilton Avenue, Stamford,
Connecticut, does hereby promise to pay PEOPLE'S BANK, a Connecticut Banking
Corporation, or order, ("Lender") at its office at 350 Bedford Street, Stamford,
Connecticut, or at such other place as the holder hereof, (including Lender,
hereinafter referred to as "Holder") may designate, the sum of FOUR HUNDRED
THOUSAND AND 00/100 ($400,000.00) DOLLARS, together with interest on the unpaid
balance of this Note beginning as of the date hereof, before or after maturity
or judgment (subject to the default rate set forth below), at the rate of one
and one-half (1.50%) percent per annum above the Holder's Prime Rate (defined
below) on a floating basis, which rate shall be computed and payable monthly in
arrears on the basis of a Three Hundred Sixty (360) day year and actual days
elapsed, together with all taxes levied or assessed on this Note or the debt
evidenced hereby against the Holder (excluding taxes on the net income of the
Holder, and together with all reasonable costs, expenses and attorneys' and
other professional fees incurred in any action to collect this Note or to
enforce, protect, preserve, defend or sustain or foreclose the lien of any
mortgage, security agreement or other agreement or in any litigation or
controversy arising from or connected with said mortgage, security agreement or
other agreement or this Note. The term "Prime Rate" as used herein shall mean
the interest rate which Lender announces from time to time as its Prime Rate.
The Prime Rate may not be Lender's lowest or most favorable rate. Any change in
the interest rate because of a change in the Prime Rate shall become effective
immediately, without notice or demand.
<PAGE>
The principal amount of this Note shall be advanced, at the discretion of
Holder, pursuant to a Commercial Revolving Loan, Term Loan and Security
Agreement among Maker and Lender dated June 4, 1993 as Amended and Modified
("CRLTLSA") and is subject in all respects to the terms and conditions of said
CRLTLSA as amended and modified, including without limitation, the repayment
terms and the termination date set forth in the CRLTLSA. Advances and payments
on this Note may be evidenced by borrowing certificates, a grid (if any)
attached to this Note or similar certificates or documents, or by an internal
ledger account of Holder which shall set forth, among other things, the
principal amount of any advances and payments therefor.
Maker shall pay interest, principal and all other sums due hereunder ON
DEMAND, and if demand is not sooner made, interest shall be due and payable
monthly in arrears on the 4th day of each and every month commencing on January
4, 1996 and continuing until the obligations evidenced by this Note are fully
and finally paid. Holder may, in its sole discretion, charge any amounts due
hereunder to Maker's revolving loan account maintained with the Holder pursuant
to the CRLTLSA.
Without in any way limiting the demand nature of the indebtedness due
hereunder, which shall at all times be payable ON DEMAND, Maker agrees that: (i)
if any installment of interest or any other sum due hereunder is not paid within
ten (10) days of the date such payment is due and payable; or (ii) if any
indebtedness evidenced by this Note is not paid on demand; or (iii) if Maker or
Holder shall terminate the revolving Loan facility made pursuant to the CRLTLSA;
or (iv) if any installment of principal or interest or any other sums due under
that certain Promissory Note dated June 4, 1993 from Maker to Holder in the
original principal amount of $450,000.00 (the "Term Note") is not paid when due
and payable; (v) If Maker or any endorser hereof or any guarantor or surety of
any obligation of Maker hereunder shall suffer or permit the filing by or
against it of any petition for adjudication, arrangement, reorganization or the
like under any bankruptcy or insolvency law, make an assignment for the benefit
of creditors or suffer or permit the appointment of a receiver for any part of
its property;
- 2 -
<PAGE>
or (vi) If Maker shall be in default under the CRLTLSA, the Term Note, or under
any security agreement or any other agreement securing this Note, or in the
payment or performance of any other obligation to any other person; then, upon
the happening of any such event, an event of default shall have occurred
hereunder and the entire indebtedness with accrued interest thereon due under
this Note shall, at the option of the Holder, become immediately due and payable
without notice. Failure to exercise such option shall not constitute a waiver of
the right to exercise the same in the event of any subsequent default. Maker
shall have a thirty (30) day grace period to cure a default except for a default
in payment of installments of principal and/or interest due hereunder pursuant
to (i), (ii) and (iv) hereinabove set forth. Notwithstanding the foregoing, the
30 day period herein provided shall not be in addition to other grace periods
set forth in the Loan documents and the CRLTLSA, which Loan documents and
CRLTLSA at all times shall control. Upon the occurrence of such an event of
default, the interest rate on this Note shall automatically increase without
notice to a floating per annum rate equal to three percentage points (3.0%)
above the interest rate otherwise in effect hereunder from time to time.
In the event of Maker's failure to pay any installment of interest and/or
any other sum due hereunder or under the CRLTLSA for more than ten (10) days
from the date it is due and payable, without in any way affecting Holder's right
to make demand hereunder or to declare an event of default to have occurred, a
late charge equal to five (5.0%) percent of such late payment shall be assessed
against Maker and shall be due and payable immediately.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of the Maker and Holder (and any guarantor of Maker's liabilities)
that the maximum rate of interest to be paid by Maker (or guarantor of Maker's
liabilities) to the Holder shall not exceed the highest or the maximum rate of
interest permissible to be charged by a commercial lender such as Lender to a
commercial borrower such as Maker under the laws of the State of Connecticut.
Any amount paid in excess of such rate shall be considered to have been payments
in reduction of principal.
- 3 -
<PAGE>
Maker, and each guarantor of this Note hereby give the Holder a lien and
right of setoff after default for all Maker's liabilities upon and against all
the deposits, credits, collateral and property of Maker and guarantor, now or
hereafter in the possession or control of the Holder or in transit to it. Holder
may, upon the occurrence of an event of default hereunder, apply or setoff the
same, or any part thereof, to any liability of the Maker, even though unmatured.
Notwithstanding the foregoing, if the proceeds from an insurance policy
award is paid to the Holder pursuant to the mortgage or any security or other
agreement securing this Note, the Holder, at its option, may apply all or part
of such proceeds to the outstanding principal balance of this Note, interest
thereon and other obligations of Maker or otherwise in such order as Holder, in
its sole discretion, deems proper.
Failure by the Holder to insist upon the strict performance by Maker of any
terms and provisions herein shall not deemed to be a waiver of any terms and
provisions herein, and the Holder shall retain the right thereafter to insist
upon strict performance by the Maker of any and all terms and provisions of this
Note or any document securing the repayment of this Note.
THE MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT
OF ANY OF THE HOLDER'S RIGHTS AND REMEDIES, INCLUDING, WITHOUT LIMITATION, TORT
CLAIMS.
MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE LOAN
EVIDENCED BY THE NOTE IS A COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS TO
NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER MAY DESIRE TO USE, AND further, waive diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
and notice of any renewals or extensions of this Note, and all guarantors agree
that the time for
- 4 -
<PAGE>
payment of this Note may be extended at Holder's sole discretion, without
impairing their liability thereon, and further consent to the release of all or
any part of the security for the payment hereof, at the discretion of Holder, or
the release of any party liable for this obligation without affecting the
liability of the other parties hereto. THE MAKER ACKNOWLEDGES THAT IT MAKES THIS
WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
This Note shall be governed by the laws of the State of Connecticut.
MARINE MANAGEMENT SYSTEMS, INC.
BY: /s/ Eugene D. Story
-------------------------------------
EUGENE D. STORY
Its President
Duly Authorized
- 5 -
EXHIBIT 4.05(f)
International Department
PEOPLES'S BANK
People's Bank
Bridgeport Center, 850 Main Street
Bridgeport, Connecticut 06604-4913
203.338.4155
Fax: 203.338.4608
Telex: 6813363
January 25, 1996
Seaboard Stamford Investors Associates (LLC)
2 Stamford Landing
Southfield Avenue
Stamford, CT 06902
Gentlemen,
On the instructions and for account of Marine Management Systems, Inc.
("MS"), 102 Hamilton Avenue, Stamford, CT 06902, we hereby establish our
Irrevocable Letter of Credit No. 96-1194 in your favor, available by your
draft(s) drawn on us at sight, for sum or sums not exceeding the total amount
of. One Hundred Fifty Thousand and 00/100 United States Dollars ($150,000.00},
on a declining basis, as per attached SCHEDULE A, which is an integral part of
this credit.
Drafts drawn under this credit must be accompanied by a copy of Letter of
Credit, and :
1. A statement purportedly signed by an authorized official of the
beneficiary certifying that the Tenant, Marine Management. Systems,
Inc., ("MMS"), is in default under the lease with respect to premises
located at 470 West Avenue, Stamford, Connecticut. (Statement must be
specific as to the nature of default, Section of Lease in Default and
amount of default.)
<PAGE>
In respect to the written statement above, People's Bank is authorized to
accept it as binding and correct without investigation or responsibility for the
accuracy, veracity, correctness or validity of the same or any part thereof.
Partial Drawings are permitted.
All drafts drawn under this Letter of Credit must bear on their face the
clause "Drawn under People's Bank Credit No. 96-1194 dated January 25, 1996".
We engage with you that draft(s) drawn under and in compliance with the
terms and conditions of this credit will be duly honored upon presentation and
delivery of documents, as specified, to the above address, ATTN: International
Department, on or before December 31, 1997, which is the expiration date of this
credit.
This Letter of Credit sets forth in full the terms of our undertaking, and
this undertaking shall not in any way be modified, amended, amplified or limited
by reference to any documents, instruments or agreements referred to herein or
in which this Letter of Credit is referred to or which this Letter of Credit
relates, and any such reference shall not be deemed to incorporate herein by
reference any documents, instruments or agreements.
Please Note: In the event this Letter of Credit is no longer required, or
is to be cancelled prior to the present or future expiration date, it must be
returned along with any amendments thereto, to this office for cancellation.
Except so far as otherwise expressly stated, this documentary credit is
subject to the "Uniform Customs and Practice for Documentary Credits (1993
Revision), ICC Publication No. 500."
Very truly yours,
People's Bank
By:/s/ [Illegible]
-------------------------------------
<PAGE>
SCHEDULE A
LETTER OF
DATE* CREDIT BALANCE
----- --------------
1. May 31, 1996 $142,500
2. June 30, 1996 135,000
3. July 31, 1996 127,500
4. August 31, 1996 120,000
5. September 30, 1996 112,500
6. October 31, 1996 105,000
7. November 30, 1996 97,500
8. December 3, 1996 90,000
9. January 31, 1997 82,500
10. February 28, 1997 75,000
11. March 31, 1997 67,500
12. April 30, 1997 60,000
13. May 31, 1997 52,500
14. June 30, 1997 45,000
15. July 31, 1997 37,500
16. August 31, 1997 30,000
17. September 30, 1997 22,500
18. October 31, 1997 15,000
19. November 30, 1997 7,500
20. December 31, 1997 0
* On each of the dates set forth on this SCHEDULE A, the balance available for
drawing on the Letter of Credit shall be equal to the lesser of (i) the
amount set forth opposite each such date, or (ii) $150,000 minus the
aggregate amount of all drawings made by the beneficiary on the Letter of
Credit as of each such date.
EXHIBIT 4.06
- --------------------------------------------------------------------------------
people's bank
$75,000.000 Stamford, Connecticut November 8, 1996
- ----------- --------------------- ----------------
Date
FOR VALUE RECEIVED, the undersigned ("Borrower" whether one or more) jointly and
severally promises to pay to the order of PEOPLE'S BANK ("People's") at any of
its offices, or at such other address as the holder of this Note shall specify
in writing, the principal sum of Seventy-Five Thousand**************00/100
dollars together with interest in arrears at the RATE indicated below on the
unpaid principal balance. (All amounts which may be payable under this Note.
Including the obligations described in Paragraph 5, are collectively referred to
in this Note as the "Entire Note Balance".)
1. Rate. Borrower promises to pay interest on the unpaid principal balance at
the rate check below.
(Mark an "X" in the box that applies.)
[_] At a fixed rate of ___________% per year.
[X] At a variable rate per year equal to People's "Prime Rate" plus 1.50
percentage points.
[_] In accordance with the attached Rider which is a part of this Note.
If the interest rate is veritable, each change in Borrower's rate of
interest shall take effect on the same day that People's "Prime Rate"
changes. People's "Prime Rate" is an index People's uses to set interest
rates on certain types of loans, and is not necessarily the lowest rate
People's charges its customers. People's Prime Rate is increased and
decreased by People's from time to time in response to changes in money
market conditions. Interest shall be calculated on the basis of a 360 day
year counting the actual number of days elapsed.
2. Payment Schedule. Borrower will repay the amounts due under this Note in
the manner check below.
A. REPAYMENT. Mark an "X" in the box that applies.)
[X] The unpaid principal balance in full on February 1, 1997 with
interest payable as set froth in Paragraph 6 below.
[_] The unpaid principal balance on demand, with interest payable as
set forth in Paragraph 8 below.
[_] In consecutive _____________ payments of principal of
$______________ each, commencing on ______________________, 19___
and continuing on the same day of each successive _______________
with interest payable as set forth in Paragraph B below. A final
payment of the Entire Note Balance shall be due and payable on
_______________, 19___.
[_] In consecutive _____________ payments of principal of
$______________ each, commencing on ______________________, 19___
and continuing on the same day of each successive
_______________. A final payment of the Entire Note Balance shall
be due and payable on _______________, 19___.
[_] In accordance with the attached Rider which is a part of this
Note.
B. INTEREST. Mark an "X" in the box that applies.)
[X] In consecutive monthly payments commencing on December 1, 1996.
[_] In consecutive quarterly payments commencing on ____________,
19___ and continuing on the same day of each successive
________________, _______________, _________________ and
______________.
[_] On _________________, 19___.
[_] In accordance with the attached Rider which is a part of this
Note.
[_] Not Applicable.
<PAGE>
3. Collateral. Borrower grants to People's a security interest in the
following property (the"Collateral") to secure the payment of the Entire
Note Balance and any renewals and extensions of this Note. Mark an "X" in
the box that applies.)
A. [_] The following Collateral has been pledged and delivered to
People's as security for this Note: P S I Account #220-47748-10
i/n/o Robert D. Ohmes and Evelyn S. Ohmes Hypothecation and a
Pledge Agreement November 8, 1996 has been signed and delivered
to People's.
B. [_] This Note is secured by _______________________________________
_________________________________________________________________
as more particularly described in a signed Security Agreement
dated _____________, 19___.
[_] This Note is secured by _________________________________________
_________________________________________________________________
as more particularly described in a signed Mortgage Deed dated
__________, 19__ to be recorded on the land records of the
________________ of ___________________
[_] Other Security: _________________________________________________
Borrower agrees to promptly provide to People's such additional collateral
as People's in good faith may reasonably require from time to time.
Borrower will promptly deliver to People's any securities received (through
stock dividend stock split or otherwise) with respect to any security
pledged as Collateral.
4. Special Provisions. (Mark an "X" in the box if applicable.)
[_] Special provisions of this Note appear in the attached Rider
which is a part of this Note.
Notice: See reverse side for additional Terms and Conditions which are a
part of this Note.
<TABLE>
<CAPTION>
Individual Borrower(s) Sole Proprietorship: Business Borrower(s):
<S> <C>
Marine Management Systems, Inc.
-------------------------------------------- --------------------------------------------
Print Name(s) of Individual Borrower(s) Print Name of Corporation,
Sole IM proprietorship Partnership, Entity
By: /s/ Robert D. Ohmes
-------------------------------------------- --------------------------------------------
Signature of Borrower Print Name and Title/Robert D. Ohmes, CFO
470 West Avenue, Stamford, CT 06902
-------------------------------------------- --------------------------------------------
Address Address
-------------------------------------------- --------------------------------------------
Signature of Borrower Print Name of Corporation,
Partnership, Entity
By:
-------------------------------------------- --------------------------------------------
Address Print Name and Title
--------------------------------------------
Address
</TABLE>
- --------------------------------------------------------------------------------
I/We endorse this Note. I/We waive presentment for payment, notice of dishonor
and all other demands or notices regarding this Note. People's may renew or
extend this Note or require its payment in full without giving me/us any notice.
People's may release or substitute collateral for this Note without giving me/us
any notice. Each endorser consents and agrees to be bound by the terms and
provisions of this Note. Each endorser is jointly and severally liable for the
payment of the Entire Note Balance.
- --------------------------------------------------------------------------------
- ------------------------------------- ------------------------------------
Endorser Endorser
- --------------------------------------------------------------------------------
Bank Use Only
<PAGE>
Additional Terms and Conditions
5. Other Obligations.
A. Borrower agrees to pay interest on the unpaid principal balance of
this Note at the rate set forth in Paragraph 1 both before and after
maturity, by acceleration or otherwise, and before and after any
judgment and until the entire indebtedness evidenced by this Note is
paid in full. Borrower agrees to pay all taxes assessed upon this Note
against the holder of this Note, and to pay all costs, expenses,
attorneys' fees and their disbursements incurred by People's in the
collection of amounts due under this Note and in protecting and
maintaining People's security interest in the Collateral. The
principal sum plus all interest payable on this Note plus all amounts
payable under this Paragraph are referred to collectively in this Note
as the Entire Note Balance.
B. To the extent that the Entire Note Balance is reduced or paid in full
by reason of any payment to People's by any accommodation maker,
endorser or guarantor, and all or any part of such payment is
rescinded, avoided or recovered from People's for any reason
whatsoever, including without limitation, and proceedings in
connection with the insolvency, bankruptcy or reorganization of the
accommodation maker, endorser or guarantor, the amount of such
rescinded, avoided or returned payment shall be added to or, in the
event the Note has been previously paid in full, shall waive the
principal balance of this Note upon which interest may be charged at
the applicable rate set forth in this Note and shall be considered
part of the Entire Note Balance and all terms and provisions herein
shall thereafter apply to same.
6. Borrower's Representations. Borrower is generally paying its debts as they
become due. Borrower knows of no act, event or occurrence that would
adversely affect the present financial condition of Borrower in any
material way.
7. Financial Statements. People's may from time to time require from Borrower,
any accommodation maker or endorser such financial information. Including,
without limitation, balance sheets, statements of income and changes in
financial position, as People's shall deem necessary or desirable.
8. Right of Set-Off. Upon the occurrence of an event of default (as defined
below), or upon demand if this Note is payable on demand, People's shall
have the right to set-off the Entire Note Balance against all of
Borrower's, any accommodation maker's or endorser's deposits, credit and
property now or hereafter in the possession or control of People's, its
agent or bailee or in transit to it. People's may apply the same, or any
part thereof, to the Entire Note Balance without prior notice or demand.
9. Prepayment. Notwithstanding the payment schedule set forth in Paragraph 2
of this Note, Borrower may prepay all or any part of the unpaid principal
balance of this Note at anytime. Prepayments shall not incur any penalty.
In the event that this Note is prepaid in full before $50 in interest as
accrued, there will be a minimum interest charge of $60. All prepayments
will be applied to the remaining payments of principal in the inverse order
of their maturities.
10. Default.
A. If any of the following events occur (which is a "default"), People's
may declare the Entire Note Balance, together with any other amounts
that Borrower owes to People's, to be immediately due and payable:
i. Borrower fails to pay when due any installment of principal or
interest under this Note.
ii. Borrower or any accommodation maker, endorser or guarantor fails
to observe or perform any covenant or agreement set forth in this
Note, in any guaranty or in any instrument, document or agreement
concerning the Collateral.
iii. Borrower or any accommodation maker, endorser or guarantor
defaults in the payment of any other indebtedness to People's.
iv. Borrower or any accommodation maker, endorser or guarantor becomes
generally unable to pay its debts as they become due or admits its
inability to pay its debts as they become due.
<PAGE>
v. Borrower or any accommodation maker, endorser or guarantor makes
a general assignment for the benefit of its creditors, files or
becomes the subject of a petition in bankruptcy, for an
arrangement with its creditors or for reorganization under any
federal or state bankruptcy or other insolvency law.
vi. Borrower or any accommodation maker, endorser or guarantor files
or becomes the subject of a petition for the appointment of a
receiver, custodian, trustee or liquidator of the party or of all
or substantially all of its assets under any federal or state
bankruptcy or other insolvency law.
vii. Borrower or any accommodation maker, endorser, or guarantor dies
or is adjudicated incompetent, or if an entity, is voluntarily or
involuntarily terminated or dissolved.
viii.Any individual who is a 10% or more owner of, partner in or
joint venturer with Borrower or any accommodation maker, endorser
or guarantor dies or is adjudicated incompetent.
ix. Any change in beneficial ownership of 10% or more of Borrower or
any accommodation maker, endorser or guarantor.
x. Borrower or any accommodation maker, endorser or guarantor enters
into any merger or consolidation, or sale, lease, liquidation or
other disposition of all or substantially all of its assets or
any transaction outside the ordinary course of its business or
for less than fair consideration
xi. Any judgment is entered against Borrower or any accommodation
maker, endorser or guarantor or any attachment upon or
garnishment of any property of Borrower or any accommodation
maker, endorser or guarantor is issued.
xii. Any representation or statement made herein or any other
representation or statement made or furnished to People's by
Borrower or any accommodation maker, endorser or guarantor was
materially-incorrect or misleading at the time it was made or
furnished;
xiii.People's determines that the value of the Collateral securing
this Note is not adequate to secure Borrower's indebtedness; or
xiv. People's at any time in good faith for any commercially sound
reason deems itself insecure.
The defaults in this Subparagraph A shall not apply if this Note is
payable on demand because People's may declare the Entire Note Balance
Immediately due and payable at any time for any reason.
B. As to any Collateral, People's shall have the rights of a secured
party under the Uniform Commercial Code as in effect in the State of
Connecticut. If People's should be required by law to give any notice
to Borrower or any accommodation maker or endorser of the sale of any
Collateral. Borrower and such parties agree that notice at least 10
days before the sale shall be commercially reasonable. Borrower and
such parties waive notice of the sale of any Collateral where the
Collateral is perishable or threatens to decline in value quickly or
is of a type customarily sold on a recognized market.
C. If any payment of principal or interest is not paid when due, whether
by acceleration or otherwise, and whether or not judgment has yet been
rendered on this Note, Borrower will thereafter pay, at the option of
People's interest at a rate two percentage points above the rate that
would otherwise be payable under Paragraph 1 until the Entire Note
Balance is paid in full.
D. If People's has not received the full amount of any payment of
principal or interest by the end of 10 calendar days after the date it
is due, Borrower will pay a late charge to People's. The amount of the
charge will be 5% of the overdue payment with a minimum charge of
$50.00. Borrower will pay this late charge promptly but only once on
each late payment.
E. All payments made under this Note shall be applied first to costs and
expenses, if any, incurred in the collection of amounts due under this
Note or in protecting or maintaining People's security interest in the
Collateral, then to the payment of accrued interest and the remainder
to principal.
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F. If the original principal sum of this Note exceeds $10,000, and
Borrower will use the proceeds of the loan for a commercial,
manufacturing, industrial or non-consumer purpose, for any interest
payment that is not paid when due, the amount of such accrued and
unpaid interest may at the option of People's be added to the
principal of the debt upon which interest may be charged at the
applicable rate set forth in this Note.
11. Binding Effect. Each Borrower and accommodation maker signing this Note is
jointly and severally responsible for making all payments and performing
all other obligations specified in this Note. The provisions of this Note
are binding on the heirs, executors, administrators, assigns and successors
of each Borrower, accommodation maker and endorser under this Note and
shall inure to the benefit of People's, its successors and assigns and to
subsequent holders of this Note.
12. Prejudgment Remedy Waiver. Borrower and each accommodation maker and
endorser under this Note acknowledge that the loan evidenced by this Note
is a commercial transaction and waive their rights to notice or hearing
under Chapter 905a of the Connecticut General Statutes or as otherwise
required by any law with respect to any prejudgment remedy that People's
may use.
13. Waivers. The liability of Borrower and each accommodation maker and
endorser under this Note is unconditional and People's may, without notice
and without affecting the liability of any of them, grant extensions of
time or renewals of this Note, waive or modify any provisions of this Note,
add or release any obligor on this Note, acquire additional Collateral or
release or exchange any Collateral. Borrower and each accommodation maker
and endorser under this Note waive presentment, demand for payment,
dishonor, protest and any other notices or demands in connection with the
delivery, acceptance, performance, default and enforcement of this Note.
Any delay, failure or waiver by People's to exercise any right it may have
under this Note is not a waiver of People's right to exercise the same or
any other right at any other time.
14. Changes. No Agreement to change or waive the terms of this Note shall be
valid unless it is in writing and signed by People's and Borrower.
15. Connecticut Law. The provisions of this Note shall be governed by the laws
of the State of Connecticut, but excluding such rules as govern conflict of
laws. Borrower and each accommodation maker and endorser under this Note
agree that any proceeding arising out of this Note or any document executed
herewith may be instituted in any federal or state court in the State of
Connecticut and Borrower irrevocably submits to the jurisdiction of any
such court.
16. Jury Trial Waiver. In the interest of a speedy resolution of any lawsuit
which may arise hereunder, Borrower and each accommodation maker and
endorser under this Note waive a trial by jury in any action with respect
to this Note and as to any issues arising relating to this Note.
17. Interpretation. Captions and headings used in this Note are for convenience
only. The term "Borrower" and any pronoun referring thereto as used herein
shall be construed in the masculine, feminine or neuter as the context may
require. The singular includes the plural and the plural includes the
singular. "Any" means any and all.
18. Invalidity. If any provision of this Note or the application of any
provision to any person or circumstance shall be invalid or unenforceable,
neither the balance of this Note nor the application of the provision to
other persons or circumstances shall be affected.
EXHIBIT 9.01
STOCK PURCHASE OPTION AND SHAREHOLDER AGREEMENT
Among
COMSAT INVESTMENTS, INC.,
MARINE MANAGEMENT SYSTEMS,
EUGENE D. STORY,
ROBERT D. OHMES
and
DONALD F. LOGAN, JR.
June 20, 1990
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1 PURCHASE AND SALE OF STOCK......................... 1
1.1 Purchase and Sale............................... 1
1.2 Purchase Price.................................. 2
1.3 Closing......................................... 2
1.4 Delivery by the Corporation..................... 2
1.5 Delivery by the Purchaser....................... 2
Section 2. OPTION............................................. 3
2.1 Grant of Option................................. 3
2.2 Number of Shares................................ 3
2.3 Term............................................ 4
2.4 Price........................................... 4
2.5 Exercise........................................ 4
2.6 Representations and Warranties;
Certified Financial Statements................ 5
2.7 Access to Information........................... 5
2.8 Revocation of Exercise.......................... 5
2.9 Closing......................................... 5
2.10 Delivery of Shares.............................. 6
2.11 Reservation of Option Shares.................... 6
Section 3. REPRESENTATIONS AND WARRANTIES OF
THE CORPORATION AND THE SHAREHOLDERS............. 6
3.1 Organization.................................... 6
3.2 Subsidiary...................................... 6
3.3 Capitalization; Shareholders.................... 7
3.4 Financial Statements............................ 7
3.5 Absence of Specified Changes.................... 8
3.6 Litigation...................................... 8
3.7 No Defaults..................................... 9
3.8 Taxes........................................... 9
3.9 Compliance with Laws............................ 9
3.10 Authority to Perform Agreement.................. 10
3.11 Completeness of Representations
and Warranties................................ 11
3.12 Tangible Properties and Assets.................. 11
3.13 Intellectual Property........................... 12
3.14 Accounts Receivable............................. 13
3.15 Liabilities..................................... 13
3.16 Contracts....................................... 13
3.17 Franchises, Permits, Etc........................ 14
3.18 Customers and Sales............................. 14
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3.19 Insurance....................................... 14
3.20 Relationship with Related Parties............... 14
3.21 Books, Records and Other Documents.............. 15
Section 4. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER........................................ 15
4.1 Organization.................................... 15
4.2 Authority to Perform Agreement.................. 15
Section 5. COVENANTS.......................................... 16
5.1 Board of Membership............................. 16
5.2 Use of Proceeds................................. 16
5.3 Activities...................................... 16
5.4 No Specified Changes............................ 17
5.5 Covenants Not to Compete........................ 18
5.6 Additional Development Projects................. 19
5.7 Restrictions on Sale or Transfer of
Stock by Shareholders and Corporation......... 20
5.8 Restrictions on Sale or Transfer of Stock
by Purchaser.................................. 21
5.9 Relationship of Parties......................... 22
Section 6. INDEMNIFICATION.................................... 22
6.1 Indemnification of the Purchaser................ 22
6.2 Indemnification of the Corporation
and the Shareholders.......................... 23
6.3 Limitations..................................... 23
6.4 Notice of Claim................................. 23
6.5 Third Party Claims.............................. 24
6.6 Disputed Claims................................. 24
6.7 Payment......................................... 25
6.8 Other Remedies.................................. 25
Section 7. MISCELLANEOUS...................................... 25
7.1 Construction.................................... 25
7.2 Survival of Representations and
Warranties.................................... 25
7.3 Expenses........................................ 25
7.4 Benefit......................................... 25
7.5 Scope and Modification.......................... 26
7.6 Delays or Omissions; Waivers.................... 26
7.7 Successors and Assigns.......................... 26
7.8 Governing Law................................... 26
7.9 Notices......................................... 26
3
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7.10 Counterparts.................................... 27
4
<PAGE>
GLOSSARY
Defined Term Definition Section
- ------------ ------------------
Additional Development Agreements 5.6 (a)
After Tax Profits. 2.4 (b)
Agreement Preamble
Board 5.1
Business Preamble
COMSAT Preamble
Contract 3.16 (a)
Corporation Preamble
Exercise Date 2.5
Exercise Price 2.4 (a)
Financial Statements 3.4
Full Dilution 2.2 (b)
Indemnified Party 6.4
Indemnifying Party 6.4
Logan Preamble
Notice of Claim 6.4
Notice of Disagreement 6.6
Notice of Share Sale 5.7 (b)
Ohmes Preamble
Option 2.1
Option Closing 2.9
Option Closing Date 2.9
Option Shares 2.1
Purchased Shares 1.1
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Purchaser Preamble
Retainer 5.6 (c)
Shareholders Preamble
Shares 5.7 (a)
Standard C Development Agreement 1.4 (b)
Story Preamble
Subsidiary 3.2
Third Party Claim 6.5
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EXHIBIT 9.01
STOCK PURCHASE. OPTION AND SHAREHOLDER AGREEMENT
THIS AGREEMENT ("Agreement") is entered into the 20th day of June, 1990,
among COMSAT INVESTMENTS, INC., a Delaware corporation (the "Purchaser"), MARINE
MANAGEMENT SYSTEMS, INC., an Ohio corporation (the "Corporation"), EUGENE D.
STORY ("Story") and ROBERT D. OHMES ("Ohmes"), the majority shareholders of the
Corporation, and DONALD F. LOGAN, JR. ("Logan"), a director, officer and
shareholder of the Corporation (Story, Ohmes and Logan are referred to
collectively as the "Shareholders").
The Corporation is engaged in the business of supplying hardware, software
and engineering services directed to ship operations and the integration of
shipboard and shoreside functions through satellite communications (the
"Business").
The Purchaser, a wholly-owned subsidiary of Communications Satellite
Corporation ("COMSAT'), wishes to purchase certain shares of common stock of the
Corporation on the terms and conditions of this Agreement. The Shareholders and
the Corporation wish to have the Purchaser purchase such shares.
THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties agree as follows:
Section 1.PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale. The Purchaser is hereby purchasing from the
Corporation, and the Corporation is issuing to the Purchaser, 14,339 shares of
common stock of the Corporation (the "Purchased Shares"), which constitutes 13
percent of the total common stock of the Corporation outstanding after the
purchase, assuming Full Dilution (as defined in Section 2.2(b)).
<PAGE>
1.2 Purchase Price. The Purchaser is paying to the Corporation an aggregate
purchase price of $260,000 for the Purchased Shares and for the Option described
in Section 2.
1.3 Closing. The closing of the transactions described in Sections 1.1 and
1.2 has taken place, simultaneously with the execution of this Agreement, at the
offices of the Corporation, located at 102 Hamilton Avenue, Stamford,
Connecticut 06902, on the date of this Agreement. At such closing, the
deliveries referred to in Section 1.4 and 1.5 have occurred.
1.4 Delivery by the Corporation. The Corporation has delivered to the
Purchaser the following, receipt of which is hereby acknowledged by the
Purchaser:
(a) A stock certificate registered in the name of the Purchaser
representing the Purchased Shares;
(b) An agreement, executed by the Corporation, under which the
Corporation will develop for the Purchaser (or its affiliate) a system for
Standard C applications (the "Standard C Development Agreement");
(c) A certified resolution of the Board of Directors of the
Corporation authorizing the execution and delivery of this Agreement and
the performance by the Corporation of its obligations under this Agreement;
(d) An opinion of Diserio, Martin, O'Connor and Castiglioni, counsel
for the Corporation, satisfactory to the Purchaser; and
(e) Such other documents, instruments and certificates as the
Purchaser or its counsel have reasonably requested in order to effectuate
this Agreement.
1.5 Delivery by the Purchaser. The Purchaser has delivered to the
Corporation the following, receipt of which is hereby acknowledged by the
Corporation:
(a) Immediately available funds in the amount of $385,000, consisting
of $260,000 representing the purchase price provided for in Section 1.2 and
$125,000 representing the Retainer provided for in Section 5.6(c);
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(b) The Standard C Development Agreement, executed by the Purchaser
(or its affiliate);
(c) A certified resolution of the Board of Directors of the Purchaser
authorizing the execution and delivery of this Agreement and the
performance by the Purchaser of its obligations under this Agreement;
(d) An opinion of Willard R. Nichols, Vice President and General
Counsel of COMSAT, satisfactory to the Corporation and the Shareholders;
and
(e) Such other documents, instruments and certificates as the
Corporation, the Shareholders or their counsel have reasonably requested in
order to effectuate this Agreement.
Section 2. OPTION
2.1 Grant of Option. The Purchaser shall have an option (the "Option") to
purchase from the Corporation additional shares of common stock of the
Corporation ("Option Shares") on the terms of this Section 2.
2.2 Number of Shares.
(a) The maximum number of Option Shares shall be the number which, if
the Option were exercised in full, would cause the number of shares of
common stock of the Corporation owned by the Purchaser after receipt of the
Option Shares (including the Purchased Shares) to equal 35 percent of the
total common stock of the Corporation then outstanding, assuming Full
Dilution.
(b) The term "Full Dilution" means that all shares of common stock for
which options (other than the Option), warrants, convertible securities or
other rights pursuant to which the Corporation is, or may become, obligated
to issue any shares of common stock have been issued and are then
outstanding.
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(c) The Purchaser may exercise the Option with respect to such maximum
number of Option Shares or any lesser number of shares as the Purchaser may
choose.
2.3 Term. The Option shall be exercisable by the Purchaser at any time
during the period beginning on January 1, 1992 and ending on June 30, 1993.
2.4 Price.
(a) The purchase price per share payable by the Purchaser for the
Option Shares ("Exercise Price") shall be an amount (but not less than $1)
determined by:
(i) Multiplying the After Tax Profits for the most recent
previous calendar year by eight, and
(ii) Dividing the amount determined under clause (i) by the
number of shares of common stock of the Corporation which, as of the
Exercise Date, are outstanding, assuming Full Dilution.
(b) The term "After Tax Profits" for a year means the net income
earned by the Corporation during that year, after the deduction of U.S.
federal income taxes, state and local income and franchise taxes and
foreign income taxes, as shown on financial statements prepared in
accordance with generally accepted accounting principles applied on a
consistent basis.
2.5. Exercise. The Purchaser may exercise the Option by giving
written notice to the Corporation at any time before the expiration of the
term stated in Section 2.3. (The date upon which such notice is given is
referred to as the "Exercise Date.")
2.6 Representations and Warranties: Certified Financial
Statements.
(a) Within 20 days after the Exercise Date, the Corporation shall
provide to the Purchaser a written statement of representations and
warranties made as of the Exercise Date. Except as provided in Section
2.6(b), such representations and warranties shall be comparable in form to
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those in Section 3 of this Agreement including the supporting Schedules.
(b) The financial statements upon which determination of the Exercise
Price is made and upon which the representations and warranties comparable
to those in Section 3.4 are made shall be certified by independent
certified public accountants selected by the Corporation and approved by
the Purchaser, if (i) the Purchaser previously has notified the Corporation
that it desires such certification and (ii) the Purchaser pays 50 percent
of the fees and expenses charged by such certified public accountants for
auditing the Corporation's books and records and preparing the certified
statements.
2.7 Access to Information. For the purpose of conducting examinations and
investigations in connection with the exercise of the Option, the Purchaser and
its agents, for the period beginning on January 1, 1992 and ending 45 days after
the Exercise Date shall have (a) full and complete access to the properties,
assets, books, records, contracts and documents of the Corporation and (b) the
right to discuss the business affairs, financial condition and other matters
pertaining to the Corporation with any of the Corporation's agents,
representatives, directors, officers, employees, accountants, attorneys, lessors
or creditors or any other persons as the Purchaser deems necessary or desirable.
2.8 Revocation of Exercise. The Purchaser may revoke the exercise of the
Option at any time within 45 days after the Exercise Date by giving notice to
the Corporation. Such revocation shall terminate the Option and all other rights
and obligations of the Purchaser under this Section 2.
2.9 Closing. The closing of the purchase of the Option Shares ("Option
Closing") shall take place at the offices of the Purchaser, located at 950
L'Enfant Plaza, S.W., Washington, D.C. 20024 on the tenth day after the
Purchaser notifies the Corporation in writing that it has completed its
inspection and is prepared to proceed with the Option Closing, such date of
notification to be no later than fifty days after the Exercise Date, or on such
other date as mutually agreed by the parties (the "Option Closing Date").
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2.10 Delivery of Shares. At the Option Closing: (a) the Corporation will
deliver to the Purchaser a stock certificate registered in the name of the
Purchaser representing the number of Option Shares for which the Option was
exercised; and (b) the Purchaser will transfer to the Corporation immediately
available funds in the amount of the purchase price, as determined under Section
2.4.
2.11 Reservation of Option Shares. The Corporation shall at all times keep
reserved, out of its authorized common stock, a number of shares of common stock
sufficient to provide for the exercise of the Option.
Section 3. REPRESENTATIONS AND WARRANTIES OF
THE CORPORATION AND THE SHAREHOLDERS
The Corporation and the Shareholders, jointly and severally, represent and
warrant to the Purchaser as of the date of this Agreement as follows:
3.1 Organization. The Corporation (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio, (b)
has all requisite corporate power and authority to own and operate its
properties and assets and to conduct the Business as now conducted and (c) is
duly qualified and in good standing in each jurisdiction where the nature of its
operations makes such qualification necessary. True and correct copies of the
Articles of Incorporation and of the Bylaws of the Corporation, and all
amendments thereto, are annexed as Schedule 3.1.
3.2 Subsidiary. Marine Management Systems (UK) Limited ("Subsidiary") is
the only subsidiary of the Corporation. The Subsidiary is currently inactive and
has had no operations during the past year. The Subsidiary has no employees,
assets, liabilities or claims against it other than a bank overdraft with
Barclay's Bank in the approximate amount of $5,000. The Corporation intends to
pay off this overdraft and eliminate the Subsidiary by the end of 1990.
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3.3 Capitalization: Shareholders.
(a) The authorized capital stock of the Corporation consists of: (i)
150,000 shares of common stock, of which 94,071 shares are validly issued
and are currently outstanding, fully paid and nonassessable and 1,893 are
subject to issue upon the exercise of options and conversion rights; (ii)
2,000 shares of 6% cumulative preferred stock, of which no shares are
issued and outstanding; and (iii) 10,000 shares of 6% non-cumulative
preferred stock, of which 2,099 shares are validly issued and are currently
outstanding, fully paid and nonassessable.
(b) Annexed as Schedule 3.3 is a true and complete list of the
shareholders of the Corporation, stating each shareholder's name and
address, and the number and class of shares held by each such shareholder.
Each such shareholder is the sole owner of record and the sole beneficial
owner of the shares listed as being held by it. There are no voting trusts,
voting agreements or other agreements in effect relating to any such
shares.
(c) The stock transfer books and minute books of the Corporation,
which have been made available to the Purchaser for inspection prior to the
date of this Agreement, contain no inaccuracies or omissions.
(d) Schedule 3.3 contains a true and complete list of those persons
holding options and convertible securities, stating each such person's name
and address, the number and class of shares of capital stock each such
person has a right to obtain, and the terms and conditions of such right.
Except as stated on Schedule 3.3, there are no outstanding options,
warrants, convertible securities or other rights pursuant to which the
Corporation is, or may become, obligated to issue any shares of its capital
stock or other securities.
3.4 Financial Statements. Annexed as Schedule 3.4 are financial statements
of the Corporation, which contain balance sheets of the Corporation as of
December 31, 1988 and 1989 and statements of income and expenses for the years
then ended (the "Financial Statements"). Except as set forth in Schedule 3.4,
the Financial Statements (together with the notes thereto): (a) are true,
correct and complete; (b) are in accordance with the books and records of the
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Corporation; (c) present fairly the financial position and results of operations
of the Corporation as of the dates and for the periods indicated; and (d) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis.
3.5 Absence of Specified Changes. Except as set forth on Schedule 3.5,
since December 31, 1989, neither the Corporation nor the Subsidiary has: (a)
suffered any event or condition that has or might reasonably be expected to have
a material adverse effect on the Business, financial condition, properties,
assets, liabilities or prospects of the Corporation; (b) declared or paid any
dividends on, made any other distributions with respect to, or redeemed of
acquired any of its capital stock; (c) issued any capital stock, bonds or other
securities; (d) sold, assigned, transferred or encumbered any material
properties or assets, tangible or intangible, or any interest in such properties
or assets; (e) made a loan to any person or entity; (f) suffered any damage,
destruction or loss, whether or not covered by insurance, affecting its
properties or assets; (g) had any of its properties or assets subjected to a
lien; (h) without full payment released or waived any valuable right or claim or
cancelled any debt owing to it; (i) guaranteed any indebtedness; (j) increased
the rate of compensation of any officer, director, employee or agent by more
than 10 percent; (k) changed any of its accounting methods or practices; (l)
entered into or consummated any material transaction except in the ordinary
course of business; (m) made capital expenditures exceeding $50,000; (n) entered
into a lease of real or personal property; or (o) entered into any agreement or
made any commitment obligating it to do any of the foregoing acts.
3.6 Litigation. There is no litigation or claim at law or in equity, no
arbitration proceeding, no labor dispute or grievance, and no proceeding or
investigation by or before any government instrumentality or other agency
pending or threatened (a) against or affecting the Corporation or the Subsidiary
or (b) against any shareholder, director or officer of the Corporation or the
Subsidiary which could materially affect the Corporation. To the best knowledge
of the Corporation and the Shareholders, no basis for any such litigation,
claim, proceeding or investigation exists.
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3.7 No Defaults. Neither the Corporation nor the Subsidiary is in default
or violation under (a) its Articles of Incorporation or its Bylaws, (b) any
indenture, mortgage, lease, contract or other agreement or instrument to which
it is a party or by which it or any of its properties or assets are bound or
affected or (c) any provision of law or any order of any court or other agency
of government. There exists no condition, event or act which constitutes, nor
which after notice, lapse of time or both could constitute, a default or
violation under any of the foregoing.
3.8 Taxes. The Corporation and the Subsidiary have filed or will file
within the time prescribed by law all Federal, state, local and foreign tax
returns required to be filed by them. All such returns are true and correct. The
Corporation and the Subsidiary have paid all taxes pursuant to such returns or
pursuant to any assessments received by them or which they are obligated to
withhold from amounts owing to any employee, creditor or third party. There is
not currently pending, nor has the Corporation or the Subsidiary received notice
of, any tax examination, assessment, proposed assessment, claim or proposed
claim for taxes by any taxing authority.
3.9 Compliance with Laws. The Corporation and the Subsidiary are in
compliance in all material respects with the provisions of (a) all applicable
statutes, ordinances, rules, regulations and real property covenants affecting
their properties, employees or operations and (b) orders, judgments, decrees,
rulings, writs, arbitration awards, injunctions and stipulations to which either
of them is a party or by which it is bound. Neither the Corporation nor the
Subsidiary has received any claim, inquiry, summons or notice of violation with
respect to any such provision that has not been resolved or settled. Without
limiting the generality of the foregoing, neither the Corporation nor the
Subsidiary nor any director, officer, employee or agent of, or consultant to,
the Corporation or the Subsidiary, nor any other person authorized to act on
behalf of the Corporation or the Subsidiary, in such capacity has unlawfully (a)
paid or agreed to pay, directly or indirectly, any money or anything of value to
or for the benefit of any person who is or was at the time of such payment or
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agreement, an official, employee or candidate for office of the government of
the United States or any other country, or any state, political subdivision or
agency or instrumentality thereof or (b) participated in or agreed to
participate in, directly or indirectly, domestically or internationally, any
boycott or any practice in restraint of trade, regardless of whether such
boycott or restraint may be lawful or required by the laws of a jurisdiction
other than the United States.
3.10 Authority to Perform Agreement.
(a) The Corporation and the Shareholders (i) have all requisite right,
power, legal capacity and authority to enter into, and perform their
respective obligations under, this Agreement and (ii) have taken all
requisite corporate and other actions necessary to enter into and perform
their respective obligations under this Agreement.
(b) The Purchased Shares are (i) validly issued, fully paid and
nonassessable, (ii) free of any liens or encumbrances and (iii) not subject
to any preemptire rights or any rights of first refusal.
(c) This Agreement has been duly executed and delivered by the
Corporation and each of the Shareholders and constitutes a valid and
binding obligation of the Corporation and each of the Shareholders,
enforceable against each of them in accordance with its terms except as
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting enforcement of creditors' rights.
(d) The execution, delivery and performance of this Agreement by the
Corporation and each of the Shareholders does not (i) violate any provision
of law or any order of any court or other agency of government (ii) require
the consent, approval or authorization of, or filing with, any governmental
authority on the part of the Corporation, or (iii) conflict with, result in
a breach or termination of, constitute (with due notice or lapse of time or
both) a default under, result in the creation of a lien, security interest,
charge or encumbrance upon any of the properties or assets of the
Corporation or the Subsidiary under, or otherwise give any other
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contracting party the legal right to terminate, the Articles of
Incorporation or Bylaws of the Corporation or the Subsidiary or any
indenture, mortgage, lease, contract or other agreement or instrument to
which the Corporation or the Subsidiary is a party or by which it or any of
its properties or assets are bound or affected.
3.11 Completeness of Representations and Warranties. No warranty or
representation made by the Corporation or the Shareholders in this Agreement or
written information set forth in or furnished pursuant to this Agreement
(including, without limitation, the Schedules to this Agreement and other
agreements or instruments provided for or contemplated by this Agreement)
contains any untrue statement of material fact or, as to any representation or
warranty made in this Agreement or in any Schedule, omits to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
3.12 Tangible Properties and Assets.
(a) The December 31, 1989 Financial Statements (as modified by
transactions disclosed in Section 3.5) disclose all real and tangible
personal properties owned or leased by the Corporation or the Subsidiary,
including without limitation equipment, furniture, fixtures and leasehold
improvements.
(b) With respect to all real and tangible personal properties owned or
leased by the Corporation or the Subsidiary that are material to the
operation of the Business: (i) the Corporation or the Subsidiary has good
and marketable title to them, or valid and subsisting leasehold interests
in them, free and clear of liens, encumbrances or security interests except
for those listed on Schedule 3.12 and liens for taxes yet payable; (ii) the
Corporation or the Subsidiary is in possession of them; (iii) they are in
good operating condition and repair (ordinary wear and tear excepted); (iv)
they are usable in the ordinary course of business; (v) they and their use
conform in all material respects to all applicable laws, ordinances and
regulations; and (vi) their use does not violate any Contracts to which the
Corporation or the Subsidiary is a party.
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(c) All inventories of the Corporation and the Subsidiary (i) are in
amounts adequate to fill customer orders in the ordinary course of business
in accordance with the Corporation's normal inventory practices, (ii) are
of a quality usable and salable in the ordinary course, free of any
material defect or deficiency, and (iii) are valued at the lower of cost or
market.
3.13 Intellectual Property.
(a) Schedule 3.13 contains a true and complete list and a brief
description of all computer programs and other software, United States and
foreign patents, patent applications, inventions as to which the
Corporation or the Subsidiary intends to apply for patents, trademarks
(including registered, common law and registration applied for), service
marks (including registered, common law and registration applied for),
trade names and copyrights (including registered, common law and
registration applied for) owned by or otherwise held in the name of the
Corporation or the Subsidiary, or in which the Corporation or the
Subsidiary has an interest, by license or otherwise.
(b) Neither the Corporation nor the Subsidiary has infringed or is
infringing upon, or has engaged in or is engaging in an unauthorized use or
misappropriation of, any computer program, other software, patent,
trademark, service mark, trade name, copyright, process, design, invention,
trade secret, know-how or technology owned by or belonging to any other
person or entity. There is no pending, or to the knowledge of the
Corporation or the Shareholders threatened, claim against the Corporation
or the Subsidiary involving such property rights of any other person or
entity. All the items listed in Schedule 3.13 are owned or usable by the
Corporation free from known objection, defect or adverse claim or payments
to any person or entity except under license agreements listed in Schedule
3.13. All patents owned by the Corporation or the Subsidiary are valid.
There are no facts or claims known to the Corporation or the Shareholders
that might bring the validity of any patents owned by or licensed to the
Corporation or the Subsidiary into question.
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3.14 Accounts Receivable. Schedule 3.14 is a summary list of all accounts
and notes receivable of the Corporation and the Subsidiary, together with an
accurate aging of those accounts. Such accounts and notes receivable (a) are
valid and genuine, (b) arose from valid business transactions and (c) are
collectible in their full amounts in the ordinary course of business, except to
the extent reserved against on Schedule 3.14.
3.15 Liabilities. Schedule 3.15 is a true and complete list, in reasonable
detail, of the liabilities of the Corporation and the Subsidiary. Neither the
Corporation nor the Subsidiary has any liability or obligation, absolute or
contingent, which is not shown on Schedule 3.15.
3.16 Contracts.
(a) The term "Contract" means an outstanding written or oral contract,
agreement, arrangement or commitment to which the Corporation or the
Subsidiary is a party or by which either of them is bound, and all
amendments, modifications and supplements thereto.
(b) Schedule 3.16 is a true and complete list of all: (i) Contracts
with suppliers, manufacturers and contractors for products or services
costing $50,000 or more; (ii) Contracts with customers involving payments
of $50,000 or more; (iii) franchise, sales agency, sales representative,
reseller or similar types of Contracts; (iv) loan agreements, guarantees,
mortgages, pledges, security agreements, factoring agreements,
subordination or similar types of Contracts; (v) Contracts for the sale of
any material properties or assets of the Corporation or the Subsidiary;
(vi) employment agreements; and (vii) pension, profit sharing, stock option
or other benefit plans under which any director, officer or employee of the
Corporation or the Subsidiary will or may receive compensation or benefits,
current or deferred.
(c) The Corporation has furnished to the Purchaser a complete and
correct copy of each Contract listed on Schedule 3.16 requested by the
Purchaser.
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(d) With respect to each Contract listed on Schedule 3.16, to the best
knowledge of the Corporation and the Shareholders, (i) it is in full force
and effect, (ii) there is no threatened cancellation, termination or
acceleration of performance of it, or exercise or non-exercise of any
options under it, (iii) there is no outstanding material dispute under it,
and (iv) there is no breach, violation of any material provision, default
or event which, with notice, lapse of time, or both, would become a default
under it.
3.17 Franchises, Permits, Etc. The Corporation and the Subsidiary possess
all government franchises, permits and other authorizations necessary for each
of them to conduct the Business as now conducted. Neither the Corporation nor
the Subsidiary is in default, or has received any notice of or been threatened
with any claim of default, under any such authorization. Neither the Corporation
nor the Subsidiary is a party to or threatened with any proceeding relating to
any such authorization or claimed lack of authorization. Neither the
Corporation's execution and delivery of this Agreement nor its performance of
the transactions contemplated in this Agreement will have any materially adverse
effect upon any such franchise, permit or other authorization.
3.18 Customers and Sales. Schedule 3.18 contains a true and complete list
of the ten customers from whom the Corporation or the Subsidiary collected the
greatest amount of proceeds from transactions during the 12 months ended March
31, 1990, together with summaries of the amounts and nature of the sales or
services to each such customer during that period.
3.19 Insurance. The Corporation and the Subsidiary (a) maintain insurance
policies adequate in coverage and amount to protect against loss or damage to
their. properties and assets, and liabilities for damage or injury to per/sons
and property, (b) have complied with those policies and (c) are not in default
under any of those policies.
3.20 Relationship with Related Parties. Except as set forth on Schedule
3.20, no officer, director, shareholder, employee or agent of the Corporation or
the Subsidiary or spouse, sibling, parent, lineal descendent or affiliate of any
such person (a) owns, directly or indirectly, or has any right in, any property
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or asset which is utilized or required by the Corporation or the Subsidiary in
connection with the Business, (b) has any other business relationship (as
supplier, customer or otherwise) with the Corporation or the Subsidiary, other
than their relationship as officer, director, shareholder, employee or agent or
(c) is indebted to the Corporation or the Subsidiary or is owed money by the
Corporation or Subsidiary.
3.21 Books, Records and Other Documents. The Corporation's books, records
and other documents accurately and fairly reflect the transactions of, and
dispositions of the properties and assets of, the Corporation and the Subsidiary
and contain no material inaccuracies or omissions.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Corporation and the
Shareholders as of the date of this Agreement as follows:
4.1 Organization. The Purchaser is corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2 Authority to Perform Agreement.
(a) The Purchaser (i) has all requisite right, power, legal capacity
and authority to enter into, and perform its obligations under this
Agreement, and (ii) has taken all requisite corporate and other actions
necessary to enter into and perform its obligations under this Agreement.
(b) The execution, delivery and performance of this Agreement by the
Purchaser does not (i) violate any provision of law or any order of any
court or other agency of government or (ii) require the consent, approval
or authorization of, or filing with, any governmental authority on the part
of the Purchaser.
