EXHIBIT 4
DEBENTURE PURCHASE AGREEMENT W/ EXHIBITS
DATAMARINE INTERNATIONAL, INC.
$2,000,000 Convertible Subordinated Debentures
due December __, 2000
DEBENTURE PURCHASE AGREEMENT
As of December ___, 1995
Datamarine International, Inc.
Debenture Purchase Agreement
As of December ___, 1995
INDEX
Page
SECTION 1. TERMS OF PURCHASE; PAYMENT TERMS 1
1.1 Sale and Purchase 1
1.2 Terms of the Debentures 1
1.3 Closing 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, SEA AND
NARROWBAND 3
2.1 Organization, Existence and Authority 3
2.2 Authorization 4
2.3 Non-Contravention 4
2.4 Capitalization 4
2.5 Subsidiaries; Investments 5
2.6 SEC Reports and Financial Statements 5
2.7 Absence of Undisclosed Liabilities 6
2.8 Absence of Certain Developments 6
2.9 Accounts Receivable 7
2.10 Title to Properties 7
2.11 Tax Matters 7
2.12 Contracts and Commitments 8
2.13 Proprietary Rights; Employee Restrictions 8
2.14 Litigation and Compliance with Laws 9
2.15 Permits; FCC Approvals; Customer and Supplier Relations 10
2.16 Employee Benefit Programs 12
2.17 Labor Laws 12
2.18 Solvency 13
2.19 Environmental Matters 13
2.20 Inventory 14
2.21 Product and Service Claims. 14
2.22 Backlog. 14
2.23 Information Supplied to Lenders 14
2.24 Broker's Fee 15
SECTION 3. CLOSING CONDITIONS OF LENDERS 15
3.1 Opinion of Company Counsel 15
3.2 Authorization 15
3.3 Irrevocable Proxy 16
3.4 Delivery of Documents 16
3.5 Use of Proceeds 16
3.6 No Violation or Injunction 16
3.7 No Litigation 16
3.8 No Adverse Change 16
3.9 All Proceedings Satisfactory 17
SECTION 4. FINANCIAL COVENANTS 17
4.1 Indebtedness 17
4.2 Liens 18
4.3 Distributions or Redemptions 19
SECTION 5. OPERATING AND REPORTING COVENANTS 19
5.1 Financial Statements; Minutes 19
5.2 Budget and Strategic Plan 20
5.3 Conduct of Business 20
5.4 Payment of Taxes, Compliance with Laws, Etc. 20
5.5 Adverse Changes 20
5.6 Insurance 20
5.7 Maintenance of Properties 21
5.8 Affiliated Transactions 21
5.9 Management Compensation 21
5.10 Board of Directors; Inspection 21
5.11 Issuance of Capital Stock, Convertible Securities, Options,
Warrants or Rights 23
5.12 Merger, Consolidation, Reorganization, Sale of Assets,
Acquisition 23
5.13 No Amendments to Charter Documents 23
5.14 Restrictions on Other Agreements 24
5.15 Stay, Extension and Usury Laws 24
5.16 Right of Participation in Financings 24
5.17 [Intentionally Omitted] 25
5.18 Dissolution of Data I.C., Inc. 25
5.19 Transactions with Foreign Subsidiaries 25
SECTION 6. CONVERSION 25
SECTION 7. EVENTS OF DEFAULT; REMEDIES 26
7.1 Events of Default 26
7.2 Remedies on Default, Etc. 28
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE LENDERS 28
8.1 Representation of Lenders 28
SECTION 9. INTERCREDITOR MATTERS 29
9.1 Subordination to Payment 29
9.2 Bankruptcy or Liquidation 29
9.3 Payment Default on Senior Debt 30
9.4 Non-Payment Default on Senior Debt 30
9.5 Limitation on the Exercise of Certain Rights 30
9.6 Subrogation 31
9.7 Absolute Obligation 31
9.8 Conversion 31
SECTION 10. INDEMNIFICATION 31
SECTION 11. DEFINITIONS 33
SECTION 12. GENERAL 36
12.1 Amendments, Waivers and Consents 36
12.2 Survival of Covenants; Assignability of Rights 37
12.3 Governing Law; Jurisdiction; Venue 37
12.4 Section Headings 38
12.5 Counterparts 38
12.6 Notices and Demands 38
12.7 Severability 39
12.8 Expenses 39
12.9 Integration 39
EXHIBITS
Exhibit A - List of Lenders
Exhibit B - Form of Debenture
Exhibit C - Preferred Stock Terms
Exhibit D - Company Counsel Opinion
Exhibit E - Form of Irrevocable Proxy
Exhibit F - Form of SEA Management Agreement
Exhibit G - Form of SMR Operator Letter of Intent
Exhibit H - Form of Employee Invention and Non-Disclosure Agreement
SCHEDULES
Schedule 2.1(a) - Locations of Real Property and Employees
Schedule 2.1(b) - Locations of Real Property and Employees
Schedule 2.4 - Capitalization of Company
Schedule 2.5 - Subsidiaries; Investments
Schedule 2.6 - Financial Statements
Schedule 2.7 - Undisclosed Liabilities
Schedule 2.8 - Absence of Certain Developments
Schedule 2.10 - Title of Properties
Schedule 2.12 - Contracts and Commitments
Schedule 2.13 - Proprietary Rights
Schedule 2.14 - Litigation and Compliance with Laws
Schedule 2.15(a) - Customer and Supplier Relations
Schedule 2.15(b) - FCC Licenses
Schedule 2.15(c) - Management Agreement
Schedule 2.16 - Employee Benefit Programs
Schedule 2.17 - Labor Laws
Schedule 2.21 - Product and Service Claims
Schedule 2.22 - Backlog
Schedule 4.1(b) - Indebtedness
DEBENTURE PURCHASE AGREEMENT
AGREEMENT made as of the ____ day of December, 1995 by and among
Datamarine International, Inc., a Massachusetts corporation (the
"Company"), SEA Inc. of Delaware, a Delaware corporation ("SEA") and
Narrowband Network Systems, Inc., a Washington corporation ("Narrowband")
and the persons named in Exhibit A hereto (collectively the "Lenders," and
each individually a "Lender"). Unless otherwise expressly stated herein
or unless the context otherwise requires, all references to the Company
shall include all Subsidiaries on a consolidated basis.
WHEREAS, the Company, SEA and Narrowband have agreed to sell and the
Lenders have agreed to purchase convertible debentures due December __,
2000 of the Company, SEA and Narrowband in an aggregate principal amount
of $2,000,000.
WHEREAS, the proceeds from the purchase and sale of such convertible
debentures shall be used by the Company and its Subsidiaries for the
production of FCC approved 220MHz radio equipment and for general working
capital purposes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. TERMS OF PURCHASE; PAYMENT TERMS
1.1 Sale and Purchase. Subject to the terms and conditions herein
set forth, the Company, SEA and Narrowband shall issue and sell to each of
the Lenders, and each Lender shall purchase from the Company, SEA and
Narrowband, a convertible debenture due December __, 2000 in substantially
the form attached hereto as Exhibit B (a "Debenture" and collectively, the
"Debentures") in the principal amount set forth opposite the name of such
Lender in Exhibit A hereto for a purchase price equal to 100% of the
principal amount thereof (the "Purchase Price"). The Debentures, which
will aggregate to $2,000,000 in principal amount, will be dated the date
of issuance thereof, mature on December __, 2000 (the "Maturity Date"),
bear interest and be payable as set forth in Section 1.2 hereof and be
convertible as set forth in Section 6 hereof.
1.2 Terms of the Debentures.
(a) Interest. The Debentures shall bear interest on the
unpaid principal amount thereof: (i) from the date of issuance thereof
through and until December 31, 1996 at the rate of ten (10%) per annum;
(ii) from and after January 1, 1997 through and until December 31, 1997 at
a rate of eleven percent (11%) per annum; (iii) from and after January 1,
1998 through and until December 31, 1998 at a rate equal to twelve percent
(12%) per annum; (iv) from and after January 1, 1999 through and until
December 31, 1999 at a rate of fourteen percent (14%) per annum, and (v)
from and after January 1, 2000 at a rate of fifteen percent (15%) per
annum (the "Interest"). The Interest shall be computed on the basis of a
365-day year and the actual number of days elapsed, and be payable on each
March 31, June 30, September 30 and December 31 for the respective three-
month periods ending on each such date, commencing on March 31, 1997, and
upon any other payment or conversion of any principal amount of the
Debentures.
(b) Default Interest. In the event that any amount payable
in respect of the Debentures is not paid within fifteen (15) days of when
due and payable (whether at stated maturity, by acceleration or
otherwise), the Interest on that portion of such amount which has not been
so paid shall, notwithstanding anything herein to the contrary and until
that portion of such payment on the Debentures has been brought current,
thereafter bear interest at a rate of twenty percent (20%) per annum.
(c) Principal Payments. Subject to prior conversion
pursuant to the terms of this Agreement and prepayments authorized under
Section 1.2(f), the Company shall pay the principal balance of the
Debentures, without set-off, deduction or counterclaim, together in each
case with all accrued interest thereon on December __, 2000.
(d) Conversion. The Debentures shall be convertible at the
option of a majority in interest of the Lenders into shares of Redeemable
Convertible Participating Preferred Stock, $1.00 par value per share
("Convertible Preferred Stock"), and Redeemable Preferred Stock, $1.00 par
value per share ("Redeemable Preferred Stock"), of the Company, all in
accordance with, on the terms and during the periods set forth in Section
6 hereof. No conversion of the Debentures shall be permitted except as
provided in Section 6 hereof.
(e) Payments on the Debentures. All payments of principal
and interest on the Debentures shall be made by the Company in lawful
money of the United States of America in immediately available funds not
later than 12:00 p.m., Boston time, on the date such payment is due, or,
if such date is not a Business Day, then on the next succeeding Business
Day, at the address of the Lenders stated in Exhibit A hereto or, if not
so stated, at such other addresses of which the Company shall have
received written notice or, at the Company's or the Lender's election, by
crediting the Lender's account at a bank designated by the Lender in
writing to the Company.
(f) Prepayment. Subject to the Lender's rights of
conversion pursuant to the terms of Section 6 hereof, the outstanding
principal amount of the Debentures may be prepaid, in whole but not in
part, by the Company at any time upon sixty (60) days prior written
notice. The Debentures shall be subject to mandatory prepayment upon the
consummation of: (i) the sale of all or substantially all of the assets of
the Company or SEA; (ii) the sale or transfer of all or a majority of the
outstanding common stock of the Company or SEA in any one transaction or
series of related transactions; or (iii) the merger or consolidation of
the Company or SEA with or into another corporation or entity (other than
a wholly-owned subsidiary or in connection with an acquisition permitted
under the terms of Section 5.12 hereof) (each of the foregoing, a
"Liquidating Event").
1.3 Closing. A closing (the "Closing") of the sale and purchase
of the Debentures shall take place at such location, date and time and in
such manner as shall be mutually agreed upon by the Company and the
Lenders (the "Closing Date"). At the Closing, the Company will deliver
the Debentures being acquired by each Lender against payment of the full
Purchase Price therefor by or on behalf of each Lender to the Company by
certified or bank cashier's check or wire transfer of immediately
available funds.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, SEA AND
NARROWBAND
In order to induce the Lenders to enter into the Agreement, the
Company, SEA and Narrowband hereby jointly and severally agrees with the
Lenders and represents and warrants to the Lenders that, as of the date
hereof:
2.1 Organization, Existence and Authority.
(a) The Company has been duly formed and is validly existing
as a corporation in good standing under the laws of the Commonwealth of
Massachusetts. Except as set forth on Schedule 2.1(a), the Company does
not own or lease any real property outside The Commonwealth of
Massachusetts, and has no employees residing outside The Commonwealth of
Massachusetts. The Company has all requisite corporate power and
authority, and all material and necessary authorization, approvals,
orders, licenses, certificates and permits, to conduct its business as
presently conducted and to enter into, execute, deliver and perform all of
its duties and obligations under this Agreement and all related
instruments and agreements executed in connection herewith. A true and
complete copy of the Company's Articles of Organization as amended to
date, certified by The Commonwealth of Massachusetts, and of the Company's
by-laws, as amended to date, certified by the Company's Secretary have
previously been delivered to the Lenders, are complete and correct, and,
with the exception of the amendment creating the Preferred Shares (as
defined below), no amendments thereto are pending. The Company is not in
violation of any term of its charter or by-laws, or, in any material
respect, of any term of any agreement, instrument, judgment, decree,
order, statute, rule or government regulation applicable to the Company or
to which the Company is a party, which would, in any individual instance,
or in any series of related instances, have a material adverse effect on
the Company.
(b) Each of SEA and Narrowband has been duly formed and is
validly existing as a corporation in good standing under the laws of its
state of incorporation. Except as set forth on Schedule 2.1(b), neither
SEA nor Narrowband owns or leases any real property outside its state of
incorporation and has no employees residing outside its state of
incorporation. Each of SEA and Narrowband has all requisite corporate
power and authority, and all material and necessary authorization,
approvals, orders, licenses, certificates and permits, to conduct its
business as presently conducted and to enter into, execute, deliver and
perform all of its duties and obligations under this Agreement and all
related instruments and agreements executed in connection herewith. A
true and complete copy of each Subsidiary's charter documents, except for
those of Data I.C., Inc., have previously been delivered to the Lenders,
are complete and correct, and no amendments thereto are pending. Neither
SEA nor Narrowband is in violation of any term of its charter or by-laws,
or, in any material respect, of any term of any agreement, instrument,
judgment, decree, order, statute, rule or government regulation applicable
to it or to which it is a party, which would, in any individual instance,
or in any series of related instances, have a material adverse effect on
the Company on a consolidated basis.
2.2 Authorization. This Agreement and all documents and
instruments executed by the Company, SEA and Narrowband pursuant hereto
are valid and binding obligations of the Company, SEA and Narrowband,
enforceable in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy and other laws of general application
relating to creditor's rights or general principles of equity. The
execution, delivery and performance of this Agreement and all documents
and instruments contemplated hereby, the issuance of the Debentures and,
if converted, the Convertible Preferred Stock and the Redeemable Preferred
Stock (collectively, the "Preferred Shares") issuable upon such conversion
and, if the Convertible Preferred Stock is converted into Common Stock,
the Common Stock issuable upon such conversion (the "Conversion Shares"),
have been duly authorized by all necessary corporate action of the
Company. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority is required to be
obtained by the Company in connection with the execution and delivery of
this Agreement or the issuance, delivery, payment, redemption or
conversion of the Debentures in accordance with the terms of this
Agreement or, if the Debentures are converted, the Preferred Shares, or,
if the Convertible Preferred Stock is converted, the Conversion Shares, or
the performance or consummation of any other transaction contemplated
hereby or thereby.
