-------------------------------------------
OMB APPROVAL
-------------------------------------------
OMB Number:
Expires:
Estimated average burden
hours per form...................
-------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.____________)*
Marine Management Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.002 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
568278105
- --------------------------------------------------------------------------------
(CUSIP Number)
Michael P. Barney
470 West Avenue
Stamford, CT 06902 (203) 327-6404
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 10, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement of Schedule 13G to report
the acquisition which is the subject of the Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [ ].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filed out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
<PAGE>
CUSIP No. 13D
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Reliable Credit Association Profit Sharing Plan, Account #97305370
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 400,000
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH Not applicable
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 400,00
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
Not applicable
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
400,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.05%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
EP
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Schedule 13D
Item 1. Security and Issuer.
This statement relates to shares of the common stock, par value $.002
per share ("Common Stock"), of Marine Management Systems, Inc. (the
"Company"), which are issuable upon conversion of the Company's
Five-Year Senior Convertible Note (the "Convertible Note"), in the
principal amount of $400,000, purchased by the reporting persons.
The Convertible Note is convertible, at the rate of $1.00 face value
of the Convertible Note for each share of Common Stock, by Reliable
Credit Association Profit Sharing Plan, Account #97305370 up to
400,000 shares of the Common Stock (the "Conversion Shares"), subject
to adjustments under certain circumstances, at any time and from time
to time (i) after December 10, 1998, except sooner in the event that
the Company shall consolidate with or merge into another corporation
before such date, and (ii) prior to March 31, 2003 or upon receipt of
payment in full of the principal amount of the Convertible Note and
accrued interest thereon, whichever is earlier. For purposes of this
Schedule 13D, such Conversion Shares are deemed to be beneficially
owned by Reliable Credit Association Profit Sharing Plan, Account
#97305370.
The Convertible Note entitles its holder, prior to conversion of the
Convertible Note, to vote that number of Conversion Shares to which
the Convertible Note is convertible on the record date for such vote,
with respect to all matters voted on by holders of the Company's
Common Stock voting together as a single class.
The principal executive offices of the Company are located at 470 West
Avenue, Stamford, Connecticut 06902.
Item 2. Identity and Background.
This Schedule 13D is being filed by Reliable Credit Association Profit
Sharing Plan, Account #97305370 (the "Plan") and its Administrator,
Irwin B. Holzman:
(a) Reliable Credit Association Profit Sharing Plan, Account
#97305370
-3-
<PAGE>
(b) c/o May Management, Inc., 4550 Kruse Way #345, Lake Oswego, OR
97035
(c) An employee Profit Sharing Plan organized under the laws of the
State of Oregon.
(d) During the last five (5) years, the Plan has not been convicted
in any criminal proceeding.
(e) During the last five (5) years, the Plan has not been a party to
a civil proceeding of a judicial or administrative body of
competent jurisdiction, as a result of which proceeding having
become subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The funds, in the aggregate amount of $400,000, used in purchasing the
Convertible Note on July 10, 1998 originated from pension funds held
in an employee profit sharing plan held in trust and invested in the
ordinary course of the Plan's operations.
Item 4. Purpose of Transaction.
The Plan acquired the Convertible Note in a private transaction for
investment purposes. The purpose of the Plan obtaining the right to
vote the Conversion Shares, prior to conversion of the Convertible
Note, is to enable the Plan to influence the outcome of matters that
are subject to a vote of stockholders of the Company. Depending upon
market conditions and other factors that the Plan may deem material to
its investment decision, the Plan may purchase additional securities
of the Company in the open market or in private transactions, or may
dispose of all or a portion of the securities of the Company that it
now owns or hereafter may acquire.
-4-
<PAGE>
The Company also has granted to the holders of five-year senior
convertible notes acquired on July 10, 1998, of which the Plan
constitutes 20% (collectively, "Purchasers"), the right to appoint a
seventh (7th) member to the Company's six (6) member board of
directors. Notwithstanding any such appointment, the Purchasers were
given the option to designate an observer to the Company's board of
directors.
The Company also has granted to such Purchasers certain preemptive
rights to preserve their respective Equity Percentage (defined herein
below), pursuant to which the Purchasers may purchase, upon the same
terms and conditions, that amount of any additional shares of Common
Stock or security convertible into shares of Common Stock or any
rights or options to purchase shares of Common Stock issued by the
Company for consideration that includes cash and not to selling
stockholders of the Company pursuant to a merger or acquisition
transaction. For purposes of the transaction, "Equity Percentage"
means that percentage equal to (1) the Conversion Shares (after giving
effect to any adjustments) divided by (2) the Company's issued and
outstanding Common Stock, on a fully diluted basis (inclusive of all
outstanding securities of the Company convertible into shares of
Common Stock and rights or options to purchase shares of the Company's
Common Stock).
Except as set forth in this Item 4, the Plan does not have any present
plans or proposals that relate to or that would result in any of the
actions specified in clauses (a) through (j) of Item 4 of Schedule
13D.
Item 5. Interest in Securities of the Issuer.
(a) The calculations in this Item are based upon 4,421,120 shares of
Common Stock issued and outstanding as of June 9, 1998 (based
upon the Company's Proxy Statement dated as of such date filed
with the Securities and Exchange Commission). For purposes
hereof, the Plan beneficially owns 400,000 Conversion Shares,
issuable upon exercise of the Convertible Note,
-5-
<PAGE>
comprising 9.05% of the issued and outstanding shares of the
Company's Common Stock. The foregoing calculation is made
pursuant to Rule 13d-3 promulgated under the Securities Exchange
Act of 1934.
(b) The Plan is the sole owner of the Convertible Note and, under the
terms of such Convertible Note, has the sole power to vote its
Conversion Shares prior to any conversion of the Convertible
Note, based upon a 1:1 exchange of votes to the number of
Conversion Shares into which the Convertible Note is convertible
at the time of such vote). Upon the exercise of the Convertible
Note, the Plan will also have the sole power to vote and dispose
of all of the underlying Conversion Shares.
(c) The Plan has not effected any transactions in shares of the
Company's Common Stock or in any options or warrants to purchase
such Common Stock in the past 60 days.
(d) The Plan affirms that no other person has the right to receive or
the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares of the Company's Common
Stock beneficially owned by U.S. Bank.
(e) It is inapplicable for the purposes herein to state the date on
which the Plan ceased to be the owner of more than five percent
(5%) of the Shares.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as set forth in Item 4, the Plan does not have any contract,
arrangement, understanding or relationship (legal or otherwise) with
any person with respect to any securities of the Company. As noted in
Item 4, the Company granted the Plan (i) the right to vote its
Conversion Shares and (ii), in conjunction with the other Purchasers,
the right to appoint the seventh (7th) of the Company's six (6) member
board of directors and
-6-
<PAGE>
to purchase securities of the Company in order to maintain its Equity
Percentage.
Item 7. Materials to be Filed as Exhibits.
1. Form of Senior Note Purchase Agreement, dated July 10, 1998,
between the Company and U.S. Bank National Association, as
Trustee for Reliable Credit Association Profit Sharing Plan,
Account #97305370.
2. Form of the Company's Five-Year Senior Convertible Note.
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Reliable Credit Association Profit
Sharing Plan, Account No. 97305370
Dated July 22, 1998 By: /s/ Irwin B. Holzman
-----------------------------AES, A/F
Name: Irwin B. Holzman
Title: Administrator
MARINE MANAGEMENT SYSTEMS, INC.
SENIOR NOTE PURCHASE AGREEMENT
THIS SENIOR NOTE PURCHASE AGREEMENT ("Agreement") is made and entered into
this 10th day of July, 1998 by and between MARINE MANAGEMENT SYSTEMS, INC., a
Delaware corporation (the "Company"), and the purchasers listed on Exhibit A
annexed hereto (the "Purchasers" and individually, a "Purchaser").
R E C I T A L S:
A. The Company desires to obtain financing by issuance of Senior Five-Year
Convertible Notes (the "Notes") which are the subject of this Agreement; and
B. The Purchasers desire to acquire the Notes on the terms and conditions
set forth herein.
A G R E E M E N T:
NOW, THEREFORE, IT IS AGREED as follows:
1. PURCHASE OF SENIOR NOTES.
1.1 Subject to the terms and conditions hereof, the Purchasers hereby
agree to purchase from the Company, and the Company has offered and hereby
agrees to issue and sell to the Purchaser $2,000,000 aggregate principal
amount of the Notes due June 30, 2003, to be issued substantially in the
form attached hereto as Exhibit B for delivery at the respective offices of
the Purchasers, against payment to the Company of the respective amounts
set forth opposite the Purchasers' names in Exhibit A by wire transfer in
same day or next day funds. The term "Notes" as used herein shall include
the Notes originally issued pursuant to the provisions of this Agreement
and any promissory notes delivered in substitution or exchange therefor.
The Notes will bear interest, be payable and mature at the time and under
the terms and conditions specified therein. The Notes will be convertible
into shares of the Company's Common Stock at the rate of $1.00 face value
of the Note for each share of the Company's Common Stock, subject to
adjustment, all as provided in the Notes.
The Company has authorized and reserved for issuance up to 2,000,000 shares of
Common Stock (which number may be adjusted as provided in the Notes) upon
conversion of the Notes in accordance with their terms (as used herein, the
"Notes" and the shares of the Common Stock issuable upon conversion thereof are
referred to collectively as the "Securities").
<PAGE>
1.2 The purchase price for the Notes to be purchased by the Purchasers
hereunder shall be an aggregate of $2,000,000 (the "Purchase Price"). The
Purchasers shall pay the Purchase Price by wire transfer of immediately
available funds to the Company. Simultaneously against receipt by the
Company of the Purchase Price, the Company shall deliver one or more duly
authorized, issued and executed Notes (I/N/O each Purchaser or , if the
Company otherwise has been notified, I/N/O such Purchaser's nominee).