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Section 5. COVENANTS
5.1 Board Membership. So long as the Purchaser owns at least five percent
of the outstanding shares of common stock of the Corporation, the Purchaser
shall have the right to designate such number of members of the Board of
Directors of the Corporation (the "Board") as is proportionate to its holdings
of the common stock of the Corporation, but not less than one member. The
Shareholders shall vote their shares of capital stock, and the Board shall take
such action, as necessary to appoint or elect to the Board the person or persons
so designated by the Purchaser.
5.2 Use of Proceeds. The Corporation will use the $260,000 received by it
pursuant to the transaction described in Section 1 solely for working capital or
new product development.
5.3 Activities. So long as the Purchaser owns at least five percent of the
outstanding shares of common stock of the Corporation, the Corporation and the
Subsidiary will:
(a) Preserve their corporate existence, conduct the Business and not
do any act in contravention of their Articles of Incorporation or Bylaws;
(b) Promptly pay when due all applicable taxes and other liabilities;
(c) Keep their properties and assets in good operating condition and
repair, except for ordinary wear and tear, and make all necessary or
appropriate replacements, additions and improvements to such properties and
assets;
(d) Comply in all material respects with all applicable laws,
ordinances, rules, regulations and orders of governmental agencies;
(e) Comply with all leases or properties and assets so as to prevent
any loss or forfeiture;
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(f) Maintain adequate insurance to protect against (i) loss or damage
to their properties and assets by fire and other hazards and (ii)
liabilities for damage to persons and property;
(g) Maintain in effect their licenses, franchises and other rights
necessary to the conduct of the Business;
(h) Keep books and financial records which accurately and fairly
reflect the transactions of the Corporation and the Subsidiary and contain
no inaccuracies or omissions; controls; and
(i) Maintain adequate internal accounting
(j) Furnish to the Purchaser:
(i) Within sixty (60) days after the end of each fiscal year,
balance sheets of the Corporation as of the end of such fiscal year
and statements of revenue and expense and of sources and application
of funds of the Corporation for such year, all prepared in accordance
with generally accepted accounting principles and signed by the
principal financial officer of the Corporation; and
(ii) Within forty-five (45) days after the end of each fiscal
quarter, balance sheets of the Corporation as of the end of such
quarter, and statements of revenue and expense for the quarter and for
the current fiscal year to date, prepared in accordance with generally
accepted accounting principles consistently applied, and signed by the
principal financial officer of the Corporation.
5.4 No Specified Changes. So long as the total of the common stock of the
Corporation owned by the Purchaser and the common stock which is subject to the
Option, if the Option is then outstanding, represents at least 25 percent of the
total common stock of the Corporation then outstanding (assuming Full Dilution),
the Corporation will not, without the prior written consent of the Purchaser,
such consent not to be unreasonably withheld: (a) pay any dividends on, or make
any other distributions with respect to, or redeem or acquire any of its capital
stock; (b) except as provided in Section 5.7, issue any capital stock or other
equity securities, or any options or rights to purchase capital stock or other
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equity securities; (c) sell, assign or transfer substantially all of its
properties or assets, or any one or more properties or assets necessary in
combination for the Corporation to conduct the Business; (d) make a loan to any
person or entity, except routine advances to employees and similar advances in
the ordinary course of business; (e) guarantee any indebtedness; (f) issue any
bonds, debentures, notes or other debt instruments or make any borrowings; (g)
merge or consolidate with, or enter into a partnership or joint venture with,
any other corporation or entity; (h) grant to any officer or employee whose
total annual compensation (including salary, bonus and other compensation) from
the Corporation is $100,000 or more an increase in such total compensation
exceeding 20 percent in any calendar year; or (i) enter into any other major
agreement or transaction.
5.5 Covenants Not to Compete.
(a) So long as the total of the common stock of the Corporation owned
by the Purchaser and the common stock which is subject to the Option, if
the Option is then outstanding, represents at least 25 percent of the total
common stock of the Corporation then outstanding (assuming Full Dilution),
Story and Ohmes each agree that, during the period that he is a director,
officer or employee of the Corporation and for two years thereafter, he
will not directly or indirectly engage in (with or without compensation) as
a principal, proprietor, partner, officer, director, employee, agent,
consultant or otherwise, or have an interest in any entity that engages in
a business that competes with the Business of the Corporation in the United
States.
(b) The covenant contained in Section 5.5(a) shall be construed as a
series of separate covenants, one for each state, territory or possession
of the United States. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in
Section 5.5(a). If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in Section 5.5(a),
then the unenforceable covenant shall be deemed eliminated from these
provisions for the purpose of those proceedings to the extent necessary to
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permit the remaining separate covenants to be enforced.
(c) Recognizing that the remedies at law for any breach or threatened
breach of the covenants in Section 5.5(a) may be inadequate, Story and
Ohmes each agree that, in the event of any breach or threatened breach by
either of them of Section 5.5(a), the Purchaser, in addition to all other
remedies available to it, shall be entitled to enforcement by a court
injunction without the necessity of providing actual damages by reason of
such breach or threatened breach.
5.6 Additional Development Projects.
(a) On or before the first anniversary of the date of this Agreement,
the Purchaser shall identify to the Corporation one or more software
development projects, in addition to the project covered by the Standard C
Development Agreement, for which the Purchaser (or its affiliate) wishes to
enter into an agreement or agreements with the Corporation ("Additional
Development Agreements"). The aggregate consideration payable to the
Corporation under the Standard C Development Agreement and the Additional
Development Agreements shall be approximately $500,000.
(b) The Corporation and the Purchaser (or its affiliate) shall
thereafter negotiate in good faith enter into the Additional Development
Agreements each of which shall in general contain: (i) appropriate
provisions regarding intellectual property developed under such agreement,
including without limitation the grant to the Purchaser (or its affiliate)
of a non-exclusive license to use and relicense such intellectual property
to customers of the Purchaser (or its affiliate) or their intermediates but
not for resale by such customers; (ii) provisions appointing the Purchaser
(or its affiliate) as a sales agent for products and services developed
under such agreement; and (iii) other provisions of the type customarily
contained in agreements of this nature including without limitation
provisions relating to delivery, acceptance, payment, patent indemnity and
liquidated damages.
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(c) The Purchaser has delivered to the Corporation a retainer of
$125,000 against the work to be contracted for pursuant to the Standard C
Development Agreement and the Additional Development Agreements (the
"Retainer"). Twenty-five percent (25%) of the amount of each bill rendered
to the Purchaser (or its affiliate) for work done by the Corporation
pursuant to the Standard C Development Agreement and the Additional
Development Agreements shall be charged against the Retainer until the
Retainer has been exhausted.
5.7 Restrictions on Sale or Transfer of Stock by Shareholders and
Corporation.
(a) Except as provided in this Section 5.7, so long as the total of
the common stock of the Corporation owned by the Purchaser and the common
stock which is subject to the Option, if the Option is then outstanding,
represents at least 25 percent of the total common stock of the Corporation
then outstanding (assuming Full Dilution), (i) none of the Shareholders
shall sell or transfer any shares of common stock of the Corporation
("Shares"); and (ii) the Corporation shall not issue any additional Shares.
(b) If one of the Shareholders proposes to sell or transfer any
Shares, or the Corporation proposes to issue any additional Shares (except
Shares necessary to meet its obligations under the options and conversion
privileges listed in Schedule 3.3), such Shareholder or the Corporation, as
the case may be, shall give written notice ("Notice of Share Sale") to the
Purchaser, stating the number of Shares proposed to be sold, transferred or
issued, the proposed price and terms of payment, and the name of the
proposed buyer.
(c) Within 30 days after the date of the Notice of Share Sale, the
Purchaser may elect to purchase all, but not less than all, of the Shares
stated in the Notice of Share Sale at the price and on the terms stated in
the Notice of Share Sale. Such election shall be made by a written notice
sent to the party giving the Notice of Share Sale. If the Purchaser does
not so elect, such party may complete the proposed sale, transfer or
issuance for the price and under the terms described in the Notice of Share
Sale.
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(d) Payment by the Purchaser for Shares purchased pursuant to an
election under Section 5.7(c) shall be made against delivery of such
Shares, as soon as practicable after the election is made.
(e) A Shareholder may transfer any Shares owned by him to his spouse
or to any lineal descendant without regard to Section 5.7(b), provided that
such transferee agrees to be subject to Section 5.7 as if such transferee
were one of the Shareholders. (f) In the event of the death of a
Shareholder, his duly qualified personal representative, heirs and
distributees shall take and hold any Shares owned by the Shareholder at his
death subject to the provisions of Section 5.7, and any such person shall
be deemed to be a Shareholder for the purposes of Section 5.7.
(g) After the Option Closing Date, if one or more of the Shareholders,
jointly or separately, wish to sell Shares in a transaction which would
result in a majority of the Shares being owned by a single person or entity
(other than Story, Ohmes or Logan) or any syndicate or affiliated group of
such persons or entities, and the Purchaser has not elected to purchase
such Shares pursuant to Section 5.7(c), then, at the option of the
Purchaser, such Shareholder or Shareholder may make such sale only if the
prospective buyer of such Shares also agrees to buy the Shares then owned
by the Purchaser at the same price per Share and on the same terms as such
buyer buys the Shares of the selling Shareholder or Shareholders.
5.8 Restrictions on Sale or Transfer of Stock by Purchaser.
(a) Except as provided in this Section 5.8, the Purchaser shall not
sell or transfer any Shares.
(b) If the Purchaser proposes to sell or transfer any Shares (other
than to an affiliate or subsidiary of the Purchaser), the Purchaser shall
give a Notice of Share Sale to the Corporation, stating the number of
shares proposed to be sold or transferred, the proposed sale price and
terms of payment and the name of the proposed buyer.
(c) Within 30 days after the date of the Notice of Share Sale, the
Corporation may elect to purchase all, but not less than all, of the shares
stated in the Notice of the Share Sale at the price and on the terms stated
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in the Notice of the Share Sale. Such election shall be made by written
notice sent to the party giving the Notice of Share Sale. If the
Corporation does not so elect, Purchaser may complete the proposed sale for
the price and under the terms described in the Notice of Share Sale.
5.9 Relationship of Parties. The Corporation and the Shareholders covenant
and agree that: (a) this Agreement shall not (and except as otherwise expressly
provided therein, neither the Standard C Development Agreement not the
Additional Development Agreements shall) constitute the Corporation as a
representative, joint venturer, partner or agent of the Purchaser for any
purpose; (b) without the prior written approval of the Purchaser, the
Corporation shall have no authority to make any contract, agreement, warranty or
representation on behalf of the Purchaser or to create any obligation, express
or implied, on behalf of the Purchaser and shall not hold itself out as having
such authority; (c) the Corporation is, and shall remain, responsible for all
acts, omissions, debts and other obligations and liabilities relating to the
Business; and (d) the Purchaser shall not be liable for any act, omission, debt
or other obligation or liability of the Corporation. For purposes of this
Section 5.9, the term "Purchaser" shall include an affiliate of the Purchaser.
Section 6. INDEMNIFICATION
6.1 Indemnification of the Purchaser. Each of the Shareholders and the
Corporation, jointly and severally, shall indemnify and hold harmless the
Purchaser and each of its affiliates against all loss, liability, damage or
expense (including, without limitation, reasonable attorneys' and accountants'
fees and expenses) incurred or suffered by them arising out of or relating to
(a) any breach of, or failure by the Corporation or the Shareholders to perform
any of, their covenants and obligations under this Agreement or (b) any
inaccuracy or misrepresentation in, or breach of, any of the representations and
warranties made by the Corporation or the Shareholders in this Agreement or in
any related document furnished by any of them pursuant to the Agreement.
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6.2 Indemnification of the Corporation and the Shareholders. The Purchaser
shall indemnify and hold harmless the Corporation and the Shareholders against
all loss, liability, damage or expense (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) incurred or suffered
by them arising out of or relating to (a) any breach of, or failure by the
Purchaser to perform any of, its covenants and obligations under this Agreement
or (b) any inaccuracy or misrepresentation in, or breach of, any of the
representations and warranties made by the Purchaser in this Agreement or in any
related document furnished by the Purchaser pursuant to the Agreement.
6.3 Limitations. The parties' rights to indemnification under Sections 6.1
and 6.2 shall expire as follows: (a) the rights with respect to inaccuracies or
misrepresentations in, or breaches of, representations and warranties made in
this Agreement or related documents shall expire on the third anniversary of the
date of the Agreement; (b) the rights with respect to inaccuracies or
misrepresentations in, or breaches of, representations and warranties made
pursuant to Section 2.6 as of the Exercise Date shall expire on the third
anniversary of the Option Closing Date; (c) the rights with respect to breaches
of, or failure to perform any of, the covenants and obligations under Section 5
shall continue indefinitely; and (d) the rights with respect to any matter for
which a Notice of Claim has been properly given on or before the date specified
in Section 6.3(a) or 6.3(b) shall continue until such claim is resolved.
6.4 Notice of Claim. Promptly upon obtaining knowledge of any claim, event,
statement of facts or demand which has given rise to, or could reasonably give
rise to, a claim for indemnification under Sections 6.1 or 6.2, the party
seeking indemnification ("Indemnified Party") shall give written notice of such
claim or demand ("Notice of Claim") to each party from which indemnification is
sought ("Indemnifying Party") setting forth (a) the amount of the claim and (b)
in reasonable detail, such information as the Indemnified Party may have with
respect to the claim. No failure or delay by the Indemnified Party in giving a
Notice of Claim shall reduce or otherwise affect the obligation of an
Indemnifying Party to indemnify the Indemnified Party, except to the extent that
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such failure or delay shall have adversely affected the Indemnifying Party's
ability to defend against, settle or satisfy the claim for which indemnification
is sought.
6.5 Third Party Claims. If the claim or demand in the Notice of Claim is
based upon a claim or demand asserted by a third party ("Third Party Claim"),
the Indemnifying Party shall, within fifteen (15) days after the date of the
Notice of Claim, notify the Indemnified Party in writing whether or not it
elects to defend the Third Party Claim on behalf of the Indemnified Party. If
the Indemnifying Party elects to defend the Third Party Claim, the Indemnified
Party (a) shall make available to the Indemnifying Party and its agents and
representatives all records and other materials reasonably required in the
defense of the Third Party Claim, (b) shall otherwise cooperate with, and assist
the Indemnifying Party in the defense of the Third Party Claim, (c) so long as
the Indemnifying Party is defending the Third Party Claim in good faith, shall
not pay, settle or compromise the Third Party Claim and (d) shall have the right
to participate in such defense at its own expense. If the Indemnifying Party
elects not to defend the Third Party Claim, or is not defending the Third Party
Claim in good faith, the Indemnified Party shall have the right, in addition to
any other right or remedy it may have under this Agreement, to defend the Third
Party Claim at the Indemnifying Party's expense. The Indemnified Party shall not
have any obligation to participate in, the defense of, or defend, any Third
Party Claim. The Indemnified Party's defense of, or participation in the defense
of, any Third Party Claim shall not in any way diminish the indemnification
obligations of the Indemnifying Party under this Section 6.
6.6 Disputed Claims. If the Indemnifying Party does not agree that it is
obligated to indemnify the Indemnified Party with respect to the claim stated in
a Notice of Claim, it shall notify the Indemnified Party of such disagreement by
written notice ("Notice of Disagreement") within thirty (30) days after the date
of the Notice of Claim. The parties shall then negotiate in good faith to
attempt to resolve the disagreement.
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6.7 Payment. Except for Third Party Claims being defended in good faith,
the Indemnifying Party shall satisfy its obligations under this Section 6 by
payment in cash to the Indemnified Party within thirty (30) days after the date
of Notice of Claim or, if a Notice of Disagreement has been given, within thirty
(30) days after the resolution of such disagreement.
6.8 Other Remedies. The rights of indemnification provided in this Section
6 shall be in addition to any rights or remedies to which a party may be
entitled at law or in equity, including, but not limited to, an action for
damages and/or for specific performance.
Section 7. MISCELLANEOUS
7.1 Construction. All references in this Agreement to the singular shall
include the plural where applicable, and all references to gender shall include
both genders and neuter. In interpreting any provision of this Agreement, no
presumption shall be drawn against the party drafting the provision.
7.2 Survival of Representations and Warranties. The representations,
warranties, covenants, agreements and obligations of the parties contained in or
incurred under this Agreement shall be deemed to be material and to have been
relied upon by the recipient party and shall survive the respective closing,
irrespective of any investigation made by or on behalf of any party. The
statements contained in any certificate or other instrument delivered by or on
behalf of any party under this Agreement shall be deemed representations,
warranties, covenants, agreements or obligations as the case may be, under this
Agreement.
7.3 Expenses. Except as provided in Section 2.6(b), each party shall be
responsible for all expenses (including without limitation, attorneys' and
accountants' fees and expenses) incurred by it in connection with this Agreement
and the transactions contemplated by this Agreement, whether or not any of such
transactions are consummated.
7.4 Benefit. Unless otherwise specified in this Agreement, no person who is
not a party to this Agreement shall have any rights or derive any benefit under
this Agreement.
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7.5 Scope and Modification. This Agreement (together with all Schedules and
Exhibits to it and the documents executed and delivered in connection with it)
constitutes the entire agreement between the parties or their affiliates with
regard to the subject matter of this Agreement (except for the Confidential
Disclosure Agreement between the Corporation and COMSAT dated November 8, 1989)
and supersedes all prior oral or written agreements or understandings of the
parties or their affiliates, except for such Confidential Disclosure Agreement.
No interpretation, modification, termination or waiver of any provision of this
Agreement shall be binding upon a party unless in writing and executed by the
other parties.
7.6 Delays or Omissions Waivers.
(a) No delay or omission to exercise any right, power or remedy of a
party under this Agreement, upon a breach or default of another party under
this Agreement, shall (i) impair any such right, power or remedy or (ii) be
construed to be a waiver of or acquiescence in any such breach or default
or any similar breach or default subsequently occurring.
(b) No modification, waiver, termination, rescission, discharge or
cancellation of any right or claim under this Agreement shall affect the
right of any party to enforce any other claim or right under this
Agreement.
7.7 Successors and Assigns. Except as otherwise expressly provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, assigns, executors and administrators of the
parties.
7.8 Governing Law. This Agreement shall be interpreted in accordance with
and governed by the laws of the State of Delaware, without giving effect to the
doctrine of conflict of laws.
7.9 Notices. Any notice under this Agreement shall be in writing and shall
be delivered by personal service or by certified or registered mail, with
postage prepaid, or by overnight express courier, addressed to a party at the
address below, or at such other address as one party may give notice of to the
other parties.
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(a) If to the Purchaser to:
President
COMSAT Investments, Inc.
950 L'Enfant Plaza, S.W.
Washington, D.C. 20024
With a copy to:
Willard R. Nichols, Esq.
Vice President and General Counsel
Communications Satellite Corporation
950 L'Enfant Plaza, S.W.
Washington, D.C. 20024
(b) If to the Shareholders:
Eugene D. Story, Robert D. Ohmes
and Donald F. Logan, Jr.
c/o Marine Management Systems, Inc.
102 Hamilton Avenue
Stamford, CT 06902
(c) If to the Corporation, to:
Marine Management Systems, Inc.
102 Hamilton Avenue
Stamford, CT 06902
7.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original document.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
COMSAT INVESTMENTS, INC.
By: /s/ Robert Perry
-------------------------------
Title: President
----------------------------
MARINE MANAGEMENT SYSTEMS, INC.
By: /s/ Eugene D. Story
-------------------------------
Title: President
----------------------------
SHAREHOLDERS:
/s/ Eugene D. Story
-------------------------------
EUGENE D. STORY
/s/ Robert D. Ohmes
-------------------------------
ROBERT D. OHMES
/s/ Donald F. Logan, Jr.
-------------------------------
DONALD F. LOGAN, JR.
28
EXHIBIT 10.01(a)
WARRANT TO PURCHASE
___________ SHARES
PURCHASE WARRANT
FOR THE PURCHASE OF
COMMON STOCK, PAR VALUE $.001 PER SHARE
MARINE MANAGEMENT SYSTEMS, INC.
(Incorporated Under the Laws of the State of Delaware)
This is to certify that, for value received, __________________, is
entitled, subject to the terms and conditions hereinafter set forth during the
period specified in Paragraph 1 below, to purchase an aggregate of _______
shares of Common Stock, par value $.001 per share, of MARINE MANAGEMENT SYSTEMS,
INC. (hereinafter called the "Corporation") at the purchase price of $1.25 per
share of Common Stock so purchased, upon presentation and surrender to the
Corporation, with the form of Subscription duly executed and accompanied by
payment of the purchase price of each share purchased by certified check. The
purchase rights represented by this Warrant are exercisable at the option of the
registered owner hereof, at any time or from time to time in whole or in part,
subject to the terms and conditions set forth herein.
1. Exercise of Warrants. The rights hereunder to purchase shares of
Common Stock shall be exercisable by the holder hereof immediately upon the
issuance hereof until (insert l0 years from date).
2. Stock To Be Fully Paid. The Corporation covenants and agrees that all
shares of Common Stock which may be delivered upon the exercise of this Warrant
will, upon delivery, be fully paid and non-assessable and free from all taxes,
liens, and charges with respect to the purchase hereunder.
3. Adjustment of Price and Number of Shares Purchasable. The number of
shares of Common Stock purchasable upon the exercise of this Warrant and the
purchase price per share shall be subject to adjustment from time to time as set
forth herein.
4. Reservation of Shares. The Corporation agrees at all times to reserve
or hold available a sufficient number of shares of Common Stock to cover the
number of shares issuable upon the exercise of this and all other Warrants of
like tenor then outstanding.
<PAGE>
5. Voting Rights and Dividends. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a shareholder of the Corporation,
or to any other rights whatsoever except the rights herein expressed and such as
are set forth, and no dividends shall be payable or accrue in respect of this
Warrant or the interest represented hereby or the shares purchasable hereunder
until or unless, and except to the extent that, this Warrant shall be exercised.
6. Change in Number of Shares as a Whole. If at any time or from time to
time the Corporation shall by subdivision, dividend, split, combination,
consolidation, or reclassification of shares, or otherwise change as a whole the
outstanding shares of Common Stock into a different number or class of shares,
the number and class of shares so changed shall, for the purposes of this
Warrant and the terms and conditions hereof, replace the shares outstanding
immediately prior to such change, and the Warrant purchase price in effect, and
the number of shares purchasable under this Warrant, immediately prior to the
date upon which such change shall become effective, shall be proportionately
adjusted. Irrespective of any adjustment or change in the Warrant purchase price
or the number of shares of Common Stock actually purchasable under this or any
other Purchase Warrant of like tenor, the Warrants theretofore and thereafter
issued may continue to express the Warrant purchase price per share and the
number of shares purchasable thereunder as the Warrant purchase price per share
and the number of shares purchasable were expressed upon the Purchase Warrants
when initially issued.
7. Merger or Consolidation with Another Company. If at any time while this
Warrant is outstanding the Corporation shall consolidate with or merge into
another corporation, the holder hereof shall thereafter be entitled upon
exercise hereof to purchase, with respect to each share of Common Stock
purchasable hereunder immediately prior to the date upon which such
consolidation or merger shall become effective, the securities or property to
which a holder of one share of Common Stock would have been entitled upon such
consolidation or merger, without any change in or payment in addition to the
Warrant purchase price in effect immediately prior to such merger or
consolidation, and the Corporation shall take such steps in connection with such
consolidation or merger as may be necessary to assure that all of the provisions
of this Warrant shall thereafter be applicable, as nearly as reasonably may be,
in relation to any securities or property thereafter deliverable upon the
exercise of this Warrant. The Corporation shall not effect any such
consolidation or merger unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting therefrom shall assume by
written instrument executed and mailed to the registered holder at the address
of such holder shown on the books of the Corporation, the obligation to deliver
- 2 -
<PAGE>
to such holder such securities or property as in accordance with the foregoing
provisions such holder shall be entitled to purchase. A sale of all or
substantially all of the assets of the Corporation for a consideration (apart
from the assumption of obligations) consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
8. Notice of Change. Upon the happening of any event requiring an
adjustment of the Warrant purchase price hereunder, the Corporation shall
forthwith give written notice thereof to the registered holder of this Warrant
stating the adjusted Warrant purchase price and the adjusted number of shares of
Common Stock purchasable upon the exercise hereof resulting from such event and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. The Board of Directors of the Corporation shall
determine the computation made hereunder.
9. Dissolution Provisions and Notice. In case any voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation shall at any time be
proposed, the Corporation shall give at least 20 days prior written notice
thereof to the registered holder stating the date on which such event is to take
place and the date (which shall be at least 20 days after the giving of such
notice) as of which the holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such dissolution, liquidation, or winding up (on which date, in the event such
dissolution, liquidation, or winding up shall actually take place, this Warrant
and all rights with respect hereto shall terminate). Notices pursuant to this
paragraph shall be given by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder appearing in the
records of the Corporation.
10. Title. This Warrant is issued subject to the condition, and every
holder of this Warrant by accepting the same agrees with every subsequent holder
of this Warrant and with the Corporation, that title to this Warrant and all
rights hereunder shall be transferable by delivery of this Warrant, duly
endorsed, and that the Corporation and all persons dealing with this Warrant may
treat the registered owner hereof or, when presented duly endorsed in blank to a
specified person, as the absolute owner hereof for all purposes, any notice to
the contrary notwithstanding.
11. Covenants. The above provisions are subject to the following:
The Warrants represented by this certificate have not been registered
under the Securities Act of l933 as amended. These Warrants have been purchased
- 3 -
<PAGE>
for investment and not with a view of distribution or resale, and may not be
made subject to a security interest, pledge, hypothecated, or otherwise
transferred without an effective registration statement or an opinion of counsel
for the Corporation that registration is not required under such Act. Any shares
issued upon the exercise of this Warrant shall bear the following legend:
The shares represented by this Certificate may not be sold, transferred,
pledged, hypothecated or otherwise disposed of (1) unless they have first
been registered under the Securities Act of 1933, as amended, or unless,
in the opinion of counsel for the Corporation, such registration is not
required.
12. Absolute Ownership. The Corporation may deem and treat the owner
of this Warrant at any time as the absolute owner hereof for all purposes and
shall not be affected by any notice to the contrary.
13. Investment Letter. Upon exercise of this Warrant, as a condition
precedent to the Corporation's obligation to issue shares pursuant hereto, the
registered holder of this Warrant shall execute an investment letter
satisfactory to counsel for the Corporation and deliver same to the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
as of ________________, 1996, by the signatures of its duly authorized officers
and the corporate seal hereunder affixed.
ATTEST: MARINE MANAGEMENT SYSTEMS, INC.
______________________ By_____________________________
Robert D. Ohmes Eugene D. Story
Secretary President
- 4 -
EXHIBIT 10.01(b)
Schedule of Warrant Holders
Number of Shares
Holder Underlying Warrant Date of Warrant
- ------ ------------------ ---------------
Michael Barney 50,000 4/1/96
Robert F. Ohmes 50,000 4/1/96
Scott Ohmes 100,000 4/1/96
Mark Story 250,000 4/1/96
Donald Logan 28,000 6/3/96
Robert D. Ohmes 52,000 6/3/96
Eugene D. Story 52,000 6/3/96
Mark Story 18,000 6/3/96
EXHIBIT 10.02
SUBORDINATED NOTE
DATE: July 1, 1994
AMOUNT: $300,000
RATE: 2% Over Prime
TERM: Open
THIS AGREEMENT dated July 1, 1994, between Eugene D. Story of 22 Brush Island
Road, Darien, Connecticut 06820 (hereinafter referred to as "Story") and Marine
Management Systems, Inc. (hereinafter referred to as "MMS"), an Ohio Corporation
having its chief executive office at 102 Hamilton Avenue, Stamford, Connecticut
06902,
WITNESSETH:
1. The Loan
Pursuant to the terms of this Agreement, Story does hereby loan $300,000 to
MMS, the receipt of proceeds of which are hereby acknowledged. This
represents the total amount of loan outstanding between Story and the
Company and supersedes all previous Notes issued by MMS to Story.
2. Interest
The principal balance of the loan shall bear interest at a per annum rate
of two (2.0) percentage points in excess of the Base Rate of interest
currently in effect.
3. Payment of Interest
Interest will be paid monthly on or about the 15th of each month.
4. Payment of Principal
This Note is subordinated to a loan from People's Bank. No principal may be
paid on the Note without the prior approval of People's Bank. MMS agrees to
pay down the loan as soon as practicable and will use its best efforts to
obtain approval from People's Bank to effect an early retirement of the
Note.
5. Subordination of Note
This loan is subordinated to the loan outstanding to People's Bank.
<PAGE>
6. Collateral
Subject to any prior liens, or collateral securing the loan of People's
Bank as well as any outstanding security agreements, running in favor of
third parties, the loan is secured by the general assets of MMS.
7. Loan Retirement Rights
The undersigned agree that payments by the Company to retire the
subordinated indebtedness due to Eugene D. Story and Robert D. Ohmes will
be retired as funds are available in proportion to the ratio that the
Subordinated Notes of each bears to the other.
This loan agreement is entered into on this 1st day of July, 1994.
MARINE MANAGEMENT SYSTEMS, INC.
BY: /s/ Robert D. Ohmes /s/ Eugene D. Story
- ----------------------------- ----------------------------
Executive Vice President Eugene D. Story
Subordinated Note
July 1, 1994
Page 2
EXHIBIT 10.03
SUBORDINATED NOTE
DATE: July 1, 1994
AMOUNT: $200,000
RATE: 2% Over Prime
TERM: Open
THIS AGREEMENT dated July 1, 1994, between Robert D. Ohmes of 41 Briar Oak
Drive, Weston, Connecticut 06883 (hereinafter referred to as "Ohmes") and Marine
Management Systems, Inc. (hereinafter referred to as "MMS"), an Ohio Corporation
having its chief executive office at 102 Hamilton Avenue, Stamford, Connecticut
06902,
WITNESSETH:
1. The Loan
Pursuant to the terms of this Agreement, Ohmes does hereby loan $200,000 to
MMS, the receipt of proceeds of which are hereby acknowledged. This
represents the total amount of loan outstanding between Ohmes and the
Company and supersedes all previous Notes issued by MMS to Ohmes.
2. Interest
The principal balance of the loan shall bear interest at a per annum rate
of two (2.0) percentage points in excess of the Base Rate of interest
currently in effect.
3. Payment of Interest
Interest will be paid monthly on or about the 15th of each month.
4. Payment of Principal
This Note is subordinated to a loan from People's Bank. No principal may be
paid on the Note without the prior approval of People's Bank. MMS agrees to
pay down the loan as soon as practicable and will use its best efforts to
obtain approval from People's Bank to effect an early retirement of the
Note.
5. Subordination of Note
This loan is subordinated to the loan outstanding to People's Bank.
<PAGE>
6. Collateral
Subject to any prior liens, or collateral securing the loan of People's
Bank as well as any outstanding security agreements, running in favor of
third parties, the loan is secured by the general assets of MMS.
7. Loan Retirement Rights
The undersigned agree that payments by the Company to retire the
subordinated indebtedness due to Robert D. Ohmes and Eugene D. Story will
be retired as funds are available in proportion to the ratio that the
Subordinated Notes of each bears to the other.
This loan agreement is entered into on this 1st day of July, 1994.
MARINE MANAGEMENT SYSTEMS, INC.
BY: /s/ Eugene D. Story /s/ Robert D. Ohmes
---------------------------- -------------------------
President Robert D. Ohmes
EXHIBIT 10.04
SUBORDINATED NOTE
DATE: December 2, 1996
AMOUNT: $29,000
RATE: 9%
TERM: 2 YEARS
THIS AGREEMENT, dated December 2, 1996, between Eugene D. Story of 22 Brush
Island Road, Darien, Connecticut 06820 (hereinafter referred to as "Story") and
Marine Management Systems, Inc. (hereinafter referred to as "MMS"), a Delaware
Corporation having its chief executive office at 470 West Avenue, Stamford,
Connecticut 06902,
WITNESSETH:
1. The Loan
Pursuant to the terms of this Agreement, Story does hereby loan $29,000 to
MMS, the receipt of proceeds of which are hereby acknowledged. This loan is
in addition to an existing loan from Eugene Story in the amount of $300,000
and is part of a series of loans made from MMS officers to MMS on this date
in the aggregate amount of $166,000.
2. Interest
The principal balance of the loan shall bear interest at a per annum rate
of 9%.
3. Payment of Interest
Interest will be paid quarterly in arrears, with first payment on March 2,
1997.
4. Term of Loan
The term of the loan is two years, subject to the terms and conditions of
clauses 5 and 6 herein.
<PAGE>
Subordinated Note
December 2, 1996
Page 2
5. Subordination of Note; Payment of Principal
This Notes is subordinated to all loans now existing or to exist from
People's Bank, Connecticut Innovations, Inc. as well as any other loans to
the Company made from time to time, with the exception of the series of
notes made on this date by certain officers of MMS totaling $166,000 and
the prior notes held by Story and Robert D. Ohmes in the aggregate amount
of $500,000. No principal may be paid on the Note without the prior
approval of all parties with indebtedness Senior to this note.
6. Collateral
Subject to any prior liens, or collateral securing other indebtedness of
MMS, as well as any outstanding security agreements, running in favor of
third parties, the loan is secured by the general assets of MMS.
This loan agreement is entered into on this 2nd day of December, 1996.
MARINE MANAGEMENT SYSTEMS, INC.
BY:/s/ Robert D. Ohmes /s/ Eugene D. Story
---------------------------- --------------------------
Executive Vice President Eugene D. Story
EXHIBIT 10.05
SUBORDINATED NOTE
DATE: December 2, 1996
AMOUNT: $10,000
RATE: 9%
TERM: 2 YEARS
THIS AGREEMENT, dated December 2, 1996, between Robert D. Ohmes of 41 Briar Oak
Drive Weston, Connecticut 06883 (hereinafter referred to as "Ohmes") and Marine
Management Systems, Inc. (hereinafter referred to as "MMS"), a Delaware
Corporation having its chief executive office at 470 West Avenue, Stamford,
Connecticut 06902,
WITNESSETH:
1. The Loan
Pursuant to the terms of this Agreement, Story does hereby loan $29,000 to
MMS, the receipt of proceeds of which are hereby acknowledged. This loan is
in addition to an existing loan from Eugene Story in the amount of $300,000
and is part of a series of loans made from MMS officers to MMS on this date
in the aggregate amount of $166,000.
2. Interest
The principal balance of the loan shall bear interest at a per annum rate
of 9%.
3. Payment of Interest
Interest will be paid quarterly in arrears, with first payment on March 2,
1997.
4. Term of Loan
The term of the loan is two years, subject to the terms and conditions of
clauses 5 and 6 herein.
<PAGE>
Subordinated Note
December 2, 1996
Page 2
5. Subordination of Note; Payment of Principal
This Notes is subordinated to all loans now existing or to exist from
People's Bank, Connecticut Innovations, Inc. as well as any other loans to
the Company made from time to time, with the exception of the series of
notes made on this date by certain officers of MMS totaling $166,000 and
the prior notes held by Story and Robert D. Ohmes in the aggregate amount
of $500,000. No principal may be paid on the Note without the prior
approval of all parties with indebtedness Senior to this note.
6. Collateral
Subject to any prior liens, or collateral securing other indebtedness of
MMS, as well as any outstanding security agreements, running in favor of
third parties, the loan is secured by the general assets of MMS.
This loan agreement is entered into on this 2nd day of December, 1996.
MARINE MANAGEMENT SYSTEMS, INC.
BY: /s/ Eugene D. Story /s/ Robert D. Ohmes
--------------------------- ----------------------------
President Robert D. Ohmes
EXHIBIT 10.06
SUBORDINATED NOTE
DATE: December 2, 1996
AMOUNT: $15,000
RATE: 9%
TERM: 2 YEARS
THIS AGREEMENT, dated December 2, 1996, between Mark Story of 7 Rockmeadow Road,
Norwalk, Connecticut 06850 (hereinafter referred to as "Mark") and Marine
Management Systems, Inc. (hereinafter referred to as "MMS"), a Delaware
Corporation having its chief executive office at 470 West Avenue, Stamford,
Connecticut 06902,
WITNESSETH:
1. The Loan
Pursuant to the terms of this Agreement, Mark does hereby loan $15,000 to
MMS, the receipt of proceeds of which are hereby acknowledged. This loan is
part of a series of loans made from MMS officers to MMS on this date in the
aggregate amount of $166,000.
2. Interest
The principal balance of the loan shall bear interest at a per annum rate
of 9%.
3. Payment of Interest
Interest will be paid quarterly in arrears, with first payment on March 2,
1997.
4. Term of Loan
The term of the loan is two years, subject to the terms and conditions of
clauses 5 and 6 herein.
<PAGE>
Subordinated Note
December 2, 1996
Page 2
5. Subordination of Note; Payment of Principal
This Notes is subordinated to all loans now existing or to exist from
People's Bank, Connecticut Innovations, Inc., as well as any other loans to
the Company made from time to time, with the exception of the series of
notes made on this date by certain officers of MMS totaling $166,000 and
the prior notes held by Eugene Story and Robert D. Ohmes in the aggregate
amount of $500,000. No principal may be paid on the Note without the prior
approval of all parties with indebtedness Senior to this note.
6. Collateral
Subject to any prior liens, or collateral securing other indebtedness of
MMS, as well as any outstanding security agreements, running in favor of
third parties, the loan is secured by the general assets of MMS.
This loan agreement is entered into on this 2nd day of December, 1996.
MARINE MANAGEMENT SYSTEMS, INC.
BY: /s/ Eugene D. Story /s/ Robert D. Ohmes
--------------------------- ----------------------------
President Robert D. Ohmes
EXHIBIT 10.07
SUBORDINATED NOTE
DATE: December 2, 1996
AMOUNT: $90,000
RATE: 9%
TERM: 2 YEARS
THIS AGREEMENT, dated December 2, 1996, between Scott Ohmes of 41 Briar Oak
Drive, Weston Connecticut 06883 (hereinafter referred to as "Scott") and Marine
Management Systems, Inc. (hereinafter referred to as "MMS"), a Delaware
Corporation having its chief executive office at 470 West Avenue, Stamford,
Connecticut 06902,
WITNESSETH:
1. The Loan
Pursuant to the terms of this Agreement, Scott does hereby loan $90,000 to
MMS, the receipt of proceeds of which are hereby acknowledged. This loan is
part of a series of loans made from MMS officers to MMS on this date in the
aggregate amount of $166,000.
2. Interest
The principal balance of the loan shall bear interest at a per annum rate
of 9%.
3. Payment of Interest
Interest will be paid quarterly in arrears, with first payment on March 2,
1997.
4. Term of Loan
The term of the loan is two years, subject to the terms and conditions of
clauses 5 and 6 herein.
<PAGE>
Subordinated Note
December 2, 1996
Page 2
5. Subordination of Note; Payment of Principal
This Notes is subordinated to all loans now existing or to exist from
People's Bank, Connecticut Innovations, Inc., as well as any other loans to
the Company made from time to time, with the exception of the series of
notes made on this date by certain officers of MMS totaling $166,000 and
the prior notes held by Eugene Story and Robert D. Ohmes in the aggregate
amount of $500,000. No principal may be paid on the Note without the prior
approval of all parties with indebtedness Senior to this note.
6. Collateral
Subject to any prior liens, or collateral securing other indebtedness of
MMS, as well as any outstanding security agreements, running in favor of
third parties, the loan is secured by the general assets of MMS.
This loan agreement is entered into on this 2nd day of December, 1996.
MARINE MANAGEMENT SYSTEMS, INC.
BY: /s/ Eugene D. Story /s/ Robert D. Ohmes
--------------------------- ----------------------------
President Robert D. Ohmes
EXHIBIT 10.08
SUBORDINATED NOTE
DATE: December 2, 1996
AMOUNT: $22,000
RATE: 9%
TERM: 2 YEARS
THIS AGREEMENT, dated December 2, 1996, between Donald F. Logan of 40 Undercliff
Road, Trumbull, Connecticut 06611 (hereinafter referred to as "Logan") and
Marine Management Systems, Inc. (hereinafter referred to as "MMS"), a Delaware
Corporation having its chief executive office at 470 West Avenue, Stamford,
Connecticut 06902,
WITNESSETH:
1. The Loan
Pursuant to the terms of this Agreement, Logan does hereby loan $22,000 to
MMS, the receipt of proceeds of which are hereby acknowledged. This loan is
part of a series of loans made from MMS officers to MMS on this date in the
aggregate amount of $166,000.
2. Interest
The principal balance of the loan shall bear interest at a per annum rate
of 9%.
3. Payment of Interest
Interest will be paid quarterly in arrears, with first payment on March 2,
1997.
4. Term of Loan
The term of the loan is two years, subject to the terms and conditions of
clauses 5 and 6 herein.
<PAGE>
Subordinated Note
December 2, 1996
Page 2
5. Subordination of Note; Payment of Principal
This Notes is subordinated to all loans now existing or to exist from
People's Bank, Connecticut Innovations, Inc., as well as any other loans to
the Company made from time to time, with the exception of the series of
notes made on this date by certain officers of MMS totaling $166,000 and
the prior notes held by Eugene Story and Robert D. Ohmes in the aggregate
amount of $500,000. No principal may be paid on the Note without the prior
approval of all parties with indebtedness Senior to this note.
6. Collateral
Subject to any prior liens, or collateral securing other indebtedness of
MMS, as well as any outstanding security agreements, running in favor of
third parties, the loan is secured by the general assets of MMS.
This loan agreement is entered into on this 2nd day of December, 1996.
MARINE MANAGEMENT SYSTEMS, INC.
BY: /s/ Eugene D. Story /s/ Robert D. Ohmes
--------------------------- ----------------------------
President Robert D. Ohmes
EXHIBIT 10.09
AGREEMENT made and entered into on December 11, 1996 effective as of the
date of the closing of an initial public offering of the Company's securities by
and between MARINE MANAGEMENT SYSTEMS, INC. (the "Company"), a Delaware
corporation, and EUGENE D. STORY (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
FIRST: A. Upon the terms and subject to the conditions of this Agreement,
the Company hereby employs the Executive as the President of the Company, and
the Executive hereby accepts such employment.
B. The Executive shall perform his duties and exercise his authority as
President of the Company pursuant to such direction as may from time to time be
given by the Company's Board of Directors (the "Board") and he shall, from time
to time as and when required, report to the Chairman of the Board of the Company
with respect to his activities as President.
C. If the Company shall so request, the Executive shall become and shall
during such portion of the term of this Agreement as the Company shall request,
act as a director of the Company and/or as a director and/or officer of any of
<PAGE>
its parents or subsidiaries, or any affiliates thereof, without any compensation
in addition to that provided for in Article Third hereof.
D. The Executive shall devote his full business time and efforts and all
reasonable energy and skill to the business of the Company, its subsidiaries and
affiliates, and shall use his best efforts to promote the interests thereof. The
Executive's services shall be rendered with due regard by the Executive for the
prompt, efficient and economical operation of the Company's business to the end
of maximizing the Company's profitability.
E. During the term of this Agreement, the Executive will not, without the
prior written consent of the Board, engage in any other business or business
activity, except that he may buy, sell and hold securities of, or otherwise
invest in, corporations and other business entities for his own account and that
of his immediate family, and participate in investment decisions with respect
thereto, provided that such investment activities do not interfere with his
duties hereunder and provided further, that he does not buy, sell, or hold
shares of stock of a company traded on a national securities exchange or in the
national over-the-counter market which shall constitute two percent (2%) or more
of the outstanding shares of the stock of such company if such company competes
-2-
<PAGE>
with the Company or with any of its subsidiaries and he shall not, in any event,
thereby become involved in the management or operation of any business.
SECOND: A. This Agreement shall commence on the date herein and shall
terminate on the earliest to occur of:
(1) the second anniversary of the effective date of this Agreement;
provided, however, that this Agreement shall thereafter be automatically
renewed from year to year unless either party, commencing ninety days prior
to the second anniversary of the effective date of this Agreement, shall
have given the other party prior written notice of its intention to
terminate this Agreement on a specified date at least ninety days from the
date of such notice;
(2) The death of the Executive; or
(3) After the Company shall have given at least thirty (30) days'
prior written notice to the Executive of its intention to terminate this
Agreement on a specified date, which specified date shall be either on or
after there shall have elapsed a consecutive period of 120 days or a
non-consecutive period of 180 days during any twelve month period during
which the Executive has been incapacitated or unable to perform his duties;
provided, however, that, if the Company shall terminate this Agreement in
accordance with either clause (1) or (3) above, the Company shall continue
to pay to the Executive his annual salary at the rate specified in Article
THIRD hereof for nine (9) months after the effective date of such
termination.
B. In addition to the events specified in Paragraph A of this Article
SECOND, the Company shall at any time, at its option, be entitled to terminate
this Agreement:
-3-
<PAGE>
(1) For cause, which for the purposes of this Agreement shall mean the
continuing inattention to, refusal to perform or neglect of the Executive's
obligations hereunder, which inattention, refusal or neglect is not the
result of the Executive's illness; or
(2) If the Executive has been indicted on charges of committing a
crime other than minor misdemeanors or traffic violations. C. Termination
in accordance with any of the foregoing provisions of Paragraph A or B
above shall be effective on the date applicable to the particular
termination section referred to above, and from and after such date, this
Agreement shall be of no further force and effect, except that (i) the
Company's rights under Articles FOURTH and FIFTH hereof shall survive the
termination of this Agreement and (ii) the Company's obligations to make
any payments under paragraph 3 of part A of this Article SECOND shall
survive the termination of this Agreement.
THIRD: A. The Executive shall receive, during his employment hereunder, an
annual salary commencing on the date hereof, payable in such installments as
shall accord with normal pay practices of the Company but not less often than
monthly, at the following rates:
(i) from the date hereof to the first anniversary of the date hereof,
at the rate of $130,000 per annum, and
(ii) during each subsequent yearly period (an "Employment Year"), at a
rate per annum equal to the immediately prior Employment Year's rate plus a
-4-
<PAGE>
percentage of such prior Employment Year's amount equal to the percentage
increase, if any, in the U.S Bureau of Labor Statistics Consumer Price
Index for the Metropolitan New York Area ("CPI") as at the beginning of
such subsequent Employment Year. To illustrate the foregoing, assume that
the CPI at the beginning of the first Employment Year is 200 and at the
beginning of the Second Employment Year is 210 (or an increase of 10 points
or 5%). In such case, the rate of compensation for the second Employment
Year will be increased by $6,500 (5% of $130,000) to $136,500.
B. Nothing contained in this Agreement shall be construed to prevent the
Board upon the recommendation of the compensation committee consisting solely of
outside directors from paying a bonus to the Executive, not to exceed 50% of the
base annual salary of the Executive, in the event the Board, in its sole
discretion, evidenced by a resolution adopted by the Board, shall deem it
advisable to do so in order to compensate the Executive fairly for the services
rendered or to be rendered to the Company, but nothing herein contained will
obligate the Board, or any member thereof, to adopt such increase.
C. The Executive shall be entitled to participate, on the same basis,
subject to the same qualifications, as all other regular full time employees of
the Company in any fringe benefit plans of the Company maintained from time to
time for all its employees, as well as all fringe benefit plans maintained from
-5-
<PAGE>
time to time for its key executives (herein collectively called the "Benefit
Plans"), including any pension, medical benefits and life insurance plans;
provided, that, the Company shall, at its sole expense, maintain in the name and
for the benefit of the Executive and his designated beneficiaries, group
insurance on the life of the Executive in an amount not less than twice the
Executive annual salary, as the same may be adjusted from time to time
hereunder, whether or not the Company generally provides such benefit to its
regular full time employees or its other key executives and, provided further,
that the Company shall not be required to expend or accrue, in any calendar
year, for benefits in addition to the benefits normally provided any employee,
an amount which, without giving effect to the resulting federal, state and local
tax benefits resulting therefrom, will exceed 40% of the Executive's salary. If
and to the extent that the costs of and accruals for the benefits provided for
under the Benefit Plans shall exceed said 40% limitation in any calendar year,
(i) the Executive and the Company shall consult and determine which specific
benefits under the Benefit Plans will be reduced and the extent thereof in order
to bring the total costs and accruals within the aforesaid 40% limitation, but
in the event of the failure of the Executive and the Company to agree upon the
nature and extent of such reduction, then, the determination of the Company as
to which benefit or benefits shall be reduced, and the extent of such reduction,
shall be binding and conclusive between
-6-
<PAGE>
the parties hereto and (ii) if permitted by law and the terms of the particular
Benefit Plans, the benefits of which have been reduced, the Executive will be
given the opportunity to contribute his own funds to such Benefit Plan to
restore such benefits. For the purposes of this Paragraph C, all amounts
required to be expended or accrued by the Company shall be determined by the
independent certified public accountants regularly retained to audit the books
and records of the Company, in accordance with generally accepted accounting
principles, consistent with the accounting principles actually and consistently
applied by the Company in preparation of its financial statements, and the
determination of such accountants shall be final and binding on the parties
hereto.
D. The Company shall pay or reimburse the Executive for all reasonable
expenses incurred or paid by him in connection with the performance of his
services under this Agreement upon presentation of expense statements or
vouchers or such other supporting information as it may reasonably require.
E. The Executive shall be entitled to reasonable paid vacations during each
Employment Year at mutually convenient time or times in addition to usual
holidays.
FOURTH: During the term of this Agreement, the Executive shall bring any
and all business developments and potentially profitable situations related to
the Company's business to the Company for exploitation by the Company. In
-7-
<PAGE>
addition, the Executive shall promptly and fully disclose and assign to the
Company any and all inventions, discoveries, improvements, developments,
concepts and ideas which are related to the Company's business, whether or not
patentable and whether or not conceived, developed or reduced to practice by the
Executive or by others, or both.
FIFTH: A. The Executive acknowledges that he has been informed that it is
the policy of the Company to maintain as secret and confidential all valuable
information, not generally known by others, which gives the Company a
competitive advantage in its business, as such may relate to the business and
operations heretofore or hereafter acquired, developed and/or used by the
Company and relating to the customers and employees of the Company (all such
information hereinafter referred to as "Confidential Information"). The parties
recognize that the services to be performed by the Executive are special and
unique, and that by reason of his employment hereunder, he has acquired and will
acquire Confidential Information. In consideration of the Executive's employment
with the Company pursuant to this Agreement, the Executive agrees that:
(1) except as required by the duties of his employment with the
Company, the Executive shall not, directly or indirectly, use,
publish,disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company without the prior written
consent of the Company's Board; and
-8-
<PAGE>
(ii) during his employment with the Company, the Executive shall
exercise all due and diligent precautions to protect the integrity of the
Company's customer and prospective customer lists, mailing lists and
sources thereof, statistical data, compilations, agreements, contracts,
manuals or any other documents embodying any Confidential Information and,
upon termination of employment he shall return all such documents (and
copies thereof) in his possession or control.
B. During his employment with the Company, and (subject to Paragraph D of
this Article FIFTH) for a period of one year after the termination (for any
reason whatsoever) of his employment with the Company, the Executive shall not,
directly or indirectly, own, manage, operate, control, form or participate in
the ownership, management, operation or control of any business, firm or
corporation which engages in the business of developing or marketing information
processing systems directed to the maritime industry or otherwise competes with
the business of the Company or of any of its subsidiaries as conducted on such
date or as it had been conducted during the eighteen months prior to such date;
provided, however, that the provisions of this Paragraph B of this Article FIFTH
shall not apply (i) to investment in shares of stock traded on a national
securities exchange or on the national over-the-counter market which shall
constitute less than two (2%) percent of the outstanding shares of such stock
(ii) if, at the time of such
-9-
<PAGE>
termination, the Executive shall be a shareholder of the Company unless such
termination has occurred pursuant to part B of Article SECOND hereof or (iii) if
this Agreement has been terminated by the Company in violation of the terms
hereof.
C. During his employment with the Company, and (subject to Paragraph D of
this Article FIFTH) for a period of two (2) years after the termination (for any
reason whatsoever) of his employment with the Company, the Executive shall not
seek to persuade any person who is an employee of the Company or of any of its
subsidiaries on such date or during the eighteen months prior to such date to
discontinue that individual's status or employment with the Company or any of
its subsidiaries, nor to become employed in any activity similar to or
competitive with the activities described in Paragraph B above, nor will he hire
or retain any such person (except, following the termination of the Executive's
employment hereunder, with the express prior written consent of the Company),
nor will he solicit or cause or authorize, directly or indirectly, to be
solicited, for or on behalf of himself or any third party, any business similar
to or competitive with the activities described in Paragraph B above from others
who are, or were at any time during his employment hereunder, customers of the
Company or of any of its subsidiaries, or if the Executive is no longer employed
by the Company, from others who were, at any time within eighteen months prior
to the cessation of his
-10-
<PAGE>
employment hereunder, customers of the Company or of any of its subsidiaries.
D. If any of the restrictions on post-employment competitive activities
contained in this Article FIFTH shall for any reason be held by a court of
competent jurisdiction to be excessively broad as to duration, geographical
scope, activity or subject, such restrictions shall be construed so as to
thereafter be limited or reduced to be enforceable to the extent compatible with
the applicable law as it shall then appear; it being understood that by the
execution of this Agreement the parties hereto regard such restrictions as
reasonable and compatible with their respective rights.
E. The Executive acknowledges that were he to breach the provisions of this
Article FIFTH, the damages to the Company would be irreparable and he therefore
agrees that, in addition to damages and reasonable attorneys' fees, the Company
shall be entitled to enjoin any such breach in any competent court.
SIXTH: In consideration for the Executive observing the conditions set
forth in Article FIFTH, the company hereby agrees to pay the Executive sixty
percent (60%) of his annual salary in effect on the date of his termination of
employment for any reason other than for cause for a period of two (2) years
following termination of employment. Said payments shall continue to the
Executive or his estate despite death or disability during the two (2) year
period.
-11
<PAGE>
SEVENTH: In any case where it will be necessary for the Executive to take a
medical examination, whether for insurance purposes, to verify physical
condition or otherwise, the Executive agrees to submit to such medical
examination and in general to cooperate with the Company in connection
therewith, including, without limitation, the completion of any documentation
therefor.
EIGHTH: This Agreement constitutes the entire agreement as to employment
between the parties and there are no terms other than those contained herein,
except as set forth in the Benefit Plans. No variation hereof shall be deemed
valid unless in writing and signed by the parties hereto and no discharge of the
terms hereof shall be deemed void unless in writing signed by the parties
hereto. No waiver by either party of any provision or condition of this
Agreement by him or it to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or any prior or subsequent time.