2.3 Non-Contravention. The execution, delivery and performance by
each of the Company, SEA and Narrowband of this Agreement and the other
agreements executed pursuant hereto to which they are a party and the
consummation of the transactions contemplated hereby does not and will
not: (a) conflict with or result in any default under any material
contract, obligation or commitment of the Company or any of the
Subsidiaries or any charter provision, by-law or corporate restriction
applicable to any of them; (b) result in the creation of any lien, charge
or encumbrance of any nature upon any of the properties or assets of the
Company or any of the Subsidiaries; or (c) violate any instrument,
agreement, judgment, decree or order, or any statute, rule or regulation
of any federal, state or local government or agency, applicable to the
Company or any of the Subsidiaries or to which the Company or any of the
Subsidiaries is a party.
2.4 Capitalization. The authorized capital stock of the Company
consists of (a) 3,000,000 shares of common stock, $.01 par value per share
(the "Common Stock"), of which 1,296,865 shares are, as of November 6,
1995, duly and validly issued, outstanding, fully paid and non-assessable,
and (b) 1,000,000 shares of preferred stock, $1.00 par value per share (i)
of which 2,000 shares are, or as of the Closing Date will be, (upon the
filing of the Amended Charter), designated as Convertible Preferred Stock,
$1.00 par value per share and are duly and validly authorized and are
reserved for issuance upon conversion of the Debentures, and (ii) of which
2,000 shares are, or as of the Closing Date will be (upon the filing of
the Amended Charter) designated as Redeemable Preferred Stock, $1.00 par
value per share and are duly and validly authorized and are reserved for
issuance upon conversion of the Debentures. Except for the Debentures to
be issued hereunder and outstanding options to purchase 178,838 shares of
Common Stock which have been issued under the Company's 1991 Stock Option
Plan and 1992 Stock Option Plan for Non-Employee Directors (the "Option
Plans"), there are no outstanding warrants, options, rights, commitments,
pre-emptive rights or agreements of any kind for the issuance or sale of,
or outstanding securities convertible into, any additional shares of
capital stock of any class of the Company. The Company has duly and
validly authorized and reserved 2,000 shares of Convertible Preferred
Stock and 2,000 shares of Redeemable Preferred Stock for issuance upon
conversion of the Debentures and 163,967 Conversion Shares for issuance
upon conversion of the Convertible Preferred Stock; and the shares of
Convertible Preferred Stock, Redeemable Preferred Stock and Common Stock
so issued will, upon such conversion, be validly issued, fully paid and
non-assessable. The relative rights, preferences, restrictions and other
provisions relating to the Convertible Preferred Stock and Redeemable
Preferred Stock are as set forth in Exhibit C attached hereto (the
"Preferred Stock Terms"). Except as disclosed in Schedule 2.4 hereof or
as set forth in the Company's charter documents, there are no restrictions
on the transfer of the shares of capital stock of the Company other than
those arising under federal and state securities laws or under this
Agreement. There are no rights to have the Company's capital stock
registered for sale to the public in connection with the laws of any
jurisdiction, other than rights set forth in the Registration Rights
Agreement.
2.5 Subsidiaries; Investments. Except as disclosed in Schedule
2.5, the Company does not own or have, nor has it previously owned or had,
any direct or indirect interest in, control over or loan or advance to,
any person, corporation, partnership, joint venture or other entity of any
kind. Schedule 2.5 accurately sets forth (i) the correct legal name of
each Subsidiary owned, directly or indirectly, by the Company, (ii) the
number of authorized, issued, and outstanding shares of capital stock of
each such Subsidiary, (iii) the ownership of such shares of capital stock,
and (iv) whether such shares are fully paid and nonassessable. There are
no outstanding warrants, options, rights, commitments, preemptive rights
or agreements of any kind for the issuance or sale of, or outstanding
securities convertible into, any additional shares of capital stock of any
class of any Subsidiary. The aggregate net worth of the Foreign
Subsidiaries is not greater than $175,000.
2.6 SEC Reports and Financial Statements. The Company has
previously furnished to the Lenders complete and correct copies, including
exhibits of: (i) its Annual Report on Form 10-K for the fiscal year ended
October 1, 1994; (ii) its Quarterly Reports on Form 10-Q for the three-
month period ended December 31, 1994, April 1, 1995 and July 1, 1995;
(iii) its proxy statement relating to its February 7, 1995 meeting of
shareholders; and (iv) all reports on forms other than 10-K or 10-Q filed
by the Company with the Securities and Exchange Commission (the "SEC") or
the NASDAQ since October 2, 1993. The Company has heretofore made timely
all filings, reports and registrations required under the Securities Act
of 1993, as amended, and the rules and regulations thereunder (the
"Securities Act") and the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act") and all such
filings conformed in all material respects to the requirements of the
Securities Act and the Exchange Act, and did not at the time of filing
contain an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading.
Except as set forth on Schedule 2.6, the audited financial
statements and unaudited interim financial statements included in the
reports or other filings referred to in this Section 2.6 were prepared in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes
thereto and except that the notes to the unaudited interim financial
statements have been condensed pursuant to the rules and regulations of
the SEC) and fairly present the consolidated financial position of the
Company as of the dates thereof and the results of operations and cash
flows of the Company for the periods shown therein, subject, in the case
of unaudited interim financial statements, to normal year-end audit
adjustments which will not, in any event, be material. Nothing has come
to the attention of the senior management of the Company since such dates
which would indicate that such financial statements were not true,
accurate and complete in all material respects as of the dates thereof.
2.7 Absence of Undisclosed Liabilities. Except as and to the
extent disclosed in Schedule 2.7 or to the extent reflected or reserved
against in the Base Balance Sheet included in Schedule 2.6, the Company
does not have any material liability or liabilities arising out of any
transaction or state of facts existing prior to the date hereof and
required to be disclosed in a balance sheet prepared in accordance with
general accepted accounting principals ("GAAP") and the Company has no
other material contingent liability or liabilities arising out of any
transaction or state of facts existing prior to the date hereof which are
not specifically disclosed elsewhere in this Agreement or the Schedules
hereto (other than contractual obligations to customers and vendors
arising out of transactions entered into in the ordinary course of the
Company's business).
2.8 Absence of Certain Developments. Except as disclosed on
Schedule 2.8 or elsewhere in this Agreement (including the Schedules
hereto), since the date of the Base Balance Sheet, there has been: (a) no
material adverse change in the condition, financial or otherwise, of the
Company, SEA, or the other Subsidiaries (on a consolidated basis with the
Company and SEA) or in the assets, liabilities, properties or business of
the Company, SEA, or the other Subsidiaries (on a consolidated basis with
the Company and SEA); (b) no declaration, setting aside or payment of any
dividend or other distribution with respect to, or any direct or indirect
redemption or acquisition of, any capital stock in the Company or any
Subsidiary; (c) no waiver of any valuable right of the Company or any
Subsidiary or cancellation of any material debt or claim held by the
Company or any Subsidiary; (d) no material loan by the Company or any
Subsidiary to any officer, director, employee or shareholder of the
Company or any Subsidiary, or any agreement or commitment therefor; (e) no
increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee, agent or shareholder of the Company or any
Subsidiary (other than salary increases in the ordinary course of business
consistent with past practice); (f) no material loss, destruction or
damage to any property of the Company or any Subsidiary, whether or not
insured; (g) no labor trouble involving the Company or any Subsidiary and
no material change in the senior management or other key personnel of the
Company or any Subsidiary, or the terms and conditions of their
employment; and (h) no acquisition or disposition of any assets (or any
contract or arrangement therefor) nor any other material transaction by
the Company or any Subsidiary otherwise than for fair value in the
ordinary course of business.
2.9 Accounts Receivable. Except to the extent reserved against in
the Base Balance Sheet or disclosed elsewhere in this Agreement (including
the Schedules hereto), all of the accounts receivable of the Company
represent bona fide completed sales made in the ordinary course of
business, are valid and enforceable claims and are, to the best knowledge
of the Company, subject to no set-off or counterclaim and collectible in
the ordinary course. The Company has no accounts receivable from any
person, firm or corporation which is affiliated with it or from any of its
directors, officers, employees or, to its knowledge, shareholders.
2.10 Title to Properties. Except as disclosed in Schedule 2.10 or
in the Base Balance Sheet, the Company and each Subsidiary has good and
marketable title to all of its respective properties and assets, free and
clear of any liens, restrictions or encumbrances which could materially
and adversely affect the value of such properties or interfere with the
Company's or such Subsidiary's use thereof. All machinery and equipment
included in such properties which is necessary to the business of the
Company, SEA or Narrowband is in good condition and repair, reasonable
wear and tear excepted, and none of the Company, SEA or Narrowband is in
default under any material leases of real or personal property to which it
is a party. Neither the Company nor SEA is in violation, in any material
respect, of any zoning, building or safety ordinance, regulation or
requirement or other law or regulation applicable to the operation of its
owned or leased properties, nor has it received any notice of violation
with which it has not complied, which would, in any individual instance,
or any series of related instances, have a material adverse effect on the
Company or SEA, as applicable.
2.11 Tax Matters. The Company and each of the Subsidiaries have
timely and properly filed or received timely and proper extensions for the
filing of all Tax Returns required to be filed by them, and all such Tax
Returns were correct and complete in all material respects. The Company
and each of the Subsidiaries has paid all Taxes owed by them (whether or
not shown on any Tax Return), except Taxes which have not yet accrued or
otherwise become due. All Taxes and other assessments and levies which
the Company and each of the Subsidiaries was or is required to withhold or
collect from customers or employees have been withheld and collected and
have been paid over or will be paid over when due to the proper
governmental authorities. Neither the Company nor any Subsidiary has ever
received notice of any audit or of any proposed deficiencies from the
Internal Revenue Service ("IRS") or any other taxing authority (other than
routine audits undertaken in the ordinary course and which have been
resolved on or prior to the date hereof without material adverse effect on
the Company or any of the Subsidiaries or their respective financial
condition). There are in effect no waivers of applicable statutes of
limitations with respect to any Taxes owed by the Company or any of the
Subsidiaries for any year. Neither the IRS nor any other taxing authority
is now asserting or, to the best knowledge of the Company and each of the
Subsidiaries, threatening to assert against the Company or any of the
Subsidiaries any deficiency or claim for additional Taxes or interest
thereon or penalties in connection therewith in respect of the income or
sales of the Company. None of the Company or any of the Subsidiaries is a
party to any Tax allocation or sharing arrangement.
2.12 Contracts and Commitments. Except as set forth in this
Agreement (including the Schedules hereto), none of the Company, SEA or
Narrowband is a party to any contract, obligation or commitment: (a) which
involves a potential commitment or payment in excess of $50,000 or which
is otherwise material and not entered into in the ordinary course of
business; (b) with any of its officers or key employees or persons or
organizations related to or affiliated with any such persons; (c) which
relate to the purchase, redemption, transfer or voting of its capital
stock; or (d) relating to the licensing, distribution, development,
purchase, manufacturing, sale or servicing of telecommunications
equipment; except in each case as are described in Schedule 2.12, and
copies of all such agreements have been delivered or made available to the
Lenders, (all such contracts and commitments described on Schedule 2.12
are collectively referred to as the "Material Agreements"). Other than
termination or expiration in the ordinary course of business, none of the
Company, SEA or Narrowband knows of any basis for the termination,
expiration or modification of any of the Material Agreements within one
year from the date hereof nor has it received any notice thereof, which
termination, expiration or modification would not be at the Company's,
SEA's or Narrowband's option, as the case may be, and would have a
material adverse effect on the Company. Except as set forth on Schedule
2.7, none of the Company, SEA or Narrowband is in default in any material
respect under any Material Agreement, and to the best knowledge of the
Company, SEA and Narrowband there is no state of facts which upon notice
or lapse of time or both would constitute such a default.
2.13 Proprietary Rights; Employee Restrictions. Set forth in
Schedule 2.13 is a list and brief description of all patents, patent
rights, patent applications, trademarks, trademark applications, service
marks, service ▇▇▇▇ applications, trade names and copyrights, and all
applications for such which are in the process of being prepared, owned by
or registered in the name of the Company, SEA or Narrowband, or of which
the Company, SEA or Narrowband is a licensor or licensee or in which the
Company, SEA or Narrowband has any right, and in each case a brief
description of the nature of such right. Each of the Company, SEA and
Narrowband owns or possesses adequate licenses or other rights to use its
respective patents, patent applications, trademarks, trademark
applications, service marks, service ▇▇▇▇ applications, trade names,
copyrights, manufacturing processes, programming processes, formulae,
trade secrets and know how (collectively "Intellectual Property")
necessary to the conduct of its business as presently conducted and as
proposed to be conducted. None of the Company, SEA or Narrowband is aware
of any infringement by any other person of any of their respective rights
under any Intellectual Property. No claim is pending or, to the best
knowledge each of the Company, SEA or Narrowband, threatened against the
Company, SEA or Narrowband, respectively, to the effect that any
Intellectual Property owned or licensed by the Company, SEA or Narrowband,
respectively, or which the Company, SEA or Narrowband, respectively,
otherwise has the right to use, or the operation or products or services
of the Company, SEA or Narrowband, respectively, infringe upon or conflict
with the asserted rights of any other person under any Intellectual
Property, and, to the knowledge of the Company, SEA and Narrowband there
is no basis for any such claim (whether or not pending or threatened).
None of the Company, SEA or Narrowband has received any notice from any
other person asserting that any of the Intellectual Property owned or
licensed by the Company, SEA or Narrowband, respectively, or which the
Company, SEA or Narrowband, respectively, otherwise has the right to use,
or the operation or products or services of the Company, SEA or
Narrowband, respectively, (a) infringe upon or conflict with the asserted
rights of such person under any Intellectual Property, or (b) is invalid
or unenforceable by the Company, SEA or Narrowband, respectively. Except
as set forth on Schedule 2.13, each of the Company, SEA and Narrowband has
taken commercially reasonable actions to ensure the confidentiality of all
non-patented technical information developed by or belonging to the
Company, SEA or Narrowband, respectively, that is material to its
business. Except as disclosed in Schedule 2.13, none of the Company, SEA,
Narrowband or any other Subsidiary, nor, to the best of the Company's and
SEA's knowledge, any of the Company's or SEA's employees, has any
agreements or arrangements with former employers of any past or present
employees relating to any Intellectual Property of such employers, which
interfere or conflict with the performance of such employee's duties for
the Company or SEA or results in such employers having any rights in, or
claims on, the Company's or SEA's Intellectual Property.
2.14 Litigation and Compliance with Laws.
(a) Except as set forth in Schedule 2.14, there is no
investigation, action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to
the best knowledge of the Company, threatened against the Company or key
employee of the Company, which calls or has a possibility of calling into
question the validity, or hindering the enforceability or performance, of
this Agreement or any action taken or to be taken pursuant hereto or by
any of the other agreements and transactions contemplated hereby; nor to
the best knowledge of the Company, has there occurred any event or does
there exist any condition on the basis of which any such litigation,
proceeding or investigation should reasonably be anticipated to be
instituted and have a material adverse effect on the Company or the
business prospects of the Company.