Notwithstanding the foregoing, in the event that any Purchaser is a holder
of the Senior Convertible Notes issued on April 8, 1998 (the "Bridge
Notes") pursuant to the Bridge Note Purchase Agreement dated April 8, 1998
(the "Bridge Note Agreement"), such Purchaser shall present such Bridge
Notes for cancellation, in which case the entire amount of principal and
accrued interest outstanding under such Bridge Notes shall be deemed paid
to the Company and shall be credited against the portion of the Purchase
Price which was otherwise to have been paid by such Purchaser.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants that:
2.1 It is a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware, and duly qualified to do
business and in good standing as a foreign corporation in all jurisdictions
in which the failure to so qualify would be reasonably likely to have a
material adverse effect on the business, properties, prospects, condition
(financial or otherwise) or results of operations of the Company or on the
consummation of any of the transactions contemplated by this Agreement (a
"Material Adverse Effect"). The Company has full power and authority,
corporate and otherwise, to enter into and perform this Agreement, to
borrow hereunder, and to make, execute and deliver the various instruments
and documents provided for herein.
2.2 The execution, delivery and performance by the Company of this
Agreement and the Notes, and the making, execution and delivery by the
Company of the instruments contemplated hereby, have been duly authorized
by all necessary corporate action and will not violate any provision of
law, court order or decree, or of its Certificate of Incorporation or
Bylaws, or result in the breach of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property
or assets of the Company pursuant to any agreement or instrument to which
it is a party, or by which it or its property may be bound or affected,
except as contemplated hereby or thereby. Each of this Agreement and each
Note is a valid and binding obligation of the Company, enforceable in
accordance with its respective terms.
-2-
<PAGE>
2.3 The shares of Common Stock initially issuable upon conversion of
the Notes have been duly authorized and at all times prior to such
conversion will have been duly reserved for issuance upon such conversion
and, when issued, will be validly issued, fully paid and nonassessable.
2.4 The authorized capital of the Company is (a) 25,000,000 shares of
Common Stock, $.002 par value per share, of which approximately 4,421,120
are issued and outstanding and (b) 651 shares of Series A Preferred Stock,
par value, $.002 per share, 651 shares of which are issued and outstanding
(the "Series A Preferred Stock"). There are no shares of Common Stock
reserved for issuance on the exercise of options, warrants or conversion of
convertible securities, except as set forth on Schedule 2.4 hereto. There
are no preemptive, subscription, "call" or other similar rights to acquire
any Common Stock that have been issued or granted to any person, except as
disclosed in the Commission Filings (as defined below), otherwise
previously disclosed in writing to the Purchasers or as set forth on
Schedule 2.4 hereto. With respect to the securities set forth on Schedule
2.4, none of such securities permits any holder to receive shares of Common
Stock for a consideration of less than $1.00 per share of Common Stock.
2.5 The Company has furnished the Purchasers with copies of the
Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1997, the Company's Report on Form 10-QSB for the quarter ended March
31, 1998 (the "10-QSB") and all other reports and documents heretofore
filed by the Company with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act") since or as part of the
Company's initial public offering (collectively the "Commission Filings").
2.6 Except as disclosed in the Commission Filings, the Company does
not own or control, directly or indirectly, any interest in any other
corporation, partnership, limited liability company, unincorporated
business organization, association, trust or other business entity.
2.7 The Company has registered the Common Stock pursuant to Section 12
of the Exchange Act and has timely filed with the Commission all reports
and information required to be filed by it pursuant to all reporting
obligations under Section 13(a) or 15(d), as applicable, of the Exchange
Act for the 9-month period immediately preceding the date hereof. The
Common Stock is listed and traded on the National Association of Securities
Dealers, Inc. Automated Quotation - Small Cap market ("NASDAQ-Small Cap")
and, except as set forth in Schedule 2.7 hereto, the Company has not
received any notice regarding the termination or
-3-
<PAGE>
discontinuance of the eligibility of the Common Stock for such listing.
2.8 The Company shall cause Shipman & Goodwin LLP, counsel to the
Company, to deliver to the Purchaser an opinion of counsel dated the date
hereof, in form and substance satisfactory to the Purchasers and their
counsel.
2.9 There are (a) no material law suits or proceedings pending, or, to
the Company's knowledge, threatened against the Company and (b) no material
proceedings before any governmental commission, bureau or other
administrative agency pending, or, to the Company's knowledge, threatened
against the Company.
2.10 Any and all licenses and approvals required by the Company for
the conduct of its business have been obtained from the federal, state, or
local authorities concerned, all of which are in good standing, except
where the failure to receive such licenses or approvals would not,
individually or in the aggregate, have a material adverse effect on the
financial condition, operations, business, assets or properties of the
Company.
2.11 The minute books of the Company have been properly kept and
reflect all transactions entered into by the Company which require
submission to or action by the stockholders or directors of the Company.
2.12 No governmental permit, consent, approval or authorization (other
than as required by any applicable state securities law) is required in
connection with (i) the execution and delivery of this Agreement by the
Company or (ii) the offer, sale, issuance and delivery of the Notes
contemplated hereby by the Company; provided that, all representations made
to the Company by the Purchasers in this Agreement and in any other
document or instrument delivered in connection herewith are assumed for
purposes of this representation and warranty to be accurate and complete.
2.13 Included in the Company's Financial Statements (as defined below)
are (i) the balance sheets of the Company at December 31, 1997 and the
related statements of operations, changes in financial position and
shareholders' equity for the year ended on such date, with the report
thereon of BDO Seidman LLP, independent accountants and (ii) the unaudited
balance sheets at March 31, 1998 and the related statements of operations,
statement of retained earnings and cash flows as of and for the three(3)
month period ended March 31, 1998 (collectively, the "Financial
Statements"). Each of the Financial Statements is complete and correct in
all material respects, has been prepared in accordance
-4-
<PAGE>
with United States General Accepted Accounting Principles ("GAAP") and in
conformity with the practices consistently applied by the Company without
modification of the accounting principles used in the preparation thereof,
and fairly presents the financial position, results of operations and cash
flows of the Company as at the dates and for the periods indicated. For
purposes hereof, the balance sheet of the Company as at March 31, 1998 is
hereinafter referred to as the "Balance Sheet" and March 31, 1998 is
hereinafter referred to as the "Balance Sheet Date." The Company does not
have any indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise required to be reflected in,
reserved against or otherwise described in the Balance Sheet or in the
notes thereto in accordance with GAAP, which was not reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or
was not incurred in the ordinary course of business consistent with the
Company's past practices since the Balance Sheet Date.
2.14 None of the Company's reports and filings with the Securities and
Exchange Commission ("SEC") when filed contained a misstatement of a
material fact or omitted to state a material fact necessary to make the
statements contained therein, in the light of the circumstances in which
they were made or omitted, not misleading.
2.15 The Company's Common Stock is traded on NASDAQ-SmallCap Market.
Except as set forth in Schedule 2.7 hereto, there have been no other
notices of any delisting or delisting procedures threatened or contemplated
by NASDAQ.
2.16 Except as set forth in Schedule 2.7, since the Balance Sheet
Date, there has not occurred any change, event or development in the
business, financial condition, prospects or results of operations of the
Company, and there has not existed any condition having or reasonably
likely to have, a Material Adverse Effect.
2.17 Except as set forth in Schedule 2.7, there is no fact known to
the Company (other than general economic or industry conditions known to
the public generally) that has not been fully disclosed in the Commission
Filings to the Purchasers that (i) reasonably could be expected to have a
Material Adverse Effect or (ii) reasonably could be expected to materially
and adversely affect the ability of the Company to perform its obligations
pursuant to this Agreement, the Notes or the Permanent Financing Documents.
2.18 Except as set forth in Schedule 2.7, no "Event of Default" (as
defined in any agreement or instrument to which the Company or any of its
subsidiaries is a party) and no event which,
-5-
<PAGE>
with notice, lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing, which could have a
Material Adverse Effect.
2.19 Except as set forth in the Commission Filings, neither the
Company nor any of its officers, directors or "Affiliates" (as such term is
defined in Rule 12b-2 under the Exchange Act) has borrowed any moneys from
or has outstanding any indebtedness or other similar obligations to the
Company ("Related Party Indebtedness"). Except as set forth in the
Commission Filings, neither the Company nor any of its officers, directors
or Affiliates (i) owns any direct or indirect interest constituting more
than a one percent equity (or similar profit participation) interest in, or
controls or is a director, officer, partner, member or employee of, or
consultant to or lender to or borrower from, or has the right to
participate in the profits of, any person or entity which is a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the Company or
any of its subsidiaries, or (ii) is a party to any contract, agreement,
commitment or other arrangement with the Company, other than with respect
to their employment by the Company.
2.20 Based, in part, upon the representations of the Purchasers set
forth in Section 3 hereof, the offer and sale by the Company of the
Securities is exempt from (i) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification
provisions of all applicable state securities and "blue sky" laws. Other
than pursuant to an effective registration statement under the Securities
Act, the Company has not issued, offered or sold any shares of Common Stock
(including for this purpose any securities of the same or a similar class
as the Common Stock, or any securities convertible into or exchangeable or
exercisable for the Common Stock or any such other securities) within the
six-month period next preceding the date hereof, except as disclosed in the
Commission Filings or as set forth on Schedule 2.20 attached hereto, and
the Company shall not directly or indirectly take, and shall not permit any
of its directors, officers or Affiliates directly or indirectly to take,
any action (including, without limitation, any offering or sale to any
other person or entity of the shares of Common Stock), so as to make
unavailable the exemption from Securities Act registration being relied
upon by the Company for the offer and sale to the Purchasers of the Notes
and the shares of Common Stock issuable upon conversion thereof as
contemplated by this Agreement.