NINTH: This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and the Executive, his heirs, executors,
administrators and legal representatives.
TENTH: This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut applicable to agreements made and wholly
performed within such state.
-12-
<PAGE>
ELEVENTH: Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, if to the Executive, at 470 West Avenue,
Stamford, CT 06902, and if to the Company, at 470 West Avenue, Stamford, CT
06902 with a copy to Brian O'Connor, Esq., Diserio Martin O'Connor & Castiglioni
at 1 Atlantic Street, Stamford, CT 06901 or such other address as shall have
been specified in writing by either party to the other. Such notice or
communication shall be deemed to have been given as of the date so mailed,
except notice of change of address which shall be deemed given as of the date
received.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
MARINE MANAGEMENT SYSTEMS, INC.
By: /s/ Robert D. Ohmes
----------------------------------
/s/ Eugene D. Story
----------------------------------
EUGENE D. STORY
-13-
EXHIBIT 10.10
AGREEMENT made and entered into on December 11, 1996 effective as of the
date of the closing of an initial public offering of the Company's securities by
and between MARINE MANAGEMENT SYSTEMS, INC. (the "Company"), a Delaware
corporation, and ROBERT D. OHMES (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
FIRST: A. Upon the terms and subject to the conditions of this Agreement,
the Company hereby employs the Executive as the Executive Vice President of the
Company, and the Executive hereby accepts such employment.
B. The Executive shall perform his duties and exercise his authority as
Executive Vice President of the Company pursuant to such direction as may from
time to time be given by the Company's Board of Directors (the "Board") and he
shall, from time to time as and when required, report to the Chairman of the
Board of the Company with respect to his activities as Executive Vice President.
C. If the Company shall so request, the Executive shall become and shall
during such portion of the term of this Agreement as the Company shall request,
act as a director of the Company and/or as a director and/or officer of any of
<PAGE>
its parents or subsidiaries, or any affiliates thereof, without any compensation
in addition to that provided for in Article Third hereof.
D. The Executive shall devote his full business time and efforts and all
reasonable energy and skill to the business of the Company, its subsidiaries and
affiliates, and shall use his best efforts to promote the interests thereof. The
Executive's services shall be rendered with due regard by the Executive for the
prompt, efficient and economical operation of the Company's business to the end
of maximizing the Company's profitability.
E. During the term of this Agreement, the Executive will not, without the
prior written consent of the Board, engage in any other business or business
activity, except that he may buy, sell and hold securities of, or otherwise
invest in, corporations and other business entities for his own account and that
of his immediate family, and participate in investment decisions with respect
thereto, provided that such investment activities do not interfere with his
duties hereunder and provided further, that he does not buy, sell, or hold
shares of stock of a company traded on a national securities exchange or in the
national over-the-counter market which shall constitute two percent (2%) or more
of the outstanding shares of the stock of such company if such company competes
-2-
<PAGE>
with the Company or with any of its subsidiaries and he shall not, in any event,
thereby become involved in the management or operation of any business.
SECOND: A. This Agreement shall commence on the date herein and shall
terminate on the earliest to occur of:
(1) the second anniversary of the effective date of this Agreement;
provided, however, that this Agreement shall thereafter be automatically
renewed from year to year unless either party, commencing ninety days prior
to the second anniversary of the effective date of this Agreement, shall
have given the other party prior written notice of its intention to
terminate this Agreement on a specified date at least ninety days from the
date of such notice;
(2) The death of the Executive; or
(3) After the Company shall have given at least thirty (30) days'
prior written notice to the Executive of its intention to terminate this
Agreement on a specified date, which specified date shall be either on or
after there shall have elapsed a consecutive period of 120 days or a
non-consecutive period of 180 days during any twelve month period during
which the Executive has been incapacitated or unable to perform his duties;
provided, however, that, if the Company shall terminate this Agreement in
accordance with either clause (1) or (3) above, the Company shall continue
to pay to the Executive his annual salary at the rate specified in Article
THIRD hereof for nine (9) months after the effective date of such
termination.
B. In addition to the events specified in Paragraph A of this Article
SECOND, the Company shall at any time, at its option, be entitled to terminate
this Agreement:
-3-
<PAGE>
(1) For cause, which for the purposes of this Agreement shall mean the
continuing inattention to, refusal to perform or neglect of the Executive's
obligations hereunder, which inattention, refusal or neglect is not the
result of the Executive's illness; or
(2) If the Executive has been indicted on charges of committing a
crime other than minor misdemeanors or traffic violations.
C. Termination in accordance with any of the foregoing provisions of
Paragraph A or B above shall be effective on the date applicable to the
particular termination section referred to above, and from and after such date,
this Agreement shall be of no further force and effect, except that (i) the
Company's rights under Articles FOURTH and FIFTH hereof shall survive the
termination of this Agreement and (ii) the Company's obligations to make any
payments under paragraph 3 of part A of this Article SECOND shall survive the
termination of this Agreement.
THIRD: A. The Executive shall receive, during his employment hereunder, an
annual salary commencing on the date hereof, payable in such installments as
shall accord with normal pay practices of the Company but not less often than
monthly, at the following rates:
(i) from the date hereof to the first anniversary of the date hereof, at
the rate of $130,000 per annum, and
(ii) during each subsequent yearly period (an "Employment Year"), at a rate
per annum equal to the immediately prior Employment Year's rate plus a
-4-
<PAGE>
percentage of such prior Employment Year's amount equal to the percentage
increase, if any, in the U.S Bureau of Labor Statistics Consumer Price Index for
the Metropolitan New York Area ("CPI") as at the beginning of such subsequent
Employment Year. To illustrate the foregoing, assume that the CPI at the
beginning of the first Employment Year is 200 and at the beginning of the Second
Employment Year is 210 (or an increase of 10 points or 5%). In such case, the
rate of compensation for the second Employment Year will be increased by $6,500
(5% of $130,000) to $136,500.
B. Nothing contained in this Agreement shall be construed to prevent the
Board upon the recommendation of the compensation committee consisting solely of
outside directors from paying a bonus to the Executive, not to exceed 50% of the
base annual salary of the Executive, in the event the Board, in its sole
discretion, evidenced by a resolution adopted by the Board, shall deem it
advisable to do so in order to compensate the Executive fairly for the services
rendered or to be rendered to the Company, but nothing herein contained will
obligate the Board, or any member thereof, to adopt such increase.
C. The Executive shall be entitled to participate, on the same basis,
subject to the same qualifications, as all other regular full time employees of
the Company in any fringe benefit plans of the Company maintained from time to
time for all its employees, as well as all fringe benefit plans maintained from
-5-
<PAGE>
time to time for its key executives (herein collectively called the "Benefit
Plans"), including any pension, medical benefits and life insurance plans;
provided, that, the Company shall, at its sole expense, maintain in the name and
for the benefit of the Executive and his designated beneficiaries, group
insurance on the life of the Executive in an amount not less than twice the
Executive annual salary, as the same may be adjusted from time to time
hereunder, whether or not the Company generally provides such benefit to its
regular full time employees or its other key executives and, provided further,
that the Company shall not be required to expend or accrue, in any calendar
year, for benefits in addition to the benefits normally provided any employee,
an amount which, without giving effect to the resulting federal, state and local
tax benefits resulting therefrom, will exceed 40% of the Executive's salary. If
and to the extent that the costs of and accruals for the benefits provided for
under the Benefit Plans shall exceed said 40% limitation in any calendar year,
(i) the Executive and the Company shall consult and determine which specific
benefits under the Benefit Plans will be reduced and the extent thereof in order
to bring the total costs and accruals within the aforesaid 40% limitation, but
in the event of the failure of the Executive and the Company to agree upon the
nature and extent of such reduction, then, the determination of the Company as
to which benefit or benefits shall be reduced, and the extent of such reduction,
-6-
<PAGE>
shall be binding and conclusive between the parties hereto and (ii) if permitted
by law and the terms of the particular Benefit Plans, the benefits of which have
been reduced, the Executive will be given the opportunity to contribute his own
funds to such Benefit Plan to restore such benefits. For the purposes of this
Paragraph C, all amounts required to be expended or accrued by the Company shall
be determined by the independent certified public accountants regularly retained
to audit the books and records of the Company, in accordance with generally
accepted accounting principles, consistent with the accounting principles
actually and consistently applied by the Company in preparation of its financial
statements, and the determination of such accountants shall be final and binding
on the parties hereto.
D. The Company shall pay or reimburse the Executive for all reasonable
expenses incurred or paid by him in connection with the performance of his
services under this Agreement upon presentation of expense statements or
vouchers or such other supporting information as it may reasonably require.
E. The Executive shall be entitled to reasonable paid vacations during each
Employment Year at mutually convenient time or times in addition to usual
holidays.
FOURTH: During the term of this Agreement, the Executive shall bring any
and all business developments and potentially profitable situations related to
the Company's business to the Company for exploitation by the Company. In
-7-
<PAGE>
addition, the Executive shall promptly and fully disclose and assign to the
Company any and all inventions, discoveries, improvements, developments,
concepts and ideas which are related to the Company's business, whether or not
patentable and whether or not conceived, developed or reduced to practice by the
Executive or by others, or both.
FIFTH: A. The Executive acknowledges that he has been informed that it is
the policy of the Company to maintain as secret and confidential all valuable
information, not generally known by others, which gives the Company a
competitive advantage in its business, as such may relate to the business and
operations heretofore or hereafter acquired, developed and/or used by the
Company and relating to the customers and employees of the Company (all such
information hereinafter referred to as "Confidential Information"). The parties
recognize that the services to be performed by the Executive are special and
unique, and that by reason of his employment hereunder, he has acquired and will
acquire Confidential Information. In consideration of the Executive's employment
with the Company pursuant to this Agreement, the Executive agrees that:
(1) except as required by the duties of his employment with the
Company, the Executive shall not, directly or indirectly, use,
publish,disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company without the prior written
consent of the Company's Board; and
-8-
<PAGE>
(ii) during his employment with the Company, the Executive shall
exercise all due and diligent precautions to protect the integrity of the
Company's customer and prospective customer lists, mailing lists and
sources thereof, statistical data, compilations, agreements, contracts,
manuals or any other documents embodying any Confidential Information and,
upon termination of employment he shall return all such documents (and
copies thereof) in his possession or control.
B. During his employment with the Company, and (subject to Paragraph D of
this Article FIFTH) for a period of one year after the termination (for any
reason whatsoever) of his employment with the Company, the Executive shall not,
directly or indirectly, own, manage, operate, control, form or participate in
the ownership, management, operation or control of any business, firm or
corporation which engages in the business of developing or marketing information
processing systems directed to the maritime industry or otherwise competes with
the business of the Company or of any of its subsidiaries as conducted on such
date or as it had been conducted during the eighteen months prior to such date;
provided, however, that the provisions of this Paragraph B of this Article FIFTH
shall not apply (i) to investment in shares of stock traded on a national
securities exchange or on the national over-the-counter market which shall
constitute less than two (2%) percent of the outstanding shares of such stock
(ii) if, at the time of such termination, the Executive shall be a shareholder
-9-
<PAGE>
of the Company unless such termination has occurred pursuant to part B of
Article SECOND hereof or (iii) if this Agreement has been terminated by the
Company in violation of the terms hereof.
C. During his employment with the Company, and (subject to Paragraph D of
this Article FIFTH) for a period of two (2) years after the termination (for any
reason whatsoever) of his employment with the Company, the Executive shall not
seek to persuade any person who is an employee of the Company or of any of its
subsidiaries on such date or during the eighteen months prior to such date to
discontinue that individual's status or employment with the Company or any of
its subsidiaries, nor to become employed in any activity similar to or
competitive with the activities described in Paragraph B above, nor will he hire
or retain any such person (except, following the termination of the Executive's
employment hereunder, with the express prior written consent of the Company),
nor will he solicit or cause or authorize, directly or indirectly, to be
solicited, for or on behalf of himself or any third party, any business similar
to or competitive with the activities described in Paragraph B above from others
who are, or were at any time during his employment hereunder, customers of the
Company or of any of its subsidiaries, or if the Executive is no longer employed
by the Company, from others who were, at any time within eighteen months prior
-10-
<PAGE>
to the cessation of his employment hereunder, customers of the Company or of any
of its subsidiaries.
D. If any of the restrictions on post-employment competitive activities
contained in this Article FIFTH shall for any reason be held by a court of
competent jurisdiction to be excessively broad as to duration, geographical
scope, activity or subject, such restrictions shall be construed so as to
thereafter be limited or reduced to be enforceable to the extent compatible with
the applicable law as it shall then appear; it being understood that by the
execution of this Agreement the parties hereto regard such restrictions as
reasonable and compatible with their respective rights.
E. The Executive acknowledges that were he to breach the provisions of this
Article FIFTH, the damages to the Company would be irreparable and he therefore
agrees that, in addition to damages and reasonable attorneys' fees, the Company
shall be entitled to enjoin any such breach in any competent court.
SIXTH: In consideration for the Executive observing the conditions set
forth in Article FIFTH, the company hereby agrees to pay the Executive sixty
percent (60%) of his annual salary in effect on the date of his termination of
employment for any reason other than for cause for a period of two (2) years
following termination of employment. Said payments shall continue to the
Executive or his estate despite death or disability during the two (2) year
period.
-11-
<PAGE>
SEVENTH: In any case where it will be necessary for the Executive to take a
medical examination, whether for insurance purposes, to verify physical
condition or otherwise, the Executive agrees to submit to such medical
examination and in general to cooperate with the Company in connection
therewith, including, without limitation, the completion of any documentation
therefor.
EIGHTH: This Agreement constitutes the entire agreement as to employment
between the parties and there are no terms other than those contained herein,
except as set forth in the Benefit Plans. No variation hereof shall be deemed
valid unless in writing and signed by the parties hereto and no discharge of the
terms hereof shall be deemed void unless in writing signed by the parties
hereto. No waiver by either party of any provision or condition of this
Agreement by him or it to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or any prior or subsequent time.
NINTH: This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and the Executive, his heirs, executors,
administrators and legal representatives.
TENTH: This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut applicable to agreements made and wholly
performed within such state.
-12-
<PAGE>
ELEVENTH: Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, if to the Executive, at 470 West Avenue,
Stamford, CT 06902, and if to the Company, at 470 West Avenue, Stamford, CT
06902 with a copy to Brian O'Connor, Esq., Diserio Martin O'Connor & Castiglioni
at 1 Atlantic Street, Stamford, CT 06901 or such other address as shall have
been specified in writing by either party to the other. Such notice or
communication shall be deemed to have been given as of the date so mailed,
except notice of change of address which shall be deemed given as of the date
received.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
MARINE MANAGEMENT SYSTEMS, INC.
By: /s/ Eugene D. Story
---------------------------------
/s/ Robert D. Ohmes
---------------------------------
ROBERT D. OHMES
-13-
EXHIBIT 10.11
AGREEMENT made and entered into on December 11, 1996 effective as of the
date of the closing of an initial public offering of the Company's securities by
and between MARINE MANAGEMENT SYSTEMS, INC. (the "Company"), a Delaware
corporation, and _______________ (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
FIRST: A. Upon the terms and subject to the conditions of this Agreement,
the Company hereby employs the Executive as the Vice President of the Company,
and the Executive hereby accepts such employment.
B. The Executive shall perform his duties and exercise his authority as
Vice President of the Company pursuant to such direction as may from time to
time be given by the Company's Board of Directors (the "Board") and he shall,
from time to time as and when required, report to the Chairman of the Board of
the Company with respect to his activities as Vice President.
C. If the Company shall so request, the Executive shall become and shall
during such portion of the term of this Agreement as the Company shall request,
act as a director of the Company and/or as a director and/or officer of any of
<PAGE>
its parents or subsidiaries, or any affiliates thereof, without any compensation
in addition to that provided for in Article Third hereof.
D. The Executive shall devote his full business time and efforts and all
reasonable energy and skill to the business of the Company, its subsidiaries and
affiliates, and shall use his best efforts to promote the interests thereof. The
Executive's services shall be rendered with due regard by the Executive for the
prompt, efficient and economical operation of the Company's business to the end
of maximizing the Company's profitability.
E. During the term of this Agreement, the Executive will not, without the
prior written consent of the Board, engage in any other business or business
activity, except that he may buy, sell and hold securities of, or otherwise
invest in, corporations and other business entities for his own account and that
of his immediate family, and participate in investment decisions with respect
thereto, provided that such investment activities do not interfere with his
duties hereunder and provided further, that he does not buy, sell, or hold
shares of stock of a company traded on a national securities exchange or in the
national over-the-counter market which shall constitute two percent (2%) or more
of the outstanding shares of the stock of such company if such company competes
with the Company or with any of its subsidiaries and he shall not, in any event,
-2-
<PAGE>
thereby become involved in the management or operation of any business.
SECOND: A. This Agreement shall commence on the date herein and shall
terminate on the earliest to occur of:
(1) the second anniversary of the effective date of this Agreement;
provided, however, that this Agreement shall thereafter be automatically renewed
from year to year unless either party, commencing ninety days prior to the
second anniversary of the effective date of this Agreement, shall have given the
other party prior written notice of its intention to terminate this Agreement on
a specified date at least ninety days from the date of such notice;
(2) The death of the Executive; or
(3) After the Company shall have given at least thirty (30) days' prior
written notice to the Executive of its intention to terminate this Agreement on
a specified date, which specified date shall be either on or after there shall
have elapsed a consecutive period of 120 days or a non-consecutive period of 180
days during any twelve month period during which the Executive has been
incapacitated or unable to perform his duties; provided, however, that, if the
Company shall terminate this Agreement in accordance with either clause (1) or
(3) above, the Company shall continue to pay to the Executive his annual salary
at the rate specified in Article THIRD hereof for six months after the effective
date of such termination.
B. In addition to the events specified in Paragraph A of this Article
SECOND, the Company shall at any time, at its option, be entitled to terminate
this Agreement:
-3-
<PAGE>
(1) For cause, which for the purposes of this Agreement shall mean the
continuing inattention to, refusal to perform or neglect of the Executive's
obligations hereunder, which inattention, refusal or neglect is not the result
of the Executive's illness; or
(2) If the Executive has been indicted on charges of committing a crime
other than minor misdemeanors or traffic violations.
C. Termination in accordance with any of the foregoing provisions of
Paragraph A or B above shall be effective on the date applicable to the
particular termination section referred to above, and from and after such date,
this Agreement shall be of no further force and effect, except that (i) the
Company's rights under Articles FOURTH and FIFTH hereof shall survive the
termination of this Agreement and (ii) the Company's obligations to make any
payments under paragraph 3 of part A of this Article SECOND shall survive the
termination of this Agreement.
THIRD: A. The Executive shall receive, during his employment hereunder, an
annual salary commencing on the date hereof, payable in such installments as
shall accord with normal pay practices of the Company but not less often than
monthly, at the following rates:
(i) from the date hereof to the first anniversary of the date hereof,
at the rate of $105,000 per annum, and
(ii) during each subsequent yearly period (an "Employment Year"), at a
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<PAGE>
rate per annum equal to the immediately prior Employment Year's rate plus a
percentage of such prior Employment Year's amount equal to the percentage
increase, if any, in the U.S Bureau of Labor Statistics Consumer Price Index for
the Metropolitan New York Area ("CPI") as at the beginning of such subsequent
Employment Year. To illustrate the foregoing, assume that the CPI at the
beginning of the first Employment Year is 200 and at the beginning of the Second
Employment Year is 210 (or an increase of 10 points or 5%). In such case, the
rate of compensation for the second Employment Year will be increased by $5,200
(5% of $105,000) to $110,250.
B. Nothing contained in this Agreement shall be construed to prevent the
Board upon the recommendation of the compensation committee consisting solely of
outside directors from at any time increasing prospectively the salary to be
paid to the Executive or paying a bonus to the Executive, not to exceed 50% of
the base annual salary of the Executive, in the event the Board, in its sole
discretion, evidenced by a resolution adopted by the Board, shall deem it
advisable to do so in order to compensate the Executive fairly for the services
rendered or to be rendered to the Company, but nothing herein contained will
obligate the Board, or any member thereof, to adopt such increase.
C. The Executive shall be entitled to participate, on the same basis,
subject to the same qualifications, as all other regular full time employees of
the Company in any fringe benefit plans of the Company maintained from time to
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<PAGE>
time for all its employees, as well as all fringe benefit plans maintained from
time to time for its key executives (herein collectively called the "Benefit
Plans"), including any pension, medical benefits and life insurance plans;
provided, that, the Company shall, at its sole expense, maintain in the name and
for the benefit of the Executive and his designated beneficiaries, group
insurance on the life of the Executive in an amount not less than twice the
Executive annual salary, as the same may be adjusted from time to time
hereunder, whether or not the Company generally provides such benefit to its
regular full time employees or its other key executives and, provided further,
that the Company shall not be required to expend or accrue, in any calendar
year, for benefits in addition to the benefits normally provided any employee,
an amount which, without giving effect to the resulting federal, state and local
tax benefits resulting therefrom, will exceed 25% of the Executive's salary. If
and to the extent that the costs of and accruals for the benefits provided for
under the Benefit Plans shall exceed said 25% limitation in any calendar year,
(i) the Executive and the Company shall consult and determine which specific
benefits under the Benefit Plans will be reduced and the extent thereof in order
to bring the total costs and accruals within the aforesaid 25% limitation, but
in the event of the failure of the Executive and the Company to agree upon the
nature and extent of such reduction, then, the determination of the Company as
to which benefit or benefits shall be reduced, and the extent of such reduction,
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<PAGE>
shall be binding and conclusive between the parties hereto and (ii) if permitted
by law and the terms of the particular Benefit Plans, the benefits of which have
been reduced, the Executive will be given the opportunity to contribute his own
funds to such Benefit Plan to restore such benefits. For the purposes of this
Paragraph C, all amounts required to be expended or accrued by the Company shall
be determined by the independent certified public accountants regularly retained
to audit the books and records of the Company, in accordance with generally
accepted accounting principles, consistent with the accounting principles
actually and consistently applied by the Company in preparation of its financial
statements, and the determination of such accountants shall be final and binding
on the parties hereto.
D. The Company shall pay or reimburse the Executive for all reasonable
expenses incurred or paid by him in connection with the performance of his
services under this Agreement upon presentation of expense statements or
vouchers or such other supporting information as it may reasonably require.
E. The Executive shall be entitled to reasonable paid vacations during
each Employment Year at mutually convenient time or times in addition to usual
holidays.
FOURTH: During the term of this Agreement, the Executive shall bring any
and all business developments and potentially profitable situations related to
the Company's business to the Company for exploitation by the Company. In
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<PAGE>
addition, the Executive shall promptly and fully disclose and assign to the
Company any and all inventions, discoveries, improvements, developments,
concepts and ideas which are related to the Company's business, whether or not
patentable and whether or not conceived, developed or reduced to practice by the
Executive or by others, or both.
FIFTH: A. The Executive acknowledges that he has been informed that it is
the policy of the Company to maintain as secret and confidential all valuable
information, not generally known by others, which gives the Company a
competitive advantage in its business, as such may relate to the business and
operations heretofore or hereafter acquired, developed and/or used by the
Company and relating to the customers and employees of the Company (all such
information hereinafter referred to as "Confidential Information"). The parties
recognize that the services to be performed by the Executive are special and
unique, and that by reason of his employment hereunder, he has acquired and will
acquire Confidential Information. In consideration of the Executive's employment
with the Company pursuant to this Agreement, the Executive agrees that:
(1) except as required by the duties of his employment with the Company,
the Executive shall not, directly or indirectly, use, publish,disseminate or
otherwise disclose any Confidential Information obtained during his employment
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<PAGE>
with the Company without the prior written consent of the Company's Board; and
(ii) during his employment with the Company, the Executive shall exercise
all due and diligent precautions to protect the integrity of the Company's
customer and prospective customer lists, mailing lists and sources thereof,
statistical data, compilations, agreements, contracts, manuals or any other
documents embodying any Confidential Information and, upon termination of
employment he shall return all such documents (and copies thereof) in his
possession or control.
B. During his employment with the Company, and (subject to Paragraph D of
this Article FIFTH) for a period of one year after the termination (for any
reason whatsoever) of his employment with the Company, the Executive shall not,
directly or indirectly, own, manage, operate, control, form or participate in
the ownership, management, operation or control of any business, firm or
corporation which engages in the business of developing or marketing information
processing systems directed to the maritime industry or otherwise competes with
the business of the Company or of any of its subsidiaries as conducted on such
date or as it had been conducted during the eighteen months prior to such date;
provided, however, that the provisions of this Paragraph B of this Article FIFTH
shall not apply (i) to investment in shares of stock traded on a national
securities exchange or on the national over-the-counter market which shall
<PAGE>
constitute less than two (2%) percent of the outstanding shares of such stock
(ii) if, at the time of such termination, the Executive shall be a shareholder
of the Company unless such termination has occurred pursuant to part B of
Article SECOND hereof or (iii) if this Agreement has been terminated by the
Company in violation of the terms hereof.
C. During his employment with the Company, and (subject to Paragraph D of
this Article FIFTH) for a period of two years after the termination (for any
reason whatsoever) of his employment with the Company, the Executive shall not
seek to persuade any person who is an employee of the Company or of any of its
subsidiaries on such date or during the eighteen months prior to such date to
discontinue that individual's status or employment with the Company or any of
its subsidiaries, nor to become employed in any activity similar to or
competitive with the activities described in Paragraph B above, nor will he hire
or retain any such person (except, following the termination of the Executive's
employment hereunder, with the express prior written consent of the Company),
nor will he solicit or cause or authorize, directly or indirectly, to be
solicited, for or on behalf of himself or any third party, any business similar
to or competitive with the activities described in Paragraph B above from others
who are, or were at any time during his employment hereunder, customers of the
Company or of any of its subsidiaries, or if the Executive is no longer employed
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<PAGE>
by the Company, from others who were, at any time within eighteen months prior
to the cessation of his employment hereunder, customers of the Company or of any
of its subsidiaries.
D. If any of the restrictions on post-employment competitive activities
contained in this Article FIFTH shall for any reason be held by a court of
competent jurisdiction to be excessively broad as to duration, geographical
scope, activity or subject, such restrictions shall be construed so as to
thereafter be limited or reduced to be enforceable to the extent compatible with
the applicable law as it shall then appear; it being understood that by the
execution of this Agreement the parties hereto regard such restrictions as
reasonable and compatible with their respective rights.
E. The Executive acknowledges that were he to breach the provisions of this
Article FIFTH, the damages to the Company would be irreparable and he therefore
agrees that, in addition to damages and reasonable attorneys' fees, the Company
shall be entitled to enjoin any such breach in any competent court.
SIXTH: In consideration for the Executive observing the conditions set
forth in Article FIFTH, the company hereby agrees to pay the Executive sixty
percent (60%) of his annual salary in effect on the date of his termination of
employment for any reason other than for cause for a period of two (2) years
following termination of employment. Said payments shall continue to the
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<PAGE>
Executive or his estate despite death or disability during the two (2) year
period.
SEVENTH: In any case where it will be necessary for the Executive to take a
medical examination, whether for insurance purposes, to verify physical
condition or otherwise, the Executive agrees to submit to such medical
examination and in general to cooperate with the Company in connection
therewith, including, without limitation, the completion of any documentation
therefor.
EIGHTH: This Agreement constitutes the entire agreement as to employment
between the parties and there are no terms other than those contained herein,
except as set forth in the Benefit Plans. No variation hereof shall be deemed
valid unless in writing and signed by the parties hereto and no discharge of the
terms hereof shall be deemed void unless in writing signed by the parties
hereto. No waiver by either party of any provision or condition of this
Agreement by him or it to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or any prior or subsequent time.
NINTH: This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and the Executive, his heirs, executors,
administrators and legal representatives.
TENTH: This Agreement shall be governed by and construed in accordance with
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<PAGE>
the laws of the State of Connecticut applicable to agreements made and wholly
performed within such state.
TENTH: Any notices or other communications required or permitted hereunder
shall be sufficiently given if sent by registered mail or certified mail,
postage prepaid, addressed, if to the Executive, at 470 West Avenue, Stamford,
CT 06902, and if to the Company, at 470 West Avenue, Stamford, CT 06902 with a
copy to Brian O'Connor, Esq., Diserio Martin O'Connor & Castiglioni at 1
Atlantic Street, Stamford, CT 06901 or such other address as shall have been
specified in writing by either party to the other. Such notice or communication
shall be deemed to have been given as of the date so mailed, except notice of
change of address which shall be deemed given as of the date received.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
MARINE MANAGEMENT SYSTEMS, INC.
By: _____________________________
----------------------------
[Employee]
EXHIBIT 10.12
MARINE MANAGEMENT SYSTEMS, INC.
1996 EXECUTIVE OFFICERS' STOCK OPTION PLAN
A. Purpose and Scope.
The purposes of this Plan are to encourage stock ownership by key
executive officers of Marine Management Systems, Inc. (herein called the
"Company") and its Subsidiaries, to provide an incentive for such executive
officers to expand and improve the profits and prosperity of the Company and its
Subsidiaries, and to assist the Company and its Subsidiaries in attracting and
retaining key executive officers through the grant of Options to purchase shares
of the Company's common stock.
B. Definitions.
Unless otherwise required by the context:
1. "Board" shall mean the Board of Directors of the Company.
2. "Committee" shall mean the Compensation Committee, which is appointed
by the Board.
3 "Company" shall mean Marine Management Systems, Inc., a Delaware
corporation.
4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
5. "Option" shall mean a right to purchase Stock, granted pursuant to the
Plan.
6 "Option Price" shall mean the purchase price for Stock under an Option,
as determined in Section F below.
7. "Participant" shall mean an executive officer of the Company, or of any
Subsidiary of the Company. to whom an Option is granted under the Plan.
<PAGE>
8. "Plan" shall mean this Marine Management Systems, Inc. Executive
Officers' Stock Option Plan.
9. "Stock" shall mean the Common Stock of the Company, par value $.001.
10. "Subsidiary" shall mean a subsidiary corporation of the Company, as
defined in Sections 425(f) and 425(g) of the Code.
C. Stock to be Optioned.
Subject to the provisions of Section L of the Plan, the maximum number of
shares of Stock that maybe optioned or sold under the Plan is 500,000 shares.
Such shares may be treasury, or authorized, but unissued, shares of Stock of the
Company.
D. Administration.
The Plan shall be administered by the Committee. The Committee shall be
responsible to the Board for the operation of the Plan, and shall make
recommendations to the Board with respect to participation in the Plan by
employees of the Company and its Subsidiaries, and with respect to the extent of
that participation. The interpretation and construction of any provision of the
Plan by the Committee shall be final, unless otherwise determined by the Board.
No member of the Board or the Committee shall be liable for any action or
determination made by him in good faith.
E. Eligibility.
The Board, upon recommendation of the Committee, may grant Options to any
Executive Officer (including an employee who is a director or an officer) of the
Company or its Subsidiaries. Options may be awarded by the Board at any time and
from time to time to new Participants, or to then Participants, or to a greater
or lesser number of Participants, and may include or exclude previous
Participants, as the Board, upon recommendation by the Committee shall
determine. Options granted at different times need not contain similar
provisions.
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<PAGE>
F. Option Price
The purchase price for Stock under each Option shall be 100 percent of the
fair market value of the Stock at the time the Option is granted, but in no
event less than the par value of the Stock.
G. Terms and Conditions of Options.
Options granted pursuant to the Plan shall be authorized by the Board and
shall be evidenced by agreements in such form as the Board, upon recommendation
of the Committee, shall from time to time approve. Such agreements shall comply
with and be subject to the following terms and conditions:
1. Employment Agreement. The Board may, in its discretion, include in any
Option granted under the Plan a condition that the Participant shall agree to
remain in the employ of, and to render services to, the Company or any of its
Subsidiaries for a period of time (specified in the agreement) following the
date the Option is granted. No such agreement shall impose upon the Company or
any of its Subsidiaries, however, any obligation to employ the Participant for
any period of time.
2. Time and Method of Payment. The Option Price shall be paid in full in
cash at the time an Option is exercised under the Plan. Otherwise, an exercise
of any Option granted under the Plan shall be invalid and of no effect. Promptly
after the exercise of an Option and the payment of the full Option Price, the
Participant shall be entitled to the issuance of a stock certificate evidencing
his ownership of such a Stock. A Participant shall have none of the rights of a
stockholder with respect to such shares, until shares are issued to him, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
3. Number of Shares. Each Option shall state the total number of shares of
Stock to which it pertains.
4. Option Period and Limitations on Exercise of Options. The Board may, in
its discretion, provide that an Option may not be exercised in whole or in part
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<PAGE>
for any period or periods of time specified in the Option agreement. Except as
provided in the Option Agreement, an Option may be exercised in whole in part at
any time during its term. No Option may be exercised after the expiration of ten
years from the date it is granted. No Option may be exercised for a fractional
share of Stock.
5. Stock Purchase Agreement. All shares of Common Stock issued pursuant to
the Plan shall be subject to the provisions of a certain Stock Purchase
Agreement to be approved by the Board which the Optionee shall execute as a
condition precedent to the Optionee's receipt of the stock covered by this Plan.
6. Restrictive Legend. All shares issued upon the exercise of the Option
shall bear the following legend: "The shares represented by this Certificate may
not be sold, transferred, pledged, hypothecated or otherwise disposed of (1)
unless they have first been registered under the Securities Act of 1933, as
amended, or unless, in the opinion of counsel for the Company, such registration
is not required; and (2) the shares represented by this Certificate are subject
to the terms and conditions of a Stock Purchase Agreement, dated as of March 22,
1996, by and among the Company and the original holder of this Certificate.
Copies of such Agreement may be obtained at no cost by written request made by
the Holder of record of this Certificate to the Secretary of the Company."
7. Withholding. As a condition to the issuance of shares of Common Stock
of the Company under any Option, the Participant authorizes the Company to
withhold in accordance with applicable law from any regular cash compensation
payable to him any taxes required to be withheld by the Company under Federal,
State, or Local law as a result of his exercise of any Option. In the
alternative, as a condition to the issuance of shares of Common Stock of the
Company under any Option, the Participant agrees to remit to the Company at the
time of the exercise of any Option, any taxes required to be withheld by the
Company under Federal, State, or Local law as a result of the exercise of an
Option.
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<PAGE>
8. Amount Exercisable.
(a) No Option shall be exercisable earlier than six months from the
date of grant.
(b) The Options shall become exercisable according to the following
schedule:
Period from the Portion of Grant that
Date the Option Becomes Exercisable
is Granted after Such Period
---------- -----------------
One year after grant 25%
Two years after grant 50%
Three years after grant 75%
Four years after grant 100%
H. Termination of Employment.
Except as provided in Section I below, if a Participant ceases to be
employed by the Company or any of its Subsidiaries, his Options shall
terminate 30 days after the date of ceasing to serve as an employee, but
in no event shall any Option be exercisable more than ten years from the
date it was granted. The Committee may cancel an Option during the one
year period referred to in this paragraph, if the Participant engages in
employment or activities contrary, in the opinion of the Committee, to the
best interests of the Company or any of its Subsidiaries. The Committee
shall determine subject to applicable law, whether a leave of absence
shall constitute a termination of employment. Any such determination of
the Committee shall be final and conclusive, unless overruled by the
Board.
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<PAGE>
I. Rights in Event of Death.
If a Participant dies while employed by the Company or any of its
Subsidiaries, or within three months after having retired with the consent of
the Company or any of its Subsidiaries, and without having fully exercised his
Options, the executors or administrators, or legatees or heirs, of his estate
shall have the right to exercise such Options for one year after the date of
death to the extent that such deceased Participant was entitled to exercise the
Options on the date of his death; provided, however, that in no event shall the
Options be exercisable more than ten years from the date they were granted.
J. No Obligations to Exercise Option.
The granting of an Option shall impose no obligation upon the Participant
to exercise such Option.
K. Non-assignability.
Options shall not be transferable other than by will or by the laws of
descent and distribution, and during a Participant's lifetime shall be
exercisable only by such Participant.
L. Effect of Change in Stock Subject to the Plan.
The aggregate number of shares of Stock available for Options under the
Plan, the shares subject to any Option, and the price per share, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock subsequent to the effective date of the Plan resulting from (1)
a subdivision or consolidation of shares or any other capital adjustment, (2)
the payment of a stock dividend, or (3) other increase or decrease in such
shares effected without receipt of consideration by the Company. If the Company
shall be the surviving corporation in any merger or consolidation, any Option
shall pertain, apply, and relate to the securities to which a holder of the
number of shares of Stock subject to the Option would have been entitled after
the merger or consolidation. Upon dissolution or liquidation of the Company, or
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<PAGE>
upon a merger or consolidation in which the Company is not the surviving
corporation, all Options outstanding under the Plan shall terminate; provided,
however, that all stock Options granted to Participants prior to termination of
the Plan shall become 100 per cent vested and each Participant (and each other
person entitled under Section I to exercise an Option) shall have the right,
immediately prior to such dissolution or liquidation, or such merger or
consolidation, to exercise such Participant's Options in whole or in part.
M. Amendment and Termination.
The Board, by resolution, may terminate, amend, or revise the Plan with
respect to any shares as to which Options have not been granted. Neither the
Board nor the Committee may, without the consent of the holder of an Option,
alter or impair any Option previously granted under the Plan, except as
authorized herein. Unless sooner terminated, the Plan shall remain in effect for
a period of ten years from the date of the Plan's adoption by the Board.
Termination of the Plan shall not affect any Option previously granted.
N. Agreement and Representation of Participant.
As a condition to the exercise of any portion of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of such exercise that any shares of Stock acquired at exercise are being
acquired only for investment and without any present intention to sell or
distribute such shares, if, in the opinion of counsel for the Company, such a
representation Is required under the Securities Act of 1933 or any other
applicable law, regulation, or rule of any governmental agency.
O. Reservation of Shares of Stock.
The Company, during the term of this Plan, will at all times reserve and
keep available, and will seek or obtain from any regulatory body having
jurisdiction any requisite authority necessary to issue and to sell, the number
of shares of Stock that shall be sufficient to satisfy the requirements of this
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<PAGE>
Plan. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority deemed necessary by counsel for the Company for the
lawful issuance and sale of its Stock hereunder shall relieve the Company of any
liability in respect of the failure to issue or sell Stock as to which the
requisite authority has not been obtained.
P. Effective Date of Plan.
The Plan shall be effective from 1996 provided that it has been approved
by the stockholders of the Company on or before March 22, 1996.
Q. Governing Law.
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware without reference to
principles of conflict of laws, and shall be construed accordingly.
- 8 -
EXHIBIT 10.13(a)
AGREEMENT OF LEASE
BETWEEN
SEABOARD STAMFORD INVESTOR ASSOCIATES, LLC
(LANDLORD)
AND
MARINE MANAGEMENT SYSTEMS, INC.
(TENANT)
DATED: OCTOBER 31, 1995
WITH RESPECT TO PREMISES LOCATED
470 WEST AVENUE
STAMFORD, CONNECTICUT 06902
<PAGE>
TABLE OF CONTENTS
1. Definitions. 1
2. Demised Premises, Rent and Term. 2
3. Landlord's Work. 3
4. Force Majeure. 3
5. Use and Occupancy. 3
6. Subordination. 4
7. Alienation. 4
8. Tenant's Certificate. 5
9. Compliance With Laws. 5
10. Floor Loads. 5
11. Property Loss. 5
12. Destruction by Fire or Other Casualty. 6
13. Indemnity, Liability Insurance. 7
14. Eminent Domain. 8
15. Alterations. 8
16. Repairs. 9
17. Operating Expenses. 10
18. Real Estate Taxes. 11
19. Electricity. 13
20. Services Provided by Landlord. 14
21. Signs. 15
22. Exculpation. 15
23. No Representations by Landlord. 15
24. Brokers. 15
25. End of Term. 15
26. Default. 16
27. Effect of Re-entry. 17
28. Fees and Expenses. 18
29. Bankruptcy and Insolvency. 18
30. Holding Over. 19
31. Waiver of Trial by Jury. 19
<PAGE>
32. No Waiver. 19
33. Bills and Notices. 20
34. Access to Demised Premises. 20
35. Captions. 21
36. Restrictions. 21
37. Rules and Regulations. 21
38. Quiet Enjoyment. 21
39. Successors and Assigns. 21
40. Security Deposit. 21
41. Consent. 22
42. Mortgagee. 22
43. Transfer of Landlord's Interest. 23
44. Notices. 23
45. Miscellaneous. 23
46. Acceptance. 25
EXHIBIT 1 Demised Premises
EXHIBIT 2 Landlord's Work
EXHIBIT 3 Cleaning Specifications
EXHIBIT 4 Rules and Regulations
EXHIBIT 5 Anticipated Base Year Operating Expenses
EXHIBIT 6 Extension Options
<PAGE>
AGREEMENT OF LEASE, entered into this ____ day of _________, 1995 between
SEABOARD STAMFORD INVESTOR ASSOCIATES, LLC a Connecticut Limited Liability
Company, having an address at Two Stamford Landing, 68 Southfield Avenue,
Stamford, Connecticut 06902 (hereinafter the "Landlord"), and MARINE MANAGEMENT
SYSTEMS, INC., an Ohio corporation having an address at 102 Hamilton Avenue,
Stamford, CT 06906 (hereinafter the "Tenant").
W I T N E S S E T H:
Landlord and Tenant hereby covenant as follows:
1. Definitions. As used in this Agreement of Lease and all modifications
and agreements supplemental thereto, the following terms shall have the
meanings set forth herein.
Additional Rent: All sums payable by Tenant to Landlord hereunder, other
than Fixed Rent.
Base Year: The calendar year commencing January 1, 1996 and ending
December 31, 1996.
Brokers: GRP Realty Company
Seaboard Property Management
Building: That office building having an address of 470 West Avenue,
Stamford, Connecticut 06902.
Demised Premises: That area on the 3rd floor of the Building edged in red
on the floor plan attached hereto as Exhibit 1 and made a part hereof.
Extension Period: Any of the extension periods more particularly described
in Exhibit 6 attached hereto and made a part hereof.
Fixed Rent: The fixed rent payable pursuant to the provisions of Section
2(d) below.
Initial Electrical Charge: $1.50 per square foot per year.
Landlord's Work: Renovation work to be performed by Landlord as set forth
in Exhibit 2 attached hereto and made a part hereof.
Lease: This Agreement of Lease, as the same may hereafter be modified or
amended.
Lease Commencement Date: Upon substantial completion of Landlord's work
and delivery of Certificate of Occupancy, but not prior to December 1,
1995 or later than February 28, 1996.
Minimum Required Casualty Insurance Coverage: $1,000,000
Number of Tenant's Parking Spaces: 41
Operating Expenses: Those expenses incurred by Landlord in operating the
Building more particularly described in Section 17(a) below.
Property: All land, common areas, improvements and facilities serving the
Building and made available by easement, license, agreement or otherwise,
<PAGE>
except that Landlord reserves the right to sever the ownership or right of
use to any portion of the Property at any time provided such severance
does not materially interfere with Tenant's occupancy of the Demised
Premises, so that such portion so severed shall be excluded from the
Property for purposes of this Lease.
Real Estate Taxes: All those taxes described in Section 18(a) below.
Rent: The Fixed Rent and Additional Rent together.
Rent Commencement: Ninety (90) days after the Lease Commencement Date.
Tenant's Proportionate Share of Landlord's Electrical Expense: 23.82%
Tenant's Proportionate Share of Real Estate Tax Increases: 23.82%
Tenant's Proportionate Share of Operating Expense Increases: 23.82%
Tenant's Rentable Square Footage: 13,355 square feet.
Term: A period of 7 years commencing upon the Lease Commencement Date,
provided that if this Lease is extended pursuant hereto, the word "Term"
as used herein, shall (unless the context requires otherwise) include any
Extension Period.
2. Demised Premises, Rent and Term.
a. Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the
Demised Premises for the duration of the Term, unless sooner terminated in
accordance with the provisions herein con- tained, together with the
nonexclusive right to use, in common with Landlord, those public and common
areas of the Building and the Property as Landlord shall from time to time
designate as available for the common use of tenants within the Building.
Following the expiration of the Term, Tenant shall have the option to extend
this Lease for one or both of the Extension Periods, in accordance with the
provisions of said Exhibit 6. Following the determination of the Lease
Commencement Date, Landlord and Tenant shall, upon re- quest by either of them,
execute and deliver a memorandum of this Lease in accordance with the provisions
of Section 47(e) below.
Together with the Demised Premises, Landlord will make available to Tenant, on a
non-exclusive basis, the number of parking spaces set forth in Section 1 above
(the "Parking Spaces") which Parking Spaces shall be situated within the parking
lot (the "Parking Lot") serving the Building and shall be available for the
parking or cars by Tenant and Tenant's licensees and clients. It is agreed,
stipulated and understood that the Parking Spaces shall not be individually
designated for Tenant's use. Landlord shall regulate the use of the Parking Lot
by others, and in connection therewith, Landlord may adopt rules and regulations
with respect thereto and may employ any measures which Landlord deems
appropriate, including (without limitation) the use of an attendant and by
requiring the use of parking identification stickers for regulating admittance
into the Parking Lot. Tenant shall cooperate with all such rules and regulations
and in particular (without limitation) if requested by Landlord, Tenant shall
notify Landlord of the license plate number, year, make and model of the auto-
mobiles entitled to use the Parking Spaces and if requested by Landlord, all
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such automobiles shall be identified by automobile window stickers provided by
Landlord, so that only such designated automobiles shall be permitted to use the
Parking Spaces. It is further agreed, stipulated and understood that the Parking
Spaces are provided solely for the accommodation of Tenant, and that Landlord
assumes no responsibility or liability of any kind whatsoever from any cause
with respect to or arising out of Tenant's use of the Parking Spaces, the
Parking Lot or adjoining streets, sidewalks, driveways, property and passageways
and/or the use thereof by Tenant's agents, licensees or clients. [In any event,
Landlord will be required to maintain the parking lot and snow removal.]
During the Term, Tenant agrees to pay to Landlord at Landlord's above-referenced
address, or at such other address as Landlord may from time to time notify
Tenant, the Fixed Rent described in Section 2(d) below, which Fixed Rent shall
be payable in monthly installments in advance, commencing on the Rent
Commencement Date and on the first day of each month thereafter, in lawful money
of the United States of America, without any prior demand therefor and without
any deduction or offset whatsoever. In the event that substantial completion
shall occur other than upon the first (1st) day of a month, then Tenant shall be
permitted to occupy the Demised Premises following substantial completion and
the Rent shall be pro-rated up to the Rent Commencement Date.
The Annual Fixed Rent payable hereunder in equal monthly installments shall be
as follows:
Yr. 1 $153,582.50 Yr. 5 $180,092.50
Yr. 2 160,260.00 Yr. 6 186,970.00
Yr. 3 166,937.50 Yr. 7 193,647.50
Yr. 4 173,615.00
During any Extension Period, the Fixed Rent shall be determined in accordance
with the provisions of said Exhibit 6.
3. Landlord's Work. Landlord shall, at Landlord's sole cost and expense, and in
a good and workmanlike manner, carry out Landlord's Work as described in Exhibit
2 and Rider to Exhibit 2. In the event that Tenant shall request any other work,
then Tenant shall prepare plans and specifications with respect thereto,
consistent with all applicable building codes, and with the design, structural
capabilities, construction and equipment of the Building for Landlord's review.
If Landlord shall approve the same (which approval should not be unreasonably
withheld) then such work ("Special Work") shall be carried out by Landlord
provided that Landlord shall submit to Tenant an estimate of the cost of the
same and a statement of terms and conditions prior to commencing such Special
Work. The "cost" of Special Work shall mean the actual cost incurred by Landlord
in having such work performed by Landlord's contractor(s) plus the charges of
any engineers whose services may be required, plus ten (10%) percent overhead
and five (5%) percent profit. Notwithstanding any of the foregoing, it is agreed
and understood that all HVAC, electrical, plumbing and structural plans and
specifications forming part of any Special Work, shall be prepared by Landlord's
engineers at Tenant's sole cost and expense.
4. Force Majeure. Except as otherwise set forth herein, this Lease and the
obligation of Tenant to pay rent hereunder and perform all of the other
covenants and agreements hereunder on part of Tenant to be performed shall in no
way be affected, impaired or excused because Landlord is unable to fulfill any
of its obligations under this Lease or to supply or is delayed in supplying any
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service expressly or impliedly to be supplied or is unable to make, or is
delayed in making any repair, additions, alterations, or decorations or is
unable to supply or is delayed in supplying any equipment or fixtures if
Landlord is prevented or delayed from so doing within the time periods
applicable thereto by reason of strike or labor troubles.
5. Use and Occupancy. Tenant shall use and occupy the Demised Premises for
general office purposes only including the sale and repair of computer and
communications equipment, and for no other purpose (the "Represented Use").
Landlord represents that the Represented Use does not, as of the Lease
Commencement Date, violate either the zoning laws covering the use of the
Demised Premises or make void or voidable any insurance of Landlord now in
effect. Tenant shall not at any time use or occupy, or suffer or permit anyone
to use or occupy, the Demised Premises or do or permit anything to be done in
the Demised Premises which: (i) causes or is liable to cause injury to persons,
to the Building or its equipment, facilities or systems; (ii) impairs or tends
to impair the character, reputation or appearance of the Building as a
first-class office building; (iii) impairs or tends to impair the proper and
economic main- tenance, operation and repair of the Building or its equipment,
facilities or systems; or (iv) annoys or inconveniences or tends to annoy or
inconvenience other tenants or occupants of the Building.
6. Subordination. This Lease is subject and subordinate to all mortgages and all
ground or underlying leases and to all leasehold mortgages which may now or
hereafter affect any such leases, covering the Building or the Property, and to
all renewals, modifications, consolidations, replacements and extensions of any
such instruments. This clause shall be self-operative and no further instrument
of subordination shall be required by the holder of any such mortgage or ground
or underlying lease. In con- firmation of such subordination, Tenant shall,
within ten (10) days after notice, execute and deliver a certificate, in such
form, as Landlord may reasonably request. If Tenant fails to execute,
acknowledge or deliver any such certificate within such ten (10) day period,
Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's
attorney-in-fact, coupled with an interest, to execute and deliver the same for
and on behalf of Tenant. Landlord will use best efforts to deliver non
disturbance agreement from current and future mortgagees.
7. Alienation.
7A) Except as expressly set out in Section 7(b) below, Tenant shall not assign,
sublet, mortgage, or otherwise alienate Tenant's interest under this Lease in
any way whatsoever or otherwise suffer or permit the Demised Premises or any
part thereof to be used by any other party. Notwithstanding the foregoing, if
Tenant shall alienate Tenant's interest hereunder in breach of the provisions of
this Section 7(a), then without prejudice as to any other rights and remedies of
Landlord, Landlord may collect rent from any assignee, subtenant, licensee or
other occupant and apply the net amount collected to the Rent, provided that no
such collection of rent by Landlord shall be deemed a waiver of the provisions
of this Section 7(a) or the acceptance by Landlord of any third party as
"Tenant" hereunder, or as a release of Tenant from the further performance of
Tenant's covenants herein contained. It is agreed and understood that for the
purposes of this Lease, an "assignment" prohibited hereunder shall be deemed to
have occurred in the event that Tenant is at any time a partnership, and there
shall be a withdrawal or change (voluntary, involuntary, by operation of law or
otherwise) of any of the partners thereof or a dissolution of the same or, in
the event that Tenant is at any time a corporation, and there shall occur a
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dissolution, merger, consolidation or other reorganization of Tenant or any
change in the ownership (voluntary, involuntary, by operation of law, creation
of new stock or otherwise) of fifty (50%) percent or more of Tenant's stock, or
in the event of a sale of fifty (50%) percent or more of the value of Tenant's
assets from time to time. However, it is further agreed and understood that
Tenant shall be permitted to assign Tenant's interests hereunder to any
corporation which is a parent, subsidiary or affiliate of Tenant. For the
purposes of this Section 7(a), a "parent" shall mean a corporation which owns
one hundred (100%) percent of the outstanding stock of Tenant, a "subsidiary"
shall mean any corporation of which Tenant owns one hundred (100%) percent of
all outstanding stock, and an "affiliate" shall mean any corporation with one
hundred (100%) percent of its stock owned by Tenant's parent.
7B) Notwithstanding the provisions of Section 7(a) above, it is agreed and
understood that Tenant may, with the express prior written consent of Landlord,
which shall not be unreasonably withheld, sublet or assign all of Tenant's
interest in this Lease. Any request by Tenant to grant a sublease or assignment
shall contain all of the material terms of the proposed subletting. Following
receipt of Tenant's notice, Landlord shall have a period of ten (10) days to
either consent or refuse consent to the proposed subletting or assignment and if
Landlord shall fail to respond during said ten (10) day period, Landlord shall
be presumed to have accepted the same. In the event that Landlord shall consent
to the subletting, profit shall be split 50/50 between Landlord and Tenant,
including any premium paid by the subtenant and any excess rental payment, but
less any and all transactional costs paid by Tenant. Tenant shall reimburse
Landlord on demand for any and all costs that Landlord may incur in connection
with any proposed subletting or assignment by Tenant, including (without
limitation) the costs of investigating the acceptability of the proposed
subtenant, and all legal costs incurred in connection with the granting any of
requested consent and the preparation of documentation with respect thereto. It
is agreed and understood that any subletting or assignment made with the consent
of Landlord shall not affect the continuing primary liability of Tenant
hereunder (which, following any such subletting, shall be joint and several with
the subtenant) so that Tenant shall not be released from performing any of the
terms, covenants and conditions of this Lease by reason of such subletting.
8. Tenant's Certificate. Tenant shall, without charge at any time and from time
to time, within ten days after request by Landlord, certify by written
instrument duly acknowledged and delivered to any proposed or actual mortgagee
(including, without limitation, Mortgagee, as defined in Section 43 below),
assignee of any mortgage or purchaser, or any other person, firm or corporation
specified by Landlord:
That this Lease is unmodified and in full force and effect, or, if there has
been modification, that the same is in full force and effect as modified and
stating the modifications.
That there are then existing no setoffs, or defenses against the enforcement of
any of the agreements, terms, covenants or conditions hereof upon the part of
Tenant to be performed or complied with and that Landlord is not in default
under any provision of this Lease or any modification, extension or renewal of
this Lease or, if not the case specifying the alleged default.