(b) Except as to subject matter more specifically addressed
elsewhere in this Agreement and except as set forth in Schedule 2.14, the
Company is, and at all times during its existence has been, in material
compliance with all laws and governmental rules and regulations, domestic
or foreign and all export control or similar laws or regulations, except
where non-compliance therewith, in any individual instance or any series
of related instances, would not have a material adverse effect on the
Company. Except as set forth in Schedule 2.14, the Company is not in
default in any material respect with respect to any judgment, order, writ,
injunction, decree, demand or assessment, that the Company or its assets
are subject to or by which the Company is bound and which has been issued
by any court or any federal, state, municipal or other governmental or
self-regulatory agency, organization, board, commission, bureau,
instrumentality or department, domestic or foreign, relating to any aspect
of the business, affairs, properties or assets of the Company. Except as
set forth in Schedule 2.14, the Company has not been charged or, to the
best knowledge of the Company, threatened with, or under investigation
with respect to, any material violation of material federal, foreign,
state, municipal or other law or any administrative rule or regulation,
domestic or foreign in any matter directly relating to or affecting the
business, affairs, properties or assets of the Company.
2.15 Permits; FCC Approvals; Customer and Supplier Relations.
(a) Each of the Company, SEA and Narrowband, respectively,
has all necessary franchises, permits, licenses, authorizations and other
rights and privileges (including without limitation all FCC approvals) to
own its property and to conduct its business as it is presently or
proposed to be conducted, except for those the absence of which could not
have a material adverse effect on the Company. SEA's line of land mobile
radio products for the 220MHz narrowband spectrum has all necessary or
appropriate approvals and endorsements from the FCC and all other
governmental agencies with jurisdiction over such products, and, to the
Company's best knowledge, only Uniden, ▇.▇. ▇▇▇▇▇▇▇ and Securicore have
received similar approvals and endorsements. No prior FCC consent is
required in connection with the execution, delivery and performance of
this Agreement (including, without limitation, the conversion of the
Debentures). Each of the Company, SEA and Narrowband, respectively,
believes that its major customers and its suppliers are good commercial
working relationships, and, except as set forth on Schedule 2.15(a), no
major customer has terminated such relationship and none of the Company,
SEA or Narrowband has received any notice within the last two years from
any major customers or suppliers of their intention to terminate, or
otherwise modify such relationships in a manner which could have a
material adverse effect on the Company.
(b) Schedule 2.15(b) correctly sets forth all approvals,
permits and licenses required to be issued by the FCC in connection with
SEA's line of mobile radio products for the 220MHz narrowband spectrum
(collectively, the "Company FCC Licenses") which are held by the Company,
SEA and/or Narrowband and correctly sets forth the issuer and termination
date of each Company FCC License.
(c) Schedule 2.15(c) correctly sets forth each management
agreement entered into by each of the Company, SEA and/or Narrowband
relating to voice and data mobile radio systems operating on channel 220-
222MHz narrowband spectrum (collectively, the "Management Agreements") and
each letter of intent of the Company, SEA and/or Narrowband relating to
the management of a 220MHz system and the construction of such system by a
third party (collectively, "SMR Operator Letters"), and correctly sets
forth the identity of the party that entered into such Management
Agreement with SEA or Narrowband, as the case may be, and that entered
into such SMR Operator Letter with Narrowband, and the material economic
terms thereof. Each Management Agreement was executed in 1992, 1993 or
1994 and has a term of ten years which term may be extended in accordance
with the terms thereof. Each Management Agreement entered into by either
SEA or Narrowband is in substantially the form of Exhibit F hereto and
each SMR Operator Letter entered into by Narrowband is in the form of
Exhibit G hereto. None of the Company, SEA or Narrowband is in default in
any material respect under any Management Agreement or SMR Operator
Letter, and to the best knowledge of the Company, SEA and Narrowband,
there is no state of facts which upon notice or lapse of time or both
would constitute such a default.
(d) To the best knowledge of each of the Company, SEA and
Narrowband, each Company FCC License and each FCC license referred to in
the Management Agreements (collectively with the Company FCC Licenses, the
"FCC Licenses") was duly and validly issued by the issuer thereof pursuant
to procedures which complied with all requirements of applicable law. The
Company, SEA and/or Narrowband, as the case may be, is the licensee of
the FCC Company Licenses, free and clear of all liens and encumbrances and
is in compliance with the terms thereof in all material respects with no
known conflict with the valid rights of others which could affect or
impair materially in any manner the business, assets or condition,
financial or otherwise, of the Company, SEA and/or Narrowband. No event
has occurred which permits, or after notice or lapse of time or both would
permit, the revocation or termination of any FCC License or other right so
as to adversely affect in any material respect the business or assets or
condition, financial or otherwise, of the Company, SEA and/or Narrowband.
To the extent necessary, the Company has timely filed all applications for
renewal or extension of all FCC Licenses, and, except as otherwise
indicated in Schedule 2.15(b), all such applications have been granted
without conditions. Except as indicated on Schedule 2.15(b), and except
for actions or proceedings affecting its industry generally, no petition,
action, investigation, notice of violation or apparent liability, notice
of forfeiture, orders to show cause, complaint or proceeding is pending
or, to the best knowledge of the Company, threatened before the FCC or any
other forum or agency with respect to the Company, SEA or Narrowband or
seeking to revoke, cancel, suspend or modify any of the FCC Licenses.
None of the Company, SEA or Narrowband knows of any fact (other than facts
relating to pending or future FCC rule changes which are applicable to the
220MHz SMR industry generally) that is likely to result in the denial of
an application for renewal, or the revocation, modification, nonrenewal or
suspension of any of the FCC Licenses, or the issuance of a cease-and-
desist order, or the imposition of any administrative or judicial sanction
with respect to any of the Company, SEA or Narrowband, which may
materially adversely affect the rights under any of the FCC Licenses or
which may have a materially adverse effect on any of the Company, SEA or
Narrowband. The Company, SEA and/or Narrowband, as applicable, is in
compliance with the terms of the FCC Licenses and all applicable filing
and operating requirements related thereto and all other applicable
regulations and policies of the FCC and the Communications Act of 1934, 47
U.S.C. [SECTION]151, et seq. (the "Communications Act") and any other
governmental entity.
2.16 Employee Benefit Programs. Except as set forth on Schedule
2.16 hereto, neither the Company nor SEA maintains and has not in the past
maintained any Employee Program (as defined herein). For purposes of this
Section 2.16, "Employee Program" means (a) all employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA
Section 3(4)), plans to which more than one unaffiliated employer
contributes and employee benefit plans (such as foreign or excess benefit
plans) which are not subject to ERISA; and (b) all stock option plans,
bonus or incentive award plans, severance pay policies or plans, deferred
compensation plans, supplemental income arrangements, vacation plans, and
all other employee benefit plans, agreements, and arrangements not
described in (a) above. An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides benefits under such Employee
Program, or has any obligation (by agreement or under applicable law) to
contribute to or provide benefits under such Employee Program, or if such
Employee Program provides benefits to or otherwise covers employees of
such entity (or their spouses, dependents, or beneficiaries). Neither the
Company nor SEA has maintained any employee benefit plan to which more
than one employer contributes pursuant to one or more collective
bargaining agreements. Schedule 2.16 sets forth a list of every Pension
Plan (as hereinafter defined) that has been maintained by the Company at
any time during the twelve-month period ending on the Closing Date.
Neither the Company nor SEA has incurred (a) any material accumulated
funding deficiency within the meaning of ERISA, or (b) any material
liability to the Pension Benefit Guaranty Corporation established under
ERISA (or any successor thereto under ERISA) in connection with any
Pension Plan established or maintained by it. Neither the Company nor SEA
has had any tax assessed against it by the IRS for any alleged violation
under Section 4975 of the Internal Revenue Code. Neither the Company nor
SEA has any unfunded liability under a Pension Plan or a contingent
liability for withdrawal from a multi-employer Pension Plan except as
disclosed in the financial statements. "Pension Plan" shall mean an
employee benefit plan or other plan maintained for the employees of the
Company as described in Section 4021(a) of ERISA.
2.17 Labor Laws. The Company and the Subsidiaries employ
collectively approximately 100 individual employees. Each employee of the
Company and SEA has, in connection with his/her employment, entered into
an invention and non-disclosure agreement in the form of Exhibit H hereto.
Narrowband has no employees. Neither the Company nor SEA is subject to
any collective bargaining agreement or other labor agreement. Neither the
Company nor SEA is delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth on Schedule 2.17, upon
termination of the employment of any of said employees, neither the
Company nor SEA will by reason of anything done prior to the Closing be
liable to any of said employees for so-called "severance pay." Each of
the Company and SEA is in material compliance with all applicable laws and
regulations respecting labor, employment, fair employment practices, terms
and conditions of employment, and wages and hours. There are no charges
of employment discrimination or unfair labor practices or strikes,
slowdowns, stoppages of work, or any other concerted interference with
normal operations existing, pending or, to the best knowledge of the
Company and SEA, threatened against or involving the Company, or SEA and
no union has demanded or requested to represent or, to the best knowledge
of the Company and SEA, is currently attempting to represent, any of the
Company's or SEA's employees.
2.18 Solvency. None of the Company, SEA or Narrowband has: (a)
made a general assignment for the benefit of creditors; (b) filed any
voluntary petition in bankruptcy or suffered the filing of any involuntary
petition by its creditors; (c) suffered the appointment of a receiver to
take possession of all, or substantially all, of its assets; (d) suffered
the attachment or other judicial seizure of all, or substantially all, of
its assets; (e) admitted in writing its inability to pay its debts as they
come due; or (f) made an offer of settlement, extension or composition to
its creditors generally. After giving effect to the transactions provided
for or contemplated herein, to the best knowledge of each of the Company,
SEA and Narrowband: (a) it will be able to pay its debts as they come due
in the usual course of business and will have adequate capital to conduct
its business; and (b) its total assets will be greater than its total
liabilities (total assets for this purpose being determined on the basis
of the "fair saleable value" thereof). For purposes of this Section 2.18,
the "fair saleable value" of assets means the gross amount (without
deduction for costs of sale, taxes or other payments) of money that might
be expected to be realized, as of the valuation date, from an interested
purchaser in a not theoretical market aware of all relevant information
and a seller, equally informed, who is interested in disposing of the
entire operation as a going-concern, neither party being under a
compulsion to act.
2.19 Environmental Matters.
(a) Except for individual instances or any series of related
instances which would not have a material adverse effect on the assets,
business or financial condition of the Company: (i) to the best knowledge
of the Company, the Company has never generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined
in Section 2.19(b) below), nor has the Company contracted with any party
for the generation, transportation, use, storage, treatment, disposal or
management of any Hazardous Waste; (ii) to the best knowledge of the
Company, the Company does not presently own, operate, lease, or use, nor
has it previously owned, operated, leased, or used any site on which
underground storage tanks are or were located or which contain or
contained any asbestos or asbestos-containing material, any
polychlorinated byphenyls ("PCBs") or equipment containing PCBs, or any
urea formaldehyde foam insulation; (iii) to the best knowledge of the
Company, the Company has never violated any Environmental Law (as defined
in Section 2.19(b)(iii) below); and (iv) the Company, the operations of
its businesses, and any real property owned, operated, leased, or used by
the Company, and any facilities and operations of the Company thereon, to
the best of the Company's knowledge, are presently in compliance in all
material respects with all applicable Environmental Laws and any and all
orders or directives of any governmental authorities having jurisdiction
under such Environmental Laws, including, without limitation, any orders
or directives with respect to any clean-up or remediation of any release
or threat of release of any Hazardous Material.
(b) For purposes of this Section 2.19, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, asbestos, polychlorinated
byphenyls, urea formaldehyde, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human
health or safety, as defined or regulated under any Environmental Law;
(ii) "Hazardous Waste" shall mean and include any hazardous waste as
defined or regulated under any Environmental Law; (iii) "Environmental
Law" shall mean any environmental or health and safety-related law,
regulation, rule, ordinance, or by-law at the federal, state, or local
level existing as of the date hereof or previously enforced; and (iv) the
"Company" shall mean and include the Company and all other entities for
whose conduct the Company is or may be held responsible under any
Environmental Law including, but not limited to, lessees.
2.20 Inventory. The Company's and each Subsidiary's inventory is
of a quality and quantity which is salable in the ordinary course of
conduct of its business and the Company maintains adequate reserves
against the cost basis of its inventory based on the Company's historical
and projected performance. None of the Company's or any Subsidiary's net
inventory is obsolete or unsalable in a material amount.
2.21 Product and Service Claims. Except as set forth on Schedule
2.21, other than warranty claims substantially consistent with the
Company's past experience and which are not, in the aggregate, material to
the Company, there are no pending or, to the best of the Company's
knowledge, threatened product or service claims with respect to any
products manufactured or services provided by the Company prior to the
Closing Date nor are there any facts upon which a claim of such nature
should reasonably be anticipated to be based. Except for on-going price
renegotiation with customers in the ordinary course of business, no claim
has been made against the Company for renegotiation or price
redetermination of any business transaction resulting from or relating to
defective products or services, and, to the best of the Company's
knowledge, there are no facts upon which any such claim should reasonably
be anticipated to be based.
2.22 Backlog. As of September 30, 1995, the Company and the
Subsidiaries had a backlog of firm orders for the sale of products as set
forth in Schedule 2.22. All of the Company's and each Subsidiary's
backlog represents and will, as of the Closing Date, represent orders for
products with specifications that can be met in accordance with the terms
of such orders and in the ordinary course of conduct of its business
without undue delay or extraordinary expense.
2.23 Information Supplied to Lenders. Neither this Agreement, nor
the Schedules referenced herein, nor any certificate or statement
furnished to the Lenders by or on behalf of the Company or any Subsidiary
pursuant to the terms hereof, when taken together, contains any untrue
statement of a material fact, and none of this Agreement, the Schedules or
such other documents, omits to state a material fact necessary in order to
make the statements contained therein not misleading, in light of the
circumstances in which they were made. To the best of the Company's,
SEA's and Narrowband's knowledge, respectively, there is no material fact
directly relating to its business, operations or condition (other than
facts which relate to general economic conditions) that materially
adversely affects the same that has not been set forth in this Agreement
or in the Schedules hereto.
2.24 Broker's Fee. The Company agrees to indemnify the Lenders
against any claims against the Lenders for brokerage fees or commissions
payable to any broker or finder retained by or on behalf of the Company or
the Subsidiaries in connection with the financing contemplated by this
Agreement and to pay all expenses incurred by the Lenders in connection
with the defense of any action brought to collect any brokerage fees or
commissions by any such broker or finder.
