UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report March 26, 1999
DATAMARINE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
0-8936
(Commission File Number)
Massachusetts 04-2454559
(State of Incorporation) (I.R.S. Employer Identification Number)
7030 220th SW, Mountlake Terrace, Washington 98043
(Address of principal executive offices)
(425)771-2182
(Registrant's telephone number, including area code)
Item 5. Other Events
On December 19, 1995 Datamarine International, Inc. (the "Company")
completed a private placement issuance of $2,000,000 in Subordinated
Convertible Debentures (the "Debentures") with Alta Subordinated Debt
Partners III (the "Lender"), originally due December 19, 2000.
On November 24, 1997 the Company received notice from the Lender of an
alleged violation of certain covenants related to the Debenture Purchase
Agreement dated December 19, 1995. The alleged violations related to loans
in the form of subordinated short term notes (the "Notes") made to the
Company during September 1997 by a group of individuals including an officer
and a director of the Company (see Forms 8-K filed September 22, 1997 and
January 15, 1998). The alleged default was based on a breach of financial
covenants concerning additional debt, and was not based on the particular
terms of the Notes, nor was it payment-related. The Lender claimed that an
event of default had occurred, that the default had remained uncured for
more than thirty days, and that the Debentures were immediately due and
payable. Management of the Company believed that it had obtained the consent
of the Lender and did not agree with the claims made by the Lender.
On February 24, 1998 the Company and the Lender reached a tentative
agreement to modify certain provisions of the Debentures, which was
memorialized in a term sheet. That agreement was reached in order to resolve
the Lender's November 24, 1997 claims. The new terms changed the maturity
date of the Debentures from December 19, 2000 to February 19, 1999, deferred
all interest payments on the Debentures until February 19, 1999 and required
the Company to issue to the Lender on February 19, 1999 approximately
175,600 common shares of the Company. These common shares are the shares
that the lender is otherwise entitled to receive upon conversion of the
convertible preferred stock component of the Debentures.
The February 24, 1998 modifications set forth in the term sheet were
executed by both parties, and were subject to satisfaction of certain
conditions including the execution of final documents at a later date. On
July 10, 1998 the Company executed final documents prepared by the Lender's
counsel (the "Amendments"). The Company believed that it had complied with
the terms of the Amendments demanded by the Lender and that an agreement had
been reached between the parties.
During December 1998 the Company received notice from the Lender's counsel
that the Lender had not executed the Amendments, did not intend to do so at
that time and that it demanded numerous additional conditions placed upon
its acceptance of the Amendments. Until receipt of this notice, the Company
had not been aware that this was the Lender's position with respect to the
Amendments. After considering carefully its options and bearing in mind the
best interests of the Company, the Company notified the Lender on January
22, 1999 that the Company revoked the offer to amend that had been
manifested by its own execution of the Amendment.
On February 17, 1999 the Company received a letter from the Lender's counsel
demanding payment of the Debenture principal and all accrued interest by
February 22, 1999. Under the terms of the Company's senior bank loan no such
payment on the Debentures is allowed and no payment was made. The Company
has received notice that on February 25, 1999 the Lender filed suit in the
Superior Court of the State of Massachusetts claiming a breach of the
December 19, 1995 Debenture agreement based on the alleged events described
in paragraph two above. The complaint asks for payment of the entire
principal balance, accrued interest, default interest, costs and expenses.
The Company has until April 2, 1999 to answer the complaint and expects to
make a proposal to the Lender for modifying the Debenture terms before that
time.
In connection with the above events and in order to reserve its rights and
remedies counsel for Silicon Valley Bank (the "Bank") notified the Company
by letter dated March 16, 1999 that the Company was in default under the
terms of its senior bank loan which matured February 28, 1999. The Company
and the Bank have met to discuss a new loan agreement but no such agreement
has been reached. The Bank has not taken any other action with respect to
collecting the loan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Datamarine International, Inc.
(Registrant)
Date: March 26, 1999 /S/ JAN KALLSHIAN
Jan Kallshian
Chief Financial Officer