The dates, if any, to which the Rent has been paid in advance.
<PAGE>
9. Compliance With Laws. Tenant, at Tenant's expense, shall duly comply with all
laws and ordinances and the orders, rules, regulations and requirements of
federal, state and municipal governments and departments thereof, now or
hereafter referable to or arising by reason of Tenant's occupancy, use or manner
of use of the Demised Premises or the Parking Lot or any installations made
therein by or on behalf of Tenant. However, Tenant shall not be obligated to
make any structural changes or alterations to comply therewith unless they are
made necessary by reason of the negligence or improper conduct of Tenant, or of
Tenant's employees, agents visitors, contractors, invitees, or by reason of
Tenant's wrongful use of the Demised Premises.
10. Floor Loads. Tenant shall not place a load upon any floor of the Demised
Premises exceeding seventy (70) pounds per square foot. Landlord reserves the
right to prescribe the weight and position of all safes, business machines,
mechanical equipment and other un- usually heavy equipment. Such installments
shall be placed and maintained by Tenant, at Tenant's expense, in settlings
sufficient, in Landlord's judgment, to absorb and prevent vibrations,
unreasonable notice and annoyance.
11. Property Loss. Neither Landlord nor Landlord's agents shall be liable for
any damage to property of Tenant or of others entrusted to employees of the
Building, nor for loss of or damage to any property of Tenant by theft or
otherwise, nor for injury or damage to persons or property resulting from any
cause of whatsoever nature, unless caused by or due to the negligence or willful
acts of Landlord, or of Landlord's agents, servants or employees, invitees, or
by Landlord's failure to perform its covenants under this Lease, nor shall
Landlord or Landlord's agents be liable for any such damage caused by other
Tenant's or persons in, upon or about said Building or caused by operations in
construction of any private, public or quasi-public work. After the Lease
Commencement Date, Tenant shall not move any bulky matter or bulky fixtures into
or out of the Building without Landlord's prior written consent which shall not
be unreasonably withheld or delayed. If such bulky matter or bulky fixtures
require special handling, all work in connection therewith shall comply with all
laws and regulations applicable thereto and shall be done during such hours as
Landlord may reasonably designate. Tenant shall indemnify and save harmless
Landlord against and from all liabilities, obligations, damages, penalties,
claims, costs and expenses for which Landlord shall not be reimbursed by
insurance (including reasonable attorney's fees) which are paid, suffered or
incurred as a result of any breach by Tenant, or by Tenant's agents,
contractors, employees, invitees, or licensees, of any covenant or condition of
this Lease or by the negligent or willful acts of Tenant or of Tenant's agents,
contractors, clients or licensees. Tenant's liability under this Lease extends
to the acts and omissions of any licensee of Tenant and any agent, contractor,
employee, invitee or licensee of any such licensee, but does not extend to the
acts or omissions of Landlord or Landlord's employees, contractors or agents
when they act as contractor or agent for any such licensee. The liability of
Tenant to indemnify and save harmless Landlord, shall not extend to any matter
against which Landlord shall be effectively protected by insurance, provided,
however, that if any such liability shall exceed the amount of the effective and
collectible insurance in question (unless the non-collectibility thereof shall
have resulted from or been caused by the acts of Landlord or Landlord's agents,
servants, employees, guests or invitees) said liability of Tenant shall apply to
such excess, and provided further that said limitation will not constitute a
violation by Landlord of any provision of any applicable insurance policy or an
act which would impair payment of the proceeds under any such policy. Landlord
and Tenant each agree to obtain (if available) mutual "waiver of subrogation
clauses" in their respective liability and casualty insurance policies to the
<PAGE>
effect that each party and their respective insurance companies will not seek
recovery from the other party to the extent a casualty loss is covered by their
respective insurance policies.
12. Destruction by Fire or Other Casualty. If the Demised Premises shall be
damaged by fire or other casualty, Tenant shall give immediate notice thereof to
Landlord and this Lease shall continue in full force and effect except as
hereinafter set forth. If the Demised Premises are partially unusable, then at
Landlord's election, either (a) such damage shall be repaired and rebuilt with
reasonable diligence by and at the expense of Landlord to the extent insurance
proceeds are actually paid to Landlord, and the Rent and all Additional Rent,
from the day following the casualty until the date upon which such repair shall
be substantially completed, shall be abated in proportion to the part of the
Demised Premises which are unusable; or (b) this Lease may be terminated upon
Landlord furnishing Tenant with written notice of such termination. If the
Demised Premises are substantially damaged or rendered unusable by fire or other
casualty, then the Rent shall be proportionately paid up to the date of the
casualty and thereafter shall cease until the date when the Demised Premises
shall have been repaired, rebuilt and restored by Landlord to substantially the
same condition as the Demised Premises were as of the Lease Commencement Date,
subject to the Landlord's right to elect not to restore the same and Tenant's
right to terminate this Lease as hereinafter provided. If the Demised Premises
are rendered substantially unusable (whether or not the Demised Premises are
damaged in whole or in part) or if the Building shall be so damaged that
Landlord shall decide to demolish it or not to rebuild or repair the same, or if
Landlord shall decide to rebuild the same, but if Landlord does not
substantially complete the repair or re- building of the Demised Premises within
one hundred twenty (120) days following such casualty (but subject to Force
Majeure as described in Section 4 above), then in any of such events, Landlord
or Tenant may elect to terminate this Lease by written notice to the other given
within one hundred eighty (180) days after the date of such fire or casualty.
Such notice shall specify a date for the expiration of this Lease, and upon the
date specified the Term shall expire by lapse of time as fully and completely as
if such date were the scheduled expiration date of this Lease and Tenant shall
forthwith quit, surrender and vacate the Demised Premises, but without
prejudice, to Landlord's rights and remedies against Tenant arising prior to
such termination, and any Rent owing shall be paid up to the date of such
termination and any payments of Rent made by Tenant which were on account of any
period subsequent to such date shall be returned to Tenant. Unless Landlord
shall serve a termination notice as provided for herein, Landlord shall make
repairs and restorations as herein set forth with all reasonable expedition,
subject to delays caused by Force Majeure. Nothing contained herein shall
relieve Tenant from liability hereunder that may exist as a result of damage
from fire or other casualty. Tenant acknowledges that Landlord will not carry
insurance with respect to Tenant's furniture and/or furnishings or any fixtures
or equipment, improvements, or appurtenances removable by Tenant and agrees that
Landlord will not be obligated to repair any damage thereto or replace the same.
Landlord shall keep the Building, including Landlord's Work, insured against
loss or damage by fire and against loss or damage by other risks now or
hereafter embraced by "Extended Coverage", so-called, and against such other
risks as prudent operators of similar facilities would normally insure in
amounts sufficient to prevent Landlord from becoming a coinsurer under the terms
of the applicable policies, but in any event in an amount not less than eighty
(80%) percent of the then "full replacement cost" ("full replacement cost" being
the cost of re- placing the Building excluding the cost of excavations,
foundations and footings). In the event that Tenant's use of the Demised Premise
<PAGE>
shall be violative of the rules and regulations of the Fire Insurance Rating
Organization and, as a result thereof, Tenant cannot continue the Represented
Use without being in default of this Lease, Tenant shall nonetheless remain
liable to Landlord for the faithful observance of all the terms, covenants and
conditions of this Lease.
13. Indemnity, Liability Insurance. Tenant shall indemnify and save Landlord
harmless from and against any and all claims, suits, actions, damages,
liabilities and expenses, including reasonable attorneys' fees and investigation
costs for damages or injuries to goods, wares, merchandise and property and/or
for any personal injury or loss of life in, upon or about the Demised Premises
(except such claims as may be the result of the gross negligence or willful
misconduct of Landlord, Landlord's agents, employees, or contractors) occasioned
in whole or in part by any act or omission by Tenant, Tenant's agents,
employees, invitees or contractors and arising during the Term or (if
applicable) any earlier occupation of the Demised Premises by Tenant. Tenant
shall provide on the earlier of (a) the Lease Commencement Date or (b) Tenant's
possession of the Demised Premises, and shall keep in force during the Term for
the benefit of Landlord and Tenant, a comprehensive policy of general liability
insurance protecting Landlord and Tenant against any liability whatsoever
occasioned by accident on or about the Demised Premises or the appurtenances
thereof. Landlord shall be a "named insured" on such policy. Such policy shall
be written by good and solvent insurance companies approved by Landlord and
licensed to do business in the State of Connecticut, with a combined single
limit of not less than the Minimum Required Casualty Insurance Coverage. Such
insurance policy shall contain appropriate endorsements denying Tenant's
insurers the right of subrogation against Landlord. Prior to the time such
insurance is first required to be carried by Tenant, and thereafter, at least
thirty (30) days prior to the expiration of any such policy, Tenant agrees to
deliver to Landlord either a duplicate original of the same policy or a
certificate evidencing such insurance provided that such certificate contains an
en- dorsement that such insurance may not be cancelled except upon thirty (30)
days notice to Landlord, together with evidence of payment for the policy.
Tenant's failure to provide and keep in force such insurance shall be regarded
as a material default hereunder entitling Landlord to exercise any or all of the
remedies provided for in this Lease following an event of default.
14. Eminent Domain.
If the whole of the Property or the Building is taken by condemnation or in any
other manner for any public or quasi-public purpose, this Lease shall terminate
as of the date of vesting of title in the condemning authority (the "Date of
Taking"), and the Rent shall be prorated to the Date of Taking. If any part of
the Building or Property is so taken, this Lease shall be unaffected by such
taking, except that (i) Landlord, in Landlord's sole dis- cretion, may terminate
this Lease by notice to Tenant within ninety (90) days after the Date of Taking,
and (ii) if 20% or more of the Demised Premises shall be taken and the remaining
area of the Demised Premises, in Tenant's reasonable estimation, shall not be
reasonably sufficient for Tenant to continue operation of Tenant's business,
Tenant may terminate this Lease by notice to Landlord within ninety (90) days
after the Date of Taking. This Lease shall terminate on the thirtieth (30th) day
after any such notice by Landlord or Tenant, by which date Tenant shall vacate
and surrender the Demised Premises to Landlord, and in which case the Rent shall
be prorated to such date as Tenant vacates the Demised Premises by reason of
such taking. If this Lease continues in force upon such partial taking, the Rent
and Tenant's Proportionate Share of Landlord's Electrical Expense, Operating
<PAGE>
Expense Increases and Real Estate Tax Increases shall be equitably adjusted
according to the rentable area of the Demised Premises and the Building
remaining after such partial taking.
In the event of any taking as set forth in the immediately preceding subsection,
all of the proceeds of any award, judgment or settlement payable by the
condemning authority shall be and remain the sole and exclusive property of
Landlord, and Tenant hereby assigns all of Tenant's right, title and interest in
and to any such award, judgment or settlement to Landlord. Tenant, however,
shall have the right (to the extent that the same shall not reduce or prejudice
any award, judgment or settlement to Landlord) to claim from the condemning
authority ( but not from Landlord) such compensation as may be recoverable by
Tenant in Tenant's own right for moving expenses and damage to Tenant's
property.
15. Alterations. Tenant shall make no structural or system changes or
modifications in or to the Demised Premises of any nature without Landlord's
prior written consent. Subject to the provisions of this Section 15, Tenant at
Tenant's expense, may make alterations, installations, additions or improvements
after the Lease Commence- ment Date which are nonstructural and which do not
affect utility services including, without limitation, the HVAC system and the
plumbing and electrical lines serving the Demised Premises. Any repairs,
replacements, alterations, installation and/or additions required or permitted
to be performed by Tenant under any provision of this Lease shall not be
commenced until plans and specifications therefor have been submitted to and
approved by Landlord. Such work shall then be performed in accordance with such
approved plans and specifications and shall be performed only by contractors,
subcontractors and mechanics approved by Landlord and in a first-class manner to
Landlord's reasonable satisfaction and shall be done in a manner which will
ensure labor harmony within the Building. If Landlord grants Landlord's consent
to the making of alterations or improvements by Tenant, such consent is solely
for Landlord's benefit, and without any representation or warranty whatsoever to
Tenant with respect to the adequacy or correctness of Tenant's plans and
specifications. If Landlord requires any changes, Tenant shall cause the plans
and specifications to be revised in accordance with Landlord's requirements and
shall resubmit the same to Landlord for Landlord's review. All fixtures and
paneling, partitions, railings and other improvements installed or affixed to
the Demised Premises by or at the request of Tenant, shall become the property
of Landlord and shall remain upon and be surrendered with the Demised Premises
unless Landlord, by notice to Tenant no later than twenty (20) days prior to the
date fixed as the termination of this Lease, elects to have any items (other
than Landlord's Work) removed by Tenant, in which event, the same shall be
removed from the Demised Premises by Tenant forthwith, at Tenant's expense.
Nothing contained in this Section 15 shall be construed to prevent Tenant's
removal of Tenant's own business or trade fixtures, but upon removal of any such
business or trade fixtures from the Demised Premises or upon removal of other
installations as may be required by Landlord, Tenant shall immediately and at
Tenant's expense, repair and restore the Demised Premises to the condition
existing prior to installation, ordinary wear and tear excepted, and repair any
damage to the Demised Premises or the Building due to such removal. All property
permitted or required to be removed by Tenant at the expiration of the Term
remaining in the Demised Premises after Tenant's vacation of the Demised
Premises shall be deemed abandoned and may, at the election of Landlord, either
be retained as Landlord's property or may be removed by Landlord at Tenant's
expense. Tenant shall, before making any alterations, additions, installations
or improvements, at its expense, obtain all permits, approvals and certificates
required by any governmental or quasi-governmental bodies and (upon completion)
<PAGE>
certificates of final approval thereof and shall promptly deliver duplicates of
all such permits, approvals and certificates to Landlord and Tenant agrees to
carry workman's compensation (in full compliance with all applicable law) and
such general liability, personal and property damage insurance as Landlord may
reasonably require. If any mechanic's lien is filed against the Demised Premises
or the Building for work claimed to have been done for (or materials furnished
to) Tenant, then the same shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's expense, by filing the bond required by law, regardless
of whether Tenant disputes any such claim.
16. Repairs. Landlord shall, throughout the Term, maintain and repair the basic
structure and public portions of the Building, both exterior and interior,
including (without limitation), all load bearing walls and the roof and all
plate glass. Landlord shall insure, light, repair, keep and otherwise maintain
all portions of the public lobby and stairways within the Building and the
sidewalks, parking areas, curbs, passageways, and boardwalk areas adjoining or
appurtenant to the Building. Tenant shall, throughout the Term, take good care
of the interior of the Demised Premises and Tenant's fixtures and appurtenances
therein and at Tenant's cost and expense, shall make all non-structural repairs
thereto as and when needed to preserve them in good working order and condition,
reasonable wear and tear, obsolescence and damage from the elements, fire or
other casualty excepted. Notwith- standing the foregoing, all damage or injury
to the Demised Premises or to any other part of the Building, including plate
glass, or to the Building's fixtures, equipment and appurtenances, whether
requiring structural or non-structural repairs, proximately caused by or
resulting from carelessness, omission, neglect or improper conduct of Tenant,
Tenant's invitees, clients or licensees, shall be repaired promptly by Tenant at
Tenant's sole cost and expense, to the satisfaction of Landlord. Tenant shall
also promptly repair all damage to the Building and the Demised Premises
proximately caused by the moving of Tenant's fixtures, furniture or equipment.
All repairs by Tenant shall be of quality or class equal to the original work or
construction. If Tenant fails after ten (10) business days' written notice to
proceed with due diligence to make any repairs required to be made by Tenant
hereunder, the same may be made by Landlord at the expense of Tenant and such
expense shall be collectible as Additional Rent hereunder immediately upon
rendition of a bill or statement thereof. Tenant shall deliver to Landlord
prompt notice of any defective condition in any plumbing, HVAC system or
electrical lines located in, servicing or passing through the Demised Premises
and following such notice, Landlord shall remedy the condition with reasonable
diligence but at the expense of Tenant if the repairs are necessitated by damage
or injury attributable to Tenant, or to Tenant's clients, invitees or licensees.
Landlord shall pay for all repairs necessitated or caused by damage or injury
attributable to Landlord, Landlord's servants, agents, employees and
contractors. Landlord shall assign to Tenant all warranties or guaranties
applicable to Landlord's Work which are assignable, to the extent Tenant has any
responsibilities in connection with the warrantied or guaranteed work. There
shall be no allowance to Tenant for a diminution of rental value and no
liability on the part of Landlord by reason of inconvenience, annoyance or
injury to business arising from Landlord making or failing to make any repairs,
alterations, additions or improvements in or to any portion of the Building or
the Demised Premises or in and to the fixtures, appurtenances or equipment
thereof provided that Tenant is not materially inconvenienced thereby for a
period in excess of ten (10) business days.
17. Operating Expenses.
<PAGE>
Operating Expenses shall mean and include those charges incurred in respect to
the management, repair, operation and maintenance of the Building and the
Property in any calendar year or portion thereof including any and all of the
following: salaries, wages, hospitalization, medical, surgical and general
employee benefits (including group life insurance) and pension payments of
employees of Landlord engaged in the operation and maintenance of the Building
and Property, payroll taxes, worker's compensation insurance, utility usage
surveys, utility taxes, water (including sewer rental), heating, ventilating and
air conditioning, premiums for insurance of the kind normally carried by owners
of similar properties (including insurance in case of fire or casualty against
loss of up to eighteen (18) monthly installments of fixed rental income from the
Property) or if there be any mortgage of the Building, or the Property, or both,
as may be required by the holder of such mortgage; or also as elsewhere required
herein, repairs and maintenance, building and cleaning supplies, uniforms and
dry cleaning, window cleaning, management fees, landscaping, snow and ice
removal, accounting and other miscellaneous administrative expenses, the cost of
all supplies, tools, materials and equipment, depreciation of hand tools and
other movable equipment used in the repair, operation or maintenance of the
Building, service contracts with independent contractors, telephone charges, and
a pro rata share (reasonably based on use and square footage) of any expenses
incurred in connection with common area charges or costs benefiting the Building
and which may be shared with other facilities, utilities or improvements
relating to the Building and the Property and all other similar and customary
expenses paid in connection with the operation and maintenance of the Building
and the Property. Operating Expenses shall not include: (i) expenses for repairs
or other work occasioned by fire or other insured casualty; (ii) expenses
incurred in leasing or procuring new tenants or refitting existing space for new
tenants; (iii) rental under any ground or underlying leases; (iv) depreciation
or amortization; (v) expenditures for capital im- provements other than as
described below; (vi) wages, salaries, or other compensation paid to any
director, officer or executive employee of Landlord above the grade of Building
superintendent; (vii) principal and interest payments on mortgage financing;
(viii) Landlord's Electrical Expense as defined in Section 19; (ix) amounts
which may be the specific obligation of other tenants within the Building; and
(x) Landlord's income or corporate taxes. Notwithstanding the foregoing, if
during the Term, Landlord shall make a capital expenditure necessary or
desirable, in the opinion of the Landlord, to meet the requirements of
applicable laws.
For each calendar year of the Term (or any fraction thereof) if the projected
Operating Expenses shall exceed the actual Operating Expenses paid by Landlord
during the Base Year (an "Operating Expense Increase") then Tenant shall pay as
Additional Rent a sum equal to Tenant's Proportionate Share of Operating Expense
Increases multiplied by the Operating Expense Increase. At the commencement of
each calendar year during the Term, commencing January 1, 1996 and at all times
based upon an assumed ninety (90%) percent occupancy of the Building (whether or
not such is the case) Landlord shall project the Operating Expenses payable
during such year, and shall deliver Tenant notice thereof, together with
reasonable backup documentation to substantiate the amount of any increase, and
on the first (1st) day of the calendar month in question and on the first (1st)
day of each month thereafter during such year, Tenant shall pay to Landlord
one-twelfth (1/12) of the Additional Rent calculated pursuant to this Section
17(b). Within sixty (60) days of the end of each calendar year, Landlord shall
calculate the actual Operating Expenses paid during the immediately preceding
year, and shall notify Tenant of the same (and shall provide reasonable backup
documentation substantiating Landlord's calculations) and if the actual
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Operating Expenses were greater than the projected Operating Expenses, Tenant
shall pay to Landlord the balance within ten (10) days of receiving Landlord's
notice, and in the event that the actual Operating Expenses were less than the
projected Operating Expenses, Landlord shall credit the amount owed to Tenant
against the next installment or installments (as appropriate) of Additional Rent
payable by Tenant pursuant to this Section 17(b).
Every notice given by Landlord pursuant to this Section 17 shall be conclusive
and binding upon Tenant unless within thirty (30) days after the receipt of such
notice Tenant shall notify Landlord that Tenant disputes the correctness of the
notice, specifying the particular respects in which the notice is claimed to be
incorrect, and if such dispute shall not have been settled by agreement within
sixty (60) days, the dispute shall be submitted to arbitration in accordance
with the then existing rules of the American Arbitration Association. Pending
the determination of such dispute by agree-ment or arbitration as aforesaid,
Tenant shall pay Additional Rent in accordance with Landlord's notice, provided
that such payment shall be without prejudice to Tenant's right to dispute the
same.
Exhibit 5, attached hereto and made a part hereof, represents Landlord's
anticipated Base Year Operating Expenses. However, it is hereby agreed,
stipulated and understood between Landlord and Tenant that Landlord has provided
Tenant with such information by way of courtesy only, and that all calculations
to be made pursuant to this Section 17 shall be based upon the actual Operating
Expenses paid by Landlord during the Base Year, and that although the list of
items therein contained represents Landlord's good faith prediction of the
expenses payable with respect to the Property during the Base Year, the same may
not be exhaustive and shall not be construed as limiting those expenses which
fall within the definition of "Operating Expenses" pursuant to the provisions of
Section 17(a) above.
18. Real Estate Taxes.
For the purposes of this Section 18, the expression "Real Estate Taxes" shall
mean the aggregate of all taxes, assessments, charges, transit taxes, excises,
levies, and any other government charges of any kind or nature, special,
ordinary or extraordinary, presently existing or created hereafter, foreseen or
unforeseen, which in any calendar year period may be assessed, levied,
confirmed, im- posed upon or which may become a lien upon the Property, or which
may be assessed against Landlord in lieu of real estate taxes upon the Property,
and which become due and payable, for such calendar year.
If during the calendar year commencing January 1, 1996, and during each calendar
year of the Term thereafter (or any fraction thereof) the Real Estate Taxes paid
by Landlord shall exceed Real Estate Taxes paid during the Base Year, (a "Tax
Increase") Tenant agrees to pay Landlord, as Additional Rent, a sum equal to
Tenant's Proportionate Share of Tax Increases multiplied by the Tax Increase.
Landlord shall furnish to Tenant a copy of the Tax Assessor's report or reports
showing the assessment for the Property and the report or reports showing the
increased assessment therefor and all applicable tax bills, or such other
evidence coming from the Assessor's and/or Tax Collector's office which will
show the Real Estate Taxes involved or some other reasonable documentation of
the matter.
Any amount due to Landlord under the provisions of this Section 18 shall be
payable in equal monthly installments, commencing with the first (1st) day of
the month on which Landlord shall submit to Tenant a bill therefor.
Notwithstanding the foregoing, at such time as the Real Estate Taxes shall be
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ascertained for the then current calendar year, the installments then becoming
due hereunder shall be increased by an amount sufficient to compensate Landlord
for any previous deficiencies in installments and thereafter the monthly
installments shall be increased pro-rata based with respect to the Real Estate
Taxes for the then current calendar year so that one (1) months prior to the
date that the Real Estate Taxes Fall due, Tenant's Proportionate Share of Tax
Increases shall be paid in full. Notwithstanding the foregoing, if any Real
Estate Taxes are payable in full before the expiration of the calendar year in
question, whether in installments or by a lump sum payment, the monthly payments
by Tenant shall be in such amount as to ensure that Landlord shall have all sums
due from Tenant hereunder with respect to such Real Estate Taxes one (1) month
prior to the date such payment falls due.
Payments required pursuant to this Section 18 with respect to Real Estate Taxes
for a calendar year containing a period of time not included in the Term, shall
be pro-rated by Landlord, and Landlord's calculations shall be conclusively
binding upon Tenant.
Landlord reserves the right, through available legal remedies, to contest the
validity of any Real Estate Taxes or the amount of the assessed valuation of the
Property or any portions thereof for any calendar year. If Landlord shall
receive any tax refund, re- mission, or abatement with respect to Real Estate
Taxes for any calendar year for which Tenant has paid Tenant's Proportionate
Share of Tax Increases, Landlord shall credit Tenant pro- portionately, after
first deducting therefrom the share of Landlord's cost and expense in procuring
such refund, remission or abatement, as proportionately attributed to the
reimbursement due to Tenant. Tenant, at Tenant's sole cost and expense, with the
written consent of other tenants of the Building occupying at least sixty (60%)
percent of the total rentable square footage of the Building (including Demised
Premises), may undertake, by appropriate proceedings, to review any assessments
with respect to Real Estate Taxes for any year occurring after the Lease
Commencement Date. Any documents required to enable Tenant to reasonably
prosecute any such proceeding, shall be executed and delivered by Landlord upon
reasonable demand. If Landlord shall receive any refund for any year as a result
of any proceedings undertaken by Tenant pursuant to this Section 17(e), Landlord
shall reimburse Tenant for any reasonable expenses incurred by Tenant in
obtaining the same (including reasonable attorneys' fees) and a proportion of
the remaining sum (in accordance with Tenant's Proportionate Share of Tax
Increases) shall be paid to Tenant.
It is agreed and understand that nothing herein contained shall require Tenant
to pay municipal, state or federal income taxes assessed against Landlord, or
any municipal, state or federal capital levy, estate, succession, inheritance or
transfer taxes of Landlord, or corporation or franchise taxes imposed upon any
corporate owner of the fee simple title to the Property or any such part thereof
which includes the Demised Premises. Notwithstanding the foregoing, if Tenant
secures tax abatement through the provisions of the Enterprise Zone, or through
any other government tax abatement program such tax abatement will be fully
credited against Tenant's rent.
19. Electricity.
Except as hereinafter provided to the contrary, Landlord shall cause electricity
to be made available to the Demised Premises for the normal use of lighting and
for other items such as (but not limited to) lamps, typewriters and small office
equipment not requiring a separate circuit (small computers included), and not
for any other equipment or installations. As Additional Rent hereunder, Tenant
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shall pay monthly, commencing with the Lease Commencement Date, one-twelfth
(1/12) of Tenant's Proportionate Share of Landlord's Electrical Expense (as
defined in Section 1 above) of the total electrical service costs for the
Building and the Property (hereinafter "Landlord's Electrical Expense") as the
same shall be billed by Landlord, following receipt by Landlord of electricity
bills with respect to the Building, provided, that Tenant shall always pay an
amount which is no less than one-twelfth (1/12) of the product of (i) the
Initial Electric Charge set forth in Section 1 above and (ii) Tenant's Rentable
Square Footage, which amount shall be payable from the Lease Commencement Date
unless and until increased pursuant hereto. In the event Landlord permits any
tenant in the Building to separately meter its electricity usage, Tenant's
Proportionate Share of Landlord's Electrical Expense shall be adjusted to
reflect the ratio of (i) Tenant's Rentable Square Footage to (ii) the total
rentable square footage of the Building minus the rentable floor area of any
separately metered tenants. Any payments to Landlord or to the appropriate
utility company by separately metered tenants attributable to electricity
consumption in any part of the Building and/or the Property shall directly
reduce Landlord's Electrical Expense accordingly, on a dollar for dollar basis.
Landlord shall not be liable in any way to Tenant for any failure or defect in
the supply or character of electricity furnished to the Demised Premises by
reason of any requirement, act or omission of the public utility serving the
Property with electricity or for any other reason not within the control of
Landlord. Landlord shall replace all lighting tubes, lamps, bulbs and ballasts
required in the Demised Premises, at Tenant's expense.
All lighting, electrical and kitchen appliances and office equipment to be
initially installed in the Demised Premises shall be subject to Landlord's prior
written consent. Tenant's use of electricity in the Demised Premises shall not,
at any time, exceed the capacity of any of the electrical conductors and
equipment in or serving the Demised Premises. Tenant shall not, without
Landlord's prior consent in each instance, connect any additional or different
fixtures, appliances or equipment (other than lamps, typewriters, word
processors, copier machines, fax and telex machines and equipment not requiring
a separate circuit) to the Building's electricity distribution system or make
any alteration or addition to the electricity distribution system of the Demised
Premises. All additional risers or other equipment required in connection with
any alterations made to such electricity distribution systems on behalf of
Tenant shall be provided by Landlord and the cost thereof shall be paid by
Tenant upon demand by Landlord. If any additional fixtures, appliances or
equipment (other than lamps, typewriters, word processors, copier machines, fax
and telex machines and small office equipment not requiring a separate circuit)
shall be connected to the Building's electricity distribution system or any
alteration or addition to the electricity distribution system of the Demised
Premises shall be made by or on behalf of Tenant and if the Demised Premises are
not separately metered, forthwith upon the occurrence of any such events,
Tenant's Proportionate Share of Landlord's Electrical Expense shall be increased
by an amount which will reflect the additional electricity to be consumed by
Tenant. If Landlord and Tenant cannot agree thereon, the amount of such increase
shall be determined by a reputable, independent licensed electrical engineer, to
be selected by Landlord and reasonably acceptable to Tenant whose fees or
charges shall be included as Operating Expenses for the year in question. When
the amount of such increase is so determined, Tenant shall pay to Landlord, on
demand, the amount thereof retroactive to the date of the occurrence.
If Tenant requires the use of electricity during hours significantly greater
than the normal office hours referred to in Section 20 below, the same shall be
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supplied by Landlord at the published rate therefor from time to time in effect.
The bill for such extra electricity will be billed by Landlord to Tenant as
Additional Rent hereunder at $25.00 per hour.
If any tax is imposed upon Landlord with respect to electrical energy furnished
to Tenant by any federal, state or municipal authority, Tenant, unless
prohibited by law or by any governmental authority having jurisdiction
thereover, shall pay to Landlord, on demand, Tenant's pro rata share of any and
all such taxes.
It is agreed and understood, that at Landlord's election, or if requested in
writing by tenants leasing more than fifty (50%) percent of the total rentable
square footage of the Building, Landlord shall engage a qualified consultant to
survey electricity usage. Those tenants consuming more than their proportionate
share thereof shall pay an additional monthly charge to cover each such tenant's
excess consumption. Costs of the survey and the con- sultant shall be included
as the Operating Expenses for the year in question.
If Tenant believes that Tenant's electricity consumption is disproportionately
low, as compared to Tenant's Proportionate Share of Landlord's Electrical
Expense, Tenant shall have the right, at Tenant's sole cost and expense, to have
the usage of all tenants in the Building surveyed by an independent licensed
electrical engineer familiar with commercial office buildings in Stamford,
Connecticut, and if said survey shall show the same to be disproportionate by
more than ten (10%) percent, then Tenant's Proportionate Share of Landlord's
Electrical Expense shall be adjusted accordingly. Landlord may at any time
install a demand watt hour check meter to monitor Tenant's lighting and wall
outlet electricity consumption.
20. Services Provided by Landlord. For so long as Tenant is not in default under
any of the covenants of this Lease, Landlord shall provide: (a) full elevator
service; (b) central heating, ventilating and air conditioning ("HVAC") to the
Demised Premises when and as required on business days (holidays excepted) from
7 a.m. to 8 p.m. (weekdays) or 7 a.m. to 2:00 p.m. on Saturdays (and for more
extended hours or on Saturday afternoon, Sundays or holidays at Landlord's
published cost therefor from time to time in effect, which is $25.00 per hour at
the date hereof); (c) water for ordinary lavatory and pantry purposes, but if
Tenant uses or consumes water for any other purpose or otherwise consumes
unusual quantities, Landlord may install a water meter at Tenant's expense
(which Tenant shall thereafter maintain in good working order and repair at
Tenant's expense) to register such water consumption and Tenant shall pay
Landlord for water consumed as shown on said meter as Additional Rent as and
when bills are rendered; (d) cleaning service for the common areas of the
Building and the Demised Premises on business days (holidays excepted) as more
specifically set forth in Exhibit 3 attached hereto and made a part hereof,
provided that Tenant shall pay Landlord the cost of removal of any of Tenant's
refuse and rubbish in excess of normal amounts for the average tenant in the
Building and for special cleaning services or cleaning services in excess of
those set forth in said Exhibit 3; and (e) security systems and personnel for
the Building commensurate with that offered in comparable office buildings in
Stamford, Connecticut. Landlord reserves the right to stop providing heating,
elevators, plumbing, air conditioning, electric power, cleaning or any other
services, when necessary due to accident or for repairs, alterations,
replacements or improvements necessary or desirable in the reasonable judgment
of Landlord, for as long as may be reasonably required by reason thereof or by
reason of strikes, accidents, laws, orders or regulations or any other reason
beyond the control of Landlord, and in any such case, Tenant shall not be
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entitled to any abatement of Rent or any other offset whatsoever.
21. Signs. Tenant shall not place any sign upon or adjacent to the Demised
Premises, without the express written consent of Landlord. If Tenant shall cause
or permit any other sign to be attached to any part of the Building not within
the Demised Premises or which is visible from the exterior of the Demised
Premises without Landlord's written permission, Landlord shall have the right,
in addition to any other rights or remedies without notice or liability to
Tenant, to remove and dispose of any such sign or other object and to make any
repairs necessitated by any such removal, all at Tenant's sole cost and expense,
and Landlord's cost and expense in performing such removal and repair shall be
deemed Additional Rent hereunder, payable together with the next installment of
Fixed Rent due hereunder. Tenant, with Landlord's approval, which will not be
unreasonably withheld, may install one sign on the building's exterior.
22. Exculpation. Notwithstanding any other provision herein contained, Tenant
shall look solely to Landlord's interest in the Property for the satisfaction of
Tenant's remedies for the collection of a judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default or breach
by Landlord with respect to any of the terms, covenants and conditions of the
Lease to be observed and/or performed by Landlord, and no other property or
assets of the Landlord shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Tenant's remedies with respect to this Lease
or in connection with Tenant's occupancy or use of the Demised Premises.
23. No Representations by Landlord. Neither Landlord nor Landlord's agents have
made any representations or promise with respect to the physical condition of
the Building, the Property or the Demised Premises, except as hereby expressly
set forth and no rights, easements or licenses are acquired by Tenant by
implication or otherwise except as expressly set forth in the provisions of this
Lease. Tenant has inspected the Building and the Demised Premises and is
thoroughly acquainted with their condition, and agrees to take the same "as is"
except as the same may be modified by the completion of Landlord's Work.
24. Brokers. Tenant represents that there was no broker instrumental in
consummating this Lease other than the Brokers set forth in Section 1 above.
Tenant agrees to hold Landlord harmless from and against any and all claims or
demands for brokerage commissions arising out of or in connection with the
execution of this Lease based on conversations or negotiations with Tenant on
the part of any broker other than the Brokers, referred to in Article 1.
Landlord will pay a full commission to GRP Realty and Seaboard Property
Management, Inc. under separate agreement.
25. End of Term. Upon the expiration or other termination of the Term, Tenant
shall quit and surrender to Landlord the Demised Premises, broom clean, in good
order and condition, ordinary wear and tear excepted, and Tenant shall remove
all its property. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease. If the last day of
the Term or any Extension Period falls on Sunday, this Lease shall expire at
noon on the preceding Saturday unless it is a legal holiday in which case it
shall expire at noon on the preceding business day.
26. Default.
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The following shall be events of default under this Lease: (i) if Tenant
defaults in payment of Rent for a period of five (5) business days after any
payment or installment of Rent shall become due and payable; (ii) if Tenant
defaults in the performance of any other term, covenant, condition or obligation
of Tenant under this Lease and fails to cure such default within a period of
twenty (20) days after notice from Landlord specifying such default, or if such
default specified by Landlord is not curable within such twenty (20) days
period, if Tenant fails within three (3) days after such notice from Landlord to
commence to cure such default or thereafter fails diligently to pursue
completion of such cure during and after such twenty (20) day period; (iii) if
Tenant abandons or vacates any portion of the Demised Premises; (iv) if Tenant
makes any transfer, assignment, conveyance, sale, pledge or disposition of all
or a substantial portion of Tenant's property, or removes a substantial portion
of Tenant's Property from the Demised Premises other than by reason of any
assignment permitted under this Lease; (v) if Tenant's interest herein is sold
under execution; (vi) if Tenant shall file a voluntary petition pursuant to the
United States Bankruptcy Code, as amended from time to time (the "Bankruptcy
Code") or any successor thereto, or shall take the benefit of any insolvency act
or law or be dissolved, or if an involuntary petition is filed against Tenant
pursuant to the Bankruptcy Code or any successor thereto and said petition is
not dismissed within thirty (30) days after such filing; (vii) if a receiver
shall be appointed for Tenant's business or assets or any of them and the
appointment of such receiver is not vacated within thirty (30) days after such
appointment; or (viii) if Tenant shall make an assignment for the benefit of
Tenant's creditors.
Upon the occurrence of any such event of default, Landlord may without prejudice
to its other rights hereunder, or at law, do any one or more of the following:
(i) terminate this Lease and re-enter and take possession of the Demised
Premises; (ii) without such re-entry, recover possession of the Demised Premises
in the manner prescribed by any statute relating to summary process, and any
demand for the Rent, re-entry for condition broken, and any and all notices to
quit, or other formalities of any nature, to which Tenant may otherwise be
entitled, are hereby specifically waived; or (iii) declare immediately due and
payable all the remaining installments of the Rent and such amount, less the
fair rental value of the Demised Premises for the remainder of the Term
discounted at the rate of 8% per annum, which shall be construed as liquidated
damages and shall constitute a debt provable in bankruptcy or receivership. Upon
recovery of possession of the Demised Premises, Landlord may relet the Demised
Premises as Landlord may see fit without thereby avoiding or terminating this
Lease, and for the purpose of such reletting, Landlord is authorized to make
such repairs to the Demised Premises as may be necessary in the reasonable
opinion of Landlord, for the purpose of such reletting, and if a sufficient sum
is not realized from such reletting (after payment of all costs and expenses of
such repairs and the expense of such reletting and the collection of rent
accruing therefrom) each month to equal the Rent, then Tenant shall pay such
deficiency each month upon demand therefor.
After default by Tenant, the acceptance of the Rent or failure to re-enter by
Landlord shall not be held to be a waiver of Landlord's right to terminate this
Lease, and Landlord may re-enter and take possession of the Demised Premises as
if no Rent had been accepted after such default. All of the remedies given to
Landlord in this Lease following an event of default by Tenant are in addition
to all other rights or remedies which Landlord may be entitled under the laws of
the State of Connecticut. Any and all remedies given to Landlord hereunder or by
law by reason of Tenant's default hereunder shall be deemed cumulative and the
<PAGE>
election of one shall not be deemed a waiver of any other or further rights or
remedies.
Notwithstanding the foregoing, if Tenant shall default (i) in the payment of any
Rent (Fixed or Additional) and any such default shall continue for ten (10) days
and be repeated for a total of three times in any period of twelve (12) months
or (ii) in the performance of any other material covenant of this Lease for ten
(10) days after delivery to Tenant of a written notice of default and such
default shall be repeated more than three (3) times in any period of twelve (12)
months, then, notwithstanding that such defaults shall have been cured after the
notice period, any further similar default shall be deemed to be deliberate and
an immediate event of default and Landlord thereafter may serve a three day
notice of termination without affording Tenant an opportunity to cure such
further similar default and Landlord may, without notice, re-enter the Demised
Premises, by summary proceedings or otherwise, and remove Tenant's effects and
hold the same as if this Lease had not been made. If Tenant shall default
hereunder prior to the commencement of an Extension Period, Landlord may
promptly cancel and terminate Tenant's election to take such Extension Period
upon written notice to Tenant.
27. Effect of Re-entry. Following any such re-entry, expiration and/or
dispossession by summary proceedings or otherwise (a) the Rent shall become due
and be paid up to the time of such re-entry dispossess and/or expiration,
together with such expenses as Landlord may incur for legal expenses, attorneys'
fees, brokerage, and/or putting the Demised Premises in good order, or for
preparing the same for re-rental; (b) Landlord may re-let the Demised Premises
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may, at Landlord's option be less than or exceed the period
which would otherwise have constituted the balance of the Term and may grant
concessions or free rent or charge a higher rental than that in this Lease,
and/or (c) Tenant or the legal representatives of Tenant shall also pay to
Landlord, as liquidated damages, for the failure of Tenant to observe and
perform said Tenant's covenants herein contained, any deficiency between the
Fixed Rent and the net amount, if any, of the rents collected on account of any
new lease of leases of the Demised Premises for each month of the period which
would otherwise have constituted the balance of the Term. The failure or
inability of Landlord to re-let the Demised Premises or any xart or parts
thereof shall not release or affect Tenant's liability for damages. In computing
such liquidated damages there shall be added to such deficiency such expenses as
Landlord may incur in connection with re-letting, including legal expenses,
attorneys' fees, brokerage, advertising, and all expenses incurred in keeping
the Demised Premises in good order or preparing the same for reletting. Any such
liquidated damages shall be paid in monthly installments by Tenant on the days
specified in for payment of Rent in this Lease. Landlord, in putting the Demised
Premises in good order or pre- paring the same for re-rental may, at Landlord's
option, make such alterations, repairs, replacements, and/or decorations as
Landlord deems appropriate or necessary but the same shall not operate and be
construed to release Tenant from liability hereunder. Landlord shall in no event
be liable in any way whatsoever for failure to re-let the Demised Premises, so
long as Landlord uses reasonable efforts to do so, or in the event the Demised
Premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the Rent payable hereunder. In the event
of a breach or threatened breach by Tenant of any of the covenants or provisions
hereof, Landlord shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceeding and other
remedies were not herein provided for. Mention in this Lease of any particular
<PAGE>
remedy shall not preclude Landlord from any other remedy in law or in equity.
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Landlord obtaining possession of
the Demised Premises by reason of the violation by Tenant of any of the
covenants and conditions of this Lease.
28. Fees and Expenses.
Regardless of any other right or remedy of Landlord following an event of
default, if Tenant shall fail to perform a non-monetary covenant hereunder,
Landlord may immediately, or at any time thereafter and without notice, perform
the same for the account of Tenant, and if Landlord makes any expenditures or
incurs any obligations for the payment of money, in connection therewith
including (but not limited to) reasonable attorneys' fees in instituting,
prosecuting or defending any action or proceeding such sums paid or obligations
incurred, together with interest and costs shall be deemed to be Additional Rent
hereunder and shall be paid by Tenant to Landlord within five (5) business days
of rendition of any bill or statement to Tenant thereof.
If any payment of Rent (Fixed or Additional) is in default, Tenant shall pay to
Landlord, as Additional Rent, an amount equal to five (5%) percent of the amount
in default as compensation for Landlord's extra administrative costs in
investigating and collecting such late Rent payment. Further, if payment of any
Rent is not made within ten (10) days after the same shall become due, Tenant
shall pay as Additional Rent hereunder, interest on the sum from the date it
became due until it is paid, at an annual rate which shall be four (4%) percent
in excess of the then current "Prime Rate", as announced in the Wall Street
Journal, from time to time, provided, however, in no event shall such interest
rate be in excess of the highest rate of interest which from time to time shall
be permitted under the laws of the State of Connecticut to be charged on late
payments of sums of money due pursuant to the terms of a lease. All charges
payable pursuant to this Section 29(b) shall be payable on demand and without
prejudice to any of Landlord's other rights and remedies hereunder. No failure
by Landlord to insist upon the strict performance by Tenant of Tenant's
obligations under this Section 29(b) shall constitute a waiver by Landlord of
Landlord's right to enforce the same in the future and the provisions of this
Section 29(b) shall not be construed as extending any applicable cure period.
29. Bankruptcy and Insolvency. If at any time during the Term there shall be
filed by or against Tenant in any court pursuant to any statute either of the
United States or of any state, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant's property, and within ninety (90) days thereof, Tenant fails
to secure a stay or dismissal thereof, or if Tenant makes an assignment for the
benefit of creditors or petitions for or enters into an arrangement, this Lease,
at the option of Landlord, exercised within a reasonable time after notice of
the happening of any or more of such events, may be cancelled and terminated
upon ten (10) day's advance written notice to the Tenant of such cancellation,
and thereafter, neither Tenant nor any person claiming through or under Tenant
by virtue of any statute or any order of any court, shall be entitled to
possession or to remain in possession of the Demised Premises but shall
forthwith quit and surrender the same, and Landlord, in addition to the other
rights and remedies Landlord may have by virtue of any other provision in this
Lease contained or by virtue of any statute or rule of law, may retain as
liquidated damages, the Security Deposit and any Rent received from Tenant or
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from others on behalf of Tenant, to the extent enforceable at law, but not to
the extent that the same is greater than the damages actually suffered by
Landlord. It is stipulated, agreed and understood that in the event of the
termination of this Lease pursuant to this Section 29, Landlord shall forthwith
be entitled to recover from Tenant as liquidated damages an amount equal to the
difference between the Fixed Rent reserved hereunder for the unexpired portion
of the Term and the fair and reasonable rental value of the Demised Premises for
the same period. In the computation of such damages, the difference between any
installment of Fixed Rent becoming due hereunder after the date of termination
and the fair and reasonable rental value of the Demised Premises for the period
for which such installment was payable shall be discounted to the date of
termination at the rate per annum then published in the Wall Street Journal as
the "Prime Rate". If the Demised Premises or any part thereof shall be relet by
the Landlord for the unexpired portion of the Term (or any part thereof) before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such re-letting shall be deemed to be
the fair and reasonable rental value for that part of the Demised Premises so
re-let during the term of re-letting. Nothing herein contained shall limit or
prejudice the right of the Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when (and governing the
proceedings in which) such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
30. Holding Over.
If Tenant retains possession of the Demised Premises or any part thereof after
the expiration of the Term, Tenant's occupancy of the Demised Premises shall be
as a tenant at will, terminable at any time by Landlord. Tenant shall pay
Landlord for Tenant's use and occupancy of the Demised Premises during such
period a Rent equal to two hundred (200%) percent of the total amount of the
Rent payable hereunder for the month immediately preceding the ex- piration of
the Term, and, in addition thereto, shall pay Landlord for all damages sustained
by reason of Tenant's retention of possession. The provisions of this Section 30
shall not exclude Landlord's rights of re-entry or any other right hereunder or
at law or in equity.
31. Waiver of Trial by Jury. Landlord and Tenant hereby waive trial by jury in
any action proceeding or counterclaim brought by either Landlord or Tenant
against the other (except for personal injury or property damage) with respect
to any matters whatsoever arising out of or in any way connected with this
Lease, including the relationship of Landlord and Tenant, or Tenant's use of or
occupancy of the Demised Premises, or any emergency statutory or any other
statutory remedy.
32. No Waiver. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this Lease or
of any of the Rules or Regulations herein set forth or hereafter adopted, shall
not prevent a subsequent act which would have originally constituted a violation
from having all the force and effect of an original violation. The receipt by
Landlord of any portion of the Rent with knowledge of the breach of any covenant
of this Lease shall not be deemed a waiver of such breach and no provision of
this Lease shall be deemed to have been waived by Landlord unless such waiver be
in writing signed by the Landlord. No payment by Tenant or receipt by Landlord
of a lesser amount than the Rent herein reserved shall be deemed to be other
than a partial payment on account of the same and any endorsement or statement
on any check or any letter accompanying any check for less than the full amount
<PAGE>
of the Rent shall not in any event be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of the Rent or pursue any other remedy provided for in
this Lease. No act or thing done by Landlord or Landlord's agents during the
Term shall be deemed an acceptance of a surrender of the Demised Premises and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employees of Landlord or of Landlord's agent shall have any power
to accept the keys of the Demised Premises prior to the termination of this
Lease and the delivery of keys to any such agent or employee shall not operate
as a termination of this Lease or a surrender of the Demised Premises.
33. Bills and Notices. Unless as otherwise provided in this Lease, a bill,
statement, notice or communication which Landlord may desire or be required to
give to Tenant, shall be deemed sufficiently given or rendered if, in writing,
delivered to Tenant personally or sent by registered or certified mail addressed
to Tenant at the Demised Premises or at the last known residence address or
business address of Tenant or left at any of said locations addressed to Tenant
and the time of the rendition of such bill or statement and of the giving of
such notice or communication shall be deemed to be the time when the same is so
delivered, mailed, or left. Any notice by Tenant to Landlord must be served by
registered or certified mail addressed to Landlord at the address first
hereinabove given or at such other address as Landlord shall designate by
written notice.
34. Access to Demised Premises. Landlord or Landlord's agents shall have the
right (but shall not be obligated, except as otherwise set forth) to enter the
Demised Premises at any time in the case of an emergency, and, at other
reasonable times, to examine the same and to make such repairs, replacements and
improvements to the Demised Premises as Landlord may deem necessary and
reasonably desirable or to any other portion of the Building or as Landlord may
elect to perform following Tenant's failure to make repairs or perform any work
which Tenant is obligated to perform under this Lease, or for the purpose of
complying with laws, regulations and other directions of governmental
authorities. Tenant shall permit Landlord to use and maintain and replace pipes
and conduits in and through the walls and above the ceilings of the Demised
Premises and to erect new pipes and conduits therein. Landlord may, during the
progress of any work in the Demised Premises, take all necessary materials and
equipment into same without such action constituting an eviction nor shall the
Tenant be entitled to any abatement of Fixed Rent while such work is in progress
nor to any damages by reason of loss or interruption of business or otherwise.
Throughout the Term, Landlord shall have the right to enter the Demised Premises
at reasonable hours for the purpose of showing the same to prospective
purchasers or mortgagees of the Building or the Property, and during the last
six months of the Term, for the purpose of showing the same to prospective
purchaser. If Tenant is not present to open and permit an entry into the Demised
Premises in an emergency, Landlord or Landlord's agents may enter by master key
or forcibly and, provided reasonable care is exercised to safeguard Tenant's
property, such entry shall not render Landlord or its agents liable therefor,
nor in any event shall the obligations of Tenant hereunder be affected, except
for damage or injury to property caused by Landlord's (or Landlord's servants',
agents' and employees') negligent, illegal or wilfully tortuous acts, taking
into account all of the circumstances. If during the last month of the Term,
Tenant shall have removed all or substantially all of Tenant's property there-
from, Landlord may immediately enter the Demised Premises and alter, renovate
and redecorate without limitation or abatement of Fixed Rent, or liability to
Tenant for any compensation and such act shall have no other effect on this
Lease or Tenant's obligations hereunder. Landlord shall have the right at any
<PAGE>
time, without the same constituting an eviction and without incurring liability
to Tenant, to change the arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets, or other
public part or parts of the Building and to change the name, number or
designation by which the Building may be known.
35. Captions. The Captions contained in this Lease are inserted only as a matter
of convenience and for reference and in no way define, limit or describe the
scope of this Lease nor the intent of any provisions herein contained.
36. Restrictions. The words "re-enter" and "re-entry" as used in this Lease are
not restricted to their technical meaning. The term "business days" as used in
this Lease shall exclude Saturdays, Sundays and all days observed by the State
or Federal Government as legal holidays and those designated as holidays by the
union or union to which Landlord's employees (from time to time) may belong.
37. Rules and Regulations. Tenant and Tenant's servants, employees, agents,
visitors and licensees shall observe and comply with the Rules and Regulations,
with respect to the Building as the same are attached hereto as Exhibit 4 and
made a part hereof, and such other and further reasonable rules and regulations
as Landlord or Landlord's agents may from time to time adopt and deliver notice
of to Tenant, provided the same do not unreasonably interfere with the
Represented Use or result in a material increase in Operating Expenses. Any
right to dispute the reasonableness of any ad- ditional rule or regulation upon
Tenant's part shall be deemed waived unless the same shall be asserted by
service of a notice, in writing upon Landlord within ten (10) days after
Landlord's notice thereof. Landlord shall not be liable to Tenant for violation
of the Rules and Regulations by any other t or by such tenant's servants,
employees, agents, visitors or licensees.
38. Quiet Enjoyment. Landlord covenants and agrees that upon Tenant promptly
paying the Rent and observing and performing all the terms, covenants and
conditions on Tenant's part to be observed and performed, Tenant may peaceably
and quietly have, hold and enjoy the Demised Premises for the Term, including
appurtenances thereto such as common areas and the Parking Spaces, subject
nevertheless, to the terms, covenants and conditions of this Lease and to any
ground lease, underlying leases and mortgages. Landlord covenants that Landlord
is the owner of the Demised Premises in fee simple absolute and has authority to
lease the Demised Premises to Tenant under the terms of this Lease and that so
long as Tenant shall pay the Rent and shall keep, observe and perform all of the
other covenants of this Lease, Tenant shall and may peaceably and quietly have,
hold and enjoy the Demised Premises during the Term, free of interference from
Landlord or those claiming through or under Landlord, subject nonetheless to the
terms and conditions of this Lease. This covenant shall be construed as running
with the Demised Premises to and against subsequent owners and successors in
interest, and is not, nor shall it operate or be construed as, a personal
covenant of Landlord, except to the extent of Landlord's interest in the Demised
Premises and only so long as such interest shall continue, and thereafter this
covenant shall be binding only upon such subsequent owners and successors in
interest, to the extent of their respective interests, as and when they shall
acquire the same, and only so long as they shall retain such interest.
<PAGE>
39. Successors and Assigns. Without prejudice to Tenant's obligations pursuant
to the provisions of Section 7 above, this Lease shall be binding on the
parties, their heirs, administrators, executors, successors and assigns.