SECTION 3. CLOSING CONDITIONS OF LENDERS
The Lenders' obligation to purchase and pay for the Debentures shall
be subject to compliance by the Company with the following conditions:
3.1 Opinion of Company Counsel. The Lenders shall have received
from ▇▇▇▇▇▇▇ Coie, counsel for the Company, SEA and Narrowband, their
favorable opinion, dated the Closing Date, substantially in the form
attached hereto as Exhibit D.
3.2 Authorization.
(a) Each of the Company, SEA and Narrowband shall have duly
adopted resolutions in form reasonably satisfactory to the Lenders
authorizing each of them to consummate the transactions contemplated
hereby in accordance with the terms hereof, including, without limitation,
the issuance of the Debentures, the issuance of the Preferred Shares upon
conversion of the Debentures and, upon conversion of the Convertible
Preferred Stock, the issuance of the Conversion Shares, and the Lenders
shall have received duly executed certificate(s) of an authorized officer
of each of the Company, SEA and Narrowband setting forth a copy of such
resolutions and such other matters as may be requested by the Lenders.
(b) The Company shall have amended its Articles of
Organization to include the provisions set forth in Exhibit C (such
Articles of Organization as so amended, the "Amended Charter") and except
as so amended and restated, such Amended Charter shall not have been
further amended or modified.
3.3 Irrevocable Proxy. Each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇,
and ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have executed and delivered to the Lenders an
irrevocable proxy in substantially the form attached hereto as Exhibit E
(the "Irrevocable Proxy").
3.4 Delivery of Documents. Concurrently with the Closing of the
transactions contemplated hereby, the Company shall have executed and
delivered to the Lenders (or shall have caused to be executed and
delivered to the Lenders, by the appropriate Persons), the following:
(a) The Debentures;
(b) Certified copies of resolutions of the Company, SEA and
Narrowband authorizing the execution and delivery of this Agreement and
the Debentures;
(c) A copy of the Company's Amended Charter, certified as of
a recent date by the Secretary of State of the Commonwealth of
Massachusetts and a copy of the Company's by-laws certified by an officer
of the Company, as amended;
(d) The Registration Rights Agreement; and
(e) Such other supporting documents and certificates as the
Lenders may reasonably request and as may be required pursuant to this
Agreement.
3.5 Use of Proceeds. All proceeds from the sale of the Debentures
by the Company to the Lenders may be used for the production of 220MHz
radio equipment and general working capital purposes.
3.6 No Violation or Injunction. The consummation of the
transactions contemplated by this Agreement shall not be in violation of
any law or regulation applicable to the Company or the Subsidiaries, shall
not be subject to any injunction, stay or restraining order and shall not
require any filings, approvals or consents which shall not have previously
been made or obtained. Without limiting the generality of the foregoing,
(a) the Company shall have timely and properly filed any required Report
on Form 10-C and shall have publicly disclosed the consummation of the
transactions contemplated hereby, and (b) the Lenders shall not be subject
to any restrictions or limitations under Chapter 110F of the Massachusetts
General Laws or any other similar statute.
3.7 No Litigation. No litigation, suit, action, claim or
investigation shall be pending, or threatened, which might impair or
prevent the performance of the Company, SEA and Narrowband hereunder or
the transactions contemplated herein.
3.8 No Adverse Change. Between the date of the Base Balance Sheet
and the Closing Date, there shall have been no material adverse change in
the financial conditions, prospects, properties, assets, liabilities,
business or operations of the Company, whether or not in the ordinary
course of business.
3.9 All Proceedings Satisfactory. All corporate and other
proceedings taken by each of the Company, SEA and Narrowband prior to or
at the Closing in connection with the transactions contemplated by this
Agreement, and all documents and instruments related thereto, shall be
reasonably satisfactory in form and substance to the Lenders, and the
Lenders shall receive such copies thereof and other materials (certified,
if requested) as they may reasonably request in connection therewith. The
issuance and sale of the Debentures to the Lenders shall be made in
conformity with all applicable state and federal securities laws.
SECTION 4. FINANCIAL COVENANTS
The Company (which term includes the Subsidiaries and shall be
deemed to include, for purposes of this Section 4, any subsidiary or
subsidiaries of the Company formed after the date of this Agreement) shall
comply with the following covenants, from the date hereof and for so long
as any of the Debentures remains outstanding.
4.1 Indebtedness. The Company will not directly or indirectly,
incur, create, assume, become or be liable in any manner with respect to,
or permit to exist, any Indebtedness or liability, except:
(a) Indebtedness under the Debentures and any other
Indebtedness owed by the Company to the Lenders;
(b) Indebtedness as described in Schedule 4.1(b);
(c) Indebtedness with respect to trade obligations
(including trade payables) and other normal accruals, including Taxes,
assessments and other governmental charges, arising in the ordinary course
of business and not yet due and payable, or which are being contested in
good faith by appropriate proceedings, and then only to the extent the
amount thereof has been set aside on the Company's books;
(d) Indebtedness incurred for purchase money obligations and
Capital Leases, so long as: (i) the pertinent assets are acquired for use
in the ordinary course of the Company's business; and (ii) either the
Indebtedness secured thereby does not exceed the fair market value of such
assets or the purchase price thereof if such assets are acquired directly
from the manufacturer or an authorized dealer thereof;
(e) Indebtedness owed to a commercial bank on commercially
reasonable terms and conditions and approved by a majority of the
directors of the Company's Board of Directors; and
(f) Indebtedness in respect of guarantees by the Company to
a third party, to the extent that any such guarantee secures Indebtedness
of the Company which is specifically permitted to be incurred or to remain
outstanding under the provisions of this Section 4.1.
4.2 Liens. The Company will not, directly or indirectly, create,
incur, assume or suffer to exist any Lien (as defined below) of any nature
whatsoever on any of its assets (including any leasehold interests in
property used by the Company) or ownership interests now or hereafter
owned, other than:
(a) Liens securing the payment of taxes and other government
charges, either not yet due or the validity of which is being contested in
good faith by appropriate proceedings, and as to which the Company shall
have set aside on its books adequate reserves to the extent required by
generally accepted accounting principles and provided that, in any event,
payment of any such tax, assessment, charge, levy or claim shall be made
before any of the Company's property shall be seized and sold in
satisfaction thereof;
(b) Liens securing Indebtedness permitted under Sections
4.1(b) and 4.1(d) above;
(c) Deposits under worker's compensation, unemployment
insurance and social security laws;
(d) Restrictions, easements, and minor irregularities in
title which do not and will not materially interfere with the occupation,
use and enjoyment of the properties of the Company in the normal course of
business as presently conducted or materially impair the value of such
assets for the purpose of such business;
(e) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens and other similar Liens,
securing obligations incurred in the ordinary course of business which are
not past due or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established;
(f) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of
indebtedness), leases (to the extent permitted under the terms of this
Agreement), public or statutory obligations, surety, stay, appeal,
indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
(g) Judgment and other similar Liens arising in connection
with court proceedings, provided that the execution or other enforcement
of such Liens is effectively stayed and the claims secured thereby are
being actively contested in good faith and by appropriate proceedings; and
(h) Liens against the fee interest in real property leased
by the Company which are securing obligations of the owner of such
property.
4.3 Distributions or Redemptions. Except as otherwise expressly
authorized or permitted by this Agreement, the Company will not: (i) make
any distributions of cash, property or securities of the Company with
respect to any of its capital stock; or (ii) directly or indirectly
redeem, purchase, or otherwise acquire for consideration any shares of its
capital stock; provided, however, that any Subsidiary may make
distributions of cash, property or securities to the Company.
SECTION 5. OPERATING AND REPORTING COVENANTS
Without the prior written consent of the Lenders representing a
majority in interest of the Debentures, the Redeemable Preferred Stock, or
the Convertible Preferred Stock, as the case may be, the Company (which
term shall include the Subsidiaries and shall be deemed to include, for
purposes of this Section 6, any subsidiary or subsidiaries of the Company
formed after the date of this Agreement) shall: (a) comply with the
covenants set forth in Sections 5.1 through 5.19, for so long as any of
the Debentures or any shares of Redeemable Preferred Stock remain
outstanding; and (b) comply with the covenants set forth in Sections 5.10,
5.11 and 5.16 for so long as any shares of the Convertible Preferred
Stock remain outstanding.
5.1 Financial Statements; Minutes. The Company shall maintain a
system of accounts from which financial statements prepared in accordance
with generally accepted accounting principles consistently applied can be
derived, keep full and complete financial records and furnish to each of
the Lenders the following reports: (a) within 90 days after the end of
each fiscal year, a copy of the consolidated balance sheet of the Company
as at the end of such year, together with statements of operations and
cash flow of the Company for such year, audited by independent public
accountants of recognized national standing reasonably satisfactory to the
Lenders, prepared in accordance with generally accepted accounting
principles consistently applied, and including in comparative form the
corresponding figures for the prior fiscal period; (b) within 45 days
after the end of each calendar quarter, an unaudited consolidated balance
sheet of the Company as at the end of such quarter, and unaudited
statements of operations and cash flow for the Company for such quarter
and for the year to date, and including in comparative form the
corresponding figures for the prior fiscal period; (c) commencing January
1, 1996, within 30 days after the end of each month, an unaudited
consolidated balance sheet of the Company as at the end of such month and
unaudited statements of operations for the Company for such month and for
the year to date; (d) promptly after the same are available, copies of any
proxy statements, financial statements and reports that the Company shall
send or make available generally to any of its securityholders or file
with the Security and Exchange Commission or other regulatory authority;
(e) as soon as reasonably practicable after any meetings of the Board of
Directors of the Company, copies of the minutes of such meeting; (f) in
connection with the annual and quarterly financial statements delivered
pursuant to clauses (a) and (b) above, a certification from the Chief
Financial Officer of the Company if there exists any default or Event of
Default under this Agreement, or any set of facts or circumstances which,
with the giving of notice and/or the passage of time, could constitute
such a default or Event of Default and stating the relevant facts and the
related consequences and what actions the Company proposes to remedy them;
and (g) such other financial information as the Lenders may reasonably
request. The Lenders or their authorized representatives shall have the
right to meet with the Company's independent auditors not less than once
each year to discuss the financial condition and results of operation of
the Company, its financial controls and the accounting principles applied
in the preparation of its financial statements.
5.2 Budget and Strategic Plan. The Company shall prepare and
submit to the Lenders a budget and strategic plan for the Company for each
fiscal year of the Company at least 15 days prior to commencement of each
fiscal year thereafter, commencing fiscal year 1996. The Company shall
review the budget and strategic plan periodically with the Lenders and
shall promptly advise the Lenders of all material changes therein and all
material deviations therefrom.
5.3 Conduct of Business. The Company will continue to engage
principally in the business now conducted by the Company or a business or
businesses similar thereto or reasonably compatible therewith. The
Company will use its best efforts, in its reasonable business judgment, to
keep in full force and effect its corporate existence and all intellectual
property rights owned by it and useful in its business (except such rights
as the Company has reasonably determined are not material to the Company's
continuing operations).
5.4 Payment of Taxes, Compliance with Laws, Etc. The Company
shall pay and discharge all lawful taxes, assessments and governmental
charges or levies imposed upon it or its property before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if not paid when due, might become a lien or charge upon
its property or any part thereof; provided, however, that the Company
shall not be required to pay and discharge any such tax, assessment,
charge, levy or claim so long as the validity thereof is being contested
by it in good faith by appropriate proceedings and an adequate reserve
therefor has been established.
5.5 Adverse Changes. To the extent not disclosed in the financial
statements to be provided under Section 5.1, the Company will promptly
advise the Lenders of any event which represents a material adverse change
in the condition or business, financial or otherwise, of the Company, and
of each suit or proceeding commenced or threatened against the Company
which, if adversely determined, could result in such a material adverse
change.
5.6 Insurance. The Company will keep its insurable properties
insured, upon reasonable business terms, against liability, errors and
omissions, and the perils of casualty, fire, business interruption, and
extended coverage in amounts of coverage substantially similar to those
customarily maintained by companies in the same or similar business, and
of similar size, as the Company. The Company will also maintain with such
insurers insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for
companies engaged in the same or similar business, and of similar size.
The Company will maintain directors' and officers' liability insurance
providing coverage of at least $2,000,000 per annum and subject to
commercially reasonable deductions and exclusions, and shall not limit,
amend, alter, modify or waive any director indemnification or exculpation
provisions in its Articles of Organization or By-Laws or fail to renew the
foregoing directors and officers' liability insurance, without providing
the Lenders with at least 30 days prior written notice of such action;
provided, however, in the event that the Lenders shall at any time have a
Designated Director serving on the Board of Directors of the Company, the
Company shall use its best efforts to increase its directors' and
officers' liability insurance coverage to at least $5,000,000.
5.7 Maintenance of Properties. The Company, in its reasonable
discretion, will maintain all properties used or useful in the conduct of
its business in good repair, working order and condition, ordinary wear
and tear excepted.
5.8 Affiliated Transactions. Except as otherwise permitted under
this Agreement, the Company will not engage in any transactions with, or
make any payments or distributions (excluding management compensation
permitted by Section 5.9) to or for the benefit of, any officer or key
employee of the Company or persons or entities controlling, controlled by,
under common control with or otherwise affiliated with the Company unless
such transaction shall be conducted on an arm's-length basis, shall be on
terms and conditions no less favorable to the Company than could be
obtained from nonrelated persons and shall be approved by the independent
directors of the Board of Directors after full disclosure of the terms
thereof.
5.9 Management Compensation. Compensation paid by the Company to
its management and other employees will be: (i) both reasonably comparable
to compensation paid to similarly-situated employees in companies in the
same or similar businesses of similar size and maturity and with
comparable financial performance and reasonable in relation to the
Company's overall compensation structure; or (ii) reasonably consistent
with the past practice of the Company.
5.10 Board of Directors; Inspection.
(a) At the request of the Lenders, the Company shall use its
reasonable best efforts to cause one person designated by the Lenders to
be nominated, elected and continued in office as a Director of Datamarine
International, Inc. after the Closing Date and the Board of Directors of
the Company shall, at that time, be expanded correspondingly. The Lenders'
Director designee shall be entitled to reimbursement of all reasonable
travel expenses incurred in connection with his/her attendance at all
Board meetings and the Lenders' Director designee shall be entitled to
receive the same board fees and other compensation, if any, paid to any
outside Directors.
(b) At the request of the Lenders, the Company shall cause
one person designated by the Lenders to be, nominated, elected and
continued in office as a Director of SEA after the Closing Date and the
Board of Directors of SEA shall, at that time, be expanded
correspondingly. The Lenders' Director designee shall be entitled to
reimbursement of all reasonable travel expenses incurred in connection
with his/her attendance at all Board meetings and the Lenders' Director
designee shall be entitled to receive the same board fees and other
compensation, if any, paid to any outside Directors.