2.21 Set forth on Schedule 2.21 is a list of all Related Party
Indebtedness and, except for a $15,000 promissory note owed to Mark Story,
such Related Party Indebtedness is no longer outstanding and has been
exchanged for shares of Series A
-6-
<PAGE>
Preferred Stock based on $1,000 in principal amount and accrued interest
for each $1,000 in liquidation preference of the Series A Preferred Stock.
The Company has no liability to any entity in respect of such Related Party
Indebtedness which has been exchanged for Series A Preferred Stock. The
shares of Series A Preferred Stock have been duly authorized and have been
validly issued, fully paid and non-assessable. The shares of Common Stock
initially issuable upon conversion of the Series A Preferred Stock have
been duly authorized and at all times prior to such conversion will have
been duly reserved for issuance upon such conversion and, when issued, will
be validly issued, fully paid and nonassessable.
3. REPRESENTATIONS OF THE PURCHASERS. This Agreement is made with each
Purchaser by the Company in reliance upon each Purchaser's representations to
the Company, which by each Purchaser's acceptance hereof, each Purchaser
confirms, that (a) Purchaser is acquiring the Note to be delivered for its own
account and not for the beneficial interest of any other person, and not with a
view to the distribution thereof, and that Purchaser will not distribute, sell
or otherwise dispose of the Note or any of the shares of Common Stock of the
Company issuable upon conversion of the Note except as permitted under the
Securities Act of 1933, as amended (the "Act"), the General Rules and
Regulations thereunder, and all applicable State "Blue Sky" laws; (b)
Purchaser's financial circumstances are such as to permit Purchaser to make this
investment without having a present intention or need to liquidate its
investment; (c) Purchaser severally confirms further that it has been advised
that neither the Note nor the Common Stock issuable upon the conversion thereof
have been registered under the Act, and that, accordingly, such Note and shares
of Common Stock will be what is commonly known as "restricted securities," and
are not freely transferrable by Purchaser except pursuant to an exemption from
registration under the Act, such as Rule 144, the substance of which has been
explained to Purchaser or upon registration of the Common Stock under the Act;
(d) Purchaser is an "accredited investor" as that term is defined in SEC
Regulation D, (e) Purchaser has had the opportunity to discuss with Company
management the Company and its products, prospects, results of operation and
financial condition and to have access to any and all information regarding the
Company that Purchaser deems necessary to its decision to purchase the Note, and
(f) that the following legends shall be placed on the Note (and, until the
Common Stock is registered under the Act, any Shares of Common Stock issuable
upon conversion thereof):
"THE SECURITIES REPRESENTED BY THIS NOTE HAVE
BEEN ACQUIRED FOR INVESTMENT IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, PURSUANT TO SECTION
4(2) OF SAID ACT AND NOT WITH A VIEW TO OR IN
-7-
<PAGE>
CONNECTION WITH THE DISTRIBUTION THEREOF.
NEITHER THIS NOTE NOR THE SECURITIES ISSUED
UPON CONVERSION HEREOF MAY BE OFFERED FOR
SALE OR SOLD OR OTHERWISE DISPOSED OF EXCEPT
UPON COMPLIANCE WITH SAID ACT."
4. CERTAIN COVENANTS BY THE COMPANY
4.1 Filings. The Company shall make all necessary filings in
connection with the sale of the Securities to the Purchasers as required by
all applicable laws, and shall provide a copy thereof to each Purchaser
promptly after such filing.
4.2 Reporting Status. So long as any Purchaser beneficially owns any
of the Securities, the Company shall file all reports required to be filed
by it with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act.
4.3 Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities (excluding amounts paid by the Company for legal fees in
connection with such sale) solely to pay in full all outstanding amounts
under the Bridge Notes and for general corporate and working capital
purposes.
4.4 Reserved Conversion Shares. The Company at all times from and
after the date hereof shall have a sufficient number of shares of Common
Stock duly and validly authorized and reserved for issuance to satisfy the
conversion, in full, of the Notes.
5. TRANSFER BY THE PURCHASER.
Neither the Notes to be purchased by the Purchasers, nor any interest
therein, shall be sold, transferred, assigned, or otherwise disposed of, unless
the Company shall previously have received an opinion of counsel knowledgeable
in federal securities law, to the effect that registration under the Act is not
required in connection with such disposition pursuant to the Act, provided,
however, that the Common Stock issuable upon conversion of the Notes may be sold
if it is registered under the Act.
6. REGISTRATION.
6.1 (a) Registration. As promptly as practicable, but in no event
later than August 1, 1998, the Company shall prepare and file with the
Commission a Registration Statement (on Form S-3 or Form S-1) sufficient to
permit the public offering and sale by the Purchasers of the Common Stock
into which the Notes may, from time to time, be convertible through the
facilities of all appropriate securities exchanges and the over-the-counter
market, and will use its best efforts through its officers,
-8-
<PAGE>
directors, auditors and counsel to cause such registration statement to
become effective as promptly as practicable, but not later than 180 days
after the Closing Date. Any registration statement which becomes effective
pursuant to the provisions of this paragraph, shall be kept effective by
the Company for so long as the Purchasers own any of the Notes, or any
shares of Common Stock of the Company which they receive upon conversion of
the Notes. The Company shall not include any other securities in the
Registration Statement relating to the offer and sale of the shares of
Common Stock, except as set forth on Schedule 6.1. The Company, at its sole
expense, will also take such actions as shall permit the shares of Common
Stock to be sold in all states which the Purchasers request. Prior to the
effectiveness of such Registration Statement, the Company shall also list
or approve for listing, by NASDAQ, upon official notice of issuance, such
shares of Common Stock.
(b) Terms of Registrations. The foregoing rights and duties shall be
subject to the following terms and conditions:
(i) The Company shall bear all of the costs of any registration
statement, including all "blue sky" fees and expenses.
(ii) The Company will use its best efforts to cause such
registration statement to become effective under the Act.
6.2 In connection with any registration pursuant to Section 6.1, the
Company will (i) use its best efforts to permit a lawful distribution by
Purchasers in the manner specified by Purchasers; (ii) use its best efforts
to qualify or otherwise "blue sky" the proposed offering by Purchasers in
such states as the Purchasers shall reasonably request; provided, however,
that nothing herein contained shall require the Company to qualify as a
foreign corporation in a jurisdiction in which it is not presently
qualified or to become licensed as a securities broker or dealer in any
jurisdiction; (iii) provide Purchasers with a reasonable number of
registration statements and prospectuses (including amendments and
revisions) requested by Purchasers; and (iv) use its best efforts to have
such prospectuses meet the requirements of Section 10(a) of the Securities
Act of 1933, as amended.
6.3 The Company's obligations under this Section 6 are conditioned
upon its being furnished by Purchasers with descriptions of Purchasers'
Common Stock to be covered in the requested registration statement, the
proposed method of distribution, and such other relevant information as may
be required.
-9-
<PAGE>
6.4 In connection with any registration statement pursuant to this
Section 6, Purchasers shall severally indemnify and hold harmless the
Company and each person (if any) who controls the Company within the
meaning of Section 15 of the Act from and against all losses, claims,
damages and liabilities to which the Company or any of them may be subject,
actually or allegedly caused by any untrue or allegedly untrue statement of
a material fact contained in any such registration statement or related
prospectus or actually or allegedly caused by an omission to state therein
a material fact actually or allegedly required to be stated therein or
necessary to make the statements therein not misleading, which statement or
omission shall have been made in reliance upon and in conformity with
written information furnished to the Company by any Purchaser or on any
Purchaser's behalf specifically for use in connection with such
registration statement. Reciprocally, the Company hereby agrees to
indemnify and hold harmless each Purchaser, any broker or other person who
may be deemed an underwriter for a Purchaser and each person (if any) who
controls the Purchaser or Purchaser's underwriter within the meaning of
Section 14 of the Act, from and against all losses, claims, damages and
liabilities to which such parties or any of them may be subject, actually
or allegedly caused by any untrue or allegedly untrue statement of a
material fact contained in any such registration statement or related
prospectus or actually or allegedly caused by any omission to state therein
a material fact actually or allegedly required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such statement or omission shall have been made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of a Purchaser specifically for use in connection with such
registration statement.
(a) Subject to subsection (b) below, the foregoing indemnity shall
include reimbursements for any reasonable legal or other expenses incurred
by the indemnified party or any director, officer or controlling person, as
defined above, in connection with investigating or defending any such loss.
(b) Promptly after receipt by an indemnified party under this Section
6.4 of notice of commencement of any action, the indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party
under this Section 6.4, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability to any indemnified party except to the extent
that the failure to so notify such party adversely affected the
indemnifying party. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the latter will be entitled to participate therein,
and to the extent desired, jointly, with any other indemnifying party
-10-
<PAGE>
similarly notified, assume the defense and control the settlement thereof,
with counsel reasonably satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party as to its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 6.4 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable cost of
investigation.
(c) The Company and each Purchaser each have the right to make a
reasonable investigation of the information contained in any registration
statement covered by this Section 6 to confirm its accuracy, subject,
however, to the obligation of the party making such investigation to keep
in confidence any information derived until such time as the information is
filed with the SEC.
6.5 To the extent transfers of the Notes or Common Stock are permitted
pursuant to Section 5 hereof, Purchaser may transfer, assign or otherwise
dispose of its rights under this Section 6, as a whole or in part, but no
such action by a Purchaser shall increase or otherwise affect the nature or
extent of the Company's obligations provided in this Section.