40. Security Deposit. Tenant has deposited with Landlord an amount equal to two
months of Fixed Rent as security for the faithful performance and observance by
Tenant of the terms, provisions and conditions of this Lease (the 'Security
Deposit"). It is agreed that in the event Tenant defaults with respect to any of
the terms, provisions and conditions of this Lease, including (but without
limitation) the payment of Rent, Landlord may, if the default is not cured
within a period of thirty (30) days after service of a written notice of default
on Tenant, use, apply or retain the whole or any part of the Security Deposit to
the extent required for the payment of same or any other sum as to which Tenant
is in default or for any sum which Landlord may expend or may be required to
expend by reason of Tenant's default with respect to any of the terms, covenants
and conditions of this Lease, including, but not limited to, any damages or
deficiency in re-letting of the Demised Premises, whether such damages or
deficiency accrued before or after summary proceedings or other reentry by
Landlord. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants, and conditions of this Lease, the Security
Deposit shall be returned to Tenant at the expiration of the Term, following
surrender of possession of the Demised Premises to Landlord. In the event of a
sale of the Property or the Building or the leasing of the Building, Landlord
shall have the right to transfer the Security Deposit to the purchaser or lessee
and Landlord shall thereupon be released by Tenant from all liability for the
return of the Security Deposit and Tenant agrees to look solely to the new
landlord solely for the return of the Security Deposit, and it is agreed that
the provisions hereof shall apply to every transfer or assignment made of the
Security Deposit to a new landlord. Tenant further covenants that Tenant will
not assign or encumber the Security Deposit and that Landlord shall not be bound
by any such assignment or encumbrance.
41. Consent. Wherever in this Lease Landlord's approval or consent is required,
such approval or consent shall not unreasonably be withheld or delayed.
42. Mortgagee.
The effectiveness of this Lease is subject to the written approval of the
current mortgagee of the Property (the "Mortgagee") within fifteen (15) days
from the date hereof. Said approval shall be diligently and promptly applied for
and processed by Landlord. Tenant shall make no contact with Mortgagee for any
reason whatsoever without Landlord's prior written consent or as may be
otherwise specifically provided to the contrary herein. If Landlord notifies
Tenant in writing within twenty (20) days after the date hereof that said
approval has been withheld, then this Lease shall terminate and be of no further
force and effect. Landlord shall have no liability or responsibility to Tenant
whatsoever if this Lease is not approved by Mortgagee, other than to promptly
return all pre-paid Rent and the Security Deposit.
Tenant agrees to deliver by registered mail to Mortgagee or any future
mortgagees and/or trust deed holders, a copy of any notice of default served
upon the Landlord, provided that prior to such notice Tenant has been notified
in writing of Mortgagee's address and the addresses of such future mortgagees
and/or trust deed holders. Tenant further agrees that if Landlord shall have
failed to cure such default within the time provided for in this Lease, then
Mortgagee or such future mortgagees and/or trust deed holders shall have an
additional sixty (60) days within which to cure such default or, if such default
<PAGE>
cannot be cured within that time, then such additional time as may be necessary
to cure such default shall be granted if within such sixty (60) days Mortgagee
or such future mortgagee and/or trust deed holder has commenced and is
diligently pursuing the remedies necessary to cure such default (including,
without limitation, commencement of foreclosure proceedings if necessary to
effect such cure) in which event this Lease shall not be terminated while such
remedies are being so diligently pursued. Notice of the termination of this
Lease pursuant to the terms of this Section 43 by Tenant shall not be effective
unless and until said notice is duly delivered and any such interested party
shall fail to cure the default upon which such termination notice is based.
Tenant hereby agrees not to look to any successor in title to the Property (or
mortgagee in possession) for accountability for the Security Deposit, unless the
same has actually been received by such successor in title or mortgagee in
possession.
In the event that Mortgagee or any future mortgagee shall foreclose its
mortgage, or exercise any of the other remedies provided for by law or contained
in such mortgage resulting in the transfer of fee title to the Property (or any
part thereof containing the Demised Premises) then Tenant will, upon request by
any person or entity succeeding to the interest of Mortgagor as a result of such
enforcement, automatically become the tenant of such successor in interest,
without any change in the terms, covenants and conditions of this Lease,
provided, however, that such successor in interest shall not be bound by (i) any
payment of Rent (Fixed or Additional) for more than one (1) month in advance,
other than the Security Deposit if such successor in title shall obtain the
same, or (ii) any amendment or modification of this Lease made without the
consent of Mortgagee or any such successor in interest. Upon request by any such
successor in interest, Tenant shall execute and deliver an instrument or
instruments confirming such attornment, provided that Tenant's failure to do so
shall not affect the provisions of this Section 43(c) and if Tenant shall fail
to execute any such instrument within ten (10) days of request therefor, Tenant
hereby irrevocably constitutes and appoints Landlord and/or any such successor
in interest as attorney-in-fact, coupled with an interest, to execute and
deliver the same for and on behalf of Tenant.
43. Transfer of Landlord's Interest.
The term "Landlord" as used in this Lease, so far as covenants or agreements on
the part of Landlord are concerned, shall be limited to mean and include only
the owner or owners of Landlord's interest in this Lease. Upon any transfer or
transfers of such interest, Landlord herein named (and in case of any subsequent
transfer, the then transferor) shall thereafter be relieved of all liability for
the performance of any covenants or agreements on the part of Landlord contained
in this Lease.
44. Notices. All notices, demands or other communications ("notices") permitted
or required to be given hereunder shall be in writing and, if mailed postage
prepaid by United States certified or registered mail, return receipt requested,
shall be deemed given on the sooner of: (a) three (3) days after the date of
mailing thereof; or (b) the date of actual receipt. All notices not so mailed
shall be deemed given on the date of actual receipt. Notices shall be addressed
as follows: (a) if to Landlord, to: John DiMenna, Seaboard Property Management,
Inc., Two Stamford Landing, Stamford, CT 06902 and (b) if to Tenant, to Robert
Ohmes, Marine Management Systems, Inc., 470 West Avenue, Stamford, CT 06902.
Landlord and Tenant may from time to time by notice to the other designate
another place or other places for the receipt of future notices.
<PAGE>
45. Miscellaneous.
In any action or proceeding which Landlord or Tenant may be required to
prosecute to enforce its respective rights hereunder, the unsuccessful party in
such action or proceeding agrees to pay all costs incurred by the prevailing
party therein, including reasonable attorneys' fees. If Landlord commences any
summary proceeding or an action for non-payment of the Rent or any portion
thereof, Tenant shall not interpose any non-mandatory counterclaim of any nature
or description in any such proceedings or action.
If any clause or provision of this Lease is or becomes illegal or unenforceable
because of present or future laws or any rule or regulation of any governmental
body or entity, the intention of the parties hereto is that the remaining parts
of this Lease shall not be affected thereby unless such clause or provision is,
in the reasonable determination of Landlord, essential and material to its
rights hereunder, in which event Landlord shall have the right to terminate this
Lease by notice to Tenant.
This Lease shall be deemed to have been made in and shall be construed in
accordance with the laws of the State of Connecticut.
This Lease sets forth all the covenants, promises, agreements, conditions and
understandings between Landlord and Tenant con- cerning the Demised Premises,
the Building and the Property, and there are no covenants, promises, agreements,
conditions or understandings, either oral or written, between them other than as
are herein set forth. Except as herein otherwise provided, no subsequent
alteration, amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed by them.
At the request of either party, Landlord and Tenant shall execute, acknowledge
and deliver a memorandum with respect to this Lease sufficient for recording. In
no event shall this Lease be recorded and if Tenant records this Lease in
violation of the terms hereof, in addition to any other remedy available to
Landlord upon Tenant's default, Landlord shall have the option to terminate this
Lease by recording a notice to such effect. If a memorandum of this Lease is
recorded, Tenant shall, on the expiration of the Term, execute, acknowledge and
deliver to Landlord an instrument in recordable form releasing and quitclaiming
to Landlord all right, title and interest of Tenant in and to the Demised
Premises by reason of this Lease or otherwise.
Tenant shall have no claim, and hereby waives the right to any claim, against
Landlord for money damages by reason of any refusal, withholding or delaying by
Landlord of any consent, approval or statement of satisfaction, and in the event
of such refusal, withholding or delay. Tenant's only remedies therefor shall be
an action for specific performance, injunction or declaratory judgment to
enforce any such requirement.
If any provision contained in an exhibit or addendum hereto is inconsistent with
any other provision of this Lease, the provision contained in such exhibit or
addendum shall control, unless otherwise provided herein or in such exhibit or
addendum.
The use of the neuter singular pronoun to refer to either party shall be deemed
a proper reference even though it may be an individual, partnership, corporation
or a group of two or more individuals or corporations. The necessary grammatical
changes required to make the provisions of this Lease apply in the plural number
where there is more than one Landlord or Tenant and to either corporations,
<PAGE>
associations, partnerships or individuals, males or females, shall in all
instances be assumed as though in each case fully expressed.
This Lease has been executed in several counterparts, all of which constitute
one and the same instrument.
As used in this Lease, any list of one or more items preceded by the word
"including" shall not be deemed limited to the stated items but shall be deemed
without limitation.
If more than one person or entity executes this Lease as Tenant, each such
person or entity shall be jointly and severally liable for observing and
performing each of the terms, covenants, conditions and provisions hereof to be
observed or performed by Tenant.
Tenant shall assume and pay to Landlord at the time of paying the Rent or any
portion thereof any excise, sales, use, gross receipts or other taxes (other
than a net income or excess profits tax) which may be imposed on or measured by
the Rent or portion thereof or as may be imposed on or on account of the
Landlord and Tenant relationship evidenced and provided for hereby and which
Landlord may be required to pay or collect under any law now in effect or
hereafter enacted.
46. Acceptance. The offer represented in this Lease is not accepted by Landlord
until all counterparts of this Lease have been fully executed and delivered by
both Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease the day and year first above written.
Landlord:
SEABOARD STAMFORD INVESTORS ASSOCIATES, LLC
Seaboard Properties, Incorporated
Managing Member
By: /s/ John DiMenna, Jr.
----------------------------
Its President
Tenant:
MARINE MANAGEMENT SYSTEMS, INC.
By: /s/ Eugene D. Story
----------------------------
Its:President
<PAGE>
RIDER TO EXHIBIT 2
<PAGE>
EXHIBIT 3
CLEANING SPECIFICATIONS
GENERAL CLEANING NIGHT SERVICES
NIGHTLY
Dust sweep flooring with specially treated cloths to ensure dust-free
floors.
Wash granite flooring in Building entrance foyers.
Carpet sweep carpeted areas and rugs four nights each week and vacuum once
each week, moving light furniture other than desks, file cabinets, etc.
Clean and vacuum elevator cabs nightly.
Sweep private stairways; wash as necessary and/or vacuum private
stairways.
Empty and clean wastepaper baskets, ash trays, receptacles, etc., damp
dust as necessary.
Clean cigarette urns and replace sand or water as necessary.
Remove wastepaper and waste materials to a designated area in the
premises, using special janitor carriages.
Dust and wipe clean furniture, fixtures, desk equipment, telephones and
window sills with specially treated cloths.
Dust baseboards, chair rails, trim, louvers, pictures, charts, doors, etc.
within reach
Wash drinking fountains and coolers; polish as necessary.
OFFICE AREAS - PERIODIC CLEANING
Remove fingermarks from metal partitions and other similar surfaces, as
necessary.
OFFICE AREAS - HIGH DUSTING
Do high dusting every three months which includes the following:
- Dust pictures, frames, charts, graphs and similar wall hangings
not reached in nightly cleaning.
- Dust exterior of lighting fixtures
- Dust overhead pipes, sprinklers, etc.
- Dust venetian blinds.
- Dust window frames.
- Dust vertical surfaces such as partitions, ventilating louvers,
etc. not reached in nightly cleaning.
LAVATORIES - NIGHTLY
<PAGE>
Sweep and wash flooring with approved germicidal detergent solution, using
spray-tank method.
Wash and polish mirrors, powder shelves, bright work, etc., including
flushometers, piping and toilet seat hinges.
Wash both sides of toilet seats, wash basins, bowls and urinals with
approved germicidal detergent solution.
Dust partitions, tile walls, dispensers, doors and receptacles.
Remove wastepaper and refuse to a designated area in the premises, using
special janitor carriages.
Fill toilet tissue, soap and towel dispensers with supplies.
WINDOWS
Interior and exterior windows to be washed annually.
Tenants requiring services in excess of those described above shall request the
same through Landlord, at such tenant's expense.
<PAGE>
EXHIBIT 4
RULES AND REGULATIONS
1. The right of all tenants with respect to use of entrances, corridors and
elevators of the Building are limited to ingress to and egress from each
tenant's premises for tenants and their respective employees, licensees
and invitees and for no other purpose. No tenant shall invite to such
tenant's premises or permit the visit of persons in such numbers or under
such conditions as to interfere with the use and enjoyment of any of the
plazas, entrances, corridors, escalators, elevators and other facilities
of the Building by other tenants. Fire exits and stairways are for
emergency use only and they shall not be used for any other purposes by
any tenant, the employees, licensees or invitees. No tenant shall encumber
or obstruct or permit the encumbrance or obstruction of any of the
sidewalks, plazas, entrances, corridors, elevators, fire exits or
stairways of the Building. Landlord reserves the right to control and
operate the public portions of the Building and the public facilities, as
well as facilities furnished for the common use of all tenants, in such
manner as Landlord deems best for the benefit of tenants generally.
2. The cost of repairing any damage to the public portions of the Building or
the public facilities or to any facilities used in common with other
tenants, caused by a tenant or the employees, licensees or invitees of
such tenant, shall be paid by such tenant.
3. Landlord may refuse admission to the Building, outside of ordinary
business hours to any person not known to the watchman in charge or not
having a pass issued by Landlord or not properly identified and may
require all persons admitted to or leaving the Building outside of
ordinary business hours to register. All employees, agents and visitors of
each tenant shall be permitted to enter and leave the Building whenever
appropriate arrangements have been previously made between Landlord and
such tenant ith respect thereto. Each tenant shall be responsible for all
persons for whom he requests such persons. Any person whose presence in
the Building at any time shall, in the judgment of Landlord, be
prejudicial to the safety, character, reputation and interest of the
Building or its tenants may be denied access to the Building or may be
ejected therefrom. In case of invasion riot, public excitement or other
commotion, Landlord may prevent all access to the Building during the
continuance of the same by closing the doors or otherwise, for the safety
of the tenants and protection of property in the Building. Landlord may
require any person leaving the building with any package or other object
to exhibit a pass from the tenant occupying the premises from which the or
object is being removed but the establishment and enforcement of such
requirement shall not impose any responsibility on Landlord for the
protection of any tenant against the removal of property from the premises
of such tenant. Landlord shall, in no way, be liable to any tenant for
damages or loss arising from the admission, exclusion or ejection of any
person to or from such tenant's premises or the Building under the
provisions of this rule.
4. No tenant shall obtain or accept for use in its premises floor polishing,
lighting maintenance, cleaning or other similar services from any persons
not authorized by Landlord, which authorization will not be unreasonably
<PAGE>
withheld. Such services shall be furnished only at such hours, in such
places within such tenant's premises and under such regulations as may be
fixed by Landlord.
5. No awnings or other projections over or around the windows shall be
installed by any tenant and only such window blinds as are supplied or
permitted by Landlord shall be used in any tenant's premises.
6. All entrance doors in each tenant's premises shall be left locked when the
tenant's premises are not in use. Entrance doors shall not be left open at
any time. All windows in each tenant's premises shall be kept closed at
all times.
7. No noise, including the playing of any musical instruments, radio or
television which, in the judgment of Landlord, might disturb other tenants
in the Building shall be made or permitted by any tenant except as
expressly approved by Landlord. Nothing shall be done or permitted in any
Tenant's premises and nothing shall be brought into or kept in any
tenant's premises, which would impair or interfere with any of the
Building services or the proper and economic heating, cleaning or other
servicing of the Building or any premises therein, or the use or enjoyment
by any other tenant of any other premises, nor shall there be installed by
any tenant any ventilating, air conditioning, electrical or other
equipment of any kind, which in the sole judgment of Landlord might cause
any such impairment or interference. No dangerous, inflammable,
combustible or explosive object or material shall be brought into the
Building by any tenant or with the permission of any tenant.
8. No acids, vapors or other materials shall be discharged or permitted to be
discharged into the waste lines, vents or flues of the Building which may
damage them. The water and wash closets and other plumbing fixtures in or
serving any tenant's premises shall not be used for any purpose other than
the purpose for which they were designed or constructed and no sweeping,
rubbish, rags, acids or other foreign substances shall be deposited
therein. All damage resulting from any misuse of the fixtures shall be
borne by the tenant who, or whose servants, employees, agents, visitors or
licensees, shall have caused the same.
9. No signs, advertisements, notices or other lettering shall be exhibited,
inscribed, painted or affixed by any tenant on any part of the outside of
the Building or the premises occupied by such tenant, without the prior
consent of the Landlord. In the event of violation of the foregoing by any
tenant, the Landlord may remove the same without any liability and may
charge the expense incurred by such removal to the tenant or tenants
violating this rule. Interior signs and lettering on doors and elevators
shall be inscribed, painted or affixed for each tenant by Landlord at the
expense of such tenant and shall be of a size, color and style acceptable
to Landlord. Landlord shall have the right to prohibit any advertising by
any tenant which impairs the reputation of the Building or its
desirability as a building for offices and upon written notice from the
Landlord, the tenant in question shall refrain from or discontinue such
advertising.
10. No additional locks or bolts of any kind shall be placed upon any of the
entrance doors or windows in any tenant's premises and no lock on any
entrance door therein shall be changed or altered in any respect. The
<PAGE>
foregoing provision shall not apply to locks or bolts on doors to closets,
storage space or cabinets contained in the premises. Duplicate keys for a
tenant's premises and toilet rooms shall be procured only from a tenant's
Landlord, which may make a reasonable charge therefor. Upon the
termination of a tenant's lease, all keys to such tenant's premises and
toilet rooms shall be delivered to the Landlord.
11. No tenant shall mark, paint, drill into or in any deface any part of the
Building or the premises leased to such tenant. No boring, cutting or
stringing of wires shall be permitted, except with prior written consent
of Landlord, and as Landlord may direct. No tenant shall install any
resilient tile or similar floor covering in the premises leased to such
tenant except in a manner approved by Landlord.
12. No tenant shall use or occupy or permit any portion of the premises leased
to such tenant to be used or occupied as an office for a public
stenographer or typist or as a barber or manicure shop or as an employment
bureau. No tenant or occupant shall engage or pay any employees in the
Building, except those actually working for such tenant or occupant in the
Building, nor advertise for laborers giving an address at the Building.
13. Subject to Section 5 of the Lease, no premises shall be used or permitted
to be used at any time, as a store for the sale of goods, wares or
merchandise of any kind or as a restaurant, shop, booth, bootblack or
other stand, or for the conduct of any business or occupation which
predominantly involves direct patronage of the general public in the
premises leased to such tenant or for manufacturing or for other similar
purpose.
14. The requirements of tenants will be attended to only upon application at
the office of the Building. No employee of Landlord shall perform any work
or do anything outside of the regular duties of such employee, unless
under special instructions from the office of Landlord
15. No employees of any tenant shall loiter around the hallways, stairways,
elevators, front, roof or any other part of the Building used in common by
the occupants thereof.
16. If the premises leased to any tenant shall become infested with vermin
because of tenant's use thereof, such tenant, at its expense, shall
promptly cause its premises to be exterminated, to the satisfaction of
Landlord and shall employ such exterminators therefor as shall be approved
by Landlord.
17. Canvassing, soliciting and pedaling are prohibited and no tenant shall
suffer or permit the same on or about any portion of the Building.
18. Landlord will provide one stairwell for ingress and egress at all times.
<PAGE>
EXHIBIT 5
ANTICIPATED BASE YEAR OPERATING EXPENSES
The amounts set forth below represent the amounts which Landlord has budgeted
for the 1996 calendar year and are provided for illustrative purposes only.
OPERATING EXPENSES AMOUNT
- ------------------------------------------------
Insurance $ 10,000
Repairs & Maintenance $ 80,000
Water & Sewer $ 3,000
On Site Superintendent $ 12,500
Security $ 27,000
Management Fees $ 31,800
Other $ 5,000
--------
TOTAL OPERATING EXPENSES $169,300
REAL ESTATE TAXES $ 80,000
<PAGE>
EXHIBIT 6
EXTENSION PERIODS
1. Provided that tenant is not in default under the Lease, Tenant shall have the
option, exercisable by written notice from Tenant to Landlord given not less
than four (4) months prior to the end of the Term (or the then existing
Extension Period, as appropriate), to extend this Lease for one (1) additional
five year period on all of the terms and conditions of this Lease (an "Extension
Period"), except as with respect to Fixed Rent, which shall be determined in
accordance with Paragraph 2 below and that this option shall not apply during
the Extension Period.
2. The Fixed Rent payable during each Extension Period shall be ninety percent
(90%) of the then fair market rental for the Demised Premises, as shall be
agreed between Landlord and Tenant (the "Fair Market Rent"). In the event that
Landlord and Tenant are unable to agree upon the Fair Market Rent within one (1)
month of Tenant's notice to extend this Lease, then within ten (10) days after
the expiration of such period, each party, shall at its own cost and expense,
appoint a real estate appraiser who is a member of the American Institute of
Appraisers with at least five (5) years full time commercial appraisal
experience in the area in which the Premises are located, to appraise and set
the Fair Market Rent. If a party does not appoint an appraiser witin ten (10)
days after the other party has given due notice of the name of its appraiser,
the single appraiser appointed shall be the sole appraiser and shall set the
Fair Market Rent. If both appraisers are duly appointed by Landlord and Tenant
pursuant to the provisions hereof, they shall meet promptly and attempt to set
the Fair Market Rent. If they are unable to agree within thirty (30) days after
the second appraiser has been appointed, they shall jointly attempt to elect a
third appraiser meeting the qualifications hereinabove set out, within ten (10)
days thereafter. If they are unable to agree on a third appraiser, then either
Landlord or Tenant may apply to the presiding judge of the Superior Court,
Judicial County of Fairfield, for the selcetion of a third appraiser who meets
the qualificaitons stated herein. Landlord and Tenant shall each bear on-half of
the cost of appointment of the third appraiser and of paying the third
appraiser's fee. The third appraiser, howsoever selected, shall be a person who
has not previously acted in any capacity for either Landlord or Tenant. Wtihin
thirty (30) days after the selection of the third appraiser, a majority of the
appraisers are unable to set the Fair Market Rent within the stipulated period
of time, then each appraiser shall propose a Fair Market Rent and three proposed
Fair Market Rents shall be added together and their total divided by three (3),
and the resulting quotient shall be the Fair Market Rent. Notwisthstanding the
foreoing, if the low figure and/or the high figure are/is more than ten (10)
percent lower and/or higher than the middle figure, the low figure and/or the
high figure (as appropriate) shall be disregarded. If only one of the proposed
Fair Market Rents is disregarded, the remaining two shall be added together and
the total divided by two (2), with the resulting quotient being the Fair Market
Rent. If both the high and the low are disregarded pursuant hereto, the
remaining proposed Fair Market Rent shall be the Fair Market Rent.
3. Tenant shall have a right of first offer on all space in the building as it
becomes available during the term of its lease.
4. Tenants shall have an option during the first year of the Lease term to lease
an additional 4,000 s.f. under the same terms and conditions of the Lease by
written notice to Landlord.
EXHIBIT 10.13(b)
SEABOARD PROPERTY MANAGEMENT, INC.
Two Stamford Landing, Southfield Avenue, Stamford, CT 06902
(203) 357-1600 - Fax: (203) 324-1024
September 21, 1995
Robert Ohmes
Marine Management Systems, Inc.
102 Hamilton Avenue
Stamford, Connecticut 06906
RE: LEASE AGREEMENT BETWEEN MARINE MANAGEMENT SYSTEMS, INC. AND SEABOARD
STAMFORD INVESTORS ASSOCIATES LLC
Dear Bob:
Reference is made to the above described Lease Agreement ("Agreement")
dated September 21, 1995. In addition to the terms and conditions described
therein, Tenant may for future work to be performed within the tenants demised
area solicit bids from outside vendors to perform work. Such vendors must be
approved by Landlord, which approval will not be unreasonably withheld. Landlord
shall have the absolute option to perform such work provided that Landlord will
perform such work at the same cost of Tenants vendor.
All other terms and conditions of the Agreement remain in full force and
effect. If the foregoing is acceptable to you, kindly sign both copies of this
letter where indicated and return both to me. I will then forward back a fully
executed original copy.
Very truly yours,
/s/ John J. DiMenna, Jr.
--------------------------
John J. DiMenna, Jr.
AGREED TO BY:
MARINE MANAGEMENT SYSTEMS, INC.
/s/ Robert D. Ohmes
- --------------------------
ITS: Executive Vice President
JJD/eg
EXHIBIT 10.13(c)
MMS
Marine Management Systems, Inc.
John DiMenna, Jr.
President
Seaboard Properties Incorporated
Two Stamford Landing
Southfield Avenue
Stamford, Connecticut 06902
RE: Lease Agreement Between Marine Management Systems, Inc. ("Tenant") and
Seaboard Stamford Investors Associates LLC ("Landlord").
In reference to the above described Lease Agreement ("Agreement") dated
September 21, 1995. In addition to the terms and conditions described therein,
Landlord and Tenant agree as follows:
1. Tenant will substitute the two month security deposit with an
unconditional letter of credit in the amount of $150,000 designating
Landlord as beneficiary against default by the tenant under the said
lease. It is understood that the letter of credit will reduce by $7,500
per month starting May 31, 1996 and continue to reduce in amount until
liquidated in full by December 31, 1997. The letter of credit will be
provided by a financial institution reasonably satisfactory to Landlord
and in a form reasonably satisfactory to Landlord.
2. Landlord will credit Tenant's rent account in the amount of $3,000 which
will apply toward the first month's rent which first rent is anticipated
to be due and payable in April, 1996.
3. At the expiration of the above letter of credit, Tenant will provide
Landlord a new letter of credit in the amount of $25,000 to cover the
security deposit to the expiration of the lease.
All other terms and conditions of the Agreement remain in full force and
effect. Agreed to this _____ day of ____________ 1995.
MARINE MANAGEMENT SYSTEMS, INC. SEABOARD PROPERTIES INC.
By: /s/ Robert D. Ohmes By: /s/ John J. DiMenna, Jr.
--------------------------- ---------------------------
102 Hamilton Avenue - Stamford, CT 06902 - (203) 327-6404
Telex: 996483 - Telefax: (203) 967-2927
<PAGE>
EXHIBIT 10.14(a)
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
NOTIFICATION OF ASSISTANCE APPROVAL
(COOPERATIVE AGREEMENT)
PROJECT NUMBER: DTMA91-95-H-00069
TITLE: Integrated Shipboard Information Technology (ISIT)
Platform
EFFECTIVE DATE: JULY 12, 1995
-------------
TOTAL AMOUNT OF THE AGREEMENT: $3,825,526.00
ESTIMATED FEDERAL FUNDING: $1,912,763.00
CURRENT FEDERAL OBLIGATION: $1,159,285.00
OBLIGATION DATE: JULY 12, 1995
APPROPRIATION DATA: 69 X 1750 995 210 175000 X00K83
2523 952100k83
This Agreement is entered into between the United States of America, hereinafter
called the Government, represented by the Maritime Administration, and the
Recipient, the Integrated Shipboard Information Technology Consortium, as
defined in Article 1 pursuant to and under U.S. Federal law.
The parties to this Agreement execute it by signing in the spaces provided
below, as evidence and in acknowledgment of their intention to observe all the
provisions hereof.
FOR THE RECIPIENT: FOR THE UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION:
/s/ Eugene D. Story /s/ Joyce D. Tincher-Harris
- ------------------------------ ---------------------------------
(Signature) (Signature)
Eugene D. Story Joyce D. Tincher-Harris
Chairman, Management Committee Agreement/Contracting Officer
Integrated Shipboard
Information Technology Consortium
July 11, 1995 7/12/95
- --------------------------- --------------------------
(Date) (Date)
<PAGE>
Table of Contents
ARTICLE TITLE PAGE
- ------- ----- ----
1 Parties 4
2 Authority 4
3 Scope of the Agreement 4
4 Definitions 6
5 Reporting Requirements 6
6 Meetings 7
7 Period of Performance 8
8 Consideration of the Parties 8
9 Project Management 9
10 Modifications 9
11 Agreement Administration 10
12 Agreement Officer's Technical Representative (AOTR) 11
13 Payable Milestones 12
14 Payment Requirements 12
15 Method of Payment 13
16 Indemnity 14
17 Suspension or Termination 15
18 Disputes 16
19 Patent Rights 16
20 Data Rights 18
21 Foreign Access to Technology 21
22 Inspections 24
23 Retention and Custodial Requirements for Records 24
24 Officials Not to Benefit 24
25 Covenant Against Contingent Fees 25
26 Permits, Licenses and Responsibilities 25
27 Payment of Interest on Recipients Claim 25
28 Equal Opportunity 25
29 Drug-Free Workplace 26
30 Debarment and Suspension 27
31 Clean Air and Federal Water Pollution 27
32 Independent Research and Development Costs 27
33 Order of Precedence 28
34 Limitation on Payments to Influence Certain
Federal Transactions 28
35 Pre-Agreement Costs Incurred 34
- 2 -
<PAGE>
ATTACHMENTS
-----------
Attachment 1 - ISIT Statement of Work
Attachment 2 - Articles of Collaboration
Attachment 3 - Financial Status Report
Attachment 4 - ISIT Payable Milestones
Attachment 5 - Certifications and Representations
- 3 -
<PAGE>
ARTICLE 1 - PARTIES
- -------------------
This COOPERATIVE AGREEMENT (Agreement) is entered into by and between the United
States of America represented by the Maritime Administration (MARAD) and the
Integrated Shipboard Information Technology (ISIT) Consortium, herein after
referred to as the Recipient. The Government recognizes that the Recipient is a
Consortium of the following member companies: Marine Management Systems, Inc.,
Ultimateast Data Communications, Ltd., Radix Systems, Inc., and M. Rosenblatt &
Son, Inc. In addition, the following Project Partners are also participating in
this project: ABS Marine Services, Inc., General Electric Marine Systems, and
Sperry Marine, Inc. The individual responsibilities of the parties with regard
to this Agreement are set forth in the Articles of Collaboration which are
Attachment 2 to this Agreement.
ARTICLE 2 - AUTHORITY
- ---------------------
MARAD enters into this Agreement on behalf of ARPA pursuant to: (1) Public Law
103-160; (2) the authority contained in the Merchant Marine Act of 1936, as
amended (46 U.S.C. Appx. 1101, 1119 and 1120 and Section 207, of 46 U.S.C. Appx.
1117) pertaining to the entry into and performance of agreements and other
transactions with public and private agencies, and the authorizations necessary
for research and development activities.
ARTICLE 3 - SCOPE OF THE AGREEMENT
- ----------------------------------
A. Background
At the present time, U.S. maritime industry research and development efforts
have not focused on the conditions, needs and overall problems to be addressed
by U.S. shipyards desiring to re-enter the international commercial shipbuilding
market. During the past decade U.S. shipbuilding has been centered on the
construction of military combatants and auxiliary oceangoing ships. Since the
current and projected rate of Navy ship construction is insufficient to maintain
the industrial shipbuilding capacity required for mobilization, it is critical
that U.S. shipyards become commercially competitive in the international market.
This is essential to maintaining a capable defense resource as well as
revitalizing the economy of this industry.
In order to meet this goal, the Government solicited cooperative, cost shared
technology projects for the development and demonstration of discrete advanced
process and product technologies that will improve the manufacturing, operation,
and/or repair of ships and thereby improve the international commercial
competitiveness of the U.S. Shipbuilding industry.
B. Scope
The technology proposed for this Agreement for the Integrated Shipboard
Information Technology (ISIT) platform consists of advanced software, state of
the art hardware and standardized procedures, which together provide the ability
to collect, process and store information electronically from shipboard
sub-systems, and distribute that information throughout the ship and to the
ship's land-based offices via seamless satellite communications.
- 4 -
<PAGE>
The Recipient shall perform a coordinated research and development program for
the Integrated Shipboard Information Technology (ISIT) platform, described
above. The research shall be carried out in accordance with the Statement of
Work incorporated in this Agreement as Attachment 1.
C. Goals/Objectives
1. The goal of this Agreement is for the Government to assist the Recipient
in the development of discrete advanced process and product technologies that
will improve the manufacturing, operation, and/or repair of ships and thereby
improve the international commercial competitiveness of the U.S. Shipbuilding
industry.
2. The Government will have continuous technical involvement with the
Recipient. The Government will also obtain access to research results and
certain rights in data and patents pursuant to subsequent Articles in this
Agreement. The Government and the Recipient are bound to each other by a duty of
good faith and best research effort in achieving the goals of this Agreement as
set forth above and in the attached Statement of Work. The Parties agree that
the principle purpose of this Agreement is for the Government to support and
stimulate the United States' Shipbuilding Industry by assisting the Recipient in
accomplishing this advanced research and technology effort and not for the
acquisition of property or services for the direct benefit or use of the
Government.
ARTICLE 4 - DEFINITIONS
- -----------------------
As used throughout this Agreement, the following terms shall have the meaning
set forth below:
1. The term "head of the agency" or "Secretary" as used herein means the
Secretary, the Under Secretary, any Assistant Secretary, or the Maritime
Administrator or Deputy Maritime Administrator of the Department of
Transportation; and the term "duly authorized representative" means any person
or persons or board (other than the Agreement Officer) authorized to act for the
head of the agency.
2. The terms "Agreement Officer" and/or "Agreement/Contracting Officer"
means the person executing this Agreement on behalf of MARAD, and any other
employee who is a properly warranted Federal Contracting Officer.
3. Except as otherwise provided in this Agreement, the term "subcontracts"
includes purchase orders.
4. The term "MARAD" means the Maritime Administration.
- 5 -
<PAGE>
5. The term "Recipient" means the commercial organization(s) participating
in and legally responsible for this Agreement.
6. The term "subcontractor" means a contractor to the Recipient and all
tiers of subcontractors thereunder.
7. The term "Project Partners" refers to the Recipient's partners in the
agreement.
ARTICLE 5 - REPORTING REQUIREMENTS
- ----------------------------------
The Recipient shall provide the following reports to the Government:
1. Financial Status Report, Attachment 3, this report shall be submitted to
the Agreement Officer every three months during Agreement performance and upon
completion of the Agreement. Each report shall be submitted within 30 days after
the conclusion of the reporting period.
2. Technical Progress Reports shall be submitted to the Agreement Officer
and the Agreement Officer's Technical Representative on a quarterly basis during
Agreement performance. The report shall be due within 30 days of the end of the
reporting quarter.
3. A Final Project Report shall be submitted within 90 days after
completion of this project; one copy to the Agreement Officer and one copy to
the Agreement Officer's Technical Representative. This report should include the
background leading up to the project, the goals and objectives and how they were
met, and any other pertinent outcomes of performance. This report shall contain
the following distribution statement on the cover page:
"Distribution authorized only to U.S. Government Agencies to protect
information not owned by the U.S.o Government and protected by a Recipient's
"confidentiality" statement, or received with the understanding that it not be
routinely transmitted outside the U.S. Government. Any requests for this
document shall be referred to the Maritime Administration Office of Acquisition
who will review such requests in coordination with the Office of the Chief
Counsel and the Recipient."
4. In addition to any other financial reports provided or required, the
Recipient shall notify the Agreement Officer if any contribution from a
Consortium Member or Project Partner is not made as required and the Recipient's
plan of action regarding such contribution.
ARTICLE 6 - MEETINGS
- --------------------
1. The Agreement Officer's Technical Representative and any other
Government personnel deemed appropriate may participate in the regularly
scheduled project meetings of the participant. The intent of such participation
is to facilitate the project and to allow the Government to stay abreast of the
project status.
- 6 -
<PAGE>
2. The Recipient is responsible for establishing a schedule of technical
meetings. The Recipient shall notify Government representatives of the
established meeting schedule and the proposed subject of each meeting. In the
event of changes to the schedule, the Recipient shall notify the Government
representatives with as much advanced notice as possible prior to the next
scheduled meeting.
ARTICLE 7 - PERIOD OF PERFORMANCE
- ---------------------------------
The period of performance of this Agreement shall commence as of the effective
date as indicated on the front of this document and shall remain in full force
and effect for eighteen consecutive months in accordance with its provisions,
unless sooner terminated as provided for herein or extended by mutual agreement
in accordance with the article entitled Modifications.
ARTICLE 8 - CONSIDERATION OF THE PARTIES
- ----------------------------------------
(a) The total estimated cost to accomplish this project is $3,825,526 over an
eighteen month period. The parties agree to provide the funding as set forth
below. If either the Government or the Recipient is unable to provide its
respective total contribution, the other party may reduce its project funding by
a proportional amount.
(b) The Government will pay an amount not to exceed $1,912,763, subject to the
availability of funds. Due to funding limitations, the Government's initial
obligation under this Agreement is $1,159,285 for milestones 1 through 7. The
remaining $753,478 contribution is subject to successful completion of the
funded tasks and availability of funds.
(c) The Recipient will perform the Statement of Work, which is Attachment 1 to
this Agreement, and make contributions of $1,756,192 in cash and $156,571 in
in-kind services.
(d) Since this project is accepted under the National Shipbuilding and Shipyard
Conversion Act of 1993, P.L. 103-160, the Government's contribution may not
exceed 50 percent of the total cash and in-kind contributions throughout the
life cycle of the agreement. The Recipient will submit periodic Financial Status
Reports (Attachment 3) as set forth in. Article 5. These reports will be used to
determine that the contribution matching is evolving in accordance with the
percentages set forth above. The Government may, at any time, review the
Recipient's records on cost matching contributions to determine that these
requirements are being met. The Recipient should not at any point be expending
more of the Government's contribution then their own. If the Government
determines that the Recipient is not meeting the required contribution
percentage for that project year, the Government share will be reduced by the
appropriate amount necessary to comply with the statutory percentage. This
reduction will be accomplished by reducing the amount of the next payable
milestone or issuing a request for reimbursement to the Recipient, at the
discretion of the Agreement Officer.
- 7 -
<PAGE>
ARTICLE 9 - PROJECT MANAGEMENT
- ------------------------------
1. The following are the list of Consortium Members in this project.
Marine Management Systems, Inc.
Ultimateast Data Communications, Ltd.
Radix Systems, Inc.
M. Rosenblatt & Son, Inc.
As set forth in the Articles of Collaboration, the consortium members have
appointed the Chairman of the consortium's Management Committee as the person
authorized to enter into agreements with the Government on the Consortium's
behalf.
The following were identified in the proposal as Project Partners but are not
members of the Consortium:
ABS Marine Services, Inc.
General Electric Marine Systems
Sperry Marine, Inc.
2. It is the full and complete responsibility of the Recipient to effectively
manage this project in accordance with the terms and conditions of this
Agreement. The Agreement Officer's Technical Representative shall be responsible
for the review and verification of payments to the Recipient and shall have
continuous interaction to cause effective collaboration between the Government
and the Recipient.
ARTICLE 10 - MODIFICATIONS
- --------------------------
1. As a result of quarterly meetings, annual reviews, or at any time during the
term of the Agreement, research progress or results may indicate that changes
would be beneficial to program objectives. Minor project changes do not require
prior Government approval. The following are changes that would require
Government approval by written modification:
a. Major changes to the Statement of Work that effect Task/Sub-Task
Milestones.
b. Changes to the budget that affect Payable Milestones.
c. Changes to the schedule that would necessitate an extension to the Period
of Performance.
d. Changes to the Articles of Collaboration, if such changes substantially
alter the relationship or responsibilities between the members of the consortium
originally agreed upon when the Agreement was executed. This includes the
replacement of any members.
- 8 -
<PAGE>
e. Changes that would substantially affect the Party's contributions to
the project from that which was originally agreed upon when the Agreement was
executed.
2. Recommendations for modifications, including justifications to support any
changes to the Statement of Work and/or the Payable Milestones, will be
documented in a letter and submitted by the Recipient to the Agreement Officer
with a copy to the Agreement Officer's Technical Representative. This
documentation letter will detail the technical, chronological, and financial
impact of the proposed modification to the research program. The Agreement
Officer shall be responsible for the review and verification of any
recommendations to revise or otherwise modify the Agreement, Statement of Work,
Payable Milestones, or other proposed changes to the terms and conditions of
this Agreement.
3. The Government is not obligated to pay for additional or revised Payable
Milestones until the Payable Milestone Schedule is formally revised by the
Agreement Officer and made a part of this Agreement.
4. For minor or administrative Agreement modifications (e.g., changes in the
paying office or appropriation data, changes to the Government personnel
identified in the Agreement, etc.) no signature is required by the Recipient.
ARTICLE 11 - AGREEMENT ADMINISTRATION
- -------------------------------------
Administrative and contractual matters under this Agreement shall be referred to
the following representatives of the parties:
MARAD: Tracey L. Ford, Agreement Specialist
DOT/Maritime Administration
Office of Acquisition, MAR-380
400 Seventh Street, SW., Room 7310
Washington, DC 20590
(202) 366-1744
Recipient: Eugene D. Story
Marine Management Systems, Inc.
102 Hamilton Avenue
Stamford, CT 06902
Technical matters under this Agreement shall be referred to the following
representatives:
MARAD: John Dumbleton
Agreement Officer's Technical Representative
DOT/Maritime Administration
Office of Ship Financial Assistance
400 Seventh Street, SW., Room 8126
Washington, DC 20590
(202) 366-1928
Recipient: Raymond Kaufman, P.E.
Radix Systems, Inc.
201 Perry Parkway
Gaithersburg, MD 20877
Each party may change its representatives named in this Article by written
notification to the other party.
- 9 -
<PAGE>
ARTICLE 12 - AGREEMENT OFFICER'S TECHNICAL REPRESENTATIVE (AOTR)
- ----------------------------------------------------------------
(a) John Dumbleton is hereby designated as the AOTR for this Agreement and is
located at the address given above.
(b) The AOTR is responsible for the technical aspects of the project and
technical liaison with the Recipient.
(c) The AOTR is not authorized to make any commitments or otherwise obligate the
Government or authorize any changes which affect the price, terms or conditions
of this Agreement. Any Recipient request for changes shall be referred to the
Agreement/Contracting Officer directly or through the AOTR. No such changes
shall be made without the expressed prior authorization of the
Agreement/Contracting Officer. The AOTR may designate assistant AOTR(s) to act
for him by naming such assistants in writing and transmitting a copy of such
designation through the Agreement Officer to the Recipient.
ARTICLE 13 - PAYABLE MILESTONES
- -------------------------------
Payment under this Agreement will be accomplished at predetermined intervals
based on progression of work on this project. These predetermined intervals will
be referred to as Payable Milestones. The Payable Milestones on this project are
set forth in Attachment 4 to this Agreement. If at any time the proposed costs
associated with the progression of work change significantly, the Payable
Milestones will be modified accordingly by written modification to this
Agreement.
ARTICLE 14 - PAYMENT REQUIREMENTS
- ---------------------------------
1. Prior to the submission of invoices to MARAD by the Recipient, the Recipient
shall have and maintain an established accounting system which complies with
Generally Accepted Accounting Principles, and with the requirements of this
Agreement, and shall ensure that appropriate arrangements have been made for
receiving, distributing, and accounting for Federal funds. The Consortium, as a
separate entity, shall not incur or allocate any direct or indirect costs of its
own pursuant to this Agreement.
- 10 -
<PAGE>
2. In no case shall the Government's financial liability exceed the amount
obligated under this Agreement. No legal liability on the part of the Government
for any payment may arise for performance under this Agreement beyond the funds
obligated unless and until funds are made available to the Agreement Officer for
performance and until the Recipient receives written notice of availability from
the Agreement Officer.
3. Invoices shall be submitted in an original and three copies to DOT/Maritime
Administration, MAR-333, Room 7325, 400 Seventh Street, SW., Washington, DC
20590. To constitute a proper invoice, the following information and/or attached
documentation must be included:
(a) Name of the business concern and invoice date.
(b) Agreement number.
(c) Adequate description of payable milestone.
(d) Other substantiating documentation or information as required by the
Agreement Officer to support completion of such milestone.
4. The Recipient shall maintain adequate records to account for Federal funds
received under this Agreement, as well as Recipient funds contributed under this
Agreement. The Recipient's relevant financial records are subject to examination
or audit by the Government. The Agreement Officer or designee shall have direct
access to sufficient records and information of the Recipient, to ensure full
accountability for all funding under this Agreement. Such audit, examination, or
access shall be performed during normal business hours on normal business days.
ARTICLE 15 - METHOD OF PAYMENT
- ------------------------------
(a) Payments under this Agreement will be made either by check or by wire
transfer through the Treasury Financial Communications System at the option of
the Government. Payment will be due on the 30th calendar day after the date of
actual receipt of a proper invoice in the office designated to receive the
invoice.
(b) The Recipient shall forward the following information in writing to the
Agreement Officer not later than 7 days after receipt of notice of award.
(1) Cooperative Agreement Number.
(2) Full name (where practicable), title, phone number, company's IRS
Taxpayer ID number, and complete mailing address of responsible official(s), (i)
to whom checks are to be sent, and (ii) who may be contacted concerning the bank
account information requested below.
- 11 -
<PAGE>
(3) The following bank account information required to accomplish wire
transfers:
(i) Name, address, and telegraphic abbreviation of the receiving
financial institution.
(ii) Receiving financial institution's 9-digit American Bankers
Association (ABA) identifying number for routing transfer funds. (Provide
this number only of the receiving financial institution has access to the
Federal Reserve Communications System.)
(iii) Recipient's name and account number at the receiving
financial institution to be credited with the funds.
(iv) If the receiving financial institution does not have access to
the Federal Reserve Communications System, provide the name of the
correspondent financial institution through which the receiving financial
institution receives electronic funds transfer messages. If a correspondent
financial institution is specified, also provide:
(A) Address and telegraphic abbreviation of the correspondent
financial institution.
(B) The correspondent financial institution's 9-digit ABA
identifying number for routing transfer of funds.
(c) Any changes to the information furnished under paragraph (b) of this article
shall be furnished to the Agreement Officer in writing at least 30 days before
the effective date of change. It is the Recipient's responsibility to furnish
these changes promptly to avoid payments to erroneous addresses or bank
accounts.
(d) The document furnishing the information required in paragraph (b) and (c)
must be dated and contain the signature, title, and telephone number of the
Recipient official authorized to provide it, as well as the Recipient's name and
Agreement number.
(e) Failure to submit information required by this article could result in delay
in processing of invoices for payment.
ARTICLE 16 - INDEMNITY
- ----------------------
The Recipient agrees to hold the Government harmless from all liability for the
Recipient's own acts and omissions and the results thereof. The Recipient
assumes all risk, responsibility, and liability for itself, its agents, staff,
employees and research personnel for monetary or other losses to persons,
properties or entities resulting in any manner from the conduct of its
operations in which the products and services identified herein are utilized
and/or furnished to others. The Government assumes no liability for property
damage, personal injuries, or death of any of the private parties, their
officers, employees, or agents, or any other person arising from, or incident
to, this agreement. The Recipient agrees to indemnify the Government from and
against any and all claims, suits, actions, damages, penalties, and/or causes of
action, arising out of this agreement, and from and against all costs, counsel
fees, expenses and liabilities incurred in connection with such claims, suits,
actions, damages, penalties, and/or causes of action.
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<PAGE>
ARTICLE 17 - SUSPENSION OR TERMINATION
- --------------------------------------
As prescribed by OMB Circular A-110, the following definitions apply under this
Article:
Termination - The termination of a grant or other agreement means the
cancellation of Federal sponsorship, in whole or in part, under
an agreement at any time prior to the date of completion.
Suspension - The suspension of a grant or other agreement is an action by
a Federal sponsoring agency that temporarily suspends Federal
sponsorship under the grant or other agreement, pending
corrective action by the Recipient or pending a decision to
terminate the grant or other agreement by the Federal
sponsoring agency.
When the Recipient has failed to comply with the terms of this agreement, MARAD
may, on reasonable notice to the Recipient, suspend the grant or other
agreement, pending corrective action by the Recipient, or a decision by MARAD or
the Recipient to terminate in accordance with the provisions listed below for
termination for cause or termination for convenience. MARAD shall allow all
necessary and proper costs that the Recipient could not reasonably avoid during
the period of the suspension provided that they meet the provisions of the
applicable Federal cost principles.
MARAD's provisions for the systematic settlement of terminated grants or other
agreement include the following:
(1) Termination for Cause - MARAD may reserve the right to terminate any grant
or agreement in whole or in part at any time before the date of completion,
whenever it is determined that the Recipient has failed to comply with the
conditions of the agreement. MARAD shall promptly notify the Recipient in
writing of the determination and the reasons for the termination, together
with the effective date. Payments made to the Recipient or recoveries by
MARAD under grants or other agreements terminated for cause shall be in
accordance with the legal rights and liabilities of the parties.
(2) Termination for Convenience - MARAD or Recipient may terminate grants and
agreements in whole or in part when both parties agree that the
continuation of the program would not produce beneficial results
commensurate with the further expenditure of funds by either party. The two
parties shall agree upon the termination conditions, including the
effective date and, in the case of partial terminations, the portion to be
terminated. The Recipient shall not incur new obligations for the
terminated portion after the effective date, and shall cancel as many
outstanding obligations as possible. MARAD shall allow full credit to the
Recipient for the Federal share of the noncancelable obligations, properly
incurred by the Recipient prior to termination.
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ARTICLE 18 - DISPUTES
- ---------------------
All disputes of fact or of interpretation under this Agreement not disposed of
by mutual agreement shall be decided by the Agreement/Contracting Officer who
shall reduce the decision to writing and mail a copy thereof to the Recipient.
Within thirty (30) days of receipt of such written decision, the Recipient may
appeal in writing to the Associate Administrator for Administration, Maritime
Administration. The Associate Administrator for Administration will fix a date
for written submissions or oral presentations, or both, by the Recipient and the
Agreement/Contracting Officer, or their representatives. The Associate
Administrator for Administration shall hand down a written decision which shall
be final and conclusive upon the parties as to questions of fact. The Contract
Disputes Act of 1977 does not apply to this Agreement. Compliance with this
Article does not preclude use of any other legal remedies by the Parties.
ARTICLE 19 - PATENT RIGHTS
- --------------------------
A. Definitions
1. "Invention" means any invention or discovery which is or may be
patentable or otherwise protectable under Title 35 of the United States Code.
2. "Made" when used in relation to any invention means the conception or
first actual reduction to practice of such invention.
3. "Practical application" means to manufacture, in the case of a
composition of product; to practice, in the case of a process or method, or to
operate, in the case of a machine or system for either Government or Commercial
Shipbuilding utilization.
4. "Subject invention" means any invention of a Recipient conceived or
first actually reduced to practice in the performance of work under this
Agreement.
B. Allocation of Principal Rights
1. The Recipient shall retain the entire right, title, and interest
throughout the world to each subject invention consistent with the provisions of
35 U.S.C. 203. The Recipient shall disclose each subject invention to the
Government within four months after Recipient acknowledges invention.
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<PAGE>
2. If the Recipient determines that it does not intend to retain title
to any such invention, the Recipient shall notify the Government, in writing,
within eight months of disclosure to the Government of such decision. However,
in any case where publication sale, or public use has initiated the one-year
statutory period wherein valid patent protection, can still be obtained in the
United States, the period for such notice may be shortened by the Government to
a date that is not more than sixty calendar days prior to the end of the
statutory period.
C. March-in Rights
If the Government determines that such action is necessary because the Recipient
or assignee has not taken, or is not expected to take within two years from the
termination of the Agreement, effective steps to achieve practical application
of the subject invention then the Government has the right to require the
Recipient, an assignee, or exclusive licensee of a subject invention to grant a
nonexclusive license to a responsible applicant or applicants, upon terms that
are reasonable under the circumstances, and if the Recipient, assignee, or
exclusive licensee refuses such a request, the Government has the right to grant
such a license itself.
D. Conditions when the Government May Obtain Title
Under the Government's written request, the Recipient shall convey title to
any subject invention to the Government if the Recipient fails to disclose or
elects not to retain title to the subject invention within the times specified
in paragraph C of this Article; provided, that the Government may only request
title within sixty calendar days after learning of the failure of the Recipient
to disclose or elect within the specified times.
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<PAGE>
E. Lower Tier Agreements
The Recipient shall include this Article, suitably modified, to identify the
Parties, in all subcontracts or lower tier agreements, regardless of tier, for
experimental, developmental, or research work.
ARTICLE 20 - DATA RIGHTS
- ------------------------
A. Additional Definitions
1. "Government purpose license rights" (GPLR), as used in this article,
means rights to use, duplicate, or disclose data, in whole or in part and in any
manner, for Government purposes only, and to have or permit others to do so for
Government purposes only. Government purposes include competitive procurement,
but do not include the right to have or permit others to use technical data for
commercial purposes.
2. "Unlimited rights", as used in this article, means rights to use,
duplicate, release, or disclose, technical data or computer software in whole or
in part, in any manner and for any purposes whatsoever, and to have or permit
others to do so.
3. "Data", as used in this article, means recorded information,
regardless of form or method of recording, which includes but is not limited to
technical data, software, and trade secrets. The term does not include
financial, administrative, cost, pricing or management information and does not
include subject inventions included under the Article entitled PATENT RIGHTS.
4. "Technical Data", as used in this article, means recorded information,
regardless of the form or method of the recording of a scientific or technical
nature (including computer software documentation). The term does not include
computer software, or data incidental to agreement administration, such as
financial and/or management information.
B. Data Categories
The Parties agree to the following categories of Data.
1. Category A (Software) is the Recipient data developed and paid for
totally by private funds prior to the effective date of this Agreement and is
Data to which the Recipient retains all rights.
Ultimateast Virtual Earth Station including the following peripherals:
o FLAGstation - Communications/Fleet Management workstation,
o PC-Access + Graphics - Dispatch Center.
o SCC - Shipboard Communications Controller
o SatPAD - Satellite Packet Assembly Disassembler
o Mnet - Mobile Communications Controller
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Marine Management Systems Fleet Software Series, consisting of the following
application areas:
o FleetWORKs: Equipment, Inventory, Requisitioning, Maintenance application
systems specific to the commercial international marine industry;
o FleetWATCH: Vessel Reporting System, Personnel/Payroll System, application
systems specific to the commercial international marine industry;
o FleetLINK: Communications & Messaging, Forms Management, Menu Management,
application systems specific to the commercial international marine
industry;
o Marine Management Systems Transaction Processing Engine: Provides a data
replication backend for all of the above applications.
2. Category B (Software) is the Recipient Developed and Government funded Data
which cannot be disclosed without compromising the Recipient's competitive
position in the industry.
