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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").
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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.
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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
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discontinuance of the eligibility of the Common Stock for such listing.
2.8 The Company shall cause Xxxxxxx & Xxxxxxx 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 Xxxxxxx 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
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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,
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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 Xxxx Xxxxx,
such Related Party Indebtedness is no longer outstanding and has been
exchanged for shares of Series A
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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
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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,
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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.
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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
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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
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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
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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;
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(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;
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(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,
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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
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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.
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
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.
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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]
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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/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx, President
"Purchasers"
Wechsler & Co., Inc.
By: /s/ Xxxxxx Xxxxxxxx
----------------------------------
Xxxxxx Xxxxxxxx, President
The Xxxxx Xxxxxx Foundation
By: /s/ Xxxx X. May
----------------------------------
Name: Xxxx X. May
Title President
Key Trust Co N.A., TTEE For Reliable
Credit Association Employees Pension
Plan, A/C #0116260
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title Client Manager
U.S. Bank National Association, as
Trustee for Rellable Credit
Association, Account #00000000
By: /s/ Xxx Xxxxxx
----------------------------------
Name: Xxx Xxxxxx, Vice President
Title: Trustee
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EXHIBIT A
LIST OF PURCHASERS
Purchaser Principal Amount
of Senior Notes
Wechsler & Co., Inc. $ 1,250,000
000 Xxxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxx Xxxxx, XX 00000
The Xxxxx Xxxxxx Foundation $ 50,000
c/o May Management, Inc.
00000 Xxxxx Xxx #000
Xxxx Xxxxxx, XX 00000
Key Trust Co N.A.,
TTEE For Reliable Credit
Association Employees Pension
Plan, A/C #0116260 $ 300,000
c/o May Management, Inc.
00000 Xxxxx Xxx #000
Xxxx Xxxxxx, XX 00000
U.S. Bank National Association
As Trustee for Reliable Credit
Association, Account #00000000 $ 400,000
----------
c/o May Management, Inc.
00000 Xxxxx Xxx #000
Xxxx Xxxxxx, XX 00000
TOTAL $2,000,000
==========
21
EXHIBIT B
SENIOR CONVERTIBLE NOTE
[Filed as Exhibit 2 to Schedule 13D]
22
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.
23
SCHEDULE 2.7
Letter from The NASDAQ Stock Market, Inc., dated July 1, 1998, signed by Kit
Xxxxxxxxxx, Assistant Director.
Letter from The NASDAQ Stock Market, Inc., dated July 1, 1998, signed by Xxxxxx
Xxxxx, Analyst.
Letter from The NASDAQ Stock Market, Inc., dated May 15, 1998.
24
SCHEDULE 2.21
RELATED PARTY INDEBTEDNESS
Xxxxxx Story $300,000*
Xxxxxx Xxxxx $300,000*
Xxx Xxxxx $ 22,000*
Xxxxxx Story $ 29,000*
Xxxx Xxxxx $ 15,000
--------
$666,000
* Exchanged for Series A Preferred Stock.