7. OTHER AGREEMENTS.
7.1 Board Representation. The Purchasers and their successors will
have the right to designate a nominee, reasonably acceptable to the Board
of Directors of the Corporation, for election, at its option, as a member
of 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 until seventy-five (75%) percent of the aggregate
initial principal amount of the Notes has been paid, or 75% of the Common
Stock received upon conversion of the entire principal of the Notes has
been sold. Notwithstanding the foregoing, the Purchasers shall have the
option to designate an observer to the Board of Directors subject to the
foregoing conditions. Following the election of such nominee as a director,
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, to the
extent Directors are so reimbursed generally. The Company agrees to
indemnify and hold such director harmless, to the maximum extent provided
to other directors under the Corporation's Restated Certificate of
Incorporation against any and all claims, actions, awards and judgments
arising out of his
-11-
<PAGE>
service as a director 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 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 each Purchaser insofar
as it may be or may be alleged to be responsible for such director.
7.2 Preemptive Rights.
(a) The percentage of the Company's issued and outstanding Common
Stock, on a fully-diluted basis (based on the number of shares of Common
Stock outstanding on the date hereof and any other Equity Securities (as
defined below) outstanding on the date hereof), represented by the shares
of Common Stock issuable upon conversion of the Notes in their entirety
(after giving effect to any adjustment to the Conversion Price as set forth
in the Notes), shall be referred to herein as the "Equity Percentage." In
addition to the anti-dilution provision set forth in the Notes, the
Purchasers shall be entitled to preemptive rights as set forth herein in
order to preserve such Equity Percentage. In the case of the issuance of
additional shares of Common Stock or any security that is convertible into
shares of Common Stock or any rights or options to purchase shares of
Common Stock (collectively, "Equity Securities") which are issued for
consideration that includes cash and are not issued to the selling
shareholders in a merger or acquisition transaction, the Purchasers shall
be entitled to purchase such amount of Equity Securities, upon the same
terms and conditions as applicable to any other purchaser or recipient of
such Equity Securities, in an amount so as to preserve the Purchasers'
Equity Percentage.
(b) For purposes of this Section 7.2, (i) the Company shall be deemed
to have issued the maximum number of shares of Common Stock deliverable
upon the exercise of any such rights or options or upon conversion of any
such securities and (ii) the consideration therefor shall be deemed to be
the sum of (x) the consideration received by the Company for such
convertible securities or for such other rights or options as the case may
be, without deducting therefrom any expenses or commissions incurred or
paid by the Company for any underwriting or issuance of such convertible
security or right or option, plus (y) the consideration or adjustment
payment to be received by the Company in connection with such conversion,
plus (z) the minimum price at which shares of Common Stock are to be
delivered upon the exercise of such rights or options, or, if no minimum
price is specified and such shares are to be delivered at the option price
related to the market value of the subject shares, an option price bearing
the same relation to the market value of the subject shares at the time
such rights or options were granted, provided that as to such options such
further
-12-
<PAGE>
adjustment as shall be necessary on the basis of the actual option price at
the time of exercise shall be made at such time if the actual option price
is less than the aforesaid assumed option price.
(c) The number of shares of Common Stock at any time outstanding shall
include (i) all outstanding common stock of the Company, and (ii) the
aggregate number of shares deliverable in respect of the convertible
securities, rights and options referred to in this Section 7.2, provided
that, to the extent that any such options, warrants or conversion
privileges are not exercised, such shares shall be deemed to be outstanding
only until the expiration dates of the rights, options or conversion
privilege or the prior cancellation thereof. Notwithstanding the foregoing,
there shall not be taken into account, for the purpose of any computation
made pursuant to Section 7.2, whether for the determination of the number
of shares of Common Stock issued or outstanding on or prior to any date, or
otherwise, any options, warrants, or rights to purchase shares of Common
Stock of the Company in existence on the date of issuance of the Notes.
8. CLOSING DATE.
The date and time of the issuance and sale of the Notes (the "Closing
Date") shall be the date hereof or such other as such be mutually agreed upon in
writing. Notwithstanding anything to the contrary contained herein, the closing
shall be subject to the conditions set forth in Sections 9 and 10.
9. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
Each Purchaser understands that the Company's obligation to sell the Notes
on the Closing Date to such Purchaser pursuant to this Agreement is conditioned
upon:
(a) Delivery by the Purchasers to the Company of an aggregate of
$2,000,000 in immediately available funds (the "Purchase Price"); provided
that certain Purchaser(s) may present the Bridge Note(s) for crediting as
set forth in Section 1.2 above;
(b) The accuracy on the Closing Date of the representations and
warranties of the Purchasers contained in this Agreement as if made on the
Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the
performance by the Purchasers in all material respects on or before the
Closing Date of all covenants and agreements of each Purchaser required to
be performed by it pursuant to this Agreement on or before the Closing
Date;
-13-
<PAGE>
(c) There shall not be in effect any law or order, ruling, judgment or
writ of any court of public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by
this Agreement.
10. CONDITIONS TO PURCHASERS' OBLIGATIONS.
The Company understands that the Purchasers' obligations to purchase the
Notes on the Closing Date pursuant to this Agreement is conditioned upon:
(a) Delivery by the Company to each Purchaser of one or more
certificates (I/N/O each Purchaser and its nominee) evidencing the Notes to
be purchased by each such Purchaser pursuant to this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the
Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the
performance by the Company in all material respects on or before the
Closing Date of all covenants and agreements of the Company required to be
performed by it pursuant to this Agreement on or before the Closing Date;
(c) Purchasers having received the opinion of counsel for the Company
referred to in Section 2.8;
(d) The Company's Certificate of Incorporation has been validly
amended to provide for (i) an increase in number of shares of Common Stock
duly and validly authorized to 25,000,000 shares, and (ii) the Series A
Preferred Stock. All other matters in connection with the issuance of the
Notes which are required to be approved by the Company's shareholders
and/or Board of Directors, including without limitation, approval of the
voting rights granted to the holders of the Senior Notes have been approved
by the Company's stockholders and the Company's Board of Directors.
(e) There not having occurred any general suspension of trading in, or
limitation on prices listed for, the Common Stock on the NASDAQ - Small Cap
System;
(f) Except as disclosed in the documents set forth in Schedule 2.7 or
as otherwise disclosed herein, there not having occurred any event or
development, and there being in existence no condition, having or which
reasonably and foreseeably could have a Material Adverse Effect;
-14-
<PAGE>
(g) The Company shall have delivered to the Purchasers reimbursement
of the Purchasers' out-of-pocket costs and expenses incurred in connection
with the transactions contemplated by this Agreement and the Bridge Note
Agreement (including the fees and disbursements of the Purchasers' legal
counsel, which shall not exceed $35,000 in the aggregate), upon submission
by the Purchasers to the Company of appropriate documentary evidence of
such out-of-pocket costs and expenses; and
(h) There shall not be in effect any law or order, ruling, judgment or
writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by
this Agreement.
11. SURVIVAL; INDEMNIFICATION.
11.1 The representations, warranties and covenants made by each of the
Company and the Purchasers in this Agreement, the annexes, schedules and
exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the
Closing and the consummation of the transactions contemplated hereby. In
the event of a breach or violation of any of such representations,
warranties or covenants, the party to whom such representations, warranties
or covenants have been made shall have all rights and remedies for such
breach or violation available to it under the provisions of this Agreement
or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
11.2 The Company hereby agrees to indemnify and hold harmless the
Purchasers, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Purchaser Indemnitees"), from and
against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, "Losses"), and agrees to
reimburse the Purchaser Indemnitees for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Purchaser Indemnitees and to the extent arising
out of or in connection with:
(a) any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement; or
(b) any failure by the Company to perform in any material respect
any of its covenants, agreements,
-15-
<PAGE>
undertakings or obligations set forth in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this
Agreement.
11.3 Each Purchaser hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners
and members (collectively, the "Company Indemnitees"), from and against any
and all Losses, and agrees to reimburse the Company Indemnitees for all
out-of-pocket expenses (including the reasonable fees and expenses or legal
counsel), in each case promptly as incurred by the Company Indemnitees and
to the extent arising out of or in connection with:
(a) any misrepresentation, omission of fact, or breach of any of
the Purchasers' representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the
Purchasers pursuant to this Agreement; or
(b) any failure by the Purchasers to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or any instrument, certificate or
agreement entered into or delivered by a Purchaser pursuant to this
Agreement.
11.4 Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section 11 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 11 is being sought (the
"Indemnifying Party") of the commencement thereof; but the omission to so
notify the Indemnifying Party shall not relieve it from any liability that
it otherwise may have to the Indemnified Party, except to the extent that
the Indemnifying Party is materially prejudiced and forfeits substantive
rights and defenses by reason of such failure. In connection with any Claim
as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense
thereof. Notwithstanding the assumption of the defense of any Claim by the
Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, and
the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if
(and only if): (x) the Indemnifying Party shall have agreed to pay such
fees, out-of-pocket costs and expenses, (y) the Indemnified Party and the
Indemnifying Party reasonably shall have concluded that representation of
the
-16-
<PAGE>
Indemnified Party and the Indemnifying Party by the same legal counsel
would not be appropriate due to actual or, as reasonably determined by
legal counsel to the Indemnified Party, potentially differing interests
between such parties in the conduct of the defense of such Claim, or if
there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period
of time after notice of the commencement of such Claim. If the Indemnified
Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of
such legal counsel shall be borne exclusively by the Indemnified Party.
Except as provided above, the Indemnifying Party shall not, in connection
with any Claim in the same jurisdiction, be liable for the fees and
expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party (which
consent shall not unreasonably be withheld), settle or compromise any Claim
or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with
respect to such Claim or judgment.