Ultimateast
Section 1.4 Interface Definition;
Section 2.2.1.7 Core communication driver;
Section 2.2.1.7 Interfaces to specific mobile satellites terminals;
Section 2.2.1.7 ISIT protocol interface module;
Section 2.2.1.7 Satellite communication protocol interface;
Section 2.2.1.7 Billing and transaction handling software;
Section 2.2.1.7 Least cost routing algorithms;
Section 2.2.1.7 Data reduction algorithms;
Section 2.2.1.7 Network simulation software;
Section 2.2.1.8 ISIT to VES interface protocol;
Section 2.2.1.8 Multi-network roaming capabilities for the VES;
Section 2.2.1.8 Satellite data communication network interfaces;
Section 2.2.1.8 Network management software for the VES;
Section 2.2.1.8 Billing and transaction reporting software
Section 2.2.1.8 Interface protocol to terrestrials applications.
Marine Management Systems
Section 1.2 Architecture Definition;
Section 1.4 Interface Definition;
Section 2.1 Hardware Detailed Design;
Section 2.2 Configuration Manager;
Section 2.2 NMI Software;
Section 2.2 Data Replicator;
Section 2.2 E-Mail System
Section 2.2 Document Management System
Section 2.2 Graphical Display System;
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<PAGE>
3. Category C is the Recipient Developed Data excluding Category A and B
Data.
C. Allocation of Principal Rights
1. This Agreement shall be performed with mixed Government and
Recipient funding. The Parties agree that in consideration for the Government's
funding, and in lieu of any Government rights to Categories A or B Data, the
Recipient intends to reduce to practical application materials and processes
developed under this Agreement.
2. No deliveries in Category A and B are contemplated or required under
this Agreement; therefore, no rights in Category A and B Data shall be granted
to the Government.
3. The Government shall have Government Purpose License Rights to
Category C data for a period of two years after conclusion of the Agreement,
after which two-year period, the Government shall have Unlimited Rights to
Category C Data.
D. Marking of Data
Any Data delivered under this Agreement shall be marked with the following
legend:
Use, duplication, or disclosure is subject to the restrictions as
stated in Agreement No. DTMA91-95-H-00069 between the Government and the
Recipient.
E. Lower Tier Agreements
The Recipient shall include this Article, suitably modified to identify the
Parties, in all subcontracts or lower tier agreements, regardless of tier, for
experimental, developmental or research work.
ARTICLE 21 - FOREIGN ACCESS TO TECHNOLOGY
- -----------------------------------------
A. Definition
"Foreign Firm or Institution" means a firm or institution organized or
existing under the laws of a country other than the United States, its
territories, or possessions. The term includes, for purposes of this Agreement,
any agency or instrumentality of a foreign government; and firms, institutions
or business organizations which are owned or substantially controlled by foreign
governments, firms, institutions, or individuals.
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<PAGE>
"Know-How" means all information including, but not limited to
discoveries, formulas, materials, inventions, processes, ideas, approaches,
concepts, techniques, methods, software, programs, documentation, procedures,
firmware, hardware, technical data, specifications, devices, apparatus and
machines related to the project described in the Statement of Work.
"Technology" means discoveries, innovations, Know-How and inventions,
whether patentable or not, including computer software, recognized under U.S.
law as intellectual creations to which rights of ownership accrue, including,
but not limited to, patents, trade secrets, maskworks, and copyrights developed
under this Agreement.
B. General
The Parties agree that research findings and technology developments that may
occur under this agreement may constitute a significant enhancement to the
national defense, and to the economic vitality of the United States.
Accordingly, access to important technology developments under this Agreement by
Foreign Firms or Institutions must be carefully controlled. The controls
contemplated in this Article are in addition to, and are not intended to change
or supersede, the provisions of the International Traffic in Arms Regulation (22
CFR pt. 121 et seq.), the DoD Industrial Security Regulation (DoD 5220.22-R) and
the Department of Commerce Export Regulation (15 CFR pt. 770 et seq.)
C. Restrictions on Sale or Transfer of Technology to Foreign Firms or
Institutions
1. In order to promote the national security interests of the United
States and to effectuate the policies that underlie the regulations cited above,
the procedures stated in subparagraphs C.2, C.3 and below shall apply to any
transfer of Technology. For purposes of this paragraph, a transfer includes a
sale of the company and sales or licensing of Technology.
Transfers do not include:
(a) sales of products or components, or
(b) licenses of software or documentation related to sales of products or
components, or
(c) transfer to foreign subsidiaries of the Project Participants for
purposes related to this Agreement, or
(d) transfer which provides access to Technology to a Foreign Firm or
Institution which is an approved source of supply or source for the
conduct of research under this Agreement provided that such transfer
shall be limited to that necessary to allow the firm or institution to
perform its approved role under this Agreement.
2. For a period of 5 years from the date of completion of the project,
the Recipient shall provide written notice to the Government Program Manager and
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<PAGE>
Agreement Officer of any proposed transfer to a foreign firm or institution at
least sixty (60) calendar days prior to the proposed date of transfer. Such
notice shall cite this Article and shall state specifically what is to be
transferred and the general terms of the transfer. Within thirty (30) calendar
days of receipt of the Recipient's written notification, the Government
Agreements Administrator shall advise the Recipient whether it consents to the
proposed transfer. In cases where the Government does not concur or sixty (60)
calendar days after receipt and the Government provides no decision, the
Recipient may utilize the procedures under the Disputes Article. No transfer
shall take place until a decision is rendered.
3. For a period of 5 years upon the completion date of this project,
the Recipient shall provide written notice to the Agreement Officer within 60
days prior to any proposed transfers from the Recipient of technology developed
with Government funding under this agreement to Foreign Firms or Institutions.
If the technology transfer is approved by the Government; the Recipient shall
(a) refund to the Government funds paid for the development of the Technology
and (b) negotiate a license with the Government to the Technology under terms
that are reasonable under the circumstances. If the Government determines that
the transfer may have adverse consequences to the national security interests of
the United States, the Recipient, its vendors, and the Government shall jointly
endeavor to find alternatives to the proposed transfer which obviate or mitigate
potential adverse consequences of the transfer but which provide substantially
equivalent benefits to the Recipient.
D. Lower Tier Agreements
The Recipient shall include this Article, suitably modified, to identify the
Parties, in all subcontract or lower tier agreements, regardless of tier, for
experimental, developmental or research work.
ARTICLE 22 - INSPECTIONS
- ------------------------
The Government, through any authorized representatives, has the right at all
reasonable times to inspect or otherwise evaluate the work performed or being
performed hereunder and the premises on which it is being performed. If any
inspection or evaluation is made by the Government on the premises of the
Recipient or the subcontractor, the Recipient shall provide and shall require
all subcontractors to provide all reasonable facilities and assistance for the
safety and convenience of the Government representatives in the performance of
their duties. All inspections and evaluations shall be performed in such a
manner as to not unduly delay the work.
ARTICLE 23 - RETENTION AND CUSTODIAL REQUIREMENTS FOR RECORDS
- -------------------------------------------------------------
a. Financial records, supporting documents, statistical records, and all other
records pertinent to this Agreement including those of the Recipient and any
subcontractors shall be retained for a period of 3 years, following expiration
of this Agreement. If any litigation, claim or audit is started before the
expiration of the 3 year period, the records shall be retained until all
litigations, claims, or audit findings involving the records have been resolved.
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b. The retention period starts from the date of the submission of the final
expenditure report.
c. The head of the Federal sponsoring agency and the Comptroller General of the
United States, or any of their duly authorized representatives, shall have
access to any pertinent books, documents, papers, and records of the Recipient
and its subcontractors to make audits, examinations, excerpts and transcripts.
d. Unless otherwise required by law, MARAD shall not place restrictions on the
Recipient that will limit public access to the records of the Recipient that are
pertinent to this Agreement except when MARAD can demonstrate that such records
must be kept confidential and would have been excepted from disclosure pursuant
to the Freedom of Information Act (5 U.S.C. 552) if the records had belonged to
the Federal sponsoring agency.
ARTICLE 24 - OFFICIALS NOT TO BENEFIT
- -------------------------------------
No member of or delegate to Congress, or Resident Commissioner, shall be
admitted to any share or part of this Agreement, or to any benefit arising from
it. However, this provision does not apply to this Agreement to the extent that
this Agreement is made with a corporation for the corporation's general benefit.
ARTICLE 25 - COVENANT AGAINST CONTINGENT FEES
- ---------------------------------------------
The Recipient warrants that no person or agency has been employed or retained to
solicit or secure this Agreement upon an agreement or understanding for a
contingent fee, excepting bona fide employees or bona fide established
commercial or selling agencies maintained by the Recipient for the purpose of
securing business. For breach or violation of this warranty the Government shall
have the right to annul this Agreement without liability or in its discretion to
recover the full amount of such commission, percentage, brokerage or contingent
fee.
ARTICLE 26 - PERMITS, LICENSES AND RESPONSIBILITIES
- ---------------------------------------------------
The Recipient shall, without expense to the Government, be responsible for
obtaining any necessary licenses and permits and for complying with any Federal,
State, and municipal laws, codes, and regulations applicable to performance of
any work accomplished under this Agreement. The Recipient shall also be
responsible for all damages to persons or property that occur, and shall take
proper safety and health precautions to protect the work, the workers, the
public and the property of others.
ARTICLE 27 - PAYMENT OF INTEREST ON RECIPIENT'S CLAIMS
- ------------------------------------------------------
If an appeal is filed by the Recipient from a final decision under the Disputes
Article, above, denying a claim arising under this Agreement, interest on the
amount of the claim finally determined by the Associate Administrator for
Administration to be owed by MARAD shall be payable to the Recipient. Such
interest shall be at the rate determined pursuant to Public Law 103-160 and
shall be computed from the date of the request for decision by the Associate
Administrator for Administration.
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ARTICLE 28 - EQUAL OPPORTUNITY
- ------------------------------
During performance of this Agreement, the Recipient agrees as follows:
(1) The Recipient shall not discriminate against any employee or
applicant for employment because of race, color, religion, sex, or national
origin.
(2) The Recipient shall take affirmative action to ensure that
applicants are employed, and that employees are treated during employment,
without regard to their race, color, religion, sex, or national origin. This
shall include, but not be limited to, (i) employment, (ii) upgrading, (iii)
demotion, (iv) transfer, (v) recruitment or recruitment advertising, (vi) layoff
or termination, (vii) rates of pay or other forms of compensation, and (viii)
selection for training, including apprenticeship.
(3) The Recipient shall, in all solicitations or advertisement for
employees placed by or on behalf of the Recipient, state that all qualified
applicants will receive consideration for employment without regard to race,
color, religion, sex, or national origin.
(4) The Recipient shall comply with Executive Order 11246, as amended,
and the rules, regulations, and orders of the Secretary of Labor.
(5) The Recipient shall permit access to its books, records, and
accounts by the Government for the purposes of investigation to ascertain the
Recipient's compliance with the applicable rules, regulations, and orders.
(6) If the Government determines that the Recipient is not in
compliance with this Article or any rule, regulation, or order of the Secretary
of Labor, this Agreement may be canceled, terminated, or suspended in whole or
in part and the Recipient may be declared ineligible for further Government
assistance, under the procedures authorized in Executive Order 11246, as
amended. In addition, sanctions may be imposed and remedies invoked against the
Recipient as provided in Executive Order 11246, as amended, the rules,
regulations, and orders of the Secretary of Labor, or as otherwise provided by
law.
(7) The Recipient shall include the terms of this Article in every
Subcontract that is not exempted by the rules, regulations, or orders of the
Secretary of Labor issued under Executive Order 11246, as amended, so that these
terms and conditions will be binding upon each subcontractor.
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ARTICLE 29 - DRUG-FREE WORKPLACE
- --------------------------------
The Certification regarding a Drug-Free Workplace is contained in Attachment 5
and is incorporated into this Agreement. The Recipient shall abide by the rules
set forth in 49 CFR Part 29 Subpart F, incorporated herein by reference, with
regard to maintaining a drug-free workplace and shall implement this requirement
in all subawards under this Agreement.
ARTICLE 30 - DEBARMENT AND SUSPENSION
- -------------------------------------
The Recipient shall comply with the nonprocurement debarment and suspension
common rule implementing Executive Orders 12549 and 12689, "Debarment and
Suspension." This common rule restricts subawards and contracts with certain
parties that are debarred, suspended or otherwise excluded from or ineligible
for participation in Federal assistance programs or activities.
ARTICLE 31 - CLEAN AIR AND FEDERAL WATER POLLUTION
- --------------------------------------------------
The Recipient shall comply with the requirements of the Clean Air Act (42 U.S.C.
7401 et seq.) and the Federal Water Pollution Control Act as amended (33 U.S.C.
1251 et seq.) during performance on this Agreement. Any subawards in excess of
$100,000 shall contain a provision that requires the recipient to agree to
comply with all applicable standards, orders or regulations issued pursuant to
the above acts. Violations shall be reported to the Federal awarding agency and
the Regional Office of the Environmental Protection Agency (EPA).
ARTICLE 32 - INDEPENDENT RESEARCH AND DEVELOPMENT COSTS
- -------------------------------------------------------
The Government and the Consortium agree that the Consortium represents a
cooperative agreement with respect to the participant's relationship with each
other and is not the type of contract contemplated by Federal Acquisition
Regulation (FAR) 31.205-18(a) that would preclude the recovery of independent
research and development (IR&D) costs. It is further agreed by the Government
and the Consortium that the relationship between the Government and the
Consortium as defined by the Agreement is not a contract or grant within the
meaning of FAR 31.205-18(a).
Accordingly, this Agreement shall not prohibit the Participants from using their
IR&D funds as their share of the Consortium's Program funds or contributed work
effort, and the R&D costs incurred by the Participants pursuant to this
Agreement shall be allowable IR&D costs if the work performed would otherwise
have been allowable as contractor IR&D in the absence of this Agreement.
ARTICLE 33 - ORDER OF PRECEDENCE
- --------------------------------
The terms set forth in the Articles of Collaboration, Attachment 2 to this
Agreement, are subordinate to the terms and conditions of this Agreement. In the
event of conflict, the terms of this Agreement, excluding Attachments, shall
prevail.
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ARTICLE 34 - LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL TRANSACTIONS
(a) Definitions.
"Agency," as used in this article means executive agency as defined in 2.101.
"Covered Federal action," as used in this article, means any of the following
Federal actions:
(a) The awarding of any Federal contract.
(b) The making of any Federal grant.
(c) The making of any Federal loan.
(d) The entering into of any cooperative agreement.
(e) The extension, continuation, renewal, amendment, or
modification of any Federal contract, grant, loan, of
cooperative agreement.
"Indian tribe" and "tribal organization," as used in this article, have the
meaning provided in section 4 of the Indian Self-Determination and Education
Assistance Act (25 U.S.C. 450B) and include Alaskan Natives.
"Influencing or attempting to influence," as used in this article, means making,
with the intent to influence, any communication to or appearance before an
officer or employee of any agency, a Member of Congress, an officer or employee
of Congress, or an employee of a Member of Congress in connection with any
covered Federal action.
"Local government," as used in this article, means a unit of government in a
State and, if chartered, established, or otherwise recognized by a State for the
performance of a governmental duty, including a local public authority, a
special district, an intrastate district, a council of governments, a sponsor
group representative organization, and any other instrumentality of a local
government.
"Officer or employee of an agency," as used in this article, includes the
following individuals who are employed by an agency:
(a) An individual who is appointed to a position in the Government
under title 5, United States Code, including a position under a temporary
appointment.
(b) A member of the uniformed services, as defined in subsection
101(3), title 37, United States Code.
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(c) A special Government employee, as defined in section 202,
title 18, United States Code.
(d) An individual who is a member of a Federal advisory committee, as
defined by the Federal Advisory Committee Act, title 5, United States Code,
appendix 2.
"Person," as used in this article, means an individual, corporation, company,
association, authority, firm, partnership, society, State, and local government,
regardless of whether such entity is operated for profit, or not for profit.
This term excludes an Indian tribe, tribal organization, or any other Indian
organization with respect to expenditures specifically permitted by other
Federal law.
"Reasonable compensation," as used in this article, means, with respect to a
regularly employed officer or employee of any person, compensation that is
consistent with the normal compensation for such officer or employee for work
that is not furnished to, not funded by, or not furnished in cooperation with
the Federal Government.
"Reasonable payment," as used in this article, means, with respect to
professional and other technical services, a payment in an amount that is
consistent with the amount normally paid for such services in the private
sector.
"Recipient," as used in this article, includes the Contractor and all
subcontractors. This term excludes an Indian tribe, tribal organization, or any
other Indian organization with respect to expenditures specifically permitted by
other Federal law.
"Regularly employed," as used in this article, means, with respect to an officer
or employee of a person requesting or receiving a Federal contract, an officer
or employee who is employed by such person for at least 130 working days within
1 year immediately preceding the date of the submission that initiates agency
consideration of such person for receipt of such contract. An officer or
employee who is employed by such person for less than 130 working days within 1
year immediately preceding the date of the submission that initiates agency
consideration of such person shall be considered to be regularly employed as
soon as he or she is employed by such person for 130 working days.
"State," as used in this article, means a State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, a territory or possession
of the United States, an agency or instrumentality of a State, and multi-State,
regional, or interstate entity having governmental duties and powers.
(b) Prohibitions. (1) Section 1352 of title 31, United States Code, among other
things, prohibits a recipient of a Federal contract, grant, loan, or cooperative
agreement from using appropriated funds to pay any person for influencing or
attempting to influence an officer or employee of any agency, a Member of
Congress, an officer or employee of Congress, or an employee of a Member of
Congress in connection with any of the following covered Federal actions: the
awarding of any Federal contract; the making of any Federal grant; the making of
any Federal loan; the entering into of any cooperative agreement; or the
modification of any Federal contract, grant, loan, or cooperative agreement.
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(2) The Act also requires Contractors to furnish a disclosure if any funds other
than Federal appropriated funds (including profit or fee received under a
covered Federal transaction) have been paid, or will be paid, to any person for
influencing or attempting to influence an officer or employee of any agency, a
Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with a Federal contract, grant, loan, or
cooperative agreement.
(3) The prohibitions of the Act do not apply under the following conditions:
(i) Agency and legislative liaison by own employees.
(A) The prohibition on the use of appropriated funds, in subparagraph (b) (1) of
this article, does not apply in the case of a payment of reasonable compensation
made to an officer or employee of a person requesting or receiving a covered
Federal action if the payment is for agency and legislative liaison activities
not directly related to a covered Federal action.
(B) For purposes of subdivision (b) (3) (i) (A) of this article, providing any
information specifically requested by an agency or Congress is permitted at any
time.
(C) The following agency and legislative liaison activities are permitted at any
time where they are not related to a specific solicitation for any covered
Federal action:
(1) Discussing with an agency the qualities and characteristics (including
individual demonstrations) of the person's products or services, conditions or
terms of sale, and service capabilities.
(2) Technical discussions and other activities regarding the application or
adaptation of the person's products or services for an agency's use.
(D) The following agency and legislative liaison activities are permitted where
they are prior to formal solicitation of any covered Federal action -
(1) Providing any information not specifically requested but necessary for an
agency to make an informed decision about initiation of a covered Federal
action;
(2) Technical discussions regarding the preparation of an unsolicited proposal
prior to its official submission; and
(3) Capability presentations by persons seeking awards from an agency pursuant
to the provisions of the Small Business Act, as amended by Pub. L. 95-507, and
subsequent amendments.
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<PAGE>
(E) Only those services expressly authorized by subdivision (b) (3) (i) (A) of
this article are permitted under this agreement.
(ii) Professional and technical services. (A) The prohibition on the use of
appropriated funds, in subparagraph (b) (1) of this article, does not apply in
the case of -
(1) A payment of reasonable compensation made to an officer or employee of a
person requesting or receiving a covered Federal action or an extension,
continuation, renewal, amendment, or modification of a covered Federal action,
if payment is for professional or technical services rendered directly in the
preparation, submission, or negotiation of any bid, proposal, or application for
that Federal action or for meeting requirements imposed by or pursuant to law as
a condition for receiving that Federal action.
(2) Any reasonable payment to a person, other than an officer or employee of a
person requesting or receiving a covered Federal action or an extension,
continuation, renewal, amendment, or modification of a covered Federal action if
the payment is for professional or technical services rendered directly in the
preparation, submission, or negotiation of any bid, proposal, or application for
that Federal action or for meeting requirements imposed by or pursuant to law as
a condition for receiving that Federal action. Persons other than officers or
employees of a person requesting or receiving a covered Federal action include
consultants and trade associations.
(B) For purposes of subdivision (b) (3) (ii) (A) of this article, professional
and technical services shall be limited to advice and analysis directly applying
any professional or technical discipline. For example, drafting of a legal
document accompanying a bid or proposal by a lawyer is allowable.
Similarly, technical advice provided by an engineer on the performance or
operational capability of a piece of equipment rendered directly in the
negotiation of a contract is allowable. However, communications with the intent
to influence made by a professional (such as a licensed lawyer) or a technical
person (such as a licensed accountant) are not allowable under this section
unless they provide advice and analysis directly applying their professional or
technical expertise and unless the advice or analysis is rendered directly and
solely in the preparation, submission or negotiation of a covered Federal
action. Thus, for example, communications with the intent to influence made by a
lawyer that do not provide legal advice or analysis directly and solely related
to the legal aspects of his or her client's proposal, but generally advocate one
proposal over another are not allowable under this sections because the lawyer
is not providing professional legal services. Similarly, communications with the
intent to influence made by an engineer providing an engineering analysis prior
to the preparation or submission of a bid or proposal are not allowable under
this section since the engineer is providing technical services but not directly
in the preparation, submission or negotiation of a covered Federal action.
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<PAGE>
(C) Requirements imposed by or pursuant to law as a condition for receiving a
covered Federal award include those required by law or regulation and any other
requirements in the actual award documents.
(D) Only those services expressly authorized by subdivisions (b) (3) (ii) (A)
(1) and (2) of this article are permitted under this article.
(E) The reporting requirements of FAR 3.803(a) shall not apply with respect to
payments of reasonable compensation made to regularly employed officers or
employees of a person.
(c) Disclosure. (1) The Contractor who requests or receives from an agency a
Federal contract shall file with that agency a disclosure form, OMB Standard
Form LLL, Disclosure of Lobbying Activities, if such person has made or has
agreed to make any payment using non appropriated funds (to include profits from
any covered Federal action), which would be prohibited under subparagraph (b)
(1) of this article, if paid for with appropriated funds.
(2) The Contractor shall file a disclosure form at the end of each calendar
quarter in which there occurs any event that materially affects the accuracy of
the information contained in any disclosure form previously filed by such person
under subparagraph (c) (1) of this article. An event that materially affects the
accuracy of the information reported includes -
(i) A cumulative increase of $25,000 or more in the amount paid or expected to
be paid for influencing or attempting to influence a covered Federal action; or
(ii) A change in the person(s) or individual(s) influencing or attempting to
influence a covered Federal action; or
(iii) A change in the officer(s), employee(s), or Member(s) contacted to
influence or attempt to influence a covered Federal action.
(3) The Contractor shall require the submittal of a certification, and if
required, a disclosure form by any person who requests or received any
subcontract exceeding $100,000 under the Federal contract.
(4) All subcontractor disclosure forms (but not certifications) shall be
forwarded from tier to tier until received by the prime Contractor. The prime
Contractor shall submit all disclosures to the Contracting Officer at the end of
the calendar quarter in which the disclosure form is submitted by the
subcontractor. Each subcontractor certification shall be retained in the
subcontract file of the awarding Contractor.
(d) Agreement. The Contractor agrees not to make any payment prohibited by this
article.
(e) Penalties. (1) Any person who makes an expenditure prohibited under
paragraph (a) of this article or who fails to file or amend the disclosure form
to be filed or amended by paragraph (b) of this article shall be subject to
civil penalties as provided for by 31 U.S.C. 1352. An imposition of a civil
penalty does not prevent the Government from seeking any other remedy that may
be applicable.
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<PAGE>
(2) Contractors may rely without liability on the representation made by their
subcontractors in the certification and disclosure form.
(f) Cost allowability. Nothing in this article makes allowable or reasonable any
costs which would otherwise be unallowable or unreasonable. Conversely, costs
made specifically unallowable by the requirements in this article will not be
made allowable under any other provision.
ARTICLE 35 - PRE-AGREEMENT COSTS INCURRED
- -----------------------------------------
All costs incurred by the Recipient prior to the effective date of this
Agreement pursuant to the Recipient's Integrated Shipboard Information
Technology project plan commencing June 12, 1995 through date of award of the
agreement will be counted as part of the Recipient's cost share under this
Agreement. However, such costs shall not in the aggregate exceed $235,211.00
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<PAGE>
ISIT Consortium
Attachment # 1 (STATEMENT OF WORK)
COOPERATIVE AGREEMENT DTMA91-95-H-00069
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<PAGE>
3.0 STATEMENT OF WORK
The ISIT Platform Project will be divided into two major phases:
Phase I: System Design and Development, including development of the ASTM
Standards, and ABS Guidelines.
Phase II: Shipboard/Shoreside Prototype Demonstration Test Bed.
The Project Work Breakdown Structure (WBS) required to accomplish the project is
presented in Appendix F.
3.1 STATEMENT OF WORK TASKS
The Project Team will perform the following tasks and subtasks:
Task I - System Engineering (Phase I)
1.1 System Concept Definition. Assemble reference data; develop an updated
functional overview of the ISIT Platform; and prepare a System Concept
Report for use as a technical baseline.
1.2 Architecture Definition. Define the system architecture and to produce an
open architecture ISIT Platform. Define the standard network interfaces,
support an industry standard client/server data base, provide a back end
data replication engine, incorporate a communications server and provide
configuration management utilities.
1.3 System Requirements. Prepare a System Requirements Document for use in
software and hardware development. Conduct a Systems Requirements Review.
1.4 Interface Definition. Identify external software and hardware interfaces
for the application program; identify internal interfaces for the ISIT
Platform; and define the preliminary ISIT Platform Standard Interface
Standard.
1.5 Preliminary Design. Develop a preliminary design of the ISIT Platform,
including software, hardware and interfaces. Design a custom tailored
Virtual Earth Station. Prepare the Preliminary Design Report for
presentation at the Preliminary Design Review. Report will include a
functional breakdown of hardware and software, a specification of the
devices to which the platform will interface, the nature of the
interfaces, and a specification of the user's interface.
Task 2 - System Development (Phase I)
2.1 Hardware Detailed Design. Develop a Hardware Detailed Design Document for
the database server and network, and the Network Matching Interface
(NMI). Develop detailed designs for the cable systems, junction panels,
etc. Conduct a Final Design Review (FDR) to present the detailed hardware
design. Revise the detailed design as required following the FDR.
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<PAGE>
Procure the hardware, components, and parts of the ISIT Platform
identified during the detailed design.
Develop a standard PC-based Network Matching Interface (NMI) to interface
to a set of standard interfaces such as a GPS transceiver or an
integrated bridge system. Develop hardware necessary to interface to a
Virtual Earth Station. (VES).
Develop a hardware integration plan and an integration test plan.
Perform the hardware integration tests. Prepare a Hardware Integration
Test Report.
2.2 Software Development. Develop a Software Detailed Design Document for the
ISIT Platform software components including the Core Components, standard
applications, and NMIs. The Software Detailed Design Document will
include a definition of each software component to its lowest modular
level, a hierarchical structure chart, control dependencies and data
exchanges between modules and components, and test data definitions.
Specify the Commercial Off-The-Shelf (COTS) software and hardware
required for software development. Specify the development environment
including development platform, CASE software, compiler(s), and operating
system(s). Conduct a Final Design Review (FDR) to present the development
environment and detailed design. Revise the detailed design as required
following the FDR.
Procure the software, components, and parts of the ISIT Platform
identified during the detailed design as COTS software, components and
parts required for software development and the development environment.
Install COTS software on the development environment.
2.3 Configuration Management. Develop a Configuration Management Plan for
hardware, software, drawings, and documents. Establish hardware and
software baselines and maintain databases for problem reports. Manage and
maintain Drawing Document Change Notices and associated database. Manage
and maintain Document Change Notices and associated database. Prepare
status reports for all items under configuration management.
Task 3 - Land-Based Testing (Phase I)
3.1 System Integration and Test. Develop the System Integration Plan, and
System Integration Test Plan. Carry out tests and prepare the System
Integration Report.
3.2 Land Based Testing and Simulation (LBT). Prepare the LBT Plan; assemble
the navigation, machinery, cargo, and management systems simulators, and
the data communications platform; connect to the ISIT Platform. Conduct
network testing for system inter-connectivity, robustness, compliance to
standards, and fault-tolerance. Prepare LBT Report.
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<PAGE>
3.3 Installation Requirements. Develop system shipboard and shore-side
installation requirements and concepts for installation of the ISIT
Platform. Identify shipboard and shore side hardware and software
interfaces for the ISIT Platform.
Task 4 - ASTM Standard/ABS Guidelines (Phase I & II)
4.1 ASTM Standard Development. Establish the format for the standard based
upon ASTM criteria. Prepare a draft standard and develop a management
plan to achieve approval of the standard. After receipt of comments and
implementation of the management plan, prepare the final ASTM standard.
Develop a plan for issue, distribution and maintenance of the ASTM
standard. Participate on the ASTM F25.03.05 committee established to
develop the standard.
4.2 ABS Guidelines Development. Develop the ABS Guidelines for Shipboard Data
Management Systems (SDMS) covering hardware, software, testing, ISO
certification, and networks. Conduct studies of current status, identify
data to be included. Develop format and scope. Prepare draft guidelines
and develop a management plan to circulate for review and comment. After
receipt of comments and implementation of management plan, prepare final
guideline for ABS issue and maintenance. Participate on ASTM F25.03.05
Committee to coordinate with ISIT/ASTM standard.
4.3 Review and Comment Management. Implement the review and comment sections
of the management plan and coordinate with ASTM, ABS, NII and other
appropriate organizations.
4.4 ISO 9000 Compliance. Review developed ASTM Standard and ABS Guideline for
conformance with requirements of ISO 9000. Modify as necessary to provide
compliance.
Task 5 - Project Management (Phase I & II)
5.1 Technical Liaison. Provide technical liaison with ARPA AOTR, ASTM, ABS,
NII and the Management Committee. Submit records of liaison contacts and
meeting summaries. Make ISIT team personnel available for information
conferences to review progress and/or problems which may develop.
Conferences may be held at team member's facilities, at the ARPA
facility, or by telephone or e-mail.
5.2 Technical Reviews. Conduct the following technical reviews: System
Requirements, Preliminary Design, Final Design, Test Readiness, and
Presentation of Demonstration Results. Schedule team technical and status
reviews as required. Prepare the agenda and assemble information for the
Management Committee Quarterly Reviews. Prepare a final Project Report
upon completion of the shipboard demonstration.
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<PAGE>
5.3 Management Reports. Develop and implement the approved, detailed Project
Plan which includes: the operational and staffing plan, functions and
responsibilities of lead technical personnel, detailed work plan and
schedule utilizing a computer-based management system (e.g., Microsoft
Project for Windows), and detailed Work Test Descriptions based upon the
WBS. Prepare and maintain the Risk-Management Plan. Communications will
be via letter, memo, telephone and e-mail (Compuserve). Submit progress
reports monthly to provide an overall summary of the work performed
during the period and the activity under each task. Prepare and
distribute technical review meeting minutes and conferences reports.
Support the development of the Quality Assurance (QA) Plan.
5.4 Financial Management. Adopt a uniform method of cost accounting for the
team members and use it to summarize costs. Submit monthly cost reports
which detail labor hours and dollars expended, material costs committed
and ODCS. Cost reports will be accumulated each month and tracked against
planned expenditures and measurable milestones.
5.5 Industry Interface/Advisory Board. Coordinate information dissemination
to Industry Advisory Board members. Support Project Executive in
preparing presentations to the Industry Advisory Boards. Maintain
point-of-contact lists.
Task 6 - Business Plan for Commercialization (Phase I)
6.1 Refine Business Development Concept. Develop the refine private
commercialization approach that defines and develops the services to be
provided to the U.S. shipyards and the ship owner/operators to which the
shipyards will market their designs and products. Refine the Navy
commercialization approach and develop the services to be provided to the
U.S. Navy secondary fleets including MSC, Ready Reserve, Service Craft
and the Academic Fleet. Other DoD departments to be considered include
Army (Transportation Corps and Corps of Engineers) and Air Force. A third
area addressing other Governmental users may be included. These would
include: Department of Transportation (U.S. Coast Guard), Department of
Commerce (NOAA), EPA, Department of Interior (Geological Survey),
National Science Foundation, and NASA.
6.2 Coordinated Business Plan. Develop a Coordinated Business Plan which
details the marketing and sale of complete ISIT Systems, Technical
Support Services and Communication Services to all U.S. Shipyards and
other potential customers.
6.3 Strategic Alliances. Develop strategic alliances and working arrangements
for promotion and sale of the ISIT product line.
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<PAGE>
Task 7 - Shipboard Demonstration Test Bed (Phrase II)
7.1 Demonstration Test Plan. Prepare a demonstration test plan that describes
a three-month demonstration of the prototype ISIT Platform system. Select
the test ship and shore site to be made available by an Advisory Board
ship operator. Select application programs and prepare the installation
and checkout plan including the definition of the tests to be conducted
underway and ashore. Prepare a detailed demonstration schedule.
7.2 Demonstration Design. Perform ship and shore checks. Prepare installation
detail designs that will include: specifications and arrangements,
electrical-electronic, special hardware, and mechanical drawings. Develop
detail design for the Virtual Earth Station systems.
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<PAGE>
ISIT Consortium
Attachment #2 (ARTICLES OF COLLABORATION)
COOPERATIVE AGREEMENT DTMA91-95-H-00069
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<PAGE>
AMENDMENT NUMBER 1.
ARTICLES OF COLLABORATION
FOR
ISIT CONSORTIUM
WHEREAS Articles of Collaboration executed on 14 February 1995 form an
ISIT Consortium among Marine Management Systems, Inc.; Ultimateast Data
Communications, Ltd.; Radix Systems, Inc.; and M. Rosenblatt & Son, Inc. which
anticipates execution of an Agreement between the ISIT Consortium and the
Advanced Research Projects Agency (ARPA) on behalf of the U.S. Government, and
WHEREAS the Maritime Administration of the U.S. Department of
Transportation is now expected to execute the Agreement on behalf of the U. S.
Government rather than ARPA,
NOW THEREFORE, the Parties hereby agree that the said Articles of
Collaboration are Amended as follows:
1. All mention of, or reference to, "ARPA" or to the "Advanced Research
Projects Agency" shall be understood to mean the "U. S. Government."
2. The remainder of the Articles of Collaboration shall remain
unchanged.
IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be
executed by its dully authorized representative as set forth below.
Marine Management Systems, Inc. Ultimateast Data Communications, Ltd.
/s/ Eugene D. Story /s/ Roderick White
- ------------------------------------- ---------------------------------
Signature Signature
Eugene D. Story, President President
- ------------------------------------- ---------------------------------
Name, Title Name, Title
June 9, 1995 June 13, 95
- ------------------------------------- ---------------------------------
Date Date
Radix Systems, Inc. M. Rosenblatt & Son, Inc.
/s/ Richard N. Nelson /s/ Philip B. Kimball
- ------------------------------------- ---------------------------------
Signature Signature
Richard N. Nelson, Vice President Philip B. Kimball, V.P.
- ------------------------------------- ---------------------------------
Name, Title Name, Title
8 June 1995 6/14/95
- ------------------------------------- ---------------------------------
Date Date
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<PAGE>
ARTICLES OF COLLABORATION
FOR
ISIT CONSORTIUM
These Articles of Collaboration (hereinafter "Articles") are entered
into among two vendor companies, one system engineering company and one marine
engineering and design company as follows:
Marine Management Systems Inc. - an Ohio corporation (Vendor)
Ultimateast Data Communications, Ltd. - a Canadian corporation ("Vendor")
Radix Systems Inc. - a Maryland corporation ("Systems")
M. Rosenblatt & Son, Inc. - a New York corporation ("Engineering")
These companies hereinafter collectively identified as "Parties" and
individually identified as a "Party", are to establish the Integrated Shipboard
Information Technology "ISIT" Consortium (hereinafter "Consortium"), and to set
forth express terms and conditions outlining the obligations as between the
vendor companies ("Vendors") and systems company ("Systems") and engineering
company ("Engineering").
WHEREAS the vendors have similar interests in identifying international
market opportunities for commercial vessels and have determined that
participation in the Consortium provides an avenue for pooling their respective
talents and sharing the costs of market penetration for the ("ISIT") system
platform; and
WHEREAS the systems and engineering companies desire to assist the
vendors in meeting their international market penetration objectives while
promoting their own business opportunities:
WHEREAS each Party may individually, or in further collaboration with
other Parties to these Articles in a manner consistent with Federal and State
antitrust laws, utilize the work product resulting from the Consortium
collaboration on a proprietary basis to pursue market opportunities; and
WHEREAS the Party understand that information derived from
participation in the Consortium may not be shared or transferred to any entity
not specifically named as Parties under these Articles; and
WHEREAS, the Parties and the U.S. Government Agency agree that ARPA is
not a party to these articles and has no independent right to sell, use, or
transfer Intellectual Property as defined herein, Proprietary Technology as
defined in Article 6 (c), or Consortium Intellectual Property as defined in
Article 6 (b) and 6 (d) developed pursuant to these Articles or any technical
data provided by any party to the Consortium pursuant to these Articles; and
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<PAGE>
WHEREAS the principal purpose of this Consortium is neither to supply
property or services for the direct benefit or use of the U.S. Government, nor
to transfer a thing of value to state or local governments or other recipients
to carry out a public purpose of support or stimulation authorized by U.S. laws,
and thus it is not feasible or appropriate for the Parties and the Agency
(defined below) to enter into a procurement contract, or grant agreement with
any U.S. Government Agency; and
WHEREAS the Parties anticipate receiving partial and incremental
funding from a U.S. Government agency to perform the Statement of Work; and
WHEREAS each Party reserves its right in review and accept the terms of
any Advanced Research Project Agency Agreement (hereinafter referred to as an
"ARPA Agreement") prior to any active participation in any Consortium project
described herein; and
WHEREAS the Parties wish to enter into a joint venture as such term is
defined in the National Cooperative Research and Production Act of 1993, Public
Law 103-42, through a cooperative agreement pursuant to 31 U.S.C. S6305:
Hereinafter the following definitions apply:
o The ISIT Platform (the "Platform") is a computer based data management
system platform. The Platform will include:
a) a client/server database
b) a database replication engine
c) standardized interfaces to applications
d) a communications driver for transfer of shipboard data to
a shore based management system.
The Platform does not include:
a) shipboard application software
b) shore based communications systems and application
software
o Each of the Parties, once having executed these articles, is a "Party."
o Each Party, once having executed these Articles, has agreed to delegate
the administrative functions of the Consortium to the project manager
company, Radix Systems Inc. (hereinafter "RSI").
o Each Party, once having executed these Articles, has agreed that Marine
Management Systems, Inc. (hereinafter "MMS") will act as the financial
comptroller of the Consortium. (See para. 7a)
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<PAGE>
o The U.S. Government agency identified as providing funding to the
Consortium as a whole is the Advanced Research Project Agency
(hereinafter "ARPA") during the period such funding is available or
being used.
o Intellectual Property means any market studies, ship designs,
manufacturing processes, strategic financing plans, inventions,
creations, processes, works of authorship, software or other
developments or improvements thereto, whether patentable, copyrightable
or not. "Intellectual Property Rights" means any Rights in Intellectual
Property including patents, copyrights, trade secrets and confidential
information.
NOW THEREFORE, the Parties hereby agree as follows:
1.(a) The Parties hereby establish a joint research and development
Consortium to engage in a collaborative research effort of limited duration to
gain further knowledge and understanding of the technologies described or
identified in the Technical Proposal for An Integrated Shipboard Information
Technology (ISIT) Platform submitted to ARPA by MMS on behalf of the Parties on
February 15, 1995 (incorporated by reference as Appendix A and hereinafter
referred to as "Statement of Work"). The Parties understand that the Statement
of Work may be revised to add specificity upon request by ARPA.
(b) Subject to the availability of ARPA funding, the Parties
individually agree to expend "reasonable efforts", within the terms of the ARPA
Agreement to achieve the goals assigned to them as defined therein. By execution
of these Articles, each Party authorizes the Management Committee created under
Article 2 hereof or MMS as the Management Committee's designee, as its agent to
enter into a single "other transaction" with ARPA pursuant to 10 U.S.C S2371,
which shall constitute the ARPA Agreement. ARPA shall fund the Consortium in
accordance with the Schedule of Payments and Payable Milestones negotiated with
the Consortium and included in the ARPA Agreement. During the performance of the
Statement of Work, if the Management Committee reasonably determines that any
Party has used its "reasonable efforts" to perform the task assigned to that
Party in the Statement of Work for any given goal, the Management Committee will
instruct the comptroller to disburse to that Party the funds associated with the
goal, including such funds as have been provided by ARPA. The Management
Committee shall not unreasonably withhold funding from any Party after the
submission of a properly prepared invoice, provided that funding has been
provided by the Parties or by ARPA to the Consortium.
(c) If any party's share of costs is deemed not to be allowable or
allocable to Independent Research and Development/Bids and Proposals (IRAD/B&P)
by any agency of the U.S. Government, the party's commitment of funds may be
reduced by the disallowed said amount.
2.(a) Subject to the terms and conditions stated herein, the Consortium
will be governed by a "Management Committee" which is empowered to determine all
policy, business, financial, legal and technical issues of the Consortium and to
represent the Consortium and the Parties in reporting progress, in negotiating,
and in transacting business with ARPA. Specifically and without limitation, the
Management Committee is empowered to redirect the research, redefine the tasks
and goals of the Parties, and to equitably adjust to all Parties the amount of
funding provided by ARPA.
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<PAGE>
(b)(1) Each Party shall be entitled to one "Voting Representative",
which will comprise the Management Committee. The Management Committee will meet
in regular meetings at alternating locations or as is mutually acceptable to the
Management Committee. As specified in the ARPA Agreement, all Parties and ARPA
may attend these meetings. Each Party shall be entitled to a vote in proportion
to their investment in the project pursuant to the agreed to commitments of each
Party appearing as part of Appendix "A" Statement of Work. Notwithstanding the
size of the investment by any single Party, no single Party shall have more than
40% of the votes. Any excess over 40% will be distributed pro rata among the
remaining parties.
(2) Each Voting Representative may, with prior permission of the
Management Committee, be accompanied by other employees of the Party, including,
without limitation, financial, business, and legal personnel. Third parties,
including other Government agencies, may attend other committee meetings at the
invitation of the Management Committee. The Management Committee reserves the
right to designate the representatives that may attend non-Consortium related
committee meetings.
(3) Each Party shall have the right to specify an Alternate Voting
Representative, either in writing or through oral communication to MMS, if its
designated Voting Representative is otherwise busy, and to change the Party's
designated Voting Representative from time to time with written notice.
(c) The Project Leader Company's (MMS) designated representative shall
serve as Chairman of the Management Committee and shall deliver notification to
all Parties and ARPA regarding meetings of the Management Committee. Any Voting
Representative may call a special meeting of the Management Committee. A Voting
Representative from at least three of the Parties representing at least 50% of
the voting interest must be present in person or by telephone, to constitute a
quorum of any meeting.
(d) The Consortium has appointed Radix Systems Inc. (RSI) as the
project manager to carry out the day to day management of the project. This will
include defining, redefining, allocating or reallocating the tasks within the
scope of the Statement of Work or the ARPA Agreement, and will be the single
point of contact for ISIT Program work.
(e) The Chief Financial Officer of MMS will act as the financial
comptroller to the Consortium, and will attend the committee meetings, and will
provide a single point of contact to the financial officers of the Parties, ARPA
or their designees.
(f) RSI will be responsible to assure that minutes of the meeting are
recorded and distributed to all Parties, within 15 days after each meeting.
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<PAGE>
(g) In the event that the Management Committee is unable to resolve any
intra-Consortium dispute, the dispute shall be resolved through a simple
majority vote of the Parties at a scheduled Management Committee meeting. Each
Party shall be given advance written notice of any scheduled vote which would
resolve an ongoing dispute.
3. A three fourths majority vote of the entire Management Committee
based on the voting representation defined in Article 2 (b)(1) hereof is
required to make the following decisions for the Consortium:
(a) Revise the Articles of Collaboration:
(b) Accept, modify or terminate any funding agreement
with ARPA;
A simple majority is required for the following decisions of the Consortium
(c) Change Project Management Organization.
(d) Change or eliminate any ARPA funding allocated to any
Party as technically and/or financially justified,
but a Party experiencing any reduction in ARPA
funding may pro rata reduce its internally funded
participation in the Consortium;
(e) Approve the annual program plan for funding and
adjusting funding to all Parties.
(f) Admit new parties in accordance with Article 4,
hereof
(g) Resolve any other issues relating to these Articles
and the Statement of Work.
ARPA approval will be obtained as required in accordance with
the ARPA Agreement for any of the items listed above.
4. The Management Committee may consent to admit a new party to the
Consortium. Such new party shall become a party upon its execution of these
Articles. The Management Committee will consider admitting new Parties on a
non-discriminatory basis, but only on relatively comparable financial terms as
the exiting Parties, recognizing the risk of their contributions to date. The
factors taken into consideration will include without limitation whether the new
Party will bring to the Consortium technology otherwise unavailable on the time
scale of the program or will allow the technology of the Consortium to be
applied to new markets, whether the entry of the new Party will not
substantially adversely affect the Intellectual Property Rights of the then
existing Parties, whether the added effort would not substantially change the
ongoing Consortium program, and whether the new Party could participate without
diminishing ARPA funding provided to the original Parties. Notwithstanding the
above, the Management Committee may consider any factor in addition to those
above, and its decision on admitting new Parties is discretionary and final.
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<PAGE>
5.(a) Any Party may terminate its participation in the Consortium at
will, after it has provided written notice, a termination budget, and a revised
statement of work remaining to be accomplished, to the Management Committee
thirty (30) days in advance of the effective date of the termination. The
termination shall include the terminating Party's recommended replacement, if
applicable. During the 30-day period, the terminating Party shall seek to
accomplish an orderly conclusion of its efforts. Subject to the availability of
ARPA funding, the Management Committee shall not unreasonably withhold funding
to the terminating Party related to the orderly conclusion of its efforts.
(b) The terminating Party shall make a "reasonable effort" to transfer
its portion of Consortium work to other Parties or a prospective new Party of
the Consortium. The terminating Party must use reasonable efforts to achieve the
goals for which ARPA funding has already been provided, and refund any
unexpended funding to the Consortium. The terminating Party must provide a
license to its Consortium Intellectual Property to the Party or Parties ("the
Replacing Party") designated by the Management Committee to replace the
terminating Party solely for the purpose of performing the terminating Party's
tasks under these Articles or under the ARPA Agreement as of the date of the
termination notice ("Terminating Party's Tasks"). This license to the Replacing
Party shall be royalty-free, non-exclusive, perpetual, sub-licensable only for
the purpose of allowing the Replacing Party to subcontract the fulfillment of
the Terminating Party's Tasks, except that the Replacing Party may transfer its
right under this license if it terminates its participation in the Consortium.
This should be accomplished, if possible, within the 30 day termination period.
(c)(1) The Management Committee may terminate the participation of a
Party if that Party has committed a material breach of these Articles. The
Management Committee shall give a Party or Parties written notice of a material
breach and afford the opportunity to cure such breach, if a simple majority of
the Management Committee members not alleged to be in material breach vote
("Notice Vote") that such Party or Parties have committed and failed to cure a
material breach of these Articles. A material breach may entail the failure of
any Party to provide labor or in-kind contributions under the Statement of Work.
(2) Such termination shall be effective only if three or more
Management Committee members representing at least 50% of the voting interest of
the Committee vote that the Party has not substantially cured the breach within
30 days after such notice, and the meeting of the Management Committee occurs
between 31 to 45 days after the notice is sent to such Party. The Party subject
to the termination shall have the opportunity at both meetings to demonstrate
that it has not materially breached or has cured any material breach of these
articles.
(d) Any existing Party shall receive its pro rata portion of any
funding due for any full or partial completion of milestones under the ARPA
Agreement as of the effective date of the termination.
- 43 -
<PAGE>
6.(a) Each Party shall be permitted to use the Consortium Intellectual
Property (The ISIT Platform Intellectual Property) on a proprietary basis to
pursue business opportunities, but in no event shall any Party transfer to
shipyards or vendors not party to these Articles such Consortium Intellectual
Property. Nothing herein shall preclude a Party from utilizing Consortium
Intellectual Property to pursue business opportunities with any other Party to
these Articles. All market or technical data, systems, design, inventions or
other Intellectual Property jointly developed in performance of the Statement of
Work shall be considered Consortium Intellectual Property, as set forth and
further defined Article 6.b. and 6.d.
(b) Consortium Intellectual Property is that Intellectual Property
developed by and in the course of identified tasks assigned to and performed by
a Party whether performed under ARPA funding, funding provided by a Party, or as
a result of the in-kind contribution set forth in the Statement of Work and/or
in these Articles. The identified tasks shall be those tasks (i) agreed by the
Party in the Statement of Work of the ARPA Agreement, (ii) agreed to by the
Party with other Parties of the Consortium pursuant to these Articles, or (iii)
assigned to the Party by the Management Committee and accepted by that Party.
(c) These Articles shall not preclude any Party from developing at its
own expense complimentary technology derived from the Consortium Intellectual
Property but outside of the Statement of Work (hereinafter "Proprietary
Technology"); provided, that the Proprietary Technology of the Vendors shall be
limited to those portions of the Statement of Work for which each Vendor
contributed its specific expertise. The developing Party under this subparagraph
reserves all Intellectual Property Rights in such Proprietary Technology so
developed, subject to consultation with the Management Committee should the
Party seek a patent for the Proprietary Technology.
(d) Consortium Intellectual Property as defined by Article 6.b. does
not include (i) background intellectual property or any modifications thereto
whether or not funded within this ARPA project; (ii) pre-existing or
concurrently developed intellectual property independently funded outside of the
Consortium; or (iii) "Proprietary Technology". Any Party submitting Intellectual
Property to the Consortium for use in performing the Statement of Work shall
state that such property is not to be considered Consortium Intellectual
Property in advance of sharing it with the Consortium in accordance with Article
6(g) and Appendix B. Consortium Intellectual Property is owned by the Party
deemed responsible for the development of that Intellectual Property in the
Statement of Work.
(e) All Parties grant to each other a nontransferable, royalty free,
non-exclusive, sublicensable license to use their Consortium Intellectual
Property, provided that such licenses and use shall be restricted solely to the
performance of tasks under these Articles or under the Statement of Work or the
ARPA Agreement. In addition, a Party shall transfer its rights under this
license if it terminates its participation in this Consortium. Such transfer
shall be solely for the purpose of allowing the other Parties of the Consortium
to fulfill their tasks under these Articles or the ARPA Agreement. Such licenses
shall survive the resignation of any granting Party from the Consortium.
- 44 -
<PAGE>
(f) All Parties agree to negotiate with other Parties to grant royalty
bearing licenses with reasonable terms and conditions to Consortium Intellectual
Property. Any decision to sell or transfer Consortium Intellectual Property to
entities not party to this Agreement must be approved unanimously by the
Parties.
(g) The Consortium desires to protect the proprietary information of
the Parties "Proprietary Information". Each Party will individually decide
whether to publish its own technical data or maintain it as proprietary. As a
result of its participation in this Consortium, proprietary information or
hardware of one Party will necessarily be disclosed to or used by another Party.
A Proprietary Information Exchange Agreement is incorporated herein and is found
at Appendix "B", and will govern proprietary information exchanged among the
Parties. The exchange of proprietary information between the Consortium and ARPA
will be governed by a similar Proprietary Information Exchange Agreement to be
executed by ARPA as a part of the ARPA Agreement.
(h) Notwithstanding the Proprietary Information Exchange Agreement,
when one Party's work depends upon the Proprietary Information of another Party,
the technical data may be published for internal review and used solely within
the Consortium or to make periodic presentations to ARPA. Such work may be
published for internal use only by the Parties to the extent that such data (i)
is required for a description of one Party's work, (ii) does not disclose
proprietary information, and (iii) relates primarily to product or system
performance and characteristics. There shall be no open publication of materials
or work to the public without a unanimous vote to the Management Committee.
(i) The Parties may jointly own any invention which results from the
performance of the Statement of Work, and may file a joint patent application
for it. The Parties agree in good faith to cooperate in the filing and
prosecution of such patent. Nothing herein shall preclude a Party from seeking
to patent Proprietary Technology.
(j) The Party intending to patent Proprietary Technology subject to
these Articles shall report any such patent application which relies in
substantial measure upon Consortium Intellectual Property to the Management
Committee within one month of the filing and upon request, provide a copy of the
application including a short abstract to the Management Committee. The
Management Committee will timely report the invention, including the short
abstract, to all applicable Parties and to ARPA, as required by ARPA. All
Parties agree to cooperate with each other through the Management Committee in
resolving questions related to Consortium Intellectual Property, the abstracts,
and potential ownership rights. Any such patent information shall be covered by
the Property Information Exchange Agreement and shall not be disclosed by ARPA
to non-governmental personnel until the respective patents have been issued.
- 45 -
<PAGE>
(k) Any patent application which relies in substantial measure upon
Consortium Intellectual Property shall include the provision required by the
ARPA Agreement stating the interest of the U.S. Government.
(l) The ARPA Agreement may provide for the U.S. Government to obtain
certain rights in the Consortium Intellectual Property. Each Party agrees to
such government rights in its Consortium Intellectual Property, subject to the
exclusions of Article 6. The Parties will cooperate with the Management
Committee in performing any reporting, election, and rights predetermination to
ARPA regarding Intellectual Property as required and to provide the required
information to the Management Committee.
7.(a) MMS will receive funds from ARPA, deposit such funds in a deposit
account opened in the name of the Consortium, disburse such funds as directed by
the Management Committee or as required by Attachment 3 of the ARPA Agreement,
and will report quarterly to the Management Committee on the finances of the
Consortium. Additionally, MMS shall prepare all financial reports required by
the ARPA Agreement and submit such reports to ARPA and the Management Committee,
in accordance with the appropriate schedules. Each Party shall provide the
required financial inputs to permit MMS to meet the reporting requirements. The
financial reporting will not include any Party's proprietary financial or
pricing information. The tasks performed by MMS shall be allowable expenses to
the Consortium, subject to approval by the Management Committee.