(c) At the request of the Lenders, the Company shall cause
one person designated by the Lenders to be, nominated, elected and
continued in office as a Director of Narrowband after the Closing Date and
the Board of Directors of Narrowband shall, at that time, be expanded
correspondingly. The Lenders' Director designee shall be entitled to
reimbursement of all reasonable travel expenses incurred in connection
with his/her attendance at all Board meetings and the Lenders' Director
designee shall be entitled to receive the same board fees and other
compensation, if any, paid to any outside Directors.
(d) If at any time the Lenders do not have a designee
serving on the Board of Directors ("Designated Director") of each of the
Company, SEA and Narrowband, the Lenders shall be entitled to send a
representative (the "Lender Representative") to attend all meetings of the
Board of Directors of such companies not having a Designated Director
serving on its Board of Directors, but such Lender Representative shall
not be considered an elected member of the Board of Directors of any such
company. Each of the Company, SEA and Narrowband will ensure that meetings
of its Board of Directors are held at least once each calendar quarter and
provide the Lender Representative with at least twenty (20) days prior
written notice of all Board of Director meetings as well as copies of all
materials provided to the Directors. The Company, SEA and Narrowband, as
appropriate, will reimburse the Lender Representative for reasonable
travel expenses, including the cost of air fare and any necessary meals
and lodging, incurred in connection with attending such meetings or
performing such other business on its behalf as may be approved by it in
advance. The Company, SEA and Narrowband, as appropriate, will notify the
Lenders in writing three (3) business days prior to the effectiveness of
any action to be taken by written consent of directors or stockholders,
except with respect to ministerial matters, and will provide reasonable
opportunity for consultation with the Lenders with regard to the matters
covered thereby during such three-day period prior to the effectiveness of
such consents.
(e) At such time, if any, that the Lenders shall have
nominated a Designated Director to serve on the Board of Directors of any
of the Company, SEA and/or Narrowband, the Company, SEA and/or Narrowband,
as applicable, shall enter into an indemnification agreement with such
Designated Director on terms and conditions comparable to indemnification
agreements offered to directors of companies of similar size and maturity
and with comparable financial performance.
(f) The Company will, upon reasonable prior notice to the
Company, permit authorized representatives of the Lenders to visit and
inspect any of the properties of the Company, including its books of
account, and to discuss its affairs, finances and accounts with its
agents, officers and independent accountants, all at such reasonable times
and as often as may be reasonably requested, in all cases so as not to
interfere with the Company's operations or personnel.
(g) From and after the time that no Debenture and/or
Convertible Preferred Stock is outstanding, the Lenders shall, at the
request of the Company, cooperate to cause the resignation or removal of
the Designated Director(s), if any, from the Board of Directors of each of
the Company, SEA and/or Narrowband, as applicable.
5.11 Issuance of Capital Stock, Convertible Securities, Options,
Warrants or Rights. The Company covenants and agrees that it will not
sell or issue any shares of capital stock or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for shares of capital stock, or options, warrants or rights
carrying any rights to purchase shares of capital stock or convertible or
exchangeable securities of the Company, other than pursuant to or as
referenced in this Agreement (including with respect to stock option plans
referenced in this Agreement), for more than 10% of the common equity in
the Company or $3,000,000 in proceeds, whichever is less.
The Lenders may, in their sole discretion, condition any waiver of
the provisions of this Section 5.11 upon the Company offering each of the
Lenders (on a pro rata basis with an overallotment option as to any
amounts thereof not taken up by any other Lender) the right to participate
in all or any portion of such proposed financing, on the most favorable
terms and conditions proposed to be extended by the Company.
5.12 Merger, Consolidation, Reorganization, Sale of Assets,
Acquisition. Each of the Company, SEA and Narrowband will not without the
prior written consent of the Lenders (which consent will not be
unreasonably withheld): (a) sell, lease or otherwise dispose of (whether
in one transaction or a series of related transactions) all or any
substantial portion of its assets, other than sales of inventory in the
ordinary course of business, sales of obsolete assets and sales of other
assets in any one fiscal year which have a book value of less than
$150,000; (b) merge with or into or consolidate with another corporation,
partnership or other entity (other than a wholly-owned subsidiary or in
connection with an acquisition permitted under clause (c) below); or (c)
acquire any other corporation or business concern, whether by acquisition
of assets, capital stock or otherwise, and whether in consideration of the
payment of cash, the issuance of shares of capital stock or otherwise
where the consideration of any individual acquisition exceeds $500,000 or
the consideration for all such acquisitions in the aggregate exceeds
$1,000,000 and subject to the other limitations contained herein.
5.13 No Amendments to Charter Documents. The Company will not make
any material amendment or modification to, or waiver of any of the terms
of, the Company's Amended and Restated Articles of Organization, including
any amendment, modification or waiver which would conflict with or impair
any of the rights or privileges granted to the Lenders.
5.14 Restrictions on Other Agreements. Other than as provided in
or contemplated by Section 11 of this Agreement, the Company will not
enter into any agreement with any party which by its express terms: (a)
restricts the payments due the holders of the Debentures; or (b) otherwise
conflicts with or impairs any of the express rights or privileges granted
to the Lenders hereunder.
5.15 Stay, Extension and Usury Laws. For so long as any of the
Debentures remain outstanding, the Company covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any
stay, extension or usury law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of
this Agreement; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Lenders, but will
suffer and permit the execution of every such power as though no such law
has been enacted.
Notwithstanding anything herein or in the Debentures which may be to
the contrary, in no event, contingency, or circumstances whatsoever shall
the interest or any amount deemed to be interest payable by the Company
hereunder with respect to the Debentures exceed the maximum amount
permitted by applicable law and, to the extent that any payments in excess
of such permitted amount are finally determined to have been received by
the Lenders, such excess shall be considered payments in respect of the
principal of the Debentures, and, if the principal of the Debentures has
been paid in full, shall be refunded to the Company. All sums paid or
agreed to be paid to any Lender for the use, forbearance, or detention of
the Debentures shall, to the extent permitted by law, be amortized,
prorated, allocated, and spread throughout the entire term of the
Debentures.
5.16 Right of Participation in Financings. The Company and SEA
each covenants and agrees that it will not sell or issue any shares of its
capital stock, or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for its capital stock, or
options, warrants or rights carrying any rights to purchase its capital
stock or convertible or exchangeable securities (other than pursuant to
(a) bona fide registered public offerings which are generally available to
any investors on non-negotiated terms, (b) stock or option grants to
directors, officers, employees, consultants or agents of the Company
pursuant to bona fide issuances under the Company's employee, director,
consultant and agent stock purchase, stock option or other employee
benefit plans, or (c) any transactions involving the acquisition by the
Company of other corporations, businesses or products in which the holders
of the Common Stock of the Company immediately prior to any such
transaction shall continue to hold a majority of the outstanding Common
Stock of the Company (after giving effect to the exercise of any options,
warrants or other rights to acquire Common Stock or the conversion or
exercise of any securities convertible into or exchangeable for Common
Stock which are issued in such transaction) immediately after such
transaction) unless a written offer is first submitted to the Lenders
identifying the terms of the proposed sale, and offering to each of the
Lenders the opportunity to purchase their proportionate share of such
securities (subject to increase for overallotment if some Lenders do not
fully exercise their rights) on terms and conditions, including price, not
less favorable to the Lenders than those on which the Company or SEA
proposes to sell such securities to a third party. Each Lender's
"proportionate share" of such securities shall be based on the ratio which
the shares of the Common Stock of the Company owned or obtainable by such
Lender upon conversion of any Debentures or Convertible Preferred Shares
owned by it bears to all the issued and outstanding shares of the Common
Stock of the Company, calculated in each case on a fully-diluted basis to
include shares of the Common Stock issuable upon the exercise of any stock
options or warrants then outstanding and upon conversion or exchange of
any convertible or exchangeable securities then outstanding. Any offer to
the Lenders herewith shall remain open and irrevocable for a period of 30
days. Any securities so offered to the Lenders which are not purchased
pursuant to such offer may be sold to a third party on terms and
conditions, including price, not more favorable to the third party than
those set forth in such offer at any time within 90 days following the
date of such offer, but may not be sold to any other person or after such
90-day period without renewed compliance with this Section 5.16. In the
event that subsequent to any offer to the Lenders hereunder, the Company
or SEA proposes to amend the terms and conditions offered to any third
parties during such 90-day period, it may do so provided that it first
provides the Lenders with the opportunity to purchase their proportionate
share of the offered securities on such amended terms and conditions on at
least fifteen (15) business days written notice prior to the date on which
the securities are to be offered on such amended terms and conditions to
such third parties.
5.17 [Intentionally Omitted]
5.18 Dissolution of Data I.C., Inc. The Company shall, on or
before January 1, 1996, take, or cause to be taken, all such actions
necessary to effect the dissolution and liquidation of Data I.C., Inc. and
shall not at any time after the Closing Date permit Data I.C., Inc. to
have or hold any assets or to engage in any transaction except to the
extent necessary to carry out the dissolution and liquidation of Data,
I.C., Inc.
5.19 Transactions with Foreign Subsidiaries. The Company will not
engage in any transaction with, or transfer any assets, make any loans,
advances, capital contributions, payments or distributions to, any Foreign
Subsidiary.
SECTION 6. CONVERSION
At any time on or after the earliest to occur of (i) receipt of
notice from the Company of its intention to prepay the Debentures in
accordance with Section 1.2(f) hereof, (ii) a Liquidity Event, (iii) an
Event of Default, or (iv) December ___, 1998, Lenders holding a majority
in interest of the Debentures may, upon 30 days prior written notice to
the Company, require that all of the Debentures be converted into 2,000
shares of Convertible Preferred Stock and 2,000 shares of Redeemable
Preferred Stock. The Company and the Lenders agree that if for any reason
any principal of the Debentures shall have been prepaid prior to
conversion, such prepayment shall only reduce the amount of Redeemable
Preferred Stock received upon conversion by one (1) share of Redeemable
Preferred Stock for each $1,000 in principal amount of the Debentures that
have been prepaid and shall not reduce the amount of Convertible Preferred
Stock received upon such conversion.
In connection with the conversion of Debentures under this Section
6, the Company shall pay to the Lenders, in cash, all accrued but unpaid
Interest on the Debentures through the date of such conversion and each
Lender shall surrender all of its Debentures, marked canceled, and
acknowledged by the Lenders to be paid-in-full, to the Company at the
Company's principal office in exchange for the shares of Convertible
Preferred Stock and Redeemable Preferred Stock and interest payments
described above. Upon delivery of the Debentures to the Company, marked
canceled, the Lenders shall be deemed to be shareholders in the Company
holding their respective shares of Convertible Preferred Stock and
Redeemable Preferred Stock. The Company shall make such filings as are
required and obtain all necessary consents and approvals necessary to
consummate such conversion, including, if applicable, all necessary
filings and approvals under Title II of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended. The Company shall take all other
action that the Lenders may reasonably request to evidence and effectuate
the Lenders becoming shareholders holding shares of Convertible Preferred
Stock and Redeemable Preferred Stock in the Company. The Company will
comply with all applicable state "blue sky" or securities laws in
connection with the issuance and sale of the Debentures, any of the
securities into which the Debentures may be converted and the other
securities issued by the Company.
SECTION 7. EVENTS OF DEFAULT; REMEDIES
7.1 Events of Default.
In each case of the happening of the following events while any of
the Debentures are outstanding (each of which is herein sometimes referred
to as an "Event of Default"):
(a) if a default occurs in the payment of any premium,
installment of the principal of, interest on, or other obligation with
respect to, the Debentures, whether at the due date thereof or upon
acceleration thereof, and, solely in the case of any such default in the
payment of interest, charges, fees or expenses, such default continues for
more than five (5) days after the due date thereof;
(b) if any material representation or warranty made herein
or in any agreement executed in connection with, or in any schedule,
certificate, financial statement or other instrument furnished in
connection with, this Agreement shall prove to have been false or
misleading when made in any material respect;
(c) if a default occurs 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 provisions of Sections 4, 5.8, 5.11,
5.12 or 5.19 of this Agreement and such default remains uncured for thirty
(30) days after the occurrence thereof, or for such longer period if the
default cannot reasonably be cured within such 30-day period and the
Company is diligently pursuing cure of the default, but in no event for a
period greater than 90 days after written notice thereof has been
delivered by the Lenders to the Company, provided, however, that if such
default cannot be remedied, then such default shall be deemed to be an
Event of Default as of the date of the occurrence thereof;
(d) if a default occurs 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 any of the provisions of this Agreement
not referenced in subsections (a), (b) or (c) above and such default
remains uncured for forty-five (45) days after written notice thereof has
been delivered by the Lenders to the Company, or for such longer period if
the default cannot reasonably be cured within such 45-day period and the
Company is diligently pursuing cure of the default, but in no event for a
period greater than 90 days after written notice thereof has been
delivered by the Lenders to the Company, provided, however, that if such
default cannot be remedied, then such default shall be deemed to be an
Event of Default as of the date of the occurrence thereof;
(e) if a default occurs with respect to any other
Indebtedness of the Company for borrowed money in an aggregate amount in
excess of $100,000 and such default is not remedied or waived within
thirty (30) days of the date thereof;
(f) if the Company shall (i) discontinue its business, (ii)
apply for or consent to the appointment of a receiver, trustee, custodian
or liquidator of it or any of its property, (iii) admit in writing its
inability to pay its debts as they mature, (iv) make a general assignment
for the benefit of creditors, or (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors, or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation laws or statutes, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any
such law, or if corporate action shall be taken for the purpose of
effecting any of the foregoing;
(g) there shall be filed against the Company an involuntary
petition seeking reorganization of the Company or the appointment of a
receiver, trustee, custodian or liquidator of the Company or a substantial
part of its assets, or an involuntary petition under any bankruptcy,
reorganization or insolvency law of any jurisdiction, whether now or
hereafter in effect (any of the foregoing petitions being hereinafter
referred to as an "Involuntary Petition");
(h) if final judgment(s) from a court of competent
jurisdiction for the payment of money in excess of an aggregate of
$100,000 shall be rendered against the Company and the same shall remain
unstayed or undischarged for a period of thirty (30) consecutive days,
during which time execution shall not be effectively stayed; or
(i) if there occurs any attachment of any property of the
Company in an amount exceeding $100,000, which shall not be discharged or
bonded within thirty (30) days of the date of such attachment; then, and
upon each and every such Event of Default thereafter, and during the
continuance of any Event of Default, at the election of the Lenders, the
Debentures shall immediately become due and payable, both as to principal
and interest, without presentment, demand, or protest, all of which are
hereby expressly waived, anything contained herein or in the Debentures to
the contrary notwithstanding (except in the case of an Event of Default
under subsections (f) or (g) of this Section, in which event such
Debentures shall automatically become due and payable). In the event of
an acceleration of the Debentures as a result of the filing of an
Involuntary Petition as specified in subsection (g) of this Section, such
acceleration shall be rescinded, and the Company's rights hereunder
reinstated, if, within sixty (60) days following the filing of such
Involuntary Petition, such Involuntary Petition shall have been dismissed
or stayed, and there shall exist no other Event of Default under this
Agreement.