12. NOTICES.
All notices required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered or sent by
registered or certified mail (return receipt requested, postage prepaid),
facsimile transmission or overnight courier to the address of the intended
recipient as follows:
If to the Company:
Marine Management Systems, Inc.
470 West Avenue
Stamford, CT 06902
Attention: President
If to a Purchaser: at the address set forth on Exhibit A annexed hereto.
or, if any other address shall at any time be designated by the Company or by a
Purchaser in writing in conformance with the provisions hereof, to such other
address.
-17-
<PAGE>
13. PARTIES IN INTEREST.
All the terms and provisions of this Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
14. GOVERNING LAW.
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York.
15. SECTION AND OTHER HEADINGS.
Section and other headings herein are for reference purposes only, and
shall not be used in any way to govern, limit, modify, construe or otherwise
affect this Agreement.
16. COUNTERPARTS.
This Agreement may be executed with each Purchaser in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed but one and the same instrument.
17. AMENDMENT.
This Agreement and the Notes may be amended by written agreement of the
Company and holders of Notes representing seventy-five percent (75%) of the
principal amount of Notes then outstanding solely with respect to the matters
referred to herein and any waiver or consent pursuant to the Notes may be given
by holders of Notes representing seventy-five percent (75%) of the principal
amount of the Notes outstanding solely with respect to the matters referred to
herein. Any such amendment, waiver or consent shall be binding upon the holders
of all Notes then outstanding, but solely with respect to the following matters:
exercise of registration rights; designation of nominee as a member of the Board
of Directors; allowing the issuance of additional employee or directors'
options, warrants or stock purchase rights without affecting the anti-dilution
provisions of the Notes, and permitting any indebtedness to become senior to the
Notes.
[conditional end of page - next page is signature page]
-18-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered on the
date first above written by the duly authorized representative of the Company.
"Company"
MARINE MANAGEMENT SYSTEMS, INC.
By: /s/ Michael P. Barney
----------------------------------
Michael P. Barney, President
"Purchasers"
Wechsler & Co., Inc.
By: /s/ Norman Wechsler
----------------------------------
Norman Wechsler, President
The Laura Wanser Foundation
By: /s/
----------------------------------
Name:
Title
Key Trust Co N.A., TTEE For Reliable
Credit Association Employees Pension
Plan, A/C #0116260
By: /s/
----------------------------------
Name:
Title
U.S. Bank National Association, as
Trustee for Rellable Credit
Association, Account #97305370
By: /s/
----------------------------------
Name:
Title:
-19-
<PAGE>
EXHIBIT A
LIST OF PURCHASERS
Purchaser Principal Amount
of Senior Notes
Wechsler & Co., Inc. $ 1,250,000
105 South Bedford Road
Suite 310
Mount Kisco, NY 10543
The Laura Wanser Foundation $ 50,000
c/o May Management, Inc.
45650 Kruse Way #345
Lake Oswego, OR 97035
Key Trust Co N.A.,
TTEE For Reliable Credit
Association Employees Pension
Plan, A/C #0116260 $ 300,000
c/o May Management, Inc.
45650 Kruse Way #345
Lake Oswego, OR 97035
U.S. Bank National Association
As Trustee for Reliable Credit
Association, Account #97305370 $ 400,000
----------
c/o May Management, Inc.
45650 Kruse Way #345
Lake Oswego, OR 97035
TOTAL $2,000,000
==========
<PAGE>
EXHIBIT B
SENIOR CONVERTIBLE NOTE
[Filed as Exhibit 2 to Schedule 13D]
<PAGE>
SCHEDULE 2.4
TO
SENIOR CONVERTIBLE NOTE PURCHASE AGREEMENT
Shares of Common Stock Reserved for Issuance
The Company has reserved for issuance under the Senior Note Purchase
Agreement, 2,000,000 shares of its Common Stock and such additional shares as
may be necessary for conversion of the Notes.
The Company currently has authorized for issuance, 25,000,000 shares of
Common Stock, 4,421,120 of which are currently issued, and outstanding, and
2,721,219 of which are reserved for issuance as follows:
(a) 1,656,000 shares issuable upon exercise of warrants issued in
connection with the Company's initial public offering;
(b) 268,000 shares issuable upon exercise of warrants issued to Whale
Securities Co., L.P. (the "Underwriter's Warrants) and upon exercise of warrants
underlying the Underwriter's Warrants;
(c) 125,000 shares issuable upon exercise of warrants issued to Sperry
Marine, Inc.;
(d) 222,219 shares issuable upon exercise of warrants issued to certain
executive officers of the Company and their affiliates; and
(e) 450,000 shares reserved for issuance pursuant to the terms of the
Company's Stock Option Plan, of which options to purchase up to 200,385 shares
of the Company's Common Stock have been issued.
<PAGE>
SCHEDULE 2.7
Letter from The NASDAQ Stock Market, Inc., dated July 1, 1998, signed by Kit
Milholland, Assistant Director.
Letter from The NASDAQ Stock Market, Inc., dated July 1, 1998, signed by Leslie
Bosch, Analyst.
Letter from The NASDAQ Stock Market, Inc., dated May 15, 1998.
<PAGE>
SCHEDULE 2.21
RELATED PARTY INDEBTEDNESS
Eugene Story $300,000*
Robert Ohmes $300,000*
Don Logan $ 22,000*
Eugene Story $ 29,000*
Mark Story $ 15,000
--------
$666,000
* Exchanged for Series A Preferred Stock.
THE SECURITIES REPRESENTED BY THIS NOTE HAVE BEEN ACQUIRED FOR INVESTMENT IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO SECTION 4(2) OF SAID ACT AND NOT WITH A VIEW TO OR IN
CONNECTION WITH THE DISTRIBUTION THEREOF. NEITHER THIS NOTE NOR THE SECURITIES
ISSUED UPON CONVERSION HEREOF MAY BE OFFERED FOR SALE OR SOLD OR OTHERWISE
DISPOSED OF EXCEPT UPON COMPLIANCE WITH SAID ACT AND AS PERMITTED BY THE
PURCHASE AGREEMENT, A COPY OF WHICH IS ON FILE AND MAY BE INSPECTED AT THE
PRINCIPAL OFFICE OF THE COMPANY.
MARINE MANAGEMENT SYSTEMS, INC.
SENIOR FIVE-YEAR CONVERTIBLE NOTE
July 10, 1998
FOR VALUE RECEIVED, the undersigned, MARINE MANAGEMENT SYSTEMS, INC., a
Delaware corporation (the "Company"), hereby promises to pay to
_________________, (the "Holder") or order, the principal amount of
_______________ ($___________), such amount to be due and payable on March 31,
2003. Interest on the unpaid principal balance from the date hereof shall be
payable semi-annually commencing September 30, 1998 (provided that such first
interest payment date shall be for the period commencing as of the date hereof),
and on each March 31 and September 30 thereafter, at the rate of ten (10%)
percent per annum. For all interest payments through March 31, 2000, the
Company, at its option, may elect to pay the interest hereunder by adding to the
outstanding principal amount of this Note, such interest which has not been paid
in cash (the "Additional Principal Amount"). Interest shall begin to accrue on
such Additional Principal Amount beginning on and including the applicable
interest payment date on which such Additional Principal Amount is added to the
outstanding principal amount of this Note. If the Company has elected to pay any
such interest payment hereunder in Additional Principal Amount (to the extent
permitted), it shall so notify the Holder on or before thirty days prior to the
applicable interest payment date. As used herein, the "principal" amount of this
Note at any time shall include the outstanding principal amount of this Note,
including any Additional Principal Amount outstanding as of such date. The
Company shall have the right to prepay, without penalty or premium, all or a
portion of the principal amount of this Note with accrued interest thereon to
the date of such
<PAGE>
prepayment upon thirty (30) days' written notice to the Holder at any time
following March 31, 2001. Any prepayment shall be first applied to interest
thereon accrued through the prepayment date and allocated among the then
outstanding Notes pro rata on the basis of the then unpaid principal amount
(including any Additional Principal Amount) of each of such Notes. No prepayment
may be permitted unless, at the time of such prepayment, there is registered
with the Commission for sale by the Holder, shares of Common Stock of the
Company reflecting full conversion of this Note. The Holder shall be entitled to
convert this Note at any time prior to such Prepayment Date.
Payments of principal and interest shall be made in lawful money of the
United States of America at the principal office of the Holder or at such other
place as the Holder hereof shall have designated to the Company in writing.
This Note is made pursuant to a certain Senior Note Purchase Agreement
dated July 10, 1998 (the "Agreement") between the Company and the Holder (and
the other Holders named therein), and the Holder hereof is entitled to the
benefits of the Agreement and may exercise the remedies provided for thereby or
otherwise available in respect thereof, in case of any material breach thereof
by the Company. (This Note and other Notes identical in terms (except for name
and face amount) issued to Holder and to other Holders who are parties to the
Agreement, are hereinafter collectively called the "Notes".) Payments of
principal and interest in respect of the Notes are senior to and prior in right
of payment to all other indebtedness for borrowed money of the Company, provided
that they shall be pari passu with any borrowings by the Company from a
recognized financial institution for working capital in a principal amount not
to exceed $500,000; provided further that such borrowings for working capital
may be secured by the assets of the Company pursuant to a security agreement and
on terms and conditions reasonably acceptable to the Holder (the "Permitted Bank
Line"). In case of an Event of Default, as defined herein, the unpaid balance of
the principal of this Note may be declared and become due and payable in the
manner provided herein.