(b) The ARPA Agreement and the Statement of Work will provide for
certain rights of the government to audit the financial records of the
Consortium. Each Party agrees that it will reasonably cooperate with an audit of
the Consortium and will allow an audit of its own applicable financial records
as required by the law and upon reasonable notice. The financial comptroller
shall be primary facilitator for supporting these audits. All audit rights shall
be limited to U.S. Government employees or the audits shall be performed by a
mutually acceptable independent outside auditor.
8.(a) THE PARTIES DISCLAIM ANY EXPRESS OR IMPLIED WARRANTIES, INCLUDING
WITHOUT LIMITATION ANY WARRANTY AGAINST INFRINGEMENT OF INTELLECTUAL PROPERTY
RIGHTS, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, TO EACH OTHER, TO ANY GOVERNMENTAL AGENCY, AND TO THIRD PARTIES FOR
ACTIONS, OMISSIONS, PRODUCTS, NON-CONFORMITIES, DEFECTS, LIABILITIES, OR
INFRINGEMENT ARISING OUT OF THE ACTIVITIES OF THE CONSORTIUM. The Parties are
bound to each other and to ARPA entering into an agreement with the Consortium
by a duty of only good faith and "reasonable efforts" research in achieving the
goals of the Consortium. Joint and several liability will not attach to the
Parties of the Consortium so that no Party is responsible for the actions of
another Party but is responsible only for those tasks assigned to it and to
which it agrees to in the ARPA Agreement. THE PARTIES FURTHER DISCLAIM ANY
LIABILITY FOR CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES. IN NO EVENT SHALL A
PARTY'S LIABILITY UNDER THESE ARTICLES EXCEED THE FUNDING IT HAS RECEIVED FROM
ARPA UP TO THE TIME INCURRING SUCH LIABILITY. Any Party may waive any right,
breach or default which such Party has the right to waive, provided that such
waiver shall not be effective against the waiving Party unless it is in writing,
is signed by such Party, and specifically refers to these Articles. No waiver of
any breach of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any other agreement
or provision herein contained. Nothing contained herein shall constitute a
release to any Party for breach of the Proprietary Information Exchange
Agreement attached hereto or infringement of intellectual property rights of the
Parties.
- 46 -
<PAGE>
(b) Each of the Parties signatory hereto agrees to mutually indemnify
every other Party to these Articles with respect to any attorney's fees or court
costs arising from a legal claim or litigation against one or more of the
Parties to this Agreement, to the extent that this Agreement has been directly
identified by the claimant as a basis for the legal claim or litigation. The
parties intend that each Party shall contribute an amount toward attorney fees
or court costs equal to each party's pro rata share of the project investment.
(c) Each of the Parties signatory hereto agrees to indemnify every
other Party to these Articles against attorneys fees, court costs, or judgments
arising from a legal claim or litigation where the claimant asserts such Party
to these Articles has violated a patent, copyright, or other intellectual
property law by transferring Intellectual Property to the Consortium for which
the Party has no legally enforceable proprietary right.
9.(a) These Articles are not intended to be nor shall they be
construed, by implication or otherwise, as an agreement to establish a
partnership (limited or otherwise), a corporation or other formal business
organization or as a procurement "contract" or "grant agreement" as described
under 31 U.S.C. Sections 6303 and 6304, respectively. No Party can be bound by
another Party acting as its agent except as specifically stated in Paragraph
1(b) of these Articles. Each Party acts as an independent contractor subject
only to the terms and conditions stated herein and in the ARPA Agreement.
10. Except and to the extent as specifically set forth herein, nothing
in these Articles shall be construed as conferring by implication, estoppel or
otherwise any license or right under any patent, copyright, trade secret,
trademark or other proprietary right of any Party.
11. Except for the disclosure of basic information regarding this
Consortium, i.e., membership, purpose and a general description of the technical
work, prior written approval by all Parties is required for any specific
publicity or advertising relative to these Articles. However, the Parties agree
that notification of the establishment of this joint research and development
venture shall be filed by or on behalf of the Parties with the U.S. Attorney
General and the Federal Trade Commission in accordance with the Provision of the
National Cooperative Research and Production Act of 1993 within 90 days of
execution of these Articles and after adequate review by all Parties. The costs
of this filing shall be borne by the Consortium.
- 47 -
<PAGE>
12.(a) These Articles and the Consortium shall continue for 24 months
after execution of these Articles unless terminated earlier under any provision
of Article 12.b. It may be renewed at any time prior to the expiration of the
term of these Articles by letter agreement signed by the authorized
representatives of all the Parties who are Parties at that time.
(b) These Articles shall terminate if (i) disapproved by the Attorney
General or the Federal Trade Commission; (ii) the funding of the Statement of
Work is terminated by ARPA; or (iii) funding is not provided by ARPA by July 31,
1995. In the event of Termination for any reason, these Articles shall remain in
full force until it is specified by the Management Committee that all business
matters between the Parties have been properly settled and closed out.
(c) The obligations of confidentiality set forth in Article 6 hereof
shall survive termination of these Articles.
13. The ARPA Agreement will impose requirements upon the Consortium or
its Parties regarding reporting, accounting, civil rights, Intellectual Property
and technology transfer information or transferring of Intellectual Property
generated with funds provided by ARPA. A Party, by acceptance of such ARPA
funds, agrees to conform to such requirements and to reasonably cooperate with
the Consortium in conforming to such requirements, subject, however, to the
Party's right to resign as stated in Article 5(a) above.
14. Any notices or other communications among the parties required by
the Management Committee or permitted hereunder shall be sufficiently given if
sent by telecopier or confirmed by registered or certified mail, postage
prepaid, addressed as follows:
Marine Management Systems, Inc.
102 Hamilton Avenue
Stamford, Connecticut 06902
Attention: Eugene D. Story or Robert D. Ohmes
Fax # (203) 967-2927
Or such other addresses or telecopier or facsimile numbers as shall be
furnished by like notice by such Party. Any such notice or communication given
by mail shall be deemed to have been given three (3) business days after the
date so mailed, and any such notice or communication given by telecopier and the
appropriate answer back received.
15. Neither these Articles nor any rights hereunder, in whole or in
part, shall be assignable or otherwise transferable without the prior written
consent of all other Parties except to the Parties' wholly owned subsidiaries,
corporate parent or such corporate parent's wholly owned subsidiaries.
16.(a) These Articles shall first become effective on February 15, 1995
for any Party which has signed these Articles. These Articles shall be effective
as to a new Party on the date such new Party executes these Articles.
- 48 -
<PAGE>
17. The Parties shall further execute, sign, do or procure to be
executed, signed and done all such further deeds, documents and acts as may be
reasonably required to enable the Parties freely and fully to pursue the goals
assigned to them in the Statement of Work.
18. These Articles shall be construed under the laws of the State of
Connecticut.
19. These Articles constitute the entire agreement of the parties and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions among the Parties, whether oral or written, with respect to the
subject matter hereof.
20. If any provision of these Articles is deemed to be invalid, illegal
or unenforceable by any court of competent jurisdiction, such provision will be
deemed amended to conform to applicable laws of such jurisdiction so as to be
valid and enforceable or, if it cannot be so amended without materially altering
the intention of the Parties, it will be stricken and the remainder of these
Articles will remain in full force and effect.
21. To the extent that revenue received by the Consortium pursuant to
the ARPA Agreement creates a tax obligation, the Consortium shall take all
necessary steps to assure that such tax obligation is transferred to each of the
Parties proportionate to their contributions. Under no circumstances shall the
Consortium be operated in a manner to create a tax obligation for sales, use or
income taxes.
The Consortium is a joint undertaking merely to share expenses and does
not qualify for tax purposes as a "partnership," "tenet," or "association
taxable as corporation" as those terms are defined under Section 7701 of the
Internal Revenue Code.
- 49 -
<PAGE>
22. When a given marine commercial project leads to the construction of
a vessel, in those cases where the Consortium Intellectual Property is
contracted for, then the Party responsible for the contract shall offer the
other appropriate Parties the right of first refusal to supply its components,
systems, designs, or services, etc. at a reasonable price competitive with the
world market for such products or services. This right of first refusal shall
not apply in those cases where the prospective buyers indicates a desire to
utilize the components, systems, designs or services, etc. supplied by companies
not Parties to these Articles. The right of first refusal granted under this
Article shall expire five years from the completion of performance under the
Statement of Work.
23. If the Consortium incurs liability in excess of its assets, such
liability shall be borne by each party in proportion to their contribution. If
the liability arises out of gross negligence or willful misconduct of an
employee of a party, then such party shall bear the entire liability.
IN WITNESS WHEREOF, each of the Parties has caused these
Articles to be executed by its dully authorized representatives on the
respective dates entered below.
/s/ Eugene D. Story /s/ Richard N. Nelson
- --------------------------------- -------------------------------------
Marine Management Systems, Inc. Radix Systems, Inc.
- --------------------------------- -------------------------------------
14 February 1995
- --------------------------------- -------------------------------------
/s/ Philip B. Kimball M. Rosenblatt & Son, Inc.
- --------------------------------- -------------------------------------
/s/ Roderick White Ultimateast Data Communications, Ltd.
- --------------------------------- -------------------------------------
- 50 -
<PAGE>
ISlT Consortium
Attachment #4 (PAYABLE MILESTONES)
COOPERATIVE AGREEMENT DTMA91-95-H-00069
- 51 -
<PAGE>
ARPA/MARAD
ISIT PLATFORM PROJECT
PAYABLE MILESTONES
June 13, 1995
Sheet 1 of 7
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 1
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
1.1 System Concept Definition Preliminary System Concept Report
================================================================================================
1.2 Architecture Definition Preliminary Architecture Definition
================================================================================================
1.3 System Requirements Prelim. System Requirements Document
================================================================================================
1.4 Interface Definition Initial Interface Definition Document
================================================================================================
4.1 ASTM Standard Development ASTM Standard Management Plan
================================================================================================
4.2 ABS Guidelines Development ABS Guidelines Management Plan
================================================================================================
5.3 Management Report Project Management Plan
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 1: $235,211
TARGET COMPLETION DATE: AUGUST 18, 1995
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 2
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
1.1 System Concept Definition System Concept Report
================================================================================================
1.2 Architecture Definition Architecture Definition Document
================================================================================================
1.3 System Requirements System Requirements Document
================================================================================================
1.4 Interface Definition Preliminary Interface Definition Document
================================================================================================
1.5 Preliminary Design Preliminary Design Report Outline
================================================================================================
4.1 ASTM Standard Development ASTM Standard; Draft No. 1
================================================================================================
4.2 ABS Guidelines Development ABS Guidelines; Draft No. 1
================================================================================================
5.2 Technical Review Technical Review No. 1; System Reqs.
================================================================================================
5.3 Management Reports Risk Management Plan; QA Plan
================================================================================================
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 1
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 2: $172,573
TARGET COMPLETION DATE: SEPTEMBER 29, 1995
- 52 -
<PAGE>
June 13, 1995
Sheet 2 of 7
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 3
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
1.5 Preliminary Design Preliminary Design Report; Draft
================================================================================================
2.1 Hardware Development Hardware Development Document; Outline
================================================================================================
2.2 Software Development Software Development Document; Outline
================================================================================================
4.1 ASTM Standard Development ASTM Standard; Draft No. 2
================================================================================================
4.2 ABS Guidelines Development ABS Guidelines; Draft No. 2
================================================================================================
4.4 ISO 9000 Compliance Preliminary ISO 9000 Compliance Report
================================================================================================
5.3 Management Reports Technical Progress Report No. 1
================================================================================================
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 2;
System Design Review
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 3: $66,588
TARGET COMPLETION DATE: NOVEMBER 17, 1995
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 4
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
1.5 Preliminary Design Preliminary Design Report
================================================================================================
2.1 Hardware Development Hardware Detail Design Doc.; Draft No. 1
================================================================================================
2.2 Software Development Software Detail Design Doc.; Draft No. 1
================================================================================================
4.1 ASTM Standards Development ASTM Standard; Review Draft
================================================================================================
4.2 ABS Guidelines Development ABS Guidelines; Review Draft
================================================================================================
4.4 ISO 9000 Compliance ISO Compliance Report
================================================================================================
5.2 Technical Review Technical Review No. 2; Preliminary Design
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 4: $206,494
TARGET COMPLETION DATE: DECEMBER 29, 1995
- 53 -
<PAGE>
June 13, 1995
Sheet 3 of 7
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 5
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
================================================================================================
2.1 Hardware Development Hardware Detail Design Doc.; Draft No. 2
================================================================================================
2.2 Software Development Software Detail Design Doc.; Draft No. 2
================================================================================================
4.3 ASTM STDS/ABS Guidelines Review/Comment Status Report No. 1
Review & Comment Management
================================================================================================
5.3 Management Reports Technical Progress Report No. 2
================================================================================================
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 3;
ARPA/MARAD Mid-Project Review
================================================================================================
6.1 Business Plan Business Plan Concept; Draft
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 5: $179,546
TARGET COMPLETION DATE: FEBRUARY 16, 1996
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 6
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
2.1 Hardware Development Hardware Integration & Int. Test Plan; Draft
================================================================================================
2.2 Software Development Software Detail Design Doc.; Draft No. 3
================================================================================================
2.3 Configuration Management Configuration Management Plan; Outline
================================================================================================
4.3 STDS/Guidelines Review & Comment Review/Comment Status Report No. 2
================================================================================================
5.2 Technical Review Technical Review No. 3; Final Draft
================================================================================================
6.1 Business Plan Business Plan Concept
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 6: $180,576
TARGET COMPLETION DATE: MARCH 29, 1996
- 54 -
<PAGE>
June 13, 1995
Sheet 4 of 7
<TABLE>
<CAPTION>
<S> <C> <C>
================================================================================================
MILESTONE NUMBER 7
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
2.1 Hardware Development Hardware Integration Complete
================================================================================================
2.2 Software Development ISIT Platform Integration Complete
================================================================================================
2.3 Configuration Management Configuration Management Plan; Draft
================================================================================================
4.3 STDS/Guidelines Review & Comment Final Draft No. 1
================================================================================================
5.3 Management Reports Technical Progress Report No. 3
================================================================================================
6.2 Coordinated Business Plan Coordinated Business Plan; Outline
================================================================================================
6.3 Strategic Alliances Strategic Alliances-Preliminary Identification
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 7: $62,209
TARGET COMPLETION DATE: APRIL 26, 1996
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 8
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
2.1 Hardware Development Hardware Development Integration & Test
================================================================================================
2.2 Software Development Software Integration Test
================================================================================================
2.3 Configuration Management Configuration Management Plan
================================================================================================
4.3 STDS/Guidelines Review & Comment Final Draft No. 2
================================================================================================
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 4;
Hardware Development Complete
================================================================================================
6.2 Coordinated Business Plan Coordinated Business Plan; 1st Draft
================================================================================================
6.3 Strategic Alliances Strategic Alliances; 1st Draft
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 8: $125,101
TARGET COMPLETION DATE: MAY 31, 1996
- 55 -
<PAGE>
June 13, 1995
Sheet 5 of 7
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 9
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
2.2 Software Development ISIT Platform Software/COTS;
System Integration Plan
================================================================================================
4.3 STDS/Guidelines Review & Comment Final Draft Review; Status Report No. 2
================================================================================================
5.2 Technical Review Technical Review No. 4;
System Ready for Land-Based Testing
================================================================================================
6.2 Coordinated Business Plan Coordinated Business Plan; 2nd Draft
================================================================================================
6.3 Strategic Alliances Strategic Alliances; 2nd Draft
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 9: $121,971
TARGET COMPLETION DATE: JUNE 28, 1996
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 10
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
3.1 System Integration & Test Land-Based Test;
System Integration Test Plan
================================================================================================
4.3 STDS/Guidelines Review & Comment Final Draft Review; Status Report No. 2
================================================================================================
5.3 Management Reports Technical Progress Report No. 4
================================================================================================
6.2 Coordinated Business Plan Commercialization Plan
================================================================================================
6.3 Strategic Alliances Commercialization Plan
================================================================================================
</TABLE>
- 56 -
<PAGE>
TOTAL PAYABLE AMOUNT; MILESTONE 10: $115,161
TARGET COMPLETION DATE: JULY 26, 1996
June 13, 1995
Sheet 6 of 7
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 11
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
3.1 System Integration & Test System Integration Complete;
System Integration Report
================================================================================================
3.3 Installation Requirements Installation Requirements Document; Outline
================================================================================================
4.3 STDS/Guidelines Final Draft Review; Status Report No. 3
================================================================================================
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 5;
STDS & Guidelines Final Review Version
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 11: $118,699
TARGET COMPLETION DATE: AUGUST 30, 1996
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 12
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
3.2 Land-Based Testing Land-Based Testing Report
================================================================================================
3.3 Installation Requirements Installation Requirements Report
================================================================================================
4.3 STDS/Guidelines Final Review; Status No. 1
================================================================================================
7.1 Demonstrate Test Plan Demonstration Test Plan
================================================================================================
7.2 Demonstrate Design Demonstrate Design
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 12: $149,529
TARGET COMPLETION DATE: SEPTEMBER 27, 1996
- 57 -
<PAGE>
June 13, 1995
Sheet 7 of 7
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 13
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
4.3 STDS/Guidelines Final Review; Status No. 2
================================================================================================
5.2 Technical Review Technical Review No. 5; Final Presentation
================================================================================================
5.3 Management Reports Progress Report No. 5
================================================================================================
7.3 Demonstration Install/Checkout
Shipboard Installation/Checkout Complete
================================================================================================
7.4 Demonstration Install/checkout
Shore side Installation/Checkout Complete
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 13: $65,247
TARGET COMPLETION DATE: OCTOBER 25, 1996
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 14
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
4.3 STDS/Guidelines Final Review; Status No. 3
================================================================================================
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 6
================================================================================================
7.5 Demonstration Test Demonstration Test Preliminary Report
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 14: $53,190
TARGET COMPLETION DATE: NOVEMBER 29, 1996
<TABLE>
<CAPTION>
================================================================================================
MILESTONE NUMBER 15
================================================================================================
TASK DESCRIPTION MEASURE OF COMPLETION
================================================================================================
<S> <C> <C>
================================================================================================
4.3 STDS/Guidelines Standards Ready for Release
================================================================================================
5.3 Management Reports Final Project Report
================================================================================================
7.5 Demonstration Test Demonstration Assessment Report
================================================================================================
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 15: $60,868
TARGET COMPLETION DATE: DECEMBER 27, 1996
- 58 -
<PAGE>
Exhibit 10.14(b)
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
COOPERATIVE AGREEMENT
PROJECT NUMBER: DTMA91-94-H-00069, Dated July 12, 1995
MODIFICATION: 0001
PROJECT TITLE: "Integrated Shipboard Information Technology
Platform (ISIT)"
APPROPRIATION DATA X750 9 95 210 175000 X00K83 2523 952100K83
Increase of $398,697
RECIPIENT NAME Marine Management Systems
AND ADDRESS: 102 Hamilton Ave.
Stamford, CT 06902
AGENCY NAME AND DOT/Maritime Administration
ADDRESS: Office of Acquisition, MAR-380
400 Seventh Street, SW., Room 7310
Washington, DC 20590
MODIFICATION Article 10 - MODIFICATIONS
AUTHORITY: Mutual Agreement of the Parties
DESCRIPTION:
Modification 0001 to this Cooperative Agreement is hereby issued to provide for
the additional FY 95 funding being added to this project. Funds in the amount of
$398,697 are hereby added to this project to cover costs associated with the
completion of Tasks reflected in Attachment 4, Payable Milestone Schedule. This
changes the current Government share for FY 95 from $1,159,285 to $1,557,982.
The remaining Government share in the amount of $354,781 is subject to the
availability of FY 96 funds.
All other terms and conditions to this Cooperative Agreement remain unchanged.
MARITIME ADMINISTRATION
DEPARTMENT OF TRANSPORTATION
/s/ Tracy L. Ford Sep 29, 1995
- ----------------------------------------------- ------------
Tracey L. Ford Date
Agreement Officer
<PAGE>
EXHIBIT 10.14(c)
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
COOPERATIVE AGREEMENT
PROJECT NUMBER: DTMA91-95-H-00069
MODIFICATION: 0002
TITLE: "Integrated Shipboard Information Technology
Platform (ISIT)"
FUNDING DATA: 69X1750 996 210 175000 X00K83 2523
9621000K83 Increase: $354,781.00
RECIPIENT NAME Marine Management Systems
AND ADDRESS: 102 Hamilton Avenue
Stamford, CT 06902
AGENCY NAME AND DOT/Maritime Administration
ADDRESS: Office of Acquisition, MAR-380
400 Seventh Street, SW., Room 7310
Washington, DC 20590
MODIFICATION Article 10 Modifications and Mutual Agreement
AUTHORITY: between the Parties
DESCRIPTION:
1. By this modification Article 1 Parties, Article 9 Project Management and
Attachment 3 Financial Status Report are hereby modified to reflect the
addition of SINTEF Automatic Control as a Project Partner.
2. Marine Management Systems attached letter dated November 30, 1995 is hereby
incorporated by reference into this agreement.
3. Provide additional funding in the amount of $354,781.00 to completely fund
the agreement. The federal funding obligation is increased from:
$1,557,982.00 to: $1,912,763.00.
4. Due to a typographical error on Modification 0001, Project Number, is
hereby corrected to read: delete "DTMA91-94-H-00069" and replace with
DTMA91-95-H-00069.
5. All other terms and conditions of the Cooperative Agreement remain
unchanged.
/s/ Tracy L. Ford
- ------------------------
Tracey L. Ford
Agreements Officer
Date: March 25, 1996
<PAGE>
EXHIBIT 10.14(d)
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
COOPERATIVE AGREEMENT
PROJECT NUMBER: DTMA91-95-H-00069
MODIFICATION: 0003
TITLE: "Integrated Shipboard Information Technology
Platform (ISIT)"
FUNDING DATA: N/A
RECIPIENT NAME Marine Management Systems
AND ADDRESS: 470 West Avenue
Stamford, CT 06902
AGENCY NAME AND DOT/Maritime Administration
ADDRESS: Office of Acquisition, MAR-380
400 Seventh Street, SW., Room 7310
Washington, DC 20590
MODIFICATION Article 10 Modifications
AUTHORITY:
DESCRIPTION:
1. By this modification, Article 7 Period of Performance is hereby extended
from January 11, 1997 through July 11, 1997. The total period of
performance for this project is extended from eighteen months to
twenty-four months.
2. In accordance with Article 13 Payable Milestones, the revised ISIT
Consortium payable milestones are hereby modified to reflect the addition
of five new milestones: 8B, 8C, 9A, 10A, 11A. The attached milestones are
incorporated into this agreement.
3. All other terms and conditions of the Cooperative Agreement remain
unchanged.
DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
/s/ Tracy L. Ford July 10, 1996
- -------------------------------------------- -----------------
Tracey L. Ford Date:
Contracting Officer
<PAGE>
ISIT Consortium
Attachment #4 (Payable Milestones)
Cooperative Agreement DTMA91-95-H-00069
Modification No. 3
Project Payable Milestones
Adjusted for January 1996 and June 12 Schedule
Change
(Milestone 1-7 Unchanged)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 8A
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development System Requirements Specification - Final Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development TR: Architecture Approach; Cooperating Object
Frameworks
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development TR: Architectural Approaches; Persistence,
Distribution, Concurrency
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4.1 ASTM STDS Development Review Draft No. 4; Review & Comment
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.5 Industry Interface/Advisory Board ISO/IMO ISIT Briefings
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
6.2/6.3 Coordinated Business Plan/Strategic Alliances Coordinated Business Plan/Strategic Alliances
1st Draft
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 8A: $75,101
TARGET COMPLETION DATE: MAY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 8B
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.1 Hardware Development Hardware Integration and Integration Test Plan -
2nd Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development System Requirement Specification - Final
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.2 Technical Review Technical Review Meeting No. 4 - Final Design
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 8B: $25,000
TARGET COMPLETION DATE: JUNE 28, 1996
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 8C
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.1 Hardware Development Hardware Integration & Integration Test Plan -
Final Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development System Design Document - First Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4.1 ASTM Standards Development Rev. Draft No. 4 Submitted for Subcommittee Ballot
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4.2 ABS Guidelines Development Final Draft - Review and Comment
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.3 Management Reports Technical Progress Report No. 4
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 8C: $25,000
TARGET COMPLETION DATE: JULY 26, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 9
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development System Design Document - Final
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4.1/4.2 ASTM STDS/ABS Guidelines Development ASTM Review Draft No. 5; Status Report No. 2
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 4
- ---------------------------------------------------------------------------------------------------------------------------------
6.2/6.3 Coordinated Business Plan Coordinated Business Plan/Strategic Alliances;
2nd Draft
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 9: $63,971
TARGET COMPLETION DATE: AUGUST 30, 1996
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 9A
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development API Document - Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.3 Configuration Management Configuration Management Plan - Final
- ---------------------------------------------------------------------------------------------------------------------------------
5.2 Technical Review Technical Review Meeting No. 5
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 9A: $58,000
TARGET COMPLETION DATE: SEPTEMBER 20, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 10
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
2.2 Software Development API Document - Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.1 System Integration & Test Land-Based Test Plan - Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4.2 ABS Guidelines Development Final Draft; for Review by ABS Committees
- ---------------------------------------------------------------------------------------------------------------------------------
5.3 Management Reports Technical Progress Report No. 5
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
6.2 Coordinated Business Plan Commercialization Plan
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
6.3 Strategic Alliances Commercialization Plan
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 10: $69,097
TARGET COMPLETION DATE: OCTOBER 25, 1996
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 10A
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.1 System Integrating & Test System Integration Test Plan - Draft
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
7.1 Demonstration Test Plan Demonstration Test Plan - Draft
- ---------------------------------------------------------------------------------------------------------------------------------
7.2 Demonstration Design Demonstration Design - Draft
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 10A: $46,064
TARGET COMPLETION DATE: NOVEMBER 29, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 11
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.1 System Integration and Test Land Based Test Plan - Final
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.2 Technical Review Technical Review No. 6 - Test Readiness
- ---------------------------------------------------------------------------------------------------------------------------------
7.1 Demonstration Test Plan Demonstration Test Plan - Final
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 11: $71,219
TARGET COMPLETION DATE: DECEMBER 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 11A
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4.1 ASTM Standards Development F25 Ballot Complete
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4.2 ABS Guidelines Development Pre-Release Draft
- ---------------------------------------------------------------------------------------------------------------------------------
5.3 Management Reports Technical Progress Report No. 6
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 5
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 11A: $47,480
TARGET COMPLETION DATE: JANUARY 24, 1997
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 12
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.1 System Integration & Test System Integration and Test Report - Preliminary
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.2 Land Based Testing Test Report, Data Acquisition
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.2 Land Based Testing Test Report, Executive
- ---------------------------------------------------------------------------------------------------------------------------------
3.2 Land Based Testing Test Report, Communication Services
- ---------------------------------------------------------------------------------------------------------------------------------
7.2 Demonstration Design Demonstration Design - Final
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 12: $149,529
TARGET COMPLETION DATE: MARCH 21, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 13
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.1 System Integration and Test System Integration Test Report - Final
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3.2 Land Based Testing Land Based Test Report - Final
- ---------------------------------------------------------------------------------------------------------------------------------
5.2 Technical Review Technical Review Meeting No. 7; Final
Presentation; Phase I
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.3 Management Reports Progress Report No. 7
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
7.3 Demonstration Install/Checkout Shipboard Installation/Checkout Complete
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
7.4 Demonstration Install/Checkout Shore side Installation/Checkout Complete
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 13A: $65,247
TARGET COMPLETION DATE: APRIL 18, 1997
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 14
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.5 Industry Interface/Advisory Board Advisory Board Meeting No. 6
- ---------------------------------------------------------------------------------------------------------------------------------
7.5 Demonstration Test Demonstration Test Preliminary Report
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 14: $53,190
TARGET COMPLETION DATE: MAY 23, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MILESTONE NUMBER 15
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TASK DESCRIPTION MEASURE OF COMPLETION
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.3 Management Reports Final Project Report
- ---------------------------------------------------------------------------------------------------------------------------------
7.5 Demonstration Test Demonstration Assessment Report
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL PAYABLE AMOUNT; MILESTONE 15: $60,868
TARGET COMPLETION DATE: JUNE 20, 1997
<PAGE>
EXHIBIT 10.14(e)
U.S. Department 400 Seventh Street, S.W.
of Transportation Washington, D.C. 20590
Maritime
Administration
October 31, 1996
Mr. Eugene Story
Marine Management Systems, Inc.
4760 West Avenue
Stamford, Connecticut 06902
Dear Mr. Story
This letter serves as a clarification of our understanding of the Cooperative
Agreement #DTMA91-95-H-00069, dated July 12, 1995.
The section in question is in Article 20 of the agreement, section B "Data
Categories", section 2 "Category B (Software)". The text of the section defines
project developments, but the following listing of data is incomplete - it
includes design data, and ISIT sample application systems, but excludes the
actual ISIT system which have evolved over the course of the project. It is our
understanding that Category B includes all ISIT software developed under this
program, including the "Data Acquisition Services", "Executive Services", and
"Communication Services".
Sincerely,
/s/ Todd Ripley
- -------------------------
Todd Ripley
Office of Shipyard Revitalization
EXHIBIT 10.15
CONNECTICUT INNOVATIONS, INC.
FEDERAL TECHNOLOGY PARTNERSHIP ASSISTANCE AGREEMENT
This FEDERAL TECHNOLOGY PARTNERSHIP ASSISTANCE AGREEMENT (the "Agreement")
is made this 31st day of July, 1995, by and between MARINE MANAGEMENT SYSTEMS,
INC., an Ohio corporation with an office and principal place of business located
at 102 Hamilton Avenue, Stamford, Connecticut (the "Applicant"), and CONNECTICUT
INNOVATIONS, INCORPORATED, a specially-chartered Connecticut corporation with an
office located at 40 Cold Spring Road, Rocky Hill, Connecticut ("CII").
WITNESSETH:
WHEREAS, pursuant to Special Act 93-2 (the "Act") CII has established a
Federal Research Leverage Grant Program to assist both universities and
industries to provide a match to obtain Federal research funds in order to
encourage technology-driven economic development and manufacturing modernization
initiatives in the State of Connecticut (the "State");
WHEREAS, CII has established an "FTP Assistance Program Account" for the
purpose of providing financial assistance pursuant to the Act;
WHEREAS, the Applicant is currently undertaking a project which involves
research, development, and commercialization activities in connection with
producing an integrated shipboard information technology (ISIT) platform (the
"Project") and has been selected to receive federal funding from ARPA/MARITECH
for the Project pursuant to the collaborative project entitled "An Integrated
Information Technology (ISIT) Platform" (the "Federal Grant");
WHEREAS, CII is desirous of increasing the rate of technological
innovation, knowledge and technology transfer and product and process
development in the State and wishes to assist the Applicant in facilitating
development and commercialization of the Project, and further desires to provide
incentives to the Applicant so that the Applicant will maintain its principal
operations in the State and expand employment opportunity and attract new jobs
to the State, and has therefore agreed to provide funding upon the terms and
conditions-set forth in this Agreement;
WHEREAS, the Applicant has submitted and CII has approved an application
for financial assistance from CII pursuant to the Act for the purpose of
conducting research, development, and commercialization activities in connection
with producing an integrated shipboard information technology (ISIT) platform
(such portion of the Project which is funded by CII is hereinafter referred to
as the "FTP Project") and the approved application is attached hereto as
Schedule A and made a part hereof (the "Application"); and
WHEREAS, CII has approved the Application, including the FTP "Project
Proposal and Budget" included therein, all of which are incorporated by
reference in this Agreement as if fully set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereby agree as follows:
1. Amount of Grant. Subject to all of the terms and conditions set forth
in this Agreement, CII shall provide funding to the Applicant in the aggregate
amount of Four Hundred and Eighty-Seven Thousand Four Hundred and Thirty-Three
Dollars ($487,433.00) (the "Grant"). The Grant shall be advanced by CII to
Applicant in two installments as follows:
(A) CII will advance the first installment of Grant funds in the
amount of Two Hundred and Forty Thousand Thirty-Three Dollars
($240,033.00) to Applicant upon satisfaction of the conditions to funding
in Paragraph 3 of this Agreement; and
(B) provided no Event of Default nor any event which with the
passage of time or giving of notice, or both, might become an Event of
Default shall have occurred hereunder and further provided that Applicant
shall have delivered to CII and CII shall have accepted (i) the Critical
Milestones Report referred to in Section 5 of this Agreement and, (ii) a
Balance Sheet and Income Statement current through the most recently ended
fiscal quarter, CII will advance the remaining installment of Grant funds
in the amount of Two Hundred and Forty-Seven Thousand Four Hundred Dollars
($247,400.00) within forty-five (45) days following the acceptance of such
report by CII.
Any amount in excess of the Grant which may be necessary to cover the
Project costs set forth in the Project Proposal and Budget shall be the
responsibility of Applicant.
2. Term. The term of the Grant shall commence on July 1, 1995 and end on
December 31, 1996 (the "Term"). CII shall not advance any further Grant funds to
Applicant following the date which is Eighteen (18) Months following the date of
commencement of this Agreement (the "Grant Disbursement Period").
3. Conditions to Funding. Contemporaneously with the execution
and delivery of this Agreement and as a condition precedent to funding by
CII, the Applicant shall execute and/or deliver to CII:
(A) if Applicant employs 25 or more full-time employees as of the date of
Applicant's Application and has requested a Grant in excess of $250,000.00
(hereinafter referred to as a "Threshold Project"), a joint statement (the
"Joint Statement") executed by Applicant and CII substantially in the form of
Schedule B attached hereto, (a) identifying (i) the number of jobs to be
retained by the FTP Project, (ii) the number of jobs to be created by the FTP
Project, (iii) the wage and benefit levels of any jobs to be retained or created
by the FTP Project (iv) any other CII public policy objectives which the FTP
Project will serve and (v) the extent to which the FTP Project will further such
public policy objectives, and (b) acknowledging that the assistance for the FTP
Project is being provided by CII because of the expectation that the FTP Project
will further such objectives. The Joint Statement shall be delivered by
- 2 -
<PAGE>
CII to the chief elected official of the municipality in which the Project is
located and to any employee representative of Applicant;
(B) a certificate containing current employee count of the Applicant
designating all employees of the Applicant and their respective positions, which
count shall include a listing of all categories of employees and the respective
wage rates and benefit rates for each category of employee and which count shall
be certified as true and accurate in all respects by the Chief Executive Officer
of the Applicant;
(C) a Balance Sheet and Income Statement of the Applicant dated within 120
days prior to the date hereof or the most recently ended fiscal year, which
Balance Sheet and Income Statement shall be prepared in accordance with
Generally Accepted Accounting Principles consistently applied and shall be
certified to the satisfaction of CII in its sole and absolute discretion;
(D) if applicable, a Certificate of Good Standing (and evidence of
corporate or partnership qualification in Connecticut) of the Applicant;
(E) a copy of the Applicant's Corporate Resolution or partnership consent
authorizing this transaction, as applicable;
(F) letters from the State of Connecticut Department of Revenue Services
which evidence that the Applicant is not in default in payment of sales and use
taxes or corporation business taxes to the State; and
(G) (i) a letter, signed by the Applicant and the principal investigator
for the Project (the "P.I."), confirming that the P.I. is employed by the
Applicant and will devote to the Project at least the amount of time required
under Section 9(G) hereof, and (ii) fully executed copies of the non-competition
and proprietary information agreements entered into between the Applicant and
the P.I.
In addition, as soon as is practicable and as a condition precedent to
funding by CII, the Applicant shall deliver a fully executed copy of the
contract or agreement evidencing an award of Federal Grant funding.
This Agreement and the foregoing documents are hereinafter collectively
referred to as the "Funding Documents". Said Balance Sheet and said Income
Statement are collectively hereinafter referred to as the "Initial Financial
Statements".
4. Project Proposal and Budget. The Project Proposal and Budget attached
hereto as Schedule A shall constitute the final Project Proposal and Budget for
the entire FTP Project. Except for the reallocation referred to in Section 9(c)
of this Agreement the Project Proposal and Budget may not be amended without the
prior written consent of CII in its sole and absolute discretion. Approval by
CII of any such amendment shall not constitute or imply a revision of the amount
of the Grant specified in Section 1 hereof.
- 3 -
<PAGE>
5. Critical Milestones. Attached hereto as Schedule C and made a part
hereof is a complete and final list of the significant research, development and
commercialization milestones to be reached by Applicant during the course of the
Project, together with a timetable for the attainment of such milestones (the
"Critical Milestones"). The Critical Milestones may not be revised or amended
without the prior written consent of CII. Within 15 days following the
achievement of the Critical Milestones, the Applicant shall submit to CII (i) a
detailed written report in which the Applicant will provide evidence that it has
achieved the Critical Milestones (the "Critical Milestones Report") and (ii) a
status report with respect to Applicant's actual revenues and expenditures in
connection with the FTP Project for such period and comparison with Applicant's
Project Proposal and Budget and projections for such period. The date on which
the Critical Milestones Report (or any amendment thereto) is delivered to CII
shall be referred to herein as the "CMR Notice Date". CII shall, within
forty-five (45) days following the CMR Notice Date, notify the Applicant if it
accepts or rejects the Critical Milestones Report.
6. Information and Reporting Requirements. The Applicant shall submit to
CII:
(A) annually, within 120 days following the end of each fiscal year of the
Applicant, a Balance Sheet and Income Statement and a current employee count
containing the information described in Section 3 (B) hereof, which Balance
Sheet and Income Statement shall be certified to the satisfaction of CII, in its
sole and absolute discretion (Said Income Statements and Balance Sheets are
hereinafter referred to as the "Financial Statements"). Such Financial
Statements shall also reveal the source of all public and private funds invested
in the Project subsequent to CII's acceptance of the Applicant's Application.
(B) Applicant shall provide semi-annually an employee count containing the
information described in Section 3(B) of this Agreement throughout the Term of
this Agreement;
(C) within fifteen (15) days following the end of the Grant Disbursement
Period, a detailed written progress report with respect to the FTP Project,
which progress report shall describe (i) Applicant's progress to the date of
such report with respect to the attainment of Critical Milestones and (ii) an
evaluation of the effectiveness of the FTP Project, including without
limitation, the continued potential for commercialization and actual
commercialization achieved to such date and (iii) a status report with respect
to Applicant's actual revenues and expenditures in connection with the FTP
Project for such period and comparison with Applicant's Project Proposal and
Budget and projections for such period;
(D) if the FTP Project is a Threshold Project, with the Critical Milestones
Report described in Section 5 and within fifteen (15) days following the end of
the Grant Disbursement Period, a detailed report which describes the Applicant's
progress toward meeting the objectives described in the Joint Statement;
(E) copies of all notices and correspondence to or from Applicant with
respect to the Federal Grant; and
- 4 -
<PAGE>
(F) such additional financial and other information as CII may, at its sole
and absolute discretion, request.
7. Failure to Maintain Connecticut Presence/Relocation. In the event that
(i) at any time during the Term Applicant shall fail to maintain its principal
place of business and a numerical majority of the sum of its employees and its
major business operations and manufacturing facilities in the State (a
"Connecticut Presence"), or (ii) Applicant shall relocate outside of the State
at any time during the Term, Applicant shall be required to immediately pay to
CII two hundred (200%) percent of the Grant funds received by Applicant.
8. Change in Ownership. In the event that Applicant or any partner or
material participant in or with Applicant shall undergo a Change of Ownership
after the date hereto Applicant will immediately deliver written notice of such
Change of Ownership to CII. CII shall not be obligated to advance any further
Grant funds to Applicant following a Change in Ownership. For purposes of this
Paragraph, a Change of Ownership shall occur if any person other than the
current stockholders of the Applicant and their families, trusts for the benefit
of such current stockholders and entities owned by such current stockholders,
(i) is or becomes the owner of more than 50% of the capital stock of the
Applicant, or (ii) acquires more than 50% of the capital stock of the Applicant,
or (iii) acquires more than 50% of the Assets of the Applicant; provided,
however, that an underwritten public offering of the Applicant's capital stock
in which no single purchaser acquires 25% or more of the issuance shall not
constitute a Change in Ownership.
9. Covenants of Applicant. The Applicant covenants and agrees that
throughout the Term of the Project it shall:
(A) furnish, upon request by CII, such income statements, balance sheets,
employment records and such further financial and other information respecting
the Applicant, in the form maintained by the Applicant, as CII may, in its
discretion, reasonably require from time to time, including, without limitation
the Financial Statements and other reports referred to in Paragraph 6 hereof.
CII shall, from time to time, in its discretion, and upon 24 hours notice to the
Applicant, have the privilege of making inspections during business hours of the
Applicant's facilities and the books and records of the Applicant and to make
excerpts therefrom and the Applicant shall assist CII in making said
inspections;
(B) notify CII promptly of any material adverse change in the financial
condition or affairs of the Applicant;
(C) use the Grant funds solely and exclusively for the research and
development, marketing and marketing-related expenses described in Schedule A
attached hereto. The Grant funds may be used to pay expenses set forth on
Schedule A only within the Grant Disbursement Period and only up to the amount
set forth with respect to each line item set forth therein, except that
Applicant may reallocate amounts among different line items provided the
cumulative amount of such reallocations does not exceed ten (10%) percent of the
Grant. Any reallocation in excess of ten (10%) percent limitation shall require
the prior written consent of CII. The Applicant will promptly reimburse CII for
Grant funds not expended within the Grant
- 5 -
<PAGE>
Disbursement Period and (subject to the reallocation allowance) for expenditure
of Grant funds which exceeds the amount budgeted for a particular line item set
forth in Schedule A;
(D) comply with all applicable laws, ordinances, rules and regulations of
all federal, state and local governmental authorities having jurisdiction over
the Applicant and/or its business including without limitation all those
relating to environmental matters;
(E) maintain a Connecticut Presence as described in Section 70);
(F) offer employment at the new location to its employees from the original
location (if such employment is available) in the event that Applicant relocates
within the State during the Term;
(G) during the Grant Disbursement Period, cause the P.I. to devote at least
one-fifth (1/5) of a full-time 40-hour work week to the FTP Project. During the
Grant Disbursement Period, Applicant shall obtain the written consent of CII
prior to permitting any permanent change in P.I. or any temporary change which
may result in the existing P.I. not performing his or her duties in accordance
with the terms of this Agreement for a period of three (3) months during any
calendar year. Applicant further agrees to notify CII in writing in the event
that the P.I. is required, during the Grant Disbursement Period, to devote
substantially more or less time and/or effort to the FTP Project than
contemplated by Applicant's Project Plan and Budget;
(H) ensure that the aggregate amount of all funds for the Project which are
not provided by the Federal Grant program, by other parties, or by CII hereunder
(the "Applicant Matching Funds") shall be equal to or greater than $548,379.00
provided, however, that the Applicant Matching Funds may be in the form of cash
in an amount equal to or greater than $531,504.00 and in the form of contributed
services or assets at least valued at $16,875.00;
(I) comply with all of the terms and conditions of the Federal Grant; and
(J) use all Federal Grant funds, all Grant funds and all Applicant Matching
Funds solely and exclusively for the Project in accordance with the Application
and the Project Plan and Budget.
10. Negative Covenants. Applicant hereby agrees that it shall not:
(A) except for the Grant funds, utilize other funding provided by CII or
the State or any of its agencies, instrumentalities or political subdivisions as
Applicant's match of the required non-Federal Grant funds;
(B) permit any change in senior personnel (other than resignations by
employees or terminations of employees who are replaced within a reasonable time
by replacement senior personnel) employed in connection with the Project without
the prior written consent of CII;
- 6 -
<PAGE>
(C) use any of the Grant funds for overhead expenses incurred in connection
with the Project (except for the one (1.0%) percent administrative and oversight
fee to be paid to CII pursuant to Paragraph 15 of this Agreement);
(D) use the Grant funds exclusively for capital expenditures related to the
Project;
(E) permit any change in any partner or material participant in or with
Applicant in the Project without the prior written consent of CII (it being
understood that, if a partner or material participant withdraws from the
Project, its replacement will be subject to the approval of CII);
(F) fail to maintain a Connecticut Presence as described in Paragraph 7 or
relocate outside of the State at any time during the Term.
11. Representations and Warranties of the Applicant: The Applicant
represents, warrants and agrees that:
(A) the Applicant and its officers have the full right, power and authority
to enter into and perform all of the provisions of this Agreement and all other
instruments and documents executed or delivered in connection herewith
(collectively, the "Documents") and to incur the obligations contained herein
and that all action on the part of Applicant, its directors and shareholders,
members and/or partners necessary for the authorization, execution, delivery and
performance by the Applicant of this Agreement and all other Documents and for
the consummation of the transactions contemplated herein and therein, and has
been taken. All documents and agreements executed and delivered pursuant hereto
or in connection herewith, when delivered, will be the valid and binding
obligations of the Applicant and/or such officer(s) enforceable in accordance
with their respective terms;
(B) the execution and delivery by Applicant of this Agreement and all other
Documents and compliance herewith and therewith will not with or without notice
or the passage of time or both result in any violation of and will not conflict
with, or result in a breach of any of the terms of, or constitute a default
under any provision of, any state or federal law to which the Applicant is
subject, the Applicant's certificate of incorporation or by-laws, partnership
agreement or other organizational documents, as amended, or any mortgage,
indenture, agreement, instrument, judgment, decree, order, rule or regulation or
other restriction to which the Applicant is a party or by which it or any of its
property is bound, or may be affected, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Applicant pursuant to any such term or give to any other person or
entity the right to accelerate the time for performance of any obligation of the
Applicant;
(C) there has been no material adverse change in the financial condition or
affairs of the Applicant since the date of the Initial Financial Statements
provided pursuant to Paragraph 3 hereof;
- 7 -
<PAGE>
(D) each and every representation and warranty made by the Applicant or any
of its officers, directors, employees or stockholders in any instrument or
document heretofore delivered by the Applicant to CII or executed in connection
herewith, including, without limitation, the Applicant's Application, remains
true and accurate in all respects and does not (and nor does this Agreement or
any of the Funding Documents or any of the Documents) contain any untrue
statement of a material fact or omit to state a fact necessary in order to make
the statements contained therein not misleading;
(E) Applicant has sufficient financial capability and resources to complete
the Project and the FTP Project in accordance with the Application and Project
Proposal and Budget;
(F) Applicant is in compliance with all of the terms, conditions and
requirements of the Federal Grant;
(G) there is neither pending nor threatened any action, suit, proceeding or
claim whether or not purportedly on behalf of the Applicant, to which the
Applicant or any partner of or material participant in the Applicant is or may
be named as a party of or to which the Applicant's or any such person's or
entity's property is or may be subject;
(H) no consent, approval or authorization of, or designation, declaration
or filing with any governmental authority on the part of the Applicant is
required in connection with the valid execution and delivery of this Agreement
or the other Documents or the consummation of any other transaction contemplated
by this Agreement other than the execution of the contract or agreement
evidencing an award of Federal Grant funds;
(I) the Applicant holds all franchises, permits, licenses and other similar
authority, necessary for the conduct of its business as now being conducted by
it and believes it can obtain any similar authority necessary for the conduct of
its business as planned to be conducted, and it is not in violation, nor will
the transactions contemplated by this Agreement cause a violation of the terms
or provisions of any such franchise, permit, license or other similar authority;
and
(J) the Applicant is not in violation of any term of its Certificate of
Incorporation or Bylaws, partnership agreement or other organizational
documents, as amended. Neither the Applicant nor any of its property is in
violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company or any of such property is subject.
(K) all of the foregoing warranties and representations are true, complete
and correct as of the date hereof and will be true, complete and correct at the
time of each disbursement of Grant funds as if made at the time thereof and with
respect thereto.
12. Events of Default. Each of the following shall constitute an Event of
Default under this Agreement:
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<PAGE>
(A) failure of the Applicant to comply with any material provision of this
Agreement or of any other Document; or
(B) if any representation or warranty made or given by the Applicant in
connection with this Agreement or any other Document shall be or become untrue,
false or misleading in any material respect; or
(C) if the Applicant is, becomes, or is adjudicated to be bankrupt or
insolvent under state or federal law, dissolves or liquidates, or a receiver is
appointed of the Applicant's assets or business or the Applicant files a
petition for relief under any Chapter of the United States Bankruptcy Code or
any such petition is filed against it; or
(D) if any event occurs which requires the Applicant to repay the Federal
Grant funds; or
(E) default under any other loan agreement, promissory note, mortgage deed,
security agreement or other agreement executed by the Applicant in respect of
any other indebtedness now or hereafter owing by Applicant to CII or any other
agency, instrumentality, political subdivision or specially-chartered
corporation of the State; or
(F) the occurrence of any termination, default or withholding of funding
under the Federal Grant; or
(G) if the Project or the FTP Project is abandoned or if work on the
Project or the FTP Project ceases for a period in excess of 30 days; or
(H) if at any time during the Term, Applicant shall fail to maintain a
Connecticut Presence as described in Section 7.
13. Remedies. If there shall occur any Event of Default described in
Sections 12(A) or 12(B), and such Event of Default shall not have been cured to
the complete satisfaction of CII within thirty (30) days following the date on
which Applicant or CII becomes aware of such Event of Default, or if there shall
occur an Event of Default described in Sections 12(C) or 12(D), CII shall be
entitled to immediately declare an amount equal to one hundred percent (100%) of
the Grant funds advanced to the Applicant to be immediately due and payable, all
without further notice to the Applicant, and to exercise any remedy it may have
as set forth in the Documents or otherwise provided by law or equity, or to
exercise any such remedies cumulatively. CII shall not be obligated to disburse
to Applicant and Applicant shall not be entitled to receive any Grant funds
during such cure period or thereafter if such Event of Default is not so cured.
Upon the occurrence of any Event of Default described in Sections 12(E) - 12(H),
CII shall be entitled to immediately withhold further advances of Grant funds to
Applicant and Applicant shall immediately return all unexpended Grant funds to
CII. The remedy for the Event of Default described in Section 12(H) is set forth
in Section 7. The Applicant agrees to pay all charges, costs, damages,
liabilities and expenses, including without limitation, reasonable attorney's
fees, if any, incurred by CII in connection with any default hereunder and/or in
the attempted enforcement of this Agreement or any of the Documents and/or in
the collection or attempted collection of any and all of the obligations of the
- 9 -
<PAGE>
Applicant hereunder and under the other Documents and/or in the prosecution or
defense of any action or proceeding covering any matter related to this
Agreement or the Documents. The Applicant further agrees that all such
expenditures incurred by CII under this Agreement and/or under any of the
Documents and all other amounts owing under this Agreement which are not paid
when due, shall bear interest at the rate of fifteen (15%) percent per annum
from the date of the occurrence of an Event of Default, or due date, as
applicable.
14. Equal Employment Opportunity and Non-Discrimination. The Applicant
agrees and warrants that in the performance of this contract it will not
discriminate or permit discrimination against any person or group of persons on
the grounds of race, color, religious creed, age, marital status, national
origin, sex, sexual orientation, mental retardation or physical disability,
including, but not limited to blindness, unless it is shown by the Applicant
that such disability prevents performance of the work involved in any manner
prohibited by the laws of the United States or the State of Connecticut, and
further agrees to provide the Commission on Human Rights and Opportunities with
such information requested by the Commission concerning the employment practices
and procedures of the Applicant as relate to the provisions of this paragraph.
The Applicant hereby agrees that this Agreement is subject to Sections
4a-60(a-e) and Section 4a-60a of the Connecticut General Statutes which are
hereby incorporated herein by reference and that the applicant will comply with
all of the provisions thereof.
15. Oversight/Administrative Fee. Applicant hereby agrees that CII shall
deduct from each advance of Grant funds an oversight and administrative fee an
amount equal to one (1.0%) percent of each such advance, which fee will be used
by CII to pay for certain administrative and oversight activities conducted by
CII in connection with the Federal Technology Partnership Assistance Program.
16. Audits. The Applicant agrees that at any time upon the request of CII
and, in any event, within ninety (90) days following the end of the Grant
Disbursement Period, it will have an audit performed at its own expense by an
independent public accountant as defined by Section 7-391 of the Connecticut
General Statutes as amended. Such audit shall be performed in accordance with
Generally Accepted Accounting Principles and requirements of CII and shall
identify any expenditures of Grant funds made by the Applicant which are not in
compliance with the terms of this Agreement. Any such expenditures shall
immediately be returned to CII by Applicant.
17. Expenses. Applicant will pay or reimburse CII on demand for any and all
reasonable charges, costs and taxes incurred in the preparation, documentation
and implementation of this Agreement and all Documents, and any amendment
thereto, including, without limitation, all recording and filing fees, appraisal
fees and reasonable fees and disbursements of CII's special counsel retained in
connection therewith, including payment upon the closing hereof of any portion
of such charges, costs and fees for which an invoice shall be rendered.
18. No Waiver. No waiver by, nor any failure or delay on the part of CII in
any one or more instances to insist upon strict performance or observance of one
or more covenants or conditions hereof; or of the other Documents shall in any
- 10 -
<PAGE>
way be, or be construed to be, a waiver of such covenant or condition in any
other instance or to prevent CII's rights to later require the strict
performance or observance of such covenants or conditions, or otherwise
prejudice CII's fights, powers or remedies.
19. Waivers. The Applicant and all others who may become liable for all or
any part of this obligation do hereby consent to any number of renewals or
extensions of time of payment hereof and agree that any such renewals or
extensions may be made without notice to any of said parties and without
affecting their liability hereon and further consent to the releases of any
party or parties liable hereon, all without affecting the liability of other
persons, firms or corporations liable for the payments and obligations set forth
in this Agreement.
THE APPLICANT ACKNOWLEDGES THAT THIS AGREEMENT EVIDENCES A COMMERCIAL
TRANSACTION AS THAT TERM IS DEFINED IN CONNECTICUT GENERAL STATUTES SECTION
52-278a(a) AND PURSUANT TO CONNECTICUT GENERAL STATUTES SECTIONS 52-278b AND
52-278f, THE APPLICANT DOES HEREBY WAIVE ITS RIGHTS TO NOTICE AND HEARING PRIOR
TO THE ISSUANCE BY CII OF ANY PREJUDGMENT REMEDY, AND THE APPLICANT FURTHER
WAIVES ANY RIGHTS AS MAY EXIST UNDER FEDERAL LAW TO ANY NOTICE AND/OR HEARING
PRIOR TO CII'S OBTAINING AND EXERCISING ANY PREJUDGMENT REMEDY.