7.2 Remedies on Default, Etc. In case any one or more Events of
Default shall occur and be continuing, the Lenders may proceed to protect
and enforce their rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any
agreement contained in this Agreement or the Debentures, or for an
injunction against a violation of any of the terms hereof or thereof or in
and of the exercise of any power granted hereby or thereby or by law. No
right conferred upon the Lenders hereby or the Debentures shall be
exclusive of any other right referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE LENDERS
8.1 Representation of Lenders. In order to induce the Company and
the Subsidiaries to enter into this Agreement, each Lender hereby
severally represents and warrants to and agrees with the Company and each
of the Subsidiaries with respect to such Lender's purchase of Debentures
hereunder that as of the date hereof:
(a) The execution of the Agreement has been duly authorized
by all necessary action on the part of the Lender, and this Agreement has
been duly executed and delivered, and constitutes a valid, legal and
binding agreement of the Lender enforceable in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy and other
laws of general application relating to creditor's rights or general
principles of equity.
(b) The Lender is acquiring the Debentures for its own
account, for investment, and not with a view to any "distribution" thereof
within the meaning of the Securities Act. The Lender has not been formed
for the specific purpose of making the investment contemplated by this
Agreement, the information concerning the state of residence of each
Lender supplied to counsel for the Company is true and correct as of the
date hereof and, the Lender is an "accredited investor" as defined under
the Securities Act and the regulations promulgated thereunder.
(c) The Lender understands that because the Debentures (and
the securities into which they are convertible) have not been registered
under the Securities Act, it cannot dispose of any or all of the
Debentures (or the securities into which they are convertible) unless such
Debentures (or such securities, as the case may be) are subsequently
registered under the Securities Act or exemptions from such registration
are available. The Lender acknowledges and understands that, except as
provided in the Registration Rights Agreement, it has no independent right
to require the Company to register the Debentures (or the securities into
which they are convertible), that the Company has no intention to register
the Debentures (or the securities into which they are convertible), and
that the Company may not accomplish a public offering of the Debentures or
the securities into which they are convertible.
(d) The Lender is knowledgeable and experienced in the
making of investments in private enterprises, is able to bear the economic
risk of loss of its investment in the Company, has been granted the
opportunity to investigate the affairs of the Company, and has availed
itself of such opportunity either directly or through its authorized
representative.
(e) The Lender has been advised that the Debentures (and the
securities into which they are convertible) have not been and are not
being registered under the Securities Act or under the securities or "blue
sky" laws of any jurisdiction and that the Company in issuing the
Debentures is relying upon, among other things, the representations and
warranties of each Lender contained in this Section 10 in concluding that
each such issuance is a "private offering" and does not require compliance
with the registration provisions of the Securities Act.
(f) The Lender has had access to or been supplied with all
material information regarding the Company, its financial condition and
historical results of operations, and all questions concerning the Company
have been answered to its satisfaction.
SECTION 9. INTERCREDITOR MATTERS
9.1 Subordination to Payment. Notwithstanding anything in this
Agreement, in the Debentures or in any of the other documents and
instruments executed and, or, delivered pursuant thereto or in connection
therewith to the contrary, the Debentures shall be subordinate and junior
in right of payment to the Senior Debt of the Company to the extent and in
the manner set forth in this Section 9. Except as specifically provided
for otherwise in this Section 9, payments on account of the Debentures may
be made by the Company and such payments may be received and retained by
the Lenders as and when due.
9.2 Bankruptcy or Liquidation. Upon the event of: (a) any
insolvency or bankruptcy proceedings, or any receivership, liquidation,
reorganization or other similar proceedings with respect to the Company;
(b) any proceedings for voluntary liquidation, dissolution or other
winding up of the Company (whether or not involving insolvency or
bankruptcy proceedings); or (c) any distribution, division or application,
partial or complete, voluntary or involuntary, by operation of law or
otherwise, of all or substantially all of the property, assets or business
of the Company or the proceeds thereof to or for any creditor or creditors
other than in the ordinary course of business (including without
limitation any marshalling of assets), all Senior Debt shall be paid in
full in cash (or other property acceptable to the holders of Senior Debt
in their sole determination) before any payment or distribution, direct or
indirect, whether in cash, securities, property or otherwise, shall
thereafter be made on the Debentures; provided, however, that this
provision shall not preclude the Lenders from (i) exercising their
conversion rights under Section 6 hereof and receiving the Preferred
Shares issuable upon such conversion, or (ii) exchanging the Debentures
for other securities which are subordinated in right of payment to the
Senior Debt on terms which are no more favorable to the Lenders than the
terms of this Section 9.
9.3 Payment Default on Senior Debt. Except as specifically
provided otherwise in Section 9.8 hereof, during the continuance of any
default (without regard to any applicable grace or cure periods) in the
payment of any sums (principal, interest or otherwise) due and payable on
any Senior Debt (whether as a result of a periodic payment, maturity,
acceleration or a mandatory prepayment), no payment on the Debentures,
direct or indirect, whether in cash, securities, property or otherwise,
shall be made after written notice of the foregoing default is given to
the Company and the Lenders, unless and until the default under such
Senior Debt shall have been cured in full or arrangements for such cure,
which are accepted in writing by the holder of such Senior Debt, shall
have been made.
9.4 Non-Payment Default on Senior Debt. Except as specifically
provided otherwise in Section 9.8 hereof, upon the occurrence of a default
on any Senior Debt (without regard to any applicable grace or cure
periods), other than a default described in Section 9.2 or 9.3 above, no
payment on Debentures, direct or indirect, whether in cash, property,
securities or otherwise shall be made from the date that written notice of
the foregoing default is given to the Company and the Lenders and for a
period of 90 days thereafter, unless and until the default under such
Senior Debt shall have been cured in full or arrangements for such cure,
which are accepted in writing by the holder of such Senior Debt, shall
have been made provided; however, that: (i) no more than two (2) payment
blockage periods may be declared hereunder in any 365-day period; and (ii)
no default may be cited as the basis for two (2) separate payment
blockages in any 365-day period.
9.5 Limitation on the Exercise of Certain Rights. The Lenders
agree that, upon written notice to it from any holder of Senior Debt
specifying such holder's name and address, they will not thereafter,
without at least one day's prior written notice to the holder of such
Senior Debt, make any request or demand for, accelerate or bring any
action with respect to, the payment of the Debentures.
9.6 Subrogation. Upon the payment in full of all Senior Debt, the
Lenders shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of assets of the Company made on the
Senior Debt until all of the obligations or the Debentures shall be paid
in full. Except as may be otherwise ordered by a court with respect to
the payments contemplated under Section 9.2 hereof, no payments or
distributions to the holders of the Senior Debt of cash, property,
securities or otherwise (including any amounts paid on account of the
Debentures which are subsequently paid over to or held in trust for the
benefit of the holders of any Senior Debt) shall, as between the Company,
the Lenders and the Company's other creditors, be deemed to be a payment
by the Company on account of the Debentures. The provisions of this
Section 9 are intended solely to define the relative rights of the
Lenders, on the one hand, and the holders of Senior Debt, on the other
hand, vis a vis the Company.
9.7 Absolute Obligation. Nothing contained in this Section 9 is
intended to or shall impair, as among the Company, its creditors other
than holders of Senior Debt and the Lenders, the obligation of the
Company, which is absolute and unconditional, to pay to the Lenders any
and all sums outstanding under the Debentures as and when the same shall
become due and payable in accordance with the terms thereof. Nor is
anything contained in this Section 9 intended to: (a) affect the relative
rights of the Lenders and creditors of the Company other than the holders
of Senior Debt; or (b) prevent the Lenders from exercising all remedies
otherwise permitted by applicable law upon default, subject to the
limitations set forth in Section 9.5 hereof and to the rights under this
Section 9 of the holders of Senior Debt with respect to cash, property or
securities of the Company received upon the exercise of any such remedy.
The failure of the Company to make any payment on the Debentures by reason
of any provision of this Section 9 shall not be construed as preventing
the occurrence of an Event of Default under Section 7.
9.8 Conversion. Nothing contained in this Section 9 shall be
deemed to prohibit the rights of the Lenders to convert the Debentures
pursuant to Section 6 hereof and to receive the Preferred Shares issuable
upon such conversion.
SECTION 10. INDEMNIFICATION
(a) The Company shall, to the full extent permitted by law, and in
addition to any such rights which any Indemnified Party (as defined
herein) may have pursuant to statute, the Company's charter, the Company's
by-laws, or otherwise, indemnify and hold harmless each Lender (including
its respective directors, officers, partners, employees and agents, an
"Indemnified Investor") and each person (a "Controlling Person" and
collectively with Indemnified Investors, the "Indemnified Parties") who
controls any of them within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages, expenses and liabilities,
joint or several, including any investigation, legal and other expenses
incurred in connection with the investigation, defense, settlement or
appeal of, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted ("Losses" or "Loss"), to which they, or
any of them, may become subject solely by reason of their status as, and
not directly or indirectly by reason of their actions as, a securityholder
or controlling person of the Company, (including, without limitation, any
and all Losses under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, which
relates directly or indirectly to the registration, purchase, sale or
ownership of any securities from the Company, other than the Debentures,
the Redeemable Preferred Stock, the Convertible Preferred Stock and the
Conversion Shares (collectively, the "Lender Securities"), or to any
fiduciary obligation owed by the Company with respect to securities of the
Company (other than the Lender Securities); provided, however, that the
Company will not be liable to the extent that such Loss arises from and is
based on an untrue statement or omission or alleged untrue statement or
omission in a registration statement or prospectus which is made in
reliance on and in conformity with written information furnished to the
Company in an instrument duly executed by or on behalf of such Indemnified
Party specifically stating that it is for use in the preparation thereof.
The indemnification and contribution provided for in this Section 10 will
remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Parties or any officer, director, employee,
agent or Controlling Person of the Indemnified Parties.
(b) If the indemnification provided for in Section 10(a) above for
any reason is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party in respect of any Losses referred to therein, then
the Company, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Lenders, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Lenders in connection with the
action or inaction which resulted in such Losses, as well as any other
relevant equitable considerations. In connection with the registration of
the Company's securities, the relative benefits received by the Company
and the Lenders shall be deemed to be in the same respective proportions
that the net proceeds from the offering (before deducting expenses)
received by the Company and the Lenders, in each case as set forth in the
table on the cover page of the applicable prospectus, bear to the
aggregate public offering price of the securities so offered. The
relative fault of the Company and the Lenders shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Lenders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Lenders agree that it would not be just and
equitable if contribution pursuant to this Section 10(b) were determined
by pro rata or per capita allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. In connection with the registration
of the Company's securities, in no event shall any Lender be required to
contribute any amount under this Section 10(b) in excess of the lesser of
(i) that proportion of the total of such Losses indemnified against equal
to the proportion of the total securities sold under such registration
statement which is being sold by such Lender or (ii) the proceeds received
by such Lender from its sale of securities under such registration
statement. No person found guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
(c) Any Indemnified Party that proposes to assert the right to be
indemnified under this Section 10 will, promptly after receipt of notice
of commencement of any claim or action against such party in respect of
which a claim is to be made against the Company under this Section 10,
notify the Company of the commencement of such action, enclosing a copy of
all papers served, but the omission so to notify the Company will not
relieve the Company from any liability that the Company may have to any
Indemnified Party under the foregoing provisions of this Section 10
unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the Company or is
materially prejudicial to the Company's ability to defend such claim or
action. The Company shall have the right to participate in, and, to the
extent the Company so desires, to assume the defense of any such claim or
action with counsel mutually satisfactory to the parties; provided,
however, that an Indemnified Party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the Company, if in the
reasonable opinion of the Company, representation of such Indemnified
Party by the counsel retained by the Company would be inappropriate due to
the actual or potential differing interests between such Indemnified Party
and any other party represented by such counsel in such proceeding. If
the Indemnified Party retains its own counsel in accordance with the
foregoing sentence, all fees, disbursements and other charges incurred in
the investigation, defense and/or settlement of such action shall be
advanced and reimbursed by the Company promptly as they are incurred;
provided, however, that the Indemnified Party shall agree to repay any
expenses so advanced hereunder if it is ultimately determined by a court
of competent jurisdiction that the Indemnified Party to whom such expenses
are advanced is not entitled to be indemnified as a matter of law. The
Company shall not settle any action or claim for which indemnification is
sought under this Section 10 without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld. The
Company shall not be liable for any amounts paid in any settlement of any
proceeding effected without its consent, which consent shall not be
unreasonably withheld.
SECTION 11. DEFINITIONS
Unless the context specifically requires otherwise, capitalized
terms used in this Agreement shall have the meaning specified below:
"Base Balance Sheet" shall mean the unaudited consolidated balance sheet
of the Company dated July 1, 1995 which was filed with the SEC as a part
of the Company's Quarterly Report on 10-Q for its fiscal quarter then-
ended.
"Capital Lease" means any lease of property (real, personal or mixed)
which in accordance with generally accepted accounting principles
consistently applied, would be capitalized on the lessee's balance sheet
or for which the amount of the asset and liability thereunder should be
disclosed in a note to such balance sheet as if so capitalized.
"FCC" means the Federal Communications Commission and any successor
governmental agency performing functions similar to those performed by the
Federal Communications Commission on the date hereof.
"Foreign Subsidiaries" shall mean Nautical Realty ApS, a Danish
corporation, and Datamarine International Australia PTY, Limited, a
corporation organized under the laws of New South Wales.
"Indebtedness" means with respect to any Person, (i) any liability,
contingent or otherwise, of such Person (A) for borrowed money (whether or
not recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (B) evidenced by a note, debenture or similar
instrument (including a purchase money obligation) given in connection
with the acquisition of any property or assets, (C) for any letter of
credit or performance bond in favor of such Person, (D) for the payment of
money relating to a capitalized lease obligation, or (E) any liability,
contingent or otherwise, of such Person to any other Person for any
purchase price associated with any acquisition of assets, business or
otherwise (including any deferred purchase price, assumption of
Indebtedness, noncompetition payments or other forms of consideration);
(ii) any liability of others of the kind described in the preceding clause
(i), which the Person has guaranteed or which is otherwise its legal
liability, contingent or otherwise; (iii) any obligation secured by a Lien
to which the property or assets of such Person are subject, whether or not
the obligations secured thereby shall have been assumed by or shall
otherwise be such Person's legal liability; (iv) all other items (except
items of capital stock, capital or paid-in surplus or of retaining
earnings) which in accordance with generally accepted accounting
principles, would be included as a liability on the balance sheet of such
Person on the date of determination; and (v) any and all deferrals,
renewals, extensions or refinancing of, or amendments, modifications of
supplements to, any liability of the kind described in any of the
preceding clauses (i), (ii), (iii) or (iv).