This Note is issued subject to the following additional terms and
conditions:
1. Interest and Payment.
1.1 The principal amount of this Note outstanding from time to time
shall bear simple interest at an annual rate of ten percent (10%) (the
"Note Rate") from the date hereof (provided that interest shall accrue on
any Additional Principal Amount beginning on and including the applicable
interest payment date on which such Additional Principal Amount is added to
the outstanding principal amount of this Note) until payment in full of all
amounts of principal and interest outstanding under this Note.
-2-
<PAGE>
1.2 In the event of conversion of all or any portion of this Note,
interest on this Note shall continue to accrue until the applicable
conversion date.
1.3 All payments made by the Company on this Note shall be applied
first to the payment of accrued unpaid interest on this Note and then to
the reduction of the unpaid principal balance of this Note.
1.4 If payment of the outstanding principal amount of any Note,
together with accrued unpaid interest thereon, is not made on the earliest
to occur of (i) March 31, 2003; and (ii) any date on which any principal
amount of, or accrued unpaid interest on, any Note is declared to be, or
becomes, due and payable pursuant to the terms of such Note prior to March
31, 2003, then interest shall accrue on the outstanding principal amount
due under this Note and, to the extent permitted by law, on any unpaid
accrued interest due on this Note from and after such date of default to
the date of the payment in full of such amounts (including from and after
the date of the entry of judgment in favor of Holder in an action to
collect this Note) at an annual rate equal to the maximum rate of interest
permitted by applicable law (the "Maximum Rate").
1.5 In the event that a court of competent jurisdiction determines
that such amounts paid or agreed to be paid by the Company in connection
with this Note causes the effective interest rate on this Note to exceed
the Maximum Rate, such interest or other consideration shall automatically
be reduced to a rate which results in an effective interest rate under this
Note equal to the Maximum Rate over the term hereof, and, in such event,
any amounts received by Holder deemed to constitute excessive interest
shall be applied first to the payment of accrued unpaid interest on this
Note and then to the reduction of the unpaid principal balance of this
Note.
1.6 In the event that the date for the payment of any amount payable
under this Note falls due on a Saturday, Sunday or public holiday under the
laws of the State of New York, the time for payment of such amount shall be
extended to the next succeeding business day and interest shall continue to
accrue on any principal amount so effected until the payment thereof on
such extended due date.
2. Conversion.
2.1 Any holder of this Note will have the right at its option at any
time, and from time to time, prior to receipt of payment in full of the
principal amount of and interest on this Note to convert, subject to the
terms and provisions hereof, all or a portion of the principal amount of
this Note and accrued interest thereon, into shares of the Company's Common
Stock, $.002 par value per share, at the conversion price hereinafter
provided.
-3-
<PAGE>
Notwithstanding the foregoing, the holder shall not be entitled to convert
this Note until six months from issue date, except in the event of a
transaction referred to in Section 5 below, in which case the holder shall
be entitled to convert this Note at any time after the public announcement
of such a transaction.
2.2 To convert this Note, in whole or in part as provided herein at
the Holder's election, the Holder hereof shall surrender this Note and give
written notice to the Company of his intention to convert, stating the
portion of the Note that is to be converted and the name and address of
each person in whose name a share or shares of stock issuable upon such
conversion is to be registered and the number of shares to be issued to
each such person.
2.3 As promptly as practical after the surrender and giving of notice
to convert as herein provided, the Company shall (i) pay the Holder the
amount of accrued and unpaid interest on this Note to the date on which
such conversion is made either in cash or by means of Additional Principal
Amount as set forth above; and (ii) deliver or cause to be delivered at its
office or agency maintained for that purpose to or upon written order of
the Holder of the Note certificates representing the number of fully paid
and nonassessable shares of Common Stock of the Company into which said
Note is converted and, in the event of partial conversion, a new Note in an
aggregate principal amount equal to the unconverted portion of said Note,
dated as of the date to which interest has been paid, and if no interest
has been paid, dated as of the date the Note is converted in part, and in
all other respects identical to the Note converted.
2.4 The conversion price for each share of Common Sock issuable
pursuant to the conversion of the Note shall initially be One Dollar
($1.00) per share in lawful money of the United States of America and shall
be adjusted as provided in Section 4 hereof, and as provided below
(hereinafter called the "Conversion Price").
3. Reserved Shares.
3.1 The Company covenants and agrees that it has reserved and shall at
all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of issuing such shares upon the
conversion of the Notes (including any Additional Principal Amount in lieu
of interest), the full number of shares of Common Stock deliverable upon
the conversion of all Notes outstanding (including any Additional Principal
Amount in lieu of interest). The Company covenants and agrees that the
shares of its Common Stock delivered upon conversion of the Notes shall at
the time of delivery of the certificates for such shares of Common Stock,
be validly issued and outstanding and fully paid and nonassessable shares
of Common Stock. The Company further covenants and agrees that it will pay
when due and payable any and
-4-
<PAGE>
all Federal and state original issue taxes which may be payable in respect
of the issue of the Notes or any shares of Common Stock upon the conversion
of Notes. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the transfer and
delivery of Notes, any such tax being payable by the Holder of such Notes
at the time of surrender.
3.2 Each person in whose name any certificate for shares of Common
Stock is issuable upon the exercise of this Note shall for all purposes be
deemed to have become the holder of record of the Common Stock represented
thereby on, and such certificate shall be dated, the date upon which the
Note was duly surrendered and notice of conversion was given; provided,
however, that if the date of such surrender and notice is a date upon which
the stock transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next business day on which the stock
transfer books of the Company are open.
4. Adjustments to Conversion Price.
4.1 In case the Company shall at any time or from time to time after
the date of issuance of the Notes issue any additional shares of Common
Stock (or any security convertible into shares of Common Stock or any
rights or options to purchase shares of Common Stock) for a consideration
per share less than the Conversion Price in effect immediately prior to the
issuance of such additional shares, or without consideration, then, and
thereafter successively upon each such issuance, the Conversion Price in
effect immediately prior to the issuance of such additional shares shall
forthwith be reduced to a price determined by dividing:
(a) An amount equal to the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance multiplied
by the then existing Conversion Price, plus (ii) the consideration, if
any, received by the Company upon such issuance, by
(b) The total number of shares of Common Stock outstanding
immediately after the issuance of such additional shares.
4.2 The Company shall not be required to make any adjustment of the
Conversion Price in accordance with Section 4.1 if the amount of such
adjustment shall be less than $.01, 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 of and together with the next subsequent
adjustment of the Conversion Price which, together with all adjustments
thereof so carried forward, shall amount to not less than $.01.
-5-
<PAGE>
4.3 For the purpose of adjustments under Section 4.1, the following
provisions shall also be applicable:
(a) In the case of the issuance of additional shares of Common
Stock for cash, the consideration received by the Company therefor
shall be deemed to be the cash proceeds received for such shares
without deducting any commissions or other expenses paid or incurred
by the Company for any underwriting of, or otherwise in connection
with, the issuance of such shares.
(b) In case of the issuance (otherwise than upon conversion of
Notes) of additional shares of Common Stock for a consideration other
than cash or a consideration a part of which shall be other than cash,
the amount of the consideration shall be determined in good faith by
the Board of Directors of the Company.
(c) In the case of the issuance by the Company after the date of
issuance of the Notes, of any security that is convertible into shares
of Common Stock or any rights or options to purchase shares of Common
Stock, (i) the Company shall be deemed to have issued the maximum
number of shares of Common Stock deliverable upon the exercise of such
rights or options or upon conversion of such securities and (ii) the
consideration therefor shall be deemed to be the sum of (x) the
consideration received by the Company for such convertible securities
or for such other rights or options as the case may be, without
deducting therefrom any expenses or commissions incurred or paid by
the Company for any underwriting or issuance of such convertible
security or right or option, plus (y) the consideration or adjustment
payment to be received by the Company in connection with such
conversion, plus (z) the minimum price at which shares of Common Stock
are to be delivered upon the exercise of such rights or options, or,
if no minimum price is specified and such shares are to be delivered
at the option price related to the market value of the subject shares,
an option price bearing the same relation to the market value of the
subject shares at the time such rights or options were granted,
provided that as to such options such further adjustment as shall be
necessary on the basis of the actual option price at the time of
exercise shall be made at such time if the actual option price is less
than the aforesaid assumed option price.
(d) For the purpose hereof, any additional shares of Common Stock
issued as a stock dividend shall be deemed to have been issued for no
consideration.
(e) The number of shares of Common Stock at any time outstanding
shall include (i) all outstanding common stock of the Company, and
(ii) the aggregate number of shares deliverable in respect of the
convertible securities, rights and options referred to in this Section
4, provided that, to the extent that any such options, warrants or
conversion privileges are not exercised, such shares shall be deemed
to be outstanding only until the expiration dates of the rights,
options or conversion privilege
-6-
<PAGE>
or the prior cancellation thereof. Notwithstanding the foregoing,
there shall not be taken into account, for the purpose of any
computation made pursuant to Section 4, whether for the determination
of the number of shares of Common Stock issued or outstanding on or
prior to any date, or otherwise: (i) any options, warrants, or rights
to purchase shares of Common Stock of the Company included on Schedule
2.4 to the Agreement, (ii) options to purchase up to 450,000 shares of
Common Stock issued pursuant to the Company's Stock Option Plan if the
exercise price thereof is at least $1.00 per share, or (iii) any
shares of Common Stock issued upon the exercise of any such options,
warrants, or conversion rights referenced in the foregoing clauses (i)
and (ii).
(f) Notwithstanding the foregoing, upon the expiration or other
termination of such options, rights or warrants, if any thereof shall
not have been exercised, the number of shares of Common Stock deemed
to be issued and outstanding pursuant to subparagraphs (d) and (e)
shall be reduced by such number of shares of Common Stock as to which
options, warrants and/or rights shall have expired or terminated
unexercised, and such number of shares of Common Stock shall no longer
be deemed to be issued and outstanding, and the Conversion Price then
in effect shall forthwith be readjusted and thereafter be the price
which it would have been had adjustment been made on the basis of the
issuance only of shares of Common Stock actually issued or issuable
upon the exercise of those options, rights or warrants as to which the
exercise rights shall have not have expired or terminated unexercised.