ADDITIONALLY, THE APPLICANT AND CII HEREBY EACH WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY ACTION, DEFENSE, COUNTERCLAIM, CROSSCLAIM AND/OR ANY FORM OF
PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT OR THE OTHER DOCUMENTS OR
RELATING TO ANY OBLIGATIONS EVIDENCED HEREBY OR THEREBY.
20. No Oral Modification. This Agreement may not be modified or amended in
any manner except in writing executed by all of the parties hereto.
21. No Assignment. This Agreement and the documents related hereto and the
rights hereunder may not be assigned by the Applicant without the prior written
consent of CII.
22. Successors and Assigns. The terms, warranties, covenants and agreements
herein contained shall be binding upon and inure to the benefit of the parties
hereto and then respective legal representatives, successors and assigns.
23. Joint and Several Liability. If more than one party shall execute this
Agreement on behalf of Applicant or if the Guaranty attached hereto shall be
executed by any party, the liability of Applicant and such additional party or
guarantor hereunder shall be joint and several.
24. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
CONNECTICUT INNOVATIONS, INCORPORATED
By /s/ Victor R. Budnick
---------------------------------------------
Victor R. Budnick, Its Acting Executive Director
MARINE MANAGEMENT SYSTEMS, INC.
By /s/ Eugene D. Story
---------------------------------------------
Eugene D. Story, Its President
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<PAGE>
CONNECTICUT INNOVATIONS, INC.
ADDENDUM
to
FEDERAL TECHNOLOGY PARTNERSHIP ASSISTANCE AGREEMENT
This Addendum amends and hereby becomes an essential part of the Federal
Technology Partnership Assistance Agreement dated July 31, 1995 by and between
MARINE MANAGEMENT SYSTEMS, INC. and CONNECTICUT INNOVATIONS, INCORPORATED, as
though fully set forth therein.
In Section 2, line 2, REPLACE "December 31, 1996" with "June 30, 2005".
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of
October 4, 1995.
CONNECTICUT INNOVATIONS, INCORPORATED
By /s/ Victor R. Budnick
---------------------------------------------
Victor R. Budnick, Its Acting Executive Director
MARINE MANAGEMENT SYSTEMS, INC.
By /s/ Eugene D. Story
---------------------------------------------
Eugene D. Story, Its President
<PAGE>
EXHIBIT 10.16
AGREEMENT
THIS AGREEMENT is hereby entered into and effective this 4th day of
December , 19 96 , by and between Sperry Marine Inc., a subsidiary of Litton
Industries, Inc., organized and existing under the laws of the State of
Delaware, with an office and place of business at 1070 Seminole Trail,
Charlottesville, Virginia, 22901 (hereinafter referred to as "Sperry") and
Marine Management Systems, Inc., a corporation organized and existing under the
laws of the State of Delaware, with an office and place of business at 470 West
Avenue, Stamford, Connecticut 06902 (hereinafter referred to as "MMS"), acting
hereinafter solely as a "Party" and collectively as "the Parties".
R E C I T A L S:
WHEREAS, MMS is engaged in the business of providing computer software
and related systems and services to the marine industry; and
WHEREAS, Sperry is engaged in the business of providing various
products, services, and systems to the marine industry; and
WHEREAS, the Parties are engaged currently in unique, complementary and
non-competitive businesses, and
WHEREAS, the Parties desire to enter into a strategic alliance in
connection with the development and distribution of their existing and future
products, services, and systems.
NOW, THEREFORE, in consideration of the above premises, the mutual
covenants set forth hereinbelow, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged by Sperry and MMS, the Parties
hereby agree as follows:
I. DEFINITIONS
A. Software Application Products -- All MMS non-ISIT related
Products, not including third-party products, whether
developed and/or marketed presently or in the future by MMS
including, but not limited to, the FLEET MANAGER SERIES of
products (FleetWORKS, FleetLINK, FleetWATCH), and all
modifications, improvements and enhancements thereto, whether
or not under present development, and all associated software.
<PAGE>
B. ISIT Products -- MMS' Integrated Shipboard Information
Technology Product(s) including all modifications,
improvements and enhancements thereto, whether or not under
present development, and all associated software.
C. Turn-Key Products -- All MMS hardware, Product support and
engineering services in connection with the MMS Software
Application and ISIT Products.
D. IBS -- Sperry's Integrated Bridge System including all
modifications, improvements and enhancements thereto, whether
or not under present development, and all associated software,
hardware, product support, and engineering and marketing
services.
E. U.S. Government Market -- All Agencies of the United States
Government.
F. Foreign Government Market -- All Agencies of foreign
(non-U.S.) governments.
G. Commercial Market -- All Domestic (U.S.) and Foreign
Non-Government markets.
H. Distribute -- Means the sale of MMS Software Application,
ISIT, or Turn-Key Products to and by Sperry using transfer
pricing and resale pricing. The transfer price is MMS' price
to Sperry; the resale price is Sperry's price to the end user
or customer.
I. Sperry's Sole Right and License to Distribute means MMS
retains the right to Distribute directly its (MMS's) Products,
but relinquishes the right to appoint other distributors and
licensees.
J. Sperry's Non-Exclusive Right and License to Distribute
means that MMS retains the right to appoint other distributors
and licensees for its (MMS's) Products.
K. Bundled -- MMS Software Application and ISIT Products that
are sold and/or packaged as part of and/or within a related
Sperry product or system.
L. Non-Bundled -- MMS Software Application and ISIT Products
that are sold on a stand alone basis (that is, not sold and/or
packaged as part of and/or within a related Sperry product or
system).
M. Private Label -- A Party's trademark or trade name.
N. Products -- Means all Products as defined under Part I. A.,
B., and C. above.
<PAGE>
O. Marine and Military Applications -- Products that are sold
for use on any marine vessel or in any shore side marine
operation.
P. Bridge Financing -- The proposed financial transaction as
described in the Letter of Intent dated November 14, 1996 by
and between Sperry and MMS.
II. LICENSE TO AND DISTRIBUTION BY SPERRY OF MMS PRODUCTS
A. MMS hereby grants to Sperry the Sole Right and License to
Distribute to the U.S. Government Market all MMS Software
Application Products for Marine and Military Applications,
whether Bundled or Non-Bundled, and Distributed under either
the Sperry or MMS Private Label. The decision on how to label
is at Sperry's discretion.
B. MMS hereby grants to Sperry the Sole Right and License to
Distribute within Commercial and Foreign Government Markets
for Marine and Military Applications all Software Application
Products that are Bundled only, and Distributed only under
Sperry's Private Label. The territory of Greece shall be
excluded from this provision until June 1997.
C. MMS hereby grants to Sperry a Non-Exclusive Right and
License to Distribute within Commercial and Foreign Government
Markets for Marine and Military Applications all Software
Application Products that are Bundled only, and Distributed
only under MMS' Private Label. The territories of Greece,
Singapore-Malaysia-Indonesia, and Hong Kong shall be excluded
from this provision until June 1997, August 1997 and January
1998, respectively.
D. MMS hereby grants to Sperry the Sole Right and License to
Distribute to the U.S. Government Market for Marine and
Military Applications all ISIT Products that are Bundled only,
and Distributed under either the Sperry or MMS Private Label.
The decision to label is at Sperry's discretion, although in
either case the ISIT name shall be retained by Sperry.
E. MMS hereby grants to Sperry the Sole Right and License to
Distribute within Commercial and Foreign Government Markets
for Marine and Military Applications all ISIT Products that
are Bundled only, and Distributed only under Sperry's Private
Label, although the ISIT name shall be retained by Sperry.
<PAGE>
F. MMS hereby grants to Sperry a Non-Exclusive Right and
License to Distribute within Commercial and Foreign Government
Markets for Marine and Military Applications all ISIT Products
that are Bundled only, and Distributed only under MMS' Private
Label.
G. Subject to the limitations described elsewhere in this Part
II, MMS hereby grants to Sperry a Sole License, where it has
been granted a Sole Right to distribute hereinabove, or a
Non-Exclusive License where it has been granted a
Non-Exclusive Right to distribute hereinabove, to use and
reproduce the MMS Software Application and ISIT Products and
related documentation. MMS' licenses hereunder are granted
with the right to sublicense to the end user, and the Parties
shall agree on the terms and conditions of an end user license
agreement to be executed by Sperry and the end user prior to
delivery of any Product to an end user.
MMS shall indemnify and hold Sperry and its customers
harmless with respect to allegations or claims of
infringement of intellectual property rights held by
third- parties arising from the use or reproduction
of the software licensed hereinabove.
H. For sales situations not otherwise described in this Part
II, at MMS' discretion, which will be exercised reasonably,
and on a case by case basis, MMS may grant Sperry a
Non-Exclusive Right and License to Distribute Software
Application and ISIT Products, Non-Bundled only, under either
the MMS or Sperry Private Label. The decision on how to label
is at MMS' discretion.
I. If required by Sperry, MMS hereby agrees to make available
to Sperry the Turn- Key Products in connection with any of the
distribution arrangements described in this Part II.
J. MMS hereby represents that none of the distribution
arrangements described in this Part II cause MMS to be in
breach of, or Sperry to be liable for interfering with, any of
MMS' existing agreements with its current network of dealers
and/or marketing representatives. MMS shall indemnify and hold
harmless Sperry against and/or from any and all claims,
judgements, damages, fees, and costs that Sperry may incur
arising out of or in connection with MMS' misrepresentation of
this provision.
III. RELATIONSHIP OF THE PARTIES
This Agreement is not intended by the Parties to constitute or create a
joint venture, pooling arrangement, partnership, or formal business organization
of any kind and the rights and obligations of the Parties shall be only those
expressly set forth herein. Neither Party shall have the authority to bind the
other.
<PAGE>
Sperry is not authorized to make any representation or warranty
concerning the Products other than that provided in writing by MMS. Sperry
agrees to indemnify, defend and hold MMS harmless from any damages, claims or
costs that may be incurred by MMS for Sperry's breach of this provision.
IV. TERMS AND CONDITIONS OF TRANSFER OF MMS PRODUCTS TO SPERRY
In addition to any terms and conditions to which the Parties may
subsequently agree, the following terms and conditions shall apply to the sale,
license or other transfer of MMS Products to Sperry in connection with the
distribution arrangements described in Part II above:
A. Transfer Pricing:
1. For the Software Application Products Distributed by Sperry
under the MMS Label the following fees/discounts shall apply:
<TABLE>
<CAPTION>
<S> <C>
Sperry Finder's Fee - 10% For sales in which MMS is
substantially involved in the
sales process.
Sperry Discount off MMS' list For sales in which MMS is
prices then in effect - 30% not involved in the sales
process.
</TABLE>
Where MMS and Sperry agree to share in a sale under
this section, the Parties shall agree upon an
equitable splitting of the 30% discount described
above.
MMS shall provide to Sperry post-sale Product support
under this section on a contract basis pursuant to
mutually agreed upon terms and conditions. Post-sale
Product support includes installation, customer
training, and technical support.
MMS shall sell to Sperry any Turn-Key hardware
required under this section at cost plus 15%.
<PAGE>
2. For the Software Application Products Distributed under the
Sperry label the following discounts shall apply:
<TABLE>
<CAPTION>
<S> <C>
Discount off MMS' list For sales in which MMS is prices then in
effect - 50% not involved in the sales
process.
</TABLE>
Where MMS and Sperry agree to share in a sale under
this section, the Parties shall agree upon an
equitable splitting of the 50% discount described
above.
MMS shall provide any post-sale Product support
required by Sperry under this section on a contract
basis pursuant to mutually agreed upon terms and
conditions. Post-sale Product support includes
installation, customer training, and technical
support.
If Sperry furnishes the post-sale Product support
described above to the customer, MMS will assist
Sperry as required on a time and material basis.
MMS shall sell any Turn-Key hardware required under
this section at cost plus 15%.
3. For the ISIT Products, Sperry's discounts/fees will
be based upon MMS's most favorable pricing then in
effect.
4. The Parties agree to periodically review the elements
of Transfer Pricing described hereinabove and make
adjustments as mutually agreed upon in writing in
connection with any changes in market conditions
and/or quantity fleet buys.
5. Sperry retains sole pricing discretion in the resale
to its [Sperry's] customers and end users of all MMS
Products described hereunder, regardless of whether
the Products are sold under the MMS or the Sperry
Private Label, whether the Products are Bundled or
Non-Bundled, or whether the Products are sold within
the U.S. Government Market, the Foreign Government
Market, or the Commercial Market.
B. Training:
For Software Application Products, MMS shall provide Sperry with ten
(10) free days of Product sales training and ten (10) free days of
technical/support training at MMS's offices, after which these training
services shall be made available to Sperry at MMS' list prices less
15%.
<PAGE>
C. Promotional Materials and Manuals:
MMS shall provide Sperry with all materials reasonably necessary for
Sperry to replicate, at Sperry's expense, any sales, marketing,
operating or service manuals, and training materials for Sperry's
Private Label use at no cost. MMS shall provide Sperry with MMS' sales,
marketing, operating or service manuals, and training materials
required in connection with MMS labeled products at cost.
D. Demonstration Software:
MMS shall provide Sperry with ten (10) copies of demonstration software
for the Software Application Products within thirty (30) days after the
effective date of this Agreement.
E. Warranty:
MMS represents and warrants that each copy of the Software Application
and ISIT Products will, for a period of one (1) year after delivery to
Sperry, function and perform substantially in accordance with the
applicable user documentation. In the event that the Software
Application or ISIT Product does not operate as warranted due to a
material programming error, MMS shall, at its option, either replace
the defective copy or use commercially reasonable efforts to correct
the error or provide a detour around the error, subject, however to
receiving timely notice of the error from and the assistance and
cooperation of Sperry (and, to the extent requested by MMS, the
end-user) in identifying and isolating the error. Such repair or
replacement shall be Sperry's sole and exclusive remedy for a breach of
warranty under this provision.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, MMS MAKES NO WARRANTIES
OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND THE EXPRESS WARRANTY PROVIDED IN SECTION E IS IN LIEU OF
ALL OTHER OBLIGATIONS OF MMS OF ANY KIND WITH RESPECT TO THE DELIVERY,
USE, OR PERFORMANCE OF MMS' PRODUCTS.
MMS' liability for damages or otherwise in connection with this
Agreement, if any, shall be limited to the amount paid to it by Sperry
under this Agreement during the twelve (12) month period immediately
preceding the occurrence of the event giving rise to such damages. IN
NO EVENT WILL MMS BE LIABLE TO SPERRY FOR LOST PROFITS, LOST SAVINGS,
OR OTHER SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES.
<PAGE>
The provisions of this Section E shall survive termination of this
Agreement.
Upon the expiration of the one (1) year warranty period, MMS shall
provide extended post-sale Product (warranty) support as described in
Part IIA above under separate contract at a 15% discount from MMS'
standard support rates.
F. Point of Contact:
All Product support provided by MMS for Sperry's Private Label versions
of MMS' Software Application and ISIT Products will be provided through
a central point of contact at Sperry. This point of contact may change
upon adequate notice by Sperry to MMS.
G. Best Efforts:
Sperry shall use its best efforts to promote and market the Products.
H. Trademarks and Logos:
MMS hereby grants to Sperry a non-exclusive license to make limited use
of the names, trademarks, and logos of MMS solely in connection with
the marketing, promotion, distribution and licensing of the Products
described in this Agreement.
Sperry agrees that the names, trademarks, and logos of MMS used by
Sperry pursuant to the license granted hereunder shall conform as to
art work, lettering, color, and size to those used by MMS and shall
identify MMS as the owner of such names, trademarks, and logos. No such
use shall be in a manner which would cause a reasonable person to infer
that SPERRY has any affiliation with MMS or the right in or to the
Software other than as provided in this Agreement. MMS reserves the
right to terminate the license granted hereunder with respect to any or
all of the Marks at any time if, in MMS' reasonable judgement, Sperry's
continued use of any Mark would jeopardize or be detrimental to the
valuable goodwill which MMS enjoys in its Marks. The license granted
hereunder shall expire upon termination of this Agreement.
<PAGE>
V. FUTURE PRODUCT PLANNING, DEVELOPMENT, AND MARKETING
A. The Parties hereby agree to cooperate in the joint development
and marketing of new products related to the subject matter of
this Agreement. In furtherance of this provision, each Party
hereby agrees to permit a representative of the other Party to
participate in their respective product planning processes
and, furthermore, the Parties shall consider the establishment
of a joint New Product Planning Group that would be
responsible for developing and marketing products in the
navigation, ship control, communications management systems
areas.
B. The Parties hereby agree to jointly develop and coordinate a
worldwide account management system and strategic sales plan
for all Products described in this Agreement and, in
furtherance of this provision, shall appoint account
coordinators to manage this responsibility.
C. Sperry shall make its IBS ISIT compliant and MMS shall promote
Sperry's IBS as the first Integrated Bridge System to be fully
compliant with MMS' Software Application and ISIT Products.
Sperry shall promote ISIT as the standard maritime Information
Technology platform.
D. The Parties shall enter into separate agreements regarding
their respective ownership, manufacturing, and marketing
rights in connection with any future products that are jointly
developed and/or marketed under this Part V.
<PAGE>
VI. SOFTWARE ESCROW
Promptly after the effective date of this Agreement, the Parties shall
enter into an Escrow Agreement mutually agreeable to the Parties and the Parties
shall appoint a Software Escrow Depository (the "Depository"), the cost of which
shall be borne by Sperry, to hold MMS's Software Application and ISIT Products
source codes and related documentation including all updated versions of these
Product source codes and documentation [containing corrections, enhancements,
and so forth], which Sperry has the right to Distribute under this Agreement.
MMS shall promptly deposit copies of the source codes and documentation for the
Products with the Depository and shall promptly update the deposited source
codes and documentation as updates of the Products are released by MMS. MMS
hereby represents that it shall execute all documents and/or contracts ("the
Escrow Agreement") required by the Depository under which the Depository will
take possession of the source codes and documentation described herein. MMS
hereby agrees that the source codes and documentation to be held by the Escrow
Agent shall be kept current during the term of this Agreement, and furthermore,
hereby agrees that the Depository shall have the right to deliver the source
codes and other documentation to Sperry in accordance with the terms,
conditions, and events (including, but not limited to, the situation wherein MMS
is unable to meet its on-going financial obligations) as set forth in the Escrow
Agreement. In the event that the MMS Product source codes and documentation
described herein are delivered to Sperry by the Depository in accordance with
the Escrow Agreement, Sperry shall have a royalty-free, non-exclusive license in
these source codes and documentation to support Sperry's then existing
customers. Sperry shall be granted a royalty-bearing license to the released
Product source codes and documentation for uses other than in connection with
supporting its then existing customers under terms and conditions to be agreed
upon by Sperry and MMS or its successor in interest, but in no event shall the
amount of the royalty be greater than the Transfer Pricing then in effect.
Except as provided hereinabove, Sperry shall have no right to use,
reproduce, duplicate, or possess the source code for the Software Application
and ISIT Products software.
VII. EXCLUSIVE STRATEGIC ALLIANCE
Sperry and MMS hereby agree not to enter into a Strategic Alliance
agreement containing similar or more favorable terms, conditions, and provisions
as those set forth herein with any other non-affiliated party during the term of
this Agreement regarding products similiar to any of the Products described
herein without the prior written consent of the other, such consent not to be
unreasonably withheld.
VIII. PROPRIETARY INFORMATION
A. During the term and in furtherance of this Agreement, either
Party may disclose to the other information or data that the
disclosing party considers to be proprietary, competition
sensitive, company confidential, or secret ("Information").
B. The receiving Party agrees, from the date of disclosure, to
protect the Information received from the disclosing Party. In
order to be subject to this provision, such Information, if in
written form, shall be identified at the time of the
disclosure by an appropriate legend, marking stamp or positive
written identification on the face thereof to be
"proprietary", or if an oral disclosure is made, such
Information shall be identified at the time of disclosure by
giving appropriate notice to the receiving Party, provided,
however, that the following Information shall always be deemed
"proprietary" whether or not it is marked as such: software,
inventions, customer lists, future product plans and financial
information. The receiving Party shall maintain and protect
the disclosing Party's Information with the same degree of
care it normally uses in the protection of its own such
Information.
<PAGE>
C. The receiving Party agrees not to use directly or indirectly,
any such Information for its own benefit or for the benefit of
any other person, firm or corporation in a manner inconsistent
with the purpose of this Agreement. The receiving Party may
disclose such Information to its officers, those of its
employees and others under its control having a need-to-know,
all of whom will be required to maintain the disclosed
Information or data in their confidence. The receiving Party
shall be defined as the Party to this Agreement who is
receiving the Information, and any parent organization,
subsidiaries or affiliates thereof, including any companies
that are affiliates of the receiving Party.
D. The restriction on disclosure set forth herein shall not
apply:
1. to information that receiving Party can document was
generally available to the public at the time of
disclosure;
2. to information that receiving Party can document was
already known to receiving Party as evidenced by its
tangible records before it received Information from
disclosing Party;
3. to information developed independently from receipt
by personnel having no knowledge of disclosing Party
Information;
4. to information that is in the public domain or falls
into public domain through no breach of this
Agreement by receiving Party;
5. to information that is rightfully obtained by
receiving Party from a third Party and not under any
obligation of confidentiality;
6. to information that is provided by disclosing Party
to a third Party and not under any obligation of
confidentiality; or
7. to information that receiving Party develops
independently of Information received from
disclosing Party.
E. Part VIII of this Agreement shall be effective from the day
and year first above written, and shall remain effective for
ten (10) years thereafter. Upon the termination of this
Agreement, the receiving Party shall return to disclosing
Party all Information received under this Agreement and purge
all Information from receiving Party's computers and software,
in whatever form, and shall certify to disclosing Party as to
such returning or purging.
F. The provisions set forth in this Part VIII shall survive the
termination of this Agreement.
<PAGE>
IX. TERM
The term of this Agreement shall be for five (5) years from the effective date
as first set forth hereinabove.
X. MISCELLANEOUS PROVISIONS
A. GOVERNING LAW
This Agreement shall be construed in accordance with and governed
exclusively by the laws of the State of Delaware, excluding its
conflict of laws rules.
B. SEVERABILITY
If any provision hereof, or the application thereof to any person,
entity or circumstance shall to any extent be invalid or unenforceable
in any pertinent jurisdiction or not in compliance with the laws
thereof, the remainder hereof shall not be affected thereby but shall
remain valid and enforceable as though the invalid term or provision
were not a part hereof to the extent performance of this Agreement is
not thereby rendered impractical.
C. WAIVER
The failure or delay of either Party to enforce at any time or for any
period of time any of the provisions of this Agreement shall not
constitute a waiver of such provisions or the right of either Party to
enforce each and every provision on any future occasion.
D. ASSIGNMENT
Neither Party shall assign nor in any manner transfer its interest or
responsibilities under this Agreement to any third party without the
prior written consent of the other Party. This restriction shall not
apply to assignments to any successor corporation in the event of a
merger or consolidation, or to assignments by MMS or Sperry to any of
their respective subsidiary or affiliated corporations.
E. HEADINGS
The headings used herein are for descriptive purposes only and are not
to be construed as part of this Agreement.
<PAGE>
F. SOLICITATION OF EMPLOYEES
During the term of this Agreement, each Party agrees not to solicit for
employment or hire any technical or professional employee of the other
without prior approval of the other Party.
G. PRESS RELEASES
MMS and Sperry shall mutually agree on any press releases and other
publicity issued in connection with their Strategic Alliance.
H. MERGER AND MODIFICATIONS
This written Agreement, including the Escrow Agreement referred to
herein and hereby incorporated by reference, contains the entire
Agreement between the Parties and supersedes any previous
understandings, oral or written (including all prior drafts and
versions hereof), with respect to the subject matter hereof. Any
modification of this Agreement shall be effective only if in writing
and executed by an authorized representative of each Party.
I. EFFECT OF FAILURE OF BRIDGE FINANCING
Notwithstanding the agreed to effective date first above written and
Section X.H. above, this Agreement is contingent upon Sperry and MMS
concluding their Bridge Financing. In the event the Bridge Financing is
not concluded within a reasonable time after the date first above
written, this Agreement shall be void and have no force or effect.
<PAGE>
J. POINTS OF CONTACT
The respective points of contact hereunder for each Party are as
follows:
<TABLE>
<CAPTION>
<S> <C>
MARKETING ADMINISTRATIVE
For Sperry: For Sperry:
Thomas A. King, Jr. Nelson E. Bickers
Senior Manager, Business Development Vice President, Finance
Sperry Marine Inc. Sperry Marine Inc.
1070 Seminole Trail 1070 Seminole Trail
Charlottesville, VA 22901 Charlottesville, VA 22901
Phone 804 974-2655; Fax 804 974-2259 Phone 804 974-2240; Fax 804 974-2259
For MMS: For MMS:
Michael P. Barney Robert D. Ohmes
VP, Sales, Marketing & Corporate Development Executive Vice President
Marine Management Systems, Inc. Marine Management Systems, Inc.
470 West Ave. 70 West Ave.
Stamford, CT 06902 Stamford, CT 06902
Phone 203 327-6404; Fax 203 967-2927 Phone 203 327-6404; Fax 203 967-2927
</TABLE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives, effective as of the date
first above written.
For Marine Management Systems, Inc.: For Sperry Marine Inc.:
/s/ Eugene D. Story /s/ Paul D. Miller
- --------------------------- ----------------------------
Eugene D. Story Paul D. Miller
President President
<PAGE>
EXHIBIT 10.17
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
125,000 Warrants
MARINE MANAGEMENT SYSTEMS, INC.
WARRANT
This warrant certificate (the "Warrant Certificate") certifies that
SPERRY MARINE INC. or registered assigns (the "Holder"), is the registered
holder of warrants to purchase, at any time until 5:00 P.M. New York City time
on December 12, 2001 (the "Expiration Date"), up to 125,000 fully-paid and
non-assessable shares, subject to adjustment in accordance with Article 7 hereof
(the "Warrant Shares"), of the common stock, par value $.002 per share (the
"Common Shares"), of Marine Management Systems, Inc., a Delaware corporation
(the "Company"), subject to the terms and conditions set forth herein. The
warrants represented by this Warrant Certificate and any warrants resulting from
a transfer or subdivision of the warrants represented by this Warrant
Certificate shall sometimes hereinafter be referred to, individually, as a
"Bridge Warrant" and, collectively, as the "Bridge Warrants".
1. [Reserved]
2. Exercise of Bridge Warrants. Each Bridge Warrant is
initially exercisable to purchase one Warrant Share at an initial exercise price
of $5.00 per Warrant Share, subject to adjustment as set forth in Article 7
hereof, payable in cash or by check to the order of the Company, or any
combination of cash or check. Upon surrender of this Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment of
the Exercise Price (as hereinafter defined) for the Warrant Shares purchased, at
the Company's principal offices (presently located at 470 West Avenue, Stamford,
CT 06902) the Holder shall be entitled to receive a certificate or certificates
for the Warrant Shares so purchased. The purchase rights represented by this
<PAGE>
Warrant Certificate are exercisable at the option of the Holder hereof, in whole
or in part (but not as to fractional Common Shares). In the case of the purchase
of less than all the Warrant Shares purchasable under this Warrant Certificate,
the Company shall cancel this Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Warrant Shares purchasable hereunder.
3. Issuance of Certificates. Upon the exercise of the Bridge
Warrants, the issuance of certificates for the Warrant Shares purchased pursuant
to such exercise shall be made forthwith (and in any event within five (5)
business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 4
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and, upon exercise of the Bridge
Warrants, the certificates representing the Warrant Shares shall be executed on
behalf of the Company by the manual or facsimile signature of those officers
required to sign such certificates under applicable law.
The Warrant Certificates and, upon exercise of the Bridge
Warrants, in part or in whole, certificates representing the Warrant Shares
shall bear a legend substantially similar to the following:
"The securities represented by this certificate and the
securities issuable upon exercise thereof have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel for the Company, stating that an exemption from
registration under such Act is available."
4. Restriction on Transfer of Bridge Warrants. The Holder of
this Warrant Certificate, by its acceptance thereof, covenants and agrees that
the Bridge Warrants and the Warrant Shares issuable upon exercise of the Bridge
Warrants are being acquired as an investment and not with a view to the
distribution thereof.
<PAGE>
5. Registration Rights. The Holder shall be entitled to all of
the rights and subject to all of the obligations set forth in the Registration
Rights Agreement between the Company and the Holder dated as of the date hereof.
6. Price.
6.1 Initial and Adjusted Exercise Price. The initial
exercise price of each Bridge Warrant shall be $5.00 per Warrant Share. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Article 7 hereof.
6.2 Exercise Price. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise price, depending
upon the context.
7. Adjustments of Exercise Price and Number of Warrant Shares.
7.1 Adjustment for Lack of Public Offering. In the
event that an initial public offering of the Company's securities is not
consummated on or prior to January 31, 1998, the Exercise Price shall be reduced
to the lower of (i) $2.50 per Warrant Share and (ii) the lowest per-share price
at which the Company sells Common Shares (other than upon exercise of stock
options granted under the Company's employee stock option plan existing as of
the date hereof) during the six month period ending on January 31, 1998.
7.2 Dividends and Distributions. In case the Company
shall at any time after the date hereof pay a dividend in Common Shares or make
a distribution in Common Shares, then upon such dividend or distribution, the
Exercise Price in effect immediately prior to such dividend or distribution
shall be reduced to a price determined by dividing an amount equal to the total
number of Common Shares outstanding immediately prior to such dividend or
distribution multiplied by the Exercise Price in effect immediately prior to
such dividend or distribution, by the total number of Common Shares outstanding
immediately after such issuance or sale. For purposes of any computation to be
made in accordance with the provisions of this Section 7.2, the Common Shares
issuable by way of dividend or distribution shall be deemed to have been issued
immediately after the opening of business on the date following the date fixed
for determination of shareholders entitled to receive such dividend or
distribution.
7.3 Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding Common Shares, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
<PAGE>
7.4 Adjustment in Number of Warrant Shares. Upon
each adjustment of the Exercise Price pursuant to the provisions of this Article
7, the number of Warrant Shares issuable upon the exercise of each Bridge
Warrant shall be adjusted to the nearest full Common Share by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of the Bridge
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
7.5 Reclassification, Consolidation, Merger. etc. In
case of any reclassification or change of the outstanding Common Shares (other
than a change in nominal value to no nominal value, or from no nominal value to
nominal value, or as a result of a subdivision or combination), or in the case
of any consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding Common Shares, except a change as a result of a
subdivision or combination of such shares or a change in nominal value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the Warrant Shares
issuable upon exercise of the Bridge Warrants immediately prior to any such
events at a price equal to the product of (x) the number of Warrant Shares
issuable upon exercise of the Bridge Warrants and (y) the Exercise Price in
effect immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holder had exercised the
Bridge Warrants.
7.6 Determination of Outstanding Common Shares. For
purposes of this Article 7, the number of Common Shares at any one time
outstanding shall include the aggregate number of shares issued or issuable upon
the exercise of outstanding options, rights, warrants and upon the conversion or
exchange of outstanding convertible or exchangeable securities.
8. Exchange and Replacement of Warrant Certificates. This
Warrant Certificate is exchangeable without expense, upon the surrender hereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant Certificates, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
<PAGE>
9. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of Common Shares and
shall not be required to issue scrip or pay cash in lieu of fractional
interests, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
Common Shares.
10. Reservation of Shares. The Company covenants and agrees
that it will at all times reserve and keep available out of its authorized share
capital, solely for the purpose of issuance upon the exercise of the Bridge
Warrants, such number of Common Shares as shall be equal to the number of
Warrant Shares issuable upon the exercise of the Bridge Warrants, for issuance
upon such exercise, and that, upon exercise of the Bridge Warrants and payment
of the Exercise Price therefor, all Warrant Shares issuable upon such exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
the preemptive rights of any shareholder.
11. Notices to Bridge Warrant Holders. Nothing contained in
this Agreement shall be construed as conferring upon the Holder or Holders the
right to vote or to consent or to receive notice as a shareholder in respect of
any meetings of shareholders for the election of directors or any other matter,
or as having any rights whatsoever as a shareholder of the Company. If, however,
at any time prior to the expiration of the Bridge Warrants and their exercise,
any of the following events shall occur:
(a) the Company shall take a record of the holders of
its Common Shares for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its
Common Shares any additional Common Shares or other shares of capital
stock of the Company or securities convertible into or exchangeable for
Common Shares or other shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business
as an entirety shall be proposed;
<PAGE>
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when personally delivered or sent by registered or certified mail
(return receipt requested, postage prepaid), facsimile transmission or overnight
courier:
(a) If to the Holder, to the address of such Holder
as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 2 of this Agreement or to such other address as the
Company may designate by notice to the Holder.
13. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company and the Holder inure to the
benefit of their respective successors and assigns hereunder.
14. Governing Law. This Warrant Certificate shall be deemed to
have been made and delivered in the State of Connecticut and shall be governed
as to validity, interpretation, construction, effect and in all other respects
with the substantive laws of the State of Connecticut, without giving effect to
the choice of laws rules thereof, except insofar as the Delaware General
Corporation Law is applicable.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, as of this 12th day of December, 1996.
[SEAL] MARINE MANAGEMENT SYSTEMS, INC.
By: /s/ Robert D. Ohmes
----------------------------------
Name: Robert D. Ohmes
Title: Executive Vice President
Attest:
/s/ Bonnie Pirro
- -----------------------------
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ________ Warrant
Shares and herewith tenders in payment for such Warrant Shares cash or a
certified or bank cashier's check payable to the order of Marine Management
Systems, Inc. in the amount of $_________, all in accordance with the terms
hereof. The undersigned requests that a certificate for such Warrant Shares be
registered in the name of ______________________, whose address is
____________________________________ and that such certificate be delivered
to __________________, whose address is ____________________________________
_______________________________________.
Signature:
------------------------------
Dated:
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
- -----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED __________________________ hereby sells,
assigns and transfers unto _____________________________ (Please print name and
address of transferee) this Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_____________________, Attorney, to transfer the within Warrant Certificate on
the books of the within-named Company, with full power of substitution.
Signature:
------------------------------
Dated:
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
- -----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
EXHIBIT 10.18(a)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of the 28th day of
January, 1997, between the person whose name and address appear on the signature
page attached hereto (individually a "Holder" or collectively with the holders
of the Units issued in the Offering, each as defined below, the "Holders") and
Marine Management Systems, Inc., a company incorporated under the laws of the
State of Delaware, having its principal place of business at 470 West Avenue,
Stamford, CT 06902 (the "Company").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Holders are purchasing from the Company an aggregate of up
to 7 units (the "Units"), each Unit consisting of (i) 10,000 shares (the "Bridge
Shares") of the common stock, par value $.002 per share, of the Company (the
"Common Stock") and (ii) a non-negotiable 9% promissory note of the Company in
the principal amount of $50,000, all upon the terms set forth in the
Confidential Private Offering Memorandum of the Company dated January 13, 1997
(the "Bridge Financing");
WHEREAS, the Company has entered into a Letter of Intent with
Whale Securities Co., L.P. ("Whale") in connection with a proposed initial
public offering of the securities of the Company to be underwritten by Whale
(the "Proposed IPO") and intends to prepare and file a registration statement
relating to the Proposed IPO (the "Proposed IPO Registration Statement"), and to
use its best efforts to see that such registration statement is declared
effective, within twelve months following the closing date of the Bridge
Financing (the "Bridge Closing"); and
WHEREAS, the Company desires to grant to the Holder the
registration rights set forth herein with respect to the Bridge Shares and the
Penalty Shares (as defined below), if any (collectively, the "Registrable
Securities");
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. Mandatory Registration of the Registrable Securities.
(a) The Company will include the Bridge Shares in a
registration statement which the Company will (i) prepare and file with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Act") and (ii) use its best efforts to have declared effective
by the SEC within 15 months following the date a registration statement relating
to the initial public offering of the Company's securities (the "IPO") is
declared effective by the SEC (the "IPO Effective Date"), so as to permit the
public trading of the Bridge Shares commencing no later than 15 months following
the IPO Effective Date (the "Post-IPO Registration Statement"). At the Company's
option, the Post-IPO Registration Statement may include securities other than
Registrable Securities.
<PAGE>
(b) If the Post-IPO Registration Statement is not
declared effective by the SEC within 15 months following the IPO Effective Date,
then, commencing on the first day of the sixteenth month following the IPO
Effective Date, the Company shall (i) issue to each holder of Registrable
Securities, on the first day of each month that any of the Registrable
Securities continue not to be publicly tradeable pursuant to an effective
registration statement under the Act, such number of additional shares of Common
Stock as is equal to 10% of the total number of Registrable Securities held by
such holder (any additional shares of Common Stock issued pursuant to this
Section 1(b) are referred to herein as the "Penalty Shares") and (ii) include
the Penalty Shares as well as the Bridge Shares in, and continue to use its best
efforts to cause the SEC to promptly declare the effectiveness of, the Post-IPO
Registration Statement so as to permit the public trading of the Registrable
Securities pursuant thereto. Notwithstanding the foregoing, in the event, and
during such time as, the effectiveness of the Post-IPO Registration Statement is
delayed due to unforeseen reasons beyond the Company's control, the Company
shall not be obligated to issue Penalty Shares to the Holder during any
consecutive 12-month period commencing on the 16th month following the IPO
Effective Date which are equal to more than 25% of the Holder's original Bridge
Shares.
(c) The Holders agree that they will not sell or
otherwise transfer any of their Registrable Securities pursuant to the Post-IPO
Registration Statement or otherwise, until: (i) twelve months following the
effective date of the Proposed IPO Registration Statement (or such longer period
as The Nasdaq Stock Market, Inc. may require in connection with the Proposed
IPO) or (ii) if the Proposed IPO is not consummated prior to the first
anniversary of the Bridge Closing, the first anniversary of such Bridge Closing.
(d) Once the Post-IPO Registration Statement covering
the Registrable Securities pursuant to the provisions of this Section 1 is
declared effective by the SEC, the Company will use its best efforts to maintain
the effectiveness of such Post-IPO Registration Statement or another
registration statement covering, and permitting the public trading of, the
unsold Registrable Securities (collectively, the "Mandatory Registration
Statement") until the earlier date to occur (the "Release Date") of (i) the date
that all of the Registrable Securities have been publicly sold pursuant to the
Mandatory Registration Statement, and (ii) the date that the holders of the
unsold Registrable Securities receive an opinion of counsel to the Company that
all of the unsold Registrable Securities, other than securities held by
"affiliates" of the Company, as such term is defined in Rule 144 of the Act, may
be publicly traded without statutory limitation as to quantity or timing and
without registration under the Act, pursuant to Rule 144K of the Act or
otherwise. If the Company fails to keep the Mandatory Registration Statement
continuously effective during such period, then the Company shall, promptly upon
the request of the Holders of at least 51% of the unsold Registrable Securities,
use its best efforts to update the Mandatory Registration Statement or file a
new registration statement covering the unsold Registrable Securities, subject
to the terms and provisions hereof, and, in the event the Company fails to do so
within 90 days after receipt of such request, the Company shall issue to the
Holder, on one occasion only, such number of additional shares of Common Stock
as is equal to one-quarter of the number of shares comprising the unsold
Registrable Securities held by such Holder (subject to adjustment for stock
splits, stock dividends or recapitalizations), without further consideration,
and the Company shall be obligated to cause such additional shares, as well as
the Registrable Securities remaining unsold, to be registered promptly under the
Act, subject to the terms and provisions hereof.
-2-
<PAGE>
2. Piggyback Registration. If at any time following the IPO
Effective Date and prior to the Release Date, the Company proposes to prepare
and file a registration statement under the Act with the SEC covering equity or
debt securities of the Company, or any such securities of the Company held by
its shareholders, it will give written notice of its intention to do so by
registered mail ("Notice"), at least thirty (30) business days prior to the
filing of each such registration statement, to the Holders. Upon the written
request of a Holder (a "Requesting Holder"), made within twenty (20) business
days after the date of the Notice, that the Company include any of the
Requesting Holder's Registrable Securities in such proposed registration
statement, the Company shall use its best efforts to cause such registration
statement (a "Piggyback Registration Statement") to be declared effective under
the Act by the SEC so as to permit the public sale of the Requesting Holder's
Registrable Securities pursuant thereto; provided, however, that if the proposed
registration statement relates to an underwritten offering and in the written
opinion of the Company's managing underwriter for such offering the inclusion of
all or a portion of the Registrable Securities requested to be registered, when
added to the securities being registered by the Company, will exceed the maximum
amount of the Company's securities which can be marketed (i) at a price
reasonably related to their then current market value, or (ii) without otherwise
materially adversely affecting the entire offering, then the Company may exclude
from such offering all or a portion of the Registrable Securities which it has
been requested to register.
If securities are proposed to be offered for sale
pursuant to such Piggyback Registration Statement by other security holders of
the Company and the total number of securities to be offered by the Requesting
Holders and such other selling security holders is required to be reduced
pursuant to a request from the managing underwriter (which request shall be made
only for the reasons and in the manner set forth above), the aggregate number of
Registrable Securities to be offered by Requesting Holders pursuant to such
Piggyback Registration Statement shall equal the number which bears the same
ratio to the maximum number of securities that the underwriter believes may be
included for all the selling security holders (including the Requesting Holders)
as the original number of Registrable Securities proposed to be sold by the
Requesting Holders bears to the total original number of securities proposed to
be offered by the Requesting Holders and the other selling security holders.
Notwithstanding the provisions of this Section 2 the
Company shall have the right, at any time after it shall have given Notice
pursuant to this Section 2 (irrespective of whether any written request for
inclusion of Registrable Securities shall have already been made), to elect not
to file any Piggyback Registration Statement or to withdraw the same after the
filing but prior to the effective date thereof.
3. Additional Terms.
(a) If any stop order shall be issued by the SEC in
connection with a Mandatory Registration Statement or, following its
effectiveness, a Piggyback Registration Statement (collectively referred to
herein as the "Bridge Registration Statement") the Company will use its best
efforts to obtain the removal of such order. Following the effective date of the
Bridge Registration Statement, the Company shall, upon the request of the
Holder, forthwith supply such reasonable number of copies of the Bridge
Registration Statement, preliminary prospectus and prospectus meeting the
requirements of the Act, and other documents necessary
-3-
<PAGE>
or incidental to the registration and public offering of the Registrable
Securities, as shall be reasonably requested by the Holder to permit the Holder
to make a public distribution of the Holder's Registrable Securities. The
Company will use its reasonable efforts to qualify the Registrable Securities
for sale in such states as the Holders of such securities shall reasonably
request, provided that no such qualification will be required in any
jurisdiction where, solely as a result thereof, the Company would be subject to
general service of process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction. The obligations of the Company
hereunder with respect to the Holder's Registrable Securities are expressly
conditioned on the Holder's furnishing to the Company such appropriate
information concerning the Holder, the Holder's Registrable Securities and the
terms of the Holder's offering of such securities, as the Company may reasonably
request.
(b) The Company shall bear the entire cost and expense
of each registration of the Registrable Securities provided for herein;
provided, however, that the Holder shall be solely responsible for the fees of
any counsel retained by the Holder in connection with such registration and any
transfer taxes or underwriting discounts, commissions or fees applicable to the
Registrable Securities sold by the Holder pursuant thereto.
(c) The Company shall indemnify and hold harmless the
Holder and each underwriter, within the meaning of the Act, who may purchase
from or sell for the Holder, any Registrable Securities, from and against any
and all losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in the Bridge Registration Statement, any other
registration statement filed by the Company under the Act, any post-effective
amendment to such registration statements, or any prospectus included therein
required to be filed or furnished by reason of this Agreement or caused by any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission based upon information furnished or required to be furnished in
writing to the Company by the Holder or underwriter expressly for use therein,
which indemnification shall include each person, if any, who controls either the
Holder or underwriter within the meaning of the Act and each officer, director,
employee and agent of the Holder and underwriter; provided, however, that the
indemnification in this paragraph (c) with respect to any prospectus shall not
inure to the benefit of the Holder or underwriter (or to the benefit of any
person controlling the Holder or underwriter) on account of any such loss,
claim, damage or liability arising from the sale of Registrable Securities by
the Holder or the underwriter, if a copy of a subsequent prospectus correcting
the untrue statement or omission in such earlier prospectus was provided to the
Holder or underwriter by the Company prior to the subject sale and the
subsequent Prospectus was not delivered or sent by the Holder or underwriter to
the purchaser prior to such sale.
(d) The Holder or underwriter or other person, as the
case may be, shall indemnify the Company, its directors, each officer signing
the Bridge Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, from and against any and all losses,
claims, damages and liabilities caused by any untrue statement of a material
fact contained in the Bridge Registration Statement, any registration statement
or any prospectus required to be filed or furnished by reason of this Agreement
or caused by any omission to state
-4-
<PAGE>
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by the Holder or underwriter
expressly for use therein.
(e) If for any reason the indemnification provided for
in the preceding subparagraphs is held by a court of competent jurisdiction to
be unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
(f) Neither the filing of a Bridge Registration
Statement by the Company pursuant to this Agreement nor the making of any
request for prospectuses by the Holder shall impose upon the Holder any
obligation to sell the Holder's Registrable Securities.
(g) The Holder, upon receipt of notice from the Company
that an event has occurred which requires a post-effective amendment to the
Bridge Registration Statement or a supplement to the prospectus included
therein, shall promptly discontinue the sale of Registrable Securities pursuant
to such registration statement until the Holder receives a copy of the amended
Bridge Registration Statement or supplemented prospectus from the Company, which
the Company shall provide as soon as practicable after such notice.
4. Governing Law.
(a) The Registrable Securities are being, and will be,
delivered in New York. This Agreement shall be deemed to have been made and
delivered in the State of New York and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York.
(b) The Company and the Holder each (i) agrees that any
legal suit, action or proceeding arising out of or relating to this Agreement,
or any other agreement entered into between the Company and the Holder pursuant
to the Bridge Financing or the Bridge Registration Statement shall be instituted
exclusively in the New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (ii) waives
any objection which the Company or such Holder may have now or hereafter to the
venue of any such suit, action or proceeding, and (iii) irrevocably consents to
the jurisdiction of the New York State Supreme Court, County of New York and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The Company and the Holder each further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York or in the United States District Court for the Southern District of New
York and agrees that service of process upon the Company or the Holder mailed
-5-
<PAGE>
by certified mail to the Company at the address set forth above, in the case of
the Company, and to the Holder's address, in the case of the Holder, shall be
deemed in every respect effective service of process upon the Company or the
Holder, as the case may be, in any suit, action or proceeding.
5. Amendment. This Agreement may only be amended by a written
instrument executed by the Company and the Holder.
6. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings of the parties, oral and
written, with respect to the subject matter hereof.
7. Execution in Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same document.
8. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed duly given when
delivered by hand or five days after such notice is mailed by registered or
certified mail, postage prepaid, return receipt requested, as follows:
If to the Holder, to his or her address set forth on the
signature page of this Agreement.
If to the Company, to the address set forth on the first page
of this Agreement.
9. Binding Effect; Benefits. The Holder may not assign his or
her rights hereunder. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective heirs, legal
representatives and successors. Nothing herein contained, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective heirs, legal representatives and successors, any rights or remedies
under or by reason of this Agreement.
10. Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
11. Severability. Any provision of this Agreement which is
held by a court of competent jurisdiction to be prohibited or unenforceable in
any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
-6-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.
MARINE MANAGEMENT SYSTEMS, INC.
By:____________________________________
Name:
Title:
HOLDER:
----------------------------------
Signature
---------------------------------
Print Name
Address of Holder:
----------------------------------
----------------------------------
----------------------------------
-7-
<PAGE>
EXHIBIT 10.18(b)
SCHEDULE OF HOLDERS
Thomas Anastasoglou
Daniel M. Keenan
David Miller
George Schimenti
Sefta Trustees Limited
Westminster Capital, Inc.
<PAGE>
EXHIBIT 10.19
CONSULTING AGREEMENT
______________, 1997
Marine Management Systems, Inc.
470 West Avenue
Stamford, Connecticut 06902
Attention: Mr. Eugene Story, President
Dear Mr. Story:
This will confirm the arrangements, terms and conditions
pursuant to which Whale Securities Co., L.P. (the "Consultant"), has been
retained to serve as a financial consultant and advisor to Marine Management
Systems, Inc., a Delaware corporation (the "Company"), on a non-exclusive basis
for a period of two (2) years commencing on _____________, 1997. The undersigned
hereby agrees to the following terms and conditions:
1. Duties of Consultant. Consultant shall, at the request of
the Company, upon reasonable notice, render the following services to the
Company from time to time:
(a) Consulting Services. Consultant will provide such
financial consulting services and advice pertaining to the Company's business
affairs as the Company may from time to time reasonably request. Without
limiting the generality of the foregoing, Consultant will assist the Company in
developing, studying and evaluating financing and merger and acquisition
proposals based upon documentary information provided to the Consultant by the
Company.
(b) Financing. Consultant will assist and represent
the Company in obtaining both short and long-term financing. The Consultant will
be entitled to additional compensation under certain circumstances in accordance
with the terms set forth in Section 3 hereof.
(c) Wall Street Liaison. Consultant will, when
appropriate, arrange meetings between representatives of the Company and
individuals and financial institutions in the investment community, such as
security analysts, portfolio managers and market makers.
<PAGE>
The services described in this Section 1 shall be rendered by
Consultant without any direct supervision by the Company and at such time and
place and in such manner (whether by conference, telephone, letter or otherwise)
as Consultant may determine.
2. Compensation. As compensation for Consultant's services
hereunder, the Company shall pay to Consultant an annual fee of Twelve Thousand
Five Hundred Dollars ($12,500), the entire Twenty-Five Thousand Dollars
($25,000) payable in full, in advance, on ________________, 1997.
3. Additional Compensation in Certain Circumstances. In
addition to the financial consulting services described in Section 1 above,
Consultant may bring the Company in contact with persons, whether individuals or
entities, that may be suitable candidates for providing the Company with, or may
lead the Company to other individuals or entities that may provide the Company
with, debt or equity financing or that may be suitable candidates, or may lead
the Company to such suitable candidates, to purchase substantially all of the
stock or assets of the Company, to have substantially all of its stock or assets
purchased by the Company, merge with the Company, or enter into a joint venture
or other transaction with the Company. If, at any time up until the third
anniversary of the date hereof, the Company enters into an agreement with any
such persons or their affiliates, or with any persons introduced to the Company
by any such persons or their affiliates, pursuant to which the Company obtains
debt or equity financing or pursuant to which substantially all of the Company's
stock or assets is purchased, the Company purchases substantially all of the
stock or assets of another entity or the Company is merged with or into another
entity, or pursuant to which the Company enters into a joint venture or other on
or off balance sheet corporate finance transaction (each a "Transaction"), the
Company will pay to Consultant, in accordance with the formula set forth below,
additional compensation based on the aggregate value of the consideration,
whether in cash, securities, assumption of (or purchase subject to) debt or
liabilities (including, without limitation, indebtedness for borrowed money,
pension liabilities and guarantees), or other property, obligations or services,
paid or payable directly or indirectly (in escrow or otherwise) or otherwise
assumed in connection with such Transaction (the "Consideration"). For purposes
of this Section 3, the "Company" shall include its subsidiaries and any other
entity in which it owns (directly or indirectly) a majority interest.
The additional compensation to be paid will be paid upon the
closing of the Transaction (except that, if any part of the Consideration is in
the form of contingent payments to be
<PAGE>
calculated in reference to uncertain future occurrences, such as future
financial or business performance, than the portion of the fees of Consultant
relating to such part of the Consideration shall be payable at the earlier of
(i) the receipt or payment of such Consideration; or (ii) the time that the
amount of such Consideration can be determined, by certified check, in the
following amounts:
5% of the first $5,000,000 of the Consideration;
4% of the Consideration in excess of $5,000,000
and up to $6,000,000;
3% of the Consideration in excess of $6,000,000
and up to $7,000,000;
2% of the Consideration in excess of $7,000,000
and up to $8,000,000; and
1% of any Consideration in excess of $8,000,000.
4. Available Time. Consultant shall make available such time
as it, in its sole discretion, shall deem appropriate for the performance of its
obligations under this agreement and may in certain circumstances be entitled to
additional compensation in connection therewith.
5. Relationship. Nothing herein shall constitute Consultant as
an employee or agent of the Company, except to such extent as might hereinafter
be agreed upon for a particular purpose. Except as might hereinafter be
expressly agreed, Consultant shall not have the authority to obligate or commit
the Company in any manner whatsoever.
6. Confidentiality. Except in the course of the performance of
its duties hereunder, Consultant agrees that it shall not disclose any trade
secrets, know-how, or other proprietary information not in the public domain
learned as a result of this Agreement unless and until such information becomes
generally known.
7. Assignment and Termination. This Agreement shall not be
assignable by any party except to successors to all or substantially all of the
business of either party for any reason whatsoever without the prior written
consent of the other party, which consent may be arbitrarily withheld by the
party whose consent is required.
<PAGE>
8. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said State.
Very truly yours,
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.
General Partner
By:________________________
Name:
Title:
AGREED AND ACCEPTED:
MARINE MANAGEMENT SYSTEMS, INC.
By:_____________________________
Name:
Title:
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Marine Management Systems, Inc.
Stamford, Connecticut
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated August 16, 1996, except for the
waivers discussed in Note 6 as to which the date is January 10, 1997, relating
to the financial statements of Marine Management Systems, Inc. which is
contained in that Prospectus. Our report contains an explanatory paragraph
regarding the Company's ability to continue a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Valhalla, New York
January 31, 1997
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,531
<SECURITIES> 0
<RECEIVABLES> 653,853
<ALLOWANCES> 25,000
<INVENTORY> 39,085
<CURRENT-ASSETS> 797,665
<PP&E> 383,849
<DEPRECIATION> 170,688
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750,000
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<COMMON> 5,402
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<TOTAL-LIABILITY-AND-EQUITY> 3,128,426
<SALES> 3,505,031
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<CGS> 2,543,033
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