"Lien" means any interest in, or claim against, property relating to an
obligation owed to, or claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or
contract, and including but not limited to any security interest lien
arising from a mortgage, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes, any
rights of first refusal, charges, claims, liabilities, limitations,
conditions, restrictions or other adverse claims; provided, however, that
"Lien" shall not include the interest retained by the lessor under a lease
which is not a Capital Lease. For the purposes of this Agreement, the
Company shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement, financing lease
or other arrangement pursuant to which title to the property has been
retained by or vested in some other person or entity for security purposes
and such retention or vesting shall be deemed to be a Lien.
"Person" means any individual, corporation, partnership, joint venture,
trust or unincorporated organization or any government or any agency or
political subdivision thereof.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the Lenders, as
amended, supplemented or modified from time to time.
"Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, each as amended from time to time.
"Senior Debt" means the aggregate principal amount of any indebtedness for
money borrowed in accordance with the provisions of Section 4.1(b) and
Section 4.1(e) hereof from a bank, insurance company or other financial
institution unaffiliated with the Company.
"Subsidiary" of any Person means (a) a corporation, a majority of whose
capital stock with voting power, under ordinary circumstances, to elect
directors is at a time, directly or indirectly owned by such Person, by
one or more subsidiaries of such Person or by such Person in one or more
subsidiaries of such Person, or (b) any other Person (other than a
corporation) in which such Person, a subsidiary of such Person, or such
Person and one or more subsidiaries of such Person, directly or
indirectly, individually or with another Person, at the date of
determination thereof, has (i) at least a majority ownership interest, or
(ii) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.
"Tax" means any federal, state, local, or foreign income, gross receipts,
capital stock, franchise, profits, windfall profits, withholding, payroll,
social security (or similar), unemployment, disability, real property,
personal property, excise, occupation, sales, use, transfer, value added,
alternative minimum, environmental, customs, duties, estimated or other
tax, including any interest, penalty or addition thereto, whether disputed
or not.
"Tax Returns" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule
or attachment thereto and including any amendment thereof.
The following terms shall have the meanings assigned to them in the
provisions of this Agreement referred to below:
Amended Charter - Section 3.2(b)
Closing - Section 1.3
Closing Date - Section 1.3
Common Stock - Section 2.4
Communications Act - Section 2.15
Company - preamble
Company FCC Licenses - Section 2.15(b)
Conversion Shares - Section 2.2
Convertible Preferred Stock - Section 1.2(d)
Debentures - Section 1.1
Designated Director - Section 5.10(d)
Employee Program - Section 2.16
Environmental Law - Section 2.19(b)
ERISA - Section 2.16
Event of Default - Section 7.1
FCC Licenses - Section 2.15(d)
GAAP - Section 2.7
Hazardous Material - Section 2.19(b)
Hazardous Waste - Section 2.19(b)
Intellectual Property - Section 2.12
Interest - Section 1.2(a)
Involuntary Petition - Section 7.1(g)
IRS - Section 2.11
Lender Representative - Section 5.10(c)
Lender Securities - Section 10(a)
Lenders - preamble
Liquidity Event - Section 1.2(f)
Management Agreements - Section 2.15(c)
Material Agreements - Section 2.12
Maturity Date - Section 1.1
Option Plan - Section 2.4
PCBs - Section 2.19(a)
Pension Plan - Section 2.16
Preferred Shares - Section 2.2
Preferred Stock Terms - Section 2.4
Purchase Price - Section 1.1
Redeemable Preferred Stock - Section 1.2(d)
SEC - Section 2.6
SMR Operator Letter - Section 2.15(c)
SECTION 12. GENERAL
12.1 Amendments, Waivers and Consents. For the purposes of this
Agreement and all agreements, documents and instruments executed pursuant
hereto, except as otherwise specifically set forth herein or therein, no
course of dealing between the Company and any Lender and no delay on the
part of any party hereto in exercising any rights hereunder or thereunder
shall operate as a waiver of the rights hereof and thereof. No covenant
or other provision hereof or thereof may be waived otherwise than by a
written instrument signed by the party so waiving such covenant or other
provision; provided, however, that except as otherwise provided herein or
therein, changes in or additions to, and any consents required by, or
requests or demands made pursuant to, this Agreement may be made, and
compliance with any term, covenant, condition or provision set forth
herein may be omitted or waived (either generally or in a particular
instance and either retroactively or prospectively) by a written
instrument or instruments signed by a majority in interest of the Lenders
and the Company. Any amendment or waiver effected in accordance with this
Section 12.1 shall be binding upon each holder of any Debentures purchased
under this Agreement at the time outstanding (including securities into
which such Debentures have been converted), each future holder of all such
securities and the Company.
12.2 Survival of Covenants; Assignability of Rights. All
covenants, agreements, representations and warranties of the Company made
herein and to be performed prior to or at the Closing and in the
certificates, lists, exhibits, schedules or other written information
delivered or furnished to any Lender pursuant to the terms of this
Agreement shall be presumed to have been material and to have been relied
upon by such Lender, and, except as otherwise provided in this Agreement,
shall survive the delivery of the Debentures and shall bind the Company's
successors and assigns, whether so expressed or not, and, except as
otherwise provided in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Lenders'
successors and assigns and to transferees of the Debentures or any
securities received upon conversion thereof, whether so expressed or not.
Notwithstanding the foregoing or anything to the contrary contained in
this Agreement: (a) the Lenders may not transfer or assign their rights
hereunder unless (i) the Lenders have provided to the Company at least
five (5) days prior written notice of such transfer or assignment, and
(ii) the successor or assignee, as a condition to such transfer or
assignment, agrees in writing with the Company and the Subsidiaries to be
bound by all of the provisions hereof; (b) all representations and
warranties of the Company or the Subsidiaries contained or referenced in
Section 2 hereof shall survive only for a period of two (2) years from the
date of this Agreement, and any claim based upon any misrepresentations or
breach of warranty by the Company or the Subsidiaries under Section 2 must
be made within such period.
12.3 Governing Law; Jurisdiction; Venue. THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. The Company and each
Subsidiary hereby agree that the state and federal court of The
Commonwealth of Massachusetts shall have non-exclusive jurisdiction to
hear and determine any claims or disputes between the Lenders and the
Company and the Subsidiaries pertaining directly or indirectly to this
Agreement and all documents, instruments and agreements executed pursuant
hereto, or to any matter arising therefrom (unless otherwise expressly
provided for therein). To the extent permitted by law, the Company and
each of the Subsidiaries hereby expressly submit and consent in advance to
such jurisdiction in any action or proceeding commenced by the Lenders in
any of such courts, and agrees that service of such summons and complaint
or other process or papers may be made by registered or certified mail
addressed to the Company and to each of the Subsidiaries at the address to
which notices are to be sent pursuant to this Agreement. The Company and
each of the Subsidiaries waive any claim that Boston, Massachusetts is an
inconvenient forum or an improper forum based on lack of venue. The
choice of forum set forth in this section 12.3 shall not be deemed to
preclude the enforcement of any judgment obtained in such forum or the
taking of any action to enforce the same in any other appropriate
jurisdiction.
12.4 Section Headings. The descriptive headings in this Agreement
have been inserted for convenience only and shall not be deemed to limit
or otherwise affect the construction of any provision thereof or hereof.
12.5 Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which when so executed and
delivered shall be taken to be an original; but such counterparts shall
together constitute but one and the same document.
12.6 Notices and Demands. Any notice or demand which, by any
provision of this Agreement or any agreement, document or instrument
executed pursuant hereto or thereto, except as otherwise provided therein,
is required or provided to be given shall be deemed to have been
sufficiently given or served and received for all purposes when delivered
in hand, by facsimile transmission with receipt acknowledged or by express
delivery providing receipt of delivery, to the following addresses and
numbers:
if to the Company, SEA or Narrowband:
c/o SEA Inc. of Delaware
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ Coie
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address designated by the Company, SEA or Narrowband, as
the case may be, to the Lenders in writing; if to a Lender, at its mailing
address and facsimile number, if applicable, as shown on Exhibit A hereto,
or at any other address or facsimile number designated by such Lender to
the Company and the other Lenders in writing; and if to an assignee of a
Lender, at its address or facsimile number as designated to the Company
and the other Lenders in writing.
12.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall
be deemed prohibited or invalid under such applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, and
such prohibition or invalidity shall not invalidate the remainder of such
provision or the other provisions of this Agreement.
12.8 Expenses. The Company shall pay the reasonable legal fees
and disbursements for professional services of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇,
special counsel to the Lenders, incurred in connection with the
negotiation, execution, delivery and performance of this Agreement and the
agreements, documents and instruments contemplated hereby or executed
pursuant hereto.
12.9 Integration. This Agreement, including the exhibits,
documents and instruments referred to herein or therein and executed in
connection herewith or therewith, constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof.
[END OF TEXT]
IN WITNESS WHEREOF, the undersigned have executed this Debenture
Purchase Agreement as of the day and year first above written.
DATAMARINE INTERNATIONAL, INC.
By:
Name:
Title:
SEA INC. OF DELAWARE
By:
Name:
Title:
NARROWBAND NETWORK SYSTEMS, INC.
By:
Name:
Title:
LENDERS:
ALTA SUBORDINATED DEBT PARTNERS III, L.P.
By: Alta Subordinated Debt Management III, L.P., its General Partner
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
General Partner
EXHIBIT A
List of Lenders
Aggregate Amount
Name of Debentures Purchased
----------------------------------------------------------------------
Alta Subordinated Debt Partners III, L.P. $2,000,000
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") OR ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (a) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR (b) SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION.
THIS SECURITY IS SUBJECT TO THE TERMS OF THE SUBORDINATION AGREEMENT DATED
AS OF DECEMBER 19, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ SUBORDINATED
DEBT PARTNERS III, L.P.
CONVERTIBLE DEBENTURE
DUE DECEMBER 19, 2000
$2,000,000 December 19, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
FOR VALUE RECEIVED, DATAMARINE INTERNATIONAL, INC., a Massachusetts
corporation, SEA INC. OF DELAWARE, a Delaware corporation, and NARROWBAND
NETWORK SYSTEMS, INC., a Washington corporation, (collectively, the
"Maker"), jointly and severally promise to pay to ALTA SUBORDINATED DEBT
PARTNERS III, L.P. (hereinafter called the "Payee"), or to its order, at
its address c/o Burr, Egan, Deleage & Co., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, the principal sum of Two Million Dollars
($2,000,000), together with interest in arrears on the unpaid principal
balance from time to time outstanding from the date hereof until the
entire principal amount due hereunder is paid in full at the rates
provided in that certain Debenture Purchase Agreement of even date
herewith by and between the Payee, certain other entities and the Maker
(the "Agreement"). Principal shall be paid, and interest shall accrue and
be paid, as provided in the Agreement.
This Convertible Debenture due December 19, 2000 ("Debenture") is
one of the Debentures (as defined in the Agreement) referred to in and
issued pursuant to the Agreement, and is entitled to the benefits of, and
subject to, the terms and provisions of the Agreement, including, without
limitation, the terms and provisions relating to payment and conversion of
the Debentures. The outstanding principal amount of this Debenture shall
be paid in full as provided in the Agreement and may only be prepaid in
accordance with the provisions of the Agreement.
Upon the occurrence of an Event of Default as defined in the
Agreement, the Lenders (as such parties are defined in the Agreement) may
declare the entire unpaid principal balance hereunder and any accrued and
unpaid interest thereon immediately due and payable without notice,
demand, presentment or protest (except as and to the extent required under
the Agreement) and may exercise any of their rights under the Agreement.
In the event that the Payee or any subsequent holder of this Debenture
shall exercise or endeavor to exercise any of its remedies hereunder or
under the Agreement, the Maker shall pay on demand all reasonable costs
and expenses incurred in connection therewith including, without
limitation, reasonable attorneys' fees, and the Payee may take judgment
for all such amounts in addition to all other sums due hereunder.
Except as otherwise specifically provided in the Agreement, the
Maker, to the extent permitted by applicable law, waives presentment for
payment, protest and demand, and notice of protest, demand and/or dishonor
and nonpayment of this Debenture, notice of any Event of Default under the
Agreement by Maker, and all other notices or demands otherwise required by
law that the Maker may lawfully waive. No unilateral consent or waiver by
the Payee with respect to any action or failure to act which, without
consent, would constitute a breach by Maker of any provision of this
Debenture or the Agreement shall be valid and binding unless in writing
and signed by a majority in interest of the Lenders as provided in
accordance with Section 12.1 of the Agreement.
Upon receipt of evidence satisfactory to the Maker of the loss,
theft, destruction or mutilation of this Debenture and, in the case of any
such loss, theft or destruction, upon delivery of indemnity satisfactory
to the Maker, or in case of such mutilation, upon surrender and
cancellation of this Debenture, the Maker will issue a new debenture, of
like tenor, in lieu, and dated the date, of such lost, stolen, destroyed
or mutilated Debenture.
The rights and obligations of the Maker and all provisions hereof
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts.
All agreements between the Maker and the Payee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason
of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Payee for the
use, forbearance or detention of the indebtedness evidenced hereby exceed
the maximum permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof,
provided, however, that in the event there is a change in the law which
results in a higher permissible rate of interest than the highest
permissible rate under applicable law in effect as of the date hereof,
then this Debenture shall be governed by such new law as of its effective
date. If, from any circumstance whatsoever, fulfillment of any provision
hereof or the Agreement at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled shall automatically be reduced to the
limit of such validity, and if from any circumstances the Payee should
ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to
the reduction of the principal balance evidenced hereby and not to the
payment of interest, and if the principal amount of this Debenture has
been paid in full, shall be refunded to the Maker. This provision shall
control every other provision of all agreements between the Maker and the
Payee.
IN WITNESS WHEREOF, the Maker has caused this Debenture to be
executed by its duly authorized representative as of the day and year
first above written.
WITNESS: DATAMARINE INTERNATIONAL, INC.
By:
Name:
Title:
WITNESS: SEA INC. OF DELAWARE
By:
Name:
Title:
WITNESS: NARROWBAND NETWORK SYSTEMS, INC.
By:
Name:
Title:
EXHIBIT C
TERMS FOR CONVERTIBLE PREFERRED STOCK
AND REDEEMABLE PREFERRED STOCK
A. Convertible Preferred Stock. This series of preferred stock
par value $1.00 per share ("Preferred Stock") of Datamarine International,
Inc. (the "Corporation") shall be comprised of 2,000 shares designated as
"Redeemable Convertible Participating Preferred Stock" (hereinafter
referred to as "Convertible Preferred Stock"). The relative rights,
preferences, restrictions and other matters relating to the Convertible
Preferred Stock are as follows:
1. Dividends. The holders of the Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor,
dividends at the same rate as dividends are paid with respect to this
Corporation's common stock, par value $.01 per share (the "Common Stock")
(treating each share of Convertible Preferred Stock as being equal to the
number of shares of Common Stock into which each such share of Convertible
Preferred Stock could be converted pursuant to the provisions of Section
A.5 hereof with such number determined as of the record date for the
determination of holders of Common Stock entitled to receive such
dividend).