4.4 If at any time or from time to time the Company shall by
subdivision, 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 shares issuable upon conversion of each Note
and the Conversion Price per share shall be proportionately and
correspondingly adjusted so as to give the Holder substantially the same
rights as the Holder would have had if the Holder had converted this Note
immediately prior to the occurrence of such event.
4.5 In case the Company shall declare a dividend upon the Common Stock
payable otherwise than out of earnings or earned surplus and otherwise than
in Common Stock, the Conversion Price in effect immediately prior to the
declaration of such dividend shall be reduced by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per share of the
Common Stock, or in the case of any other dividend, to the fair value
thereof per share of the Common Stock as determined, in good faith, by the
Board of Directors of the Company. For the purposes of the foregoing, a
dividend other than in cash shall be considered payable out of earnings or
earned surplus only to the extent that such earnings or earned surplus are
charged an amount equal to the fair value of such dividend as determined in
good faith by the Board of Directors of the Company. Such reductions shall
take
-7-
<PAGE>
effect as of the date as of which the holders of Common Stock of record are
entitled to such dividend.
4.6 Irrespective of any adjustments or changes in the Conversion Price
or the number of shares of Common Stock actually issuable under the several
Notes, the Notes shall continue to express the Conversion Price per share
and the number of shares issuable thereunder as expressed in the Notes when
initially issued.
4.7 The Company shall give notice to the Holder of any change in the
Conversion Price under this Note and the method of calculation thereof. The
Company shall give the Holder advance notice of any cash dividends, rights
offerings and other transactions directly for the benefit of holders of
Common Stock of the Company and any transaction referred to in Section 5
below; provided that in any event such notice shall be provided prior to
the applicable record date for or the effective date of any such
transaction.
4.8 The Company 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 Company but will at all times in good faith assist in the carrying out
of all the provisions of this Note and in the taking of all such actions as
may be necessary or appropriate in order to protect the conversion rights
of the Holders of the Notes.
5. Merger.
If, prior to the payment in full or conversion in full of the Notes, the
Company shall at any time consolidate with or merge into another corporation,
the Holder of each Note will thereafter be entitled to receive, upon the
conversion thereof, the securities or property to which a holder of the number
of shares of Common Stock then issuable upon the conversion of such Note would
have been entitled upon such consolidation or merger, and the Company shall take
such steps in connection with such consolidation or merger as may be necessary
to assure that this Note (or a new Note issued by the succeeding company
containing exactly the same terms as this Note) shall remain in effect and that
the provisions of this Note shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter issuable
upon the conversion of the Notes. A sale of all or substantially all of the
assets of the Company for a consideration (apart from the assumption of
obligations) consisting principally of securities or, a purchase of 50% or more
of the Common Stock by a person or a group of related people pursuant to a
tender offer or otherwise shall be deemed a consolidation or merger for the
foregoing purposes. In the event of a consolidation
-8-
<PAGE>
or merger, provided that the consideration per share of Common Stock to be
received by the Company's shareholders is less than the Conversion Price, the
Holder shall have the option to put the Note to the issuer for the principal
amount of the Note, plus accrued interest; payment to be made at the time of the
closing of any such consolidation or merger. In the event of a consolidation or
merger, provided that the consideration per share of Common Stock to be received
by the stockholders is equal to at least two (2) times the then Conversion
Price, the Company shall have the right to prepay the Note in accordance with
the prepayment provisions set forth above.
6. Fractional Shares.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the conversion of Notes, but in respect
of any final fraction of a share it will make a payment in cash based on the
then market value of the Common Stock as determined by the Company's Board of
Directors.
7. Covenants of the Company . The Company covenants and agrees that, so
long as this Note remains outstanding and unpaid, in whole or in part:
7.1 The Company will not, and will not permit any of its subsidiaries
to, sell, transfer or in any other manner alienate or dispose of a material
part of its assets; provided, however, that the Company or any of its
subsidiaries may effect such a transaction if (i) the transaction is a bona
fide transaction in which fair market value is received, (ii) no Event of
Default (defined below) or any condition or event which, with the giving of
notice or the lapse of time or both, would become an Event of Default has
occurred or would occur after giving effect to such transaction, and (iii)
the payment of this Note is duly provided for from such sale proceeds;
7.2 The Company will not, and will not permit any of its subsidiaries
to, make any loan to any person who is or becomes a shareholder of the
Company, other than for reasonable advances for expenses in the ordinary
course of business;
7.3 The Company will, and will cause each of its subsidiaries to,
promptly pay and discharge all lawful taxes, assessments and governmental
charges or levies imposed upon it, its income and profits, or any of its
property, before the same shall become in default, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might become a
lien or charge upon such properties or any part thereof; provided, however,
that the Company or such subsidiary shall not be required to pay and
discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate
proceedings and the Company or such subsidiary, as the
-9-
<PAGE>
case may be, shall set aside on its books adequate reserves with respect to
any such tax, assessment, charge, levy or claim so contested;
7.4 The Company will, and will cause each of its subsidiaries to, do
or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and substantially
comply with all laws applicable to the Company as its counsel may advise;
7.5 The Company will, and will cause each of its subsidiaries to, at
all times maintain, preserve, protect and keep its property used or useful
in the conduct of its business in good repair, working order and condition
(except for the effects of reasonable wear and tear in the ordinary course
of business) and will, from time to time, make all necessary and proper
repairs, renewals, replacements, betterments and improvements thereto;
7.6 The Company will, and will cause each of its subsidiaries to, keep
adequately insured, by financially sound reputable insurers, all property
of a character usually insured by similar corporations and carry such other
insurance as is usually carried by similar corporations;
7.7 The Company will, promptly following the occurrence of an Event of
Default or of any condition or event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default, furnish a
statement of the Company's President or Chief Financial Officer to Holder
setting forth the details of such Event of Default or condition or event
and the action which the Company intends to take with respect thereto;
7.8 The Company will, and will cause each of its subsidiaries to, at
all times maintain books of account in which all of its financial
transactions are duly recorded in conformance with generally accepted
accounting principles; and
7.9 The Company shall not, and shall not permit any of its
subsidiaries to: (a) redeem, purchase or otherwise acquire for
consideration any shares of capital stock or (b) declare or pay dividends
of any kind with respect to any capital stock of the Company, except for
dividends due and payable on the outstanding shares of Series A Preferred
Stock.
7.10 The Company will not incur, or permit the incurrence of or
otherwise permit to be outstanding, any indebtedness which (a) is senior in
right of payment to the Notes, or (b) is pari passu in right of payment to
the Notes, except that the Permitted Bank Line may be pari passu in right
of payment to the Notes, or (c) except with the prior written consent of
the Purchasers, grants to the holder of such indebtedness (or any
-10-
<PAGE>
affiliated entities) any voting rights with respect to matters voted on by
holders of the Company's Common Stock.
8. Events of Default. If any of the following events (each an "Event of
Default") occurs:
8.1 The dissolution of the Company or any subsidiary of the Company or
any vote in favor thereof by the board of directors and shareholders of the
Company or any subsidiary of the Company; or
8.2 The Company or any of its subsidiaries becomes insolvent, however
evidenced, or makes an assignment for the benefit of creditors, or files
with a court of competent jurisdiction an application for appointment of a
receiver or similar official with respect to it or any substantial part of
its assets, or the Company or any of its subsidiaries files a petition
seeking relief under any provision of the Federal Bankruptcy Code or any
other federal or state statute now or hereafter in effect affording relief
to debtors, or any such application or petition is filed against the
Company or any of its subsidiaries, which application or petition is not
dismissed or withdrawn within sixty (60) days from the date of its filing;
or
8.3 The Company fails to pay the principal amount of this Note or any
of the other Notes as and when the same becomes due and payable or fails to
pay the interest on, or any other amount payable under, this Note or any of
the other Notes on or before the 10th day following the date the same
becomes due and payable; or
8.4 The Company or any of its subsidiaries admits in writing its
inability to pay its debts as they mature; or
8.5 Except for a transaction which complies with Section 5 above, the
Company or any of its subsidiaries sells all or substantially all of its
assets or merges or is consolidated with or into another corporation (other
than, in the case of a subsidiary of the Company, a sale of assets to
another wholly-owned subsidiary of the Company or the merger or
consolidation of such subsidiary with or into another wholly-owned
subsidiary of the Company or into the Company); or
8.6 A proceeding is commenced to foreclose a security interest or lien
in any property or assets of the Company or of any subsidiary of the
Company as a result of a default in the payment or performance of any debt
(in excess of $75,000 and secured by such property or assets) of the
Company or of any subsidiary of the Company; or
8.7 A final judgement for the payment of money in excess of $75,000 is
entered against the Company or any subsidiary of the Company by a court of
competent jurisdiction, and such
-11-
<PAGE>
judgment is not discharged (nor the discharge thereof duly provided for) in
accordance with its terms, nor a stay of execution thereof procured, within
thirty (30) days after the date such judgement is entered, and, within such
period (or such longer period during which execution of such judgment is
effectively stayed), an appeal therefrom has not been prosecuted and the
execution thereof caused to be stayed during such appeal; or
8.8 An attachment or garnishment is levied against the assets or
properties of the Company or any subsidiary of the Company involving an
amount which in the aggregate exceeds $75,000 and such levy is not vacated,
bonded or otherwise terminated within thirty (30) days after the date of
its effectiveness; or
8.9 The Company defaults in the due observance or performance of any
covenant, condition or agreement on the part of the Company to be observed
or performed pursuant to the terms of this Note (other than the default
specified in Section 8.3 above) and such default continues uncured for a
period of thirty (30) days; or
8.10 The Company defaults in the payment (regardless of amount) when
due of the principal of, interest on, or any other liability on account of,
any indebtedness of the Company or any of its subsidiaries (other than the
Notes, or any of them) having an aggregate face or principal amount in
excess of $75,000, or a default occurs in the performance or observance by
the Company of any covenant or condition (other than for the payment of
money) contained in any note or agreement evidencing or pertaining to any
such indebtedness, which causes the maturity of such indebtedness to be
accelerated or permits the holder or holders of such indebtedness to
declare the same to be due prior to the stated maturity thereof;
then, upon the occurrence of any such Event of Default and at any time
thereafter, the Holder of this Note shall have the right (at such Holder's
option) to declare the principal of, accrued unpaid interest on, and all
other amounts payable under this Note to be forthwith due and payable,
whereupon all such amounts shall be immediately due and payable to the
Holder of this Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived; provided, however,
that in case of the occurrence of an Event of Default under any of Sections
8.1, 8.2 or 8.4 above, such amounts shall become immediately due and
payable without any such declaration by the Holder of this Note.
9. Suits for Enforcement and Remedies. If any one or more Events of Default
shall occur and be continuing, the Holder may proceed to (i) protect and enforce
Holder's rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained
in this Note or in any agreement or document referred to herein or in aid of the
exercise of any power granted in this Note
-12-
<PAGE>
or in any agreement or document referred to herein, (ii) enforce the payment of
this Note, or (iii) enforce any other legal or equitable right of the Holder of
this Note. No right or remedy herein or in any other agreement or instrument
conferred upon the Holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
10. Voting Rights.
(a) So long as any of the principal amount or accrued interest on this Note
is still outstanding, the Holder shall be entitled to vote on all matters voted
on by holders of Common Stock, voting together as a single class with other
shares entitled to vote at all meetings of the stockholders of the Corporation.
With respect to any such vote, the Holder shall be entitled to cast the number
of votes equal to the number of votes which could be cast in such vote by a
holder of the shares of Common Stock into which this Note is convertible on the
record date for such vote. The foregoing voting rights are in addition to the
voting rights that the Holder will obtain in respect of shares of Common Stock
received upon conversion of this Note.
(b) The Company shall provide the Holder with prior notification of any
meeting of the shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Company of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any Company, the Company shall mail a
notice to the Holder, at least thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
action is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
11. Unconditional Obligation; Fees, Waivers, Other.
11.1 The obligations to make the payments provided for in this Note
are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
11.2 If, following the occurrence of an Event of Default, Holder shall
seek to enforce the collection of any amount
-13-
<PAGE>
of principal of and/or interest on this Note, there shall be immediately
due and payable from the Company, in addition to the then unpaid principal
of, and accrued unpaid interest on, this Note, all costs and expenses
incurred by Holder in connection therewith, including, without limitation,
reasonable attorneys' fees and disbursements.
11.3 No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver or as
an acquiescence in any default, nor shall any single or partial exercise of
any right or remedy preclude any other or further exercise thereof or the
exercise of any other right or remedy.
11.4 This Note may not be modified or discharged (other than by
payment) except by a writing duly executed by the Company and Holder.
11.5 The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of
protest, bringing of suit, and diligence in taking any action to collect
amounts called for hereunder, and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission with respect to the
collection of any amount called for hereunder or in connection with any
right, lien, interest or property at any and all times which Holder had or
is existing as security for any amount called for hereunder.
12. Miscellaneous.
12.1 The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms
or provisions of this Note.
12.2 All notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been duly given when personally
delivered or sent by registered or certified mail (return receipt
requested, postage prepaid), facsimile transmission or overnight courier to
the address of the intended recipient as set forth in the preamble to this
Note or at such other address as the intended recipient shall have
hereafter given to the other party hereto pursuant to the provisions of
this Note.
12.3 This Note and the obligations of the Company and the rights of
Holder shall be governed by and construed in accordance with the
substantive laws of the State of New York without giving effect to the
choice of laws rules thereof.
12.4 The Company (i) agrees that any legal suit, action or proceeding
arising out of or relating to this Note shall be instituted exclusively in
the New York State Supreme Court, County of New York or in the United
States District Court for the
-14-
<PAGE>
Southern District of New York, (ii) waives any objection which The Company
may have now or hereafter based upon forum non conveniens or 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 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, will be deemed in every
respect effective service of process upon the Company, in any suit, action
or proceeding. FURTHER, BOTH THE COMPANY AND HOLDER HEREBY WAIVE TRIAL BY
JURY IN ANY ACTION TO ENFORCE THIS NOTE AND IN CONNECTION WITH ANY DEFENSE,
COUNTERCLAIM OR CROSSCLAIM ASSERTED IN ANY SUCH ACTION.
12.5 This Note shall bind the Company and its successors and assigns.
[conditional end of page, signature page to follow]
-15-
<PAGE>
WITNESS the seal of the Company and the signature of its duly authorized
officers.
MARINE MANAGEMENT SYSTEMS, INC.
By: _______________________________
Name:
Title:
-16-
================================================================================
POWER OF ATTORNEY
- --------------------------------------------------------------------------------
IRWIN B. HOLZMAN
- --------------------------------------------------------------------------------
To
ARDEN E. SHENKER
- --------------------------------------------------------------------------------
After recording, return to (Name, Address, Zip):
- --------------------------------------------------------------------------------
STATE OF OREGON,
County of ____________________________ } ss.
I certify that the within instrument was received for
record on the _____ day of ____________________ , 19_____ ,
SPACE RESERVED at ________________ o'clock _____ .M., and recorded in
FOR book/reel/volume No. __________ on page ______________
RECORDER'S USE and/or as fee/file/instrument/microfilm/reception No.
_____________, Records of said County.
Witness my hand and seal of County affixed.
____________________________________________________________
NAME TITLE
By _______________________________________________ , Deputy.
- --------------------------------------------------------------------------------
KNOW ALL BY THESE PRESENTS that I, IRWIN B. HOLZMAN --------------------
- --------------------------------------------------------------------------------
have made, constituted and appointed, and by these presents do hereby make,
constitute and appoint ------------------------------------------------------
- ---------------------------ARDEN E. SHENKER-------------------------------------
my true and lawful attorney for me and in my name, place and stead, and for my
use and benefit: to demand, sue for, recover, collect and receive all such sums
of money, debts, rents, dues, accounts, legacies, bequests, interests,
dividends, annuities and demands whatsoever, as are now or shall hereafter
become due, owing, payable or belonging to me; to have, use and take all lawful
ways and means in my name or otherwise for the recovery thereof, and to
compromise, settle and adjust and to execute and deliver acquittances or other
sufficient discharges for any of the same; to bargain, contract for, purchase,
receive and take lands, tenements, hereditaments, and accept the seisin and
possession thereof and all deeds and other assurances in the law therefor, and
to lease, let, demise, bargain, sell, remise, release, convey, mortgage and
hypothecate lands, tenements and hereditaments, including my right of homestead
in any of the same for such price, upon such terms and conditions and with such
covenants as my attorney shall think fit; to sell, transfer and deliver all or
any shares of stock owned by me in any corporation for any price and receive
payment therefor, and to vote any such stock as my proxy; to bargain for, buy,
sell, mortgage, hypothecate and in any and every way and manner deal in and with
goods, wares and merchandise, choses in action, and other property in possession
or in action, and to make, do and transact all and every kind of business of
whatsoever nature or kind; for me and in my name and as my act and deed, to
sign, seal, execute, acknowledge and deliver all deeds, covenants, indentures,
agreements, trust agreements, mortgages, pledges, hypothecations, bills of
lading, bills, bonds, notes, evidences of debt, receipts, releases and
satisfactions of mortgages, judgments and other debts payable to me and other
instruments in writing of whatever kind and nature which my attorney in his/her
absolute (discretion shall deem to be for my best interests; to have access to
any safe deposit box which has been rented in my name, or in the name of myself
and any other person or persons; to sell, discount, endorse, deliver and/or
deposit all checks, drafts, notes and negotiable instruments payable to my
order; to withdraw any moneys deposited in my name with any bank, by check or
otherwise, and generally to do any business with any bank or banker on my
behalf; to complete, sign, and deliver any tax return or form and pay taxes
thereon or collect refunds therefrom; also to act on my behalf as Administrator
of Pension and Profit Sharing Plans for reporting purposes and all other
ancillary purposes.
GIVING AND GRANTING unto my attorney the full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as I might
or could if personally present, with full power of substitution and revocation,
hereby ratifying and confirming all that my attorney shall lawfully do or cause
to be done by virtue of these presents.
This power shall take effect on July 22, 1998, and terminate on July 24,
1998, at 6 p.m. EDT.
In construing this instrument, and where the context so requires, the
singular includes the plural.
IN WITNESS WHEREOF, I have hereunto set my hand on 22 July, 1998.
/S/ IRWIN B. HOLZMAN
-------------------------------------------
STATE OF OREGON, County of Deschutes) ss.
This instrument was acknowledged before me on July 22, 1998,
by /S/ IRWIN B. HOLZMAN
-------------------------------------------------------------------
[SEAL] OFFICIAL SEAL
ROCHELLE A. JOHNSON
NOTARY PUBLIC - OREGON
COMMISSION NO. 062224
MY COMMISSION EXPIRES APR 23, 2001
/S/ ROCHELLE A. JOHNSON
---------------------------------------------
Notary Public for Oregon
My commission expires 4/23/2001
================================================================================