2. Preference on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, the holders of the
Convertible Preferred Stock shall be entitled to share in any distribution
of any of the assets, capital, surplus or earnings of the Corporation
ratably with the holders of the Common Stock of the Corporation (after the
payment in full of the liquidation preference on the Redeemable Preferred
Stock), based upon the amount which such Convertible Preferred Stock would
have been entitled to receive in connection with such liquidation,
dissolution or winding up if such share had been converted into Common
Stock at the Conversion Price (as defined in Section A.5 below) in effect
on such date, together with an amount equal to all declared but unpaid
dividends on the Convertible Preferred Stock as provided in Section A.1
above, if any.
3. Redemption.
(a) At the election of the Corporation, subject to the
holders' of Convertible Preferred Stock rights of conversion pursuant to
the terms of Section 5 hereof, the Corporation may redeem all, but not
less than all, of the shares of Convertible Preferred Stock then
outstanding on or after December 31, 2000, so long as the Redeemable
Preferred Stock shall have been redeemed in full on or prior to such date.
If the Corporation elects to redeem the Convertible Preferred Stock, it
shall give written notice of such election at least 60 days prior to the
date of redemption, together with the date of redemption, and, if the
Corporation's Common Stock is not then publicly held, the Corporation's
estimate of the Fair Market Value of the Convertible Preferred Stock, to
the holders of the Convertible Preferred Stock and all shares of
Convertible Preferred Stock will be redeemed on the date specified for
redemption in the Company's notice (the "Redemption Date") for a per share
cash purchase price equal to the Fair Market Value (as determined in
Section A.3(d) below) of the Convertible Preferred Stock plus any
accumulated and unpaid dividends (the "Redemption Price"). On or after
the Redemption Date, each holder of shares of Convertible Preferred Stock
called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price.
(b) Rights. From and after the Redemption Date, unless
there shall have been a default in payment or tender by the Corporation of
the Redemption Price, all rights of the holders with respect to such
redeemed shares of Convertible Preferred Stock (except the right to
receive the Redemption Price in accordance with the terms hereof upon
surrender of their certificate) shall cease and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to
be outstanding for any purpose whatsoever.
(c) Insufficient Funds. If the funds of the Corporation
legally available for redemption of shares of Convertible Preferred Stock
on the Redemption Date are insufficient to redeem the total number of
shares of Convertible Preferred Stock, the Corporation shall use those
funds which are legally available to redeem the maximum possible number of
such shares ratably among the holders of such shares to be redeemed. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Convertible Preferred Stock,
such funds will immediately be used to redeem the balance of the shares
which the Corporation has become obligated to redeem on the Redemption
Date but which it has not redeemed at the Redemption Price together with
any accrued interest thereon as provided below. If any shares of
Convertible Preferred Stock are not redeemed because the Corporation
failed to pay or tender to pay the aggregate Redemption Price on all
outstanding shares of Convertible Preferred Stock, all shares which have
not been redeemed shall remain outstanding and entitled to all the rights
and preferences provided herein, and the Corporation shall pay interest on
the unpaid portion of the Redemption Price for the unredeemed portion at a
per annum rate equal to twenty percent (20%) or the maximum rate of
interest permitted under applicable law, whichever is less.
(d) Fair Market Value Determination. If the Corporation's
Common Stock is publicly traded at the Redemption Date, the Fair Market
Value of each share of Convertible Preferred Stock shall equal the product
of the number of shares of Common Stock into which each share of the
Convertible Preferred Stock may then be converted multiplied by the
average closing price for the Corporation's Common Stock for the thirty
(30) trading days immediately preceding the Redemption Date. If the
Corporation's Common Stock is not publicly traded on the Redemption Date,
the Fair Market Value shall be determined in accordance with the following
provisions. If the holders of a majority in interest of the Convertible
Preferred Stock do not object in writing to the Corporation's estimate of
the Fair Market Value of the Convertible Preferred Stock within fifteen
(15) days after receipt of the Corporation's written notice of redemption,
such estimate shall be the Fair Market Value for purposes of determining
the Redemption Price of the Convertible Preferred Stock. If the holders
of a majority in interest of the Convertible Preferred Stock do timely
object to the Corporation's estimate of Fair Market Value, the Corporation
and such holders shall seek for a ten (10) day period thereafter to
negotiate the Fair Market Value in good faith. If the Corporation and the
holders of a majority in interest of the Convertible Preferred Stock are
unable to agree upon such Fair Market Value by the end of such period,
each of the Corporation and the holders (acting by a majority in interest)
shall, within ten (10) days thereafter, select an unaffiliated investment
banking firm of nationally recognized standing in the telecommunications
equipment industry to appraise the Fair Market Value of the Convertible
Preferred Stock. Each such firm will deliver its appraisal of the Fair
Market Value within fifteen (15) days thereafter, and if the lower
appraisal is at least 90% of the higher appraisal, the arithmetic mean of
the two shall be the Fair Market Value. If the two appraisals vary by
more than 10%, the two firms shall promptly select a third investment
banking firm of nationally recognized standing in the telecommunications
equipment industry. Such third firm shall, within ten (10) days
thereafter, deliver its appraisal of the Fair Market Value of the
Convertible Preferred Stock, the two appraisals which are closest together
in value shall be averaged and such amount shall be the Fair Market Value
for purposes of determining the Redemption Price. The Fair Market Value
of the Convertible Preferred Stock shall be determined: (i) without regard
to the illiquid nature of such stock or for any discount attributable to
the minority interest represented by such stock; (ii) with the Corporation
valued as a going concern (including all net working capital); and (iii)
on the basis of what a willing buyer would pay to a seller under no
compunction to sell. All costs of the appraisals hereunder shall be borne
by the Corporation.
4. Voting. Except as otherwise provided herein or as required by
law, the shares of the Convertible Preferred Stock shall be voted together
with the Corporation's Common Stock as a single voting group at any annual
or special meeting of the stockholders of the Corporation, or may act by
written consent as a single voting group with the Corporation's Common
Stock, and shall otherwise have the same voting rights of the Common
Stock. Each share of Convertible Preferred Stock shall entitle the holder
thereof to such number of votes per share as shall equal the number of
shares of Common Stock into which such share of Convertible Preferred
Stock is then convertible.
5. Conversion Rights. The holders of Convertible Preferred Stock
shall have conversion rights as follows:
(a) Conversion at Holder's Election. Each share of
Convertible Preferred Stock shall be converted promptly upon the written
election to so convert by holders of a majority in interest of the
Convertible Preferred Stock into shares of Common Stock, initially at a
conversion price equal to $9.00 per share of Common Stock, which price
shall be adjusted as hereinafter provided (and, as so adjusted, is
hereinafter sometimes referred to as the "Conversion Price"), with each
share of Convertible Preferred Stock being valued for such purpose at
$737.85.
(b) Conversion at the Company's Election. At any time on or
after December 19, 2000, the Company may, in its sole discretion, elect to
convert each share of Convertible Preferred Stock into shares of Common
Stock, at the Conversion Price, with each share of Convertible Preferred
Stock being valued for such purpose at $737.85, by providing written
notice of the Company's election to each holder of Convertible Preferred
Stock specifying a date not earlier than sixty (60) days from the mailing
date of such notice as the date for surrender of certificates of
Convertible Preferred Stock in connection with such conversion (the
"Initial Surrender Date") and provided that the Company shall redeem all
outstanding shares of Redeemable Preferred Stock (defined below) at or
prior to the Initial Surrender Date.
(c) Dividends. If Convertible Preferred Stock is converted
pursuant to Section A.5(a) or Section A.5(b) and at such time there are
declared and unpaid dividends or other amounts due on such shares, such
dividends shall be paid in full by the Corporation in connection with such
conversion.
(d) Conversion Procedures. Any holder of Convertible
Preferred Stock whose shares are converted into shares of Common Stock
shall promptly, in the case of conversion pursuant to Section A.5(a), or
at or within five (5) days after the Initial Surrender Date, in the case
of conversion pursuant to Section A.5(b), surrender the certificate or
certificates representing the Convertible Preferred Stock being converted,
duly assigned or endorsed for transfer to the Corporation (or accompanied
by duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer agent
for the Convertible Preferred Stock or such office or offices in the
continental United States of an agent for conversion as may from time to
time be designated by notice to the holders of the Convertible Preferred
Stock by the Corporation, accompanied, in the case of a voluntary
conversion pursuant to Section A.5(a), by written notice of conversion.
Such notice of conversion shall specify (i) the number of shares of
Convertible Preferred Stock to be converted, (ii) the name or names in
which such holder wishes the certificate or certificates for Common Stock
to be issued, and (iii) the address to which such holder wishes delivery
to be made of such new certificates to be issued upon such conversion.
Upon surrender of a certificate representing Convertible Preferred Stock
for conversion, the Corporation shall issue and send by hand delivery, by
courier or by overnight courier to the holder thereof or to such holder's
designee, at the address designated by such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled upon conversion.
(e) Effective Date of Conversion. The issuance by the
Corporation of shares of Common Stock upon a conversion of Convertible
Preferred Stock into shares of Common Stock pursuant to Section A.5(a) or
Section A.5(b) hereof shall be effective as of the date of the surrender
of the certificate or certificates for the Convertible Preferred Stock to
be converted, duly assigned or endorsed for transfer to the Corporation
(or accompanied by duly executed stock powers relating thereto); provided,
however, that in the event of conversion pursuant to Section A.5(b), any
shares of Convertible Preferred Stock in respect of which certificates
have not been surrendered in accordance with Section A.5(d) by the
Corporation's close of business on the fifth day after the Initial
Surrender Date (such day, the "Final Surrender Date") shall be
automatically converted into shares of Common Stock in accordance with
Section A.5(b), without any further action on the part of the holder of
such shares, effective as of the Final Surrender Date. On and after the
effective date of conversion, the person or persons entitled to receive
the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock.
(f) Fractional Shares. The Corporation shall not be
obligated to deliver to holders of Convertible Preferred Stock any
fractional share of Common Stock issuable upon any conversion of such
Convertible Preferred Stock, but in lieu thereof may make a cash payment
in respect thereof in any manner permitted by law.
(g) Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized and unissued
Common Stock, solely for issuance upon the conversion of Convertible
Preferred Stock as herein provided, free from any preemptive rights or
other obligations, such number of shares of Common Stock as shall from
time to time be issuable upon the conversion of all the Convertible
Preferred Stock then outstanding. The Corporation shall prepare and shall
use its best efforts to obtain and keep in force such governmental or
regulatory permits or other authorizations as may be required by law,
excluding permits or authorizations relating to registration under Federal
or state securities laws, in order to enable the Corporation lawfully to
issue and deliver to each holder of record of Convertible Preferred Stock
such number of shares of its Common Stock as shall from time to time be
sufficient to effect the conversion of all Convertible Preferred Stock
then outstanding and convertible into shares of Common Stock.
(h) Adjustments to Conversion Price. The Conversion Price
in effect from time to time shall be subject to adjustment from and after
December 19, 1995 and through the effective date of the conversion of all
of the then outstanding Convertible Preferred Stock and regardless of
whether any shares of Convertible Preferred Stock are then issued and
outstanding as follows:
(I) Stock Dividends, Subdivisions and Combinations.
Upon the issuance of additional shares of Common Stock as a dividend or
other distribution on outstanding Common Stock, the subdivision of
outstanding shares of Common Stock into a greater number of shares of
Common Stock, or the combination of outstanding shares of Common Stock
into a smaller number of shares of Common Stock, the Conversion Price
shall, simultaneously with the happening of such dividend, subdivision or
split be adjusted by multiplying the then effective Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event and the denominator of
which shall be the number of shares of Common Stock outstanding
immediately after such event. An adjustment made pursuant to this Section
A.5(g)(I) shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of stockholders
entitled to receive such dividend or distribution (on a retroactive basis)
and in the case of a subdivision or combination shall become effective
immediately as of the effective date thereof.
(II) Sale of Common Stock. In the event the
Corporation shall at any time, or from time to time, issue, sell or
exchange any shares of Common Stock (including shares held in the
Corporation's treasury but excluding any shares of Common Stock issued (i)
to employees or officers of the Corporation under the Corporation's
Datamarine Employee Investment Plan (401(k) Plan) and/or the 1980 Employee
Stock Purchase Plan, each as in effect as of November 1, 1995 or (ii) to
officers, directors, employees, consultants, advisors or agents of the
Corporation upon the exercise of Excluded Options (as defined in Section
5(g)(III) below)), for a consideration per share less than the Conversion
Price in effect immediately prior to the issuance, sale or exchange of
such shares, then, and thereafter successively upon each such issuance,
sale or exchange, the Conversion Price in effect immediately prior to the
issuance, sale or exchange of such shares shall forthwith be reduced to an
amount determined by multiplying such Conversion Price by a fraction:
(A) the numerator of which shall be (i) the number of shares of
Common Stock of all classes outstanding immediately prior to the issuance
of such additional shares of Common Stock (excluding treasury shares but
including all shares of Common Stock issuable upon conversion, exercise or
exchange of any outstanding Preferred Stock, options, warrants, rights or
convertible or exchangeable securities (including the convertible
debentures due December 19, 2000 issued by this Corporation (the
"Convertible Debentures") pursuant to that certain Debenture Purchase
Agreement dated as of December 19, 1995 among the Company and the parties
named on the signature pages and Exhibit A thereto (the "Debenture
Purchase Agreement.)), plus (ii) the number of shares of Common Stock
which the net aggregate consideration received by the Corporation for the
total number of such additional shares of Common Stock so issued would
purchase at the Conversion Price (prior to adjustment), and
(B) the denominator of which shall be (i) the number of shares of
Common Stock of all classes outstanding immediately prior to the issuance
of such additional shares of Common Stock (excluding treasury shares but
including all shares of Common Stock issuable upon conversion, exercise or
exchange of any outstanding Preferred Stock, options, warrants, rights or
convertible or exchangeable securities (including the Convertible
Debentures)), plus (ii) the number of such additional shares of Common
Stock so issued.
(III) Sale of Options, Rights or Convertible
Securities. In the event the Corporation shall at any time or from time
to time, issue options, warrants or rights to subscribe for shares of
Common Stock (other than any options or warrants for shares of Common
Stock granted to officers, directors, employees, consultants, advisors or
agents of the Corporation pursuant to either (a) the Corporation's 1991
Stock Option Plan at an exercise price equal to at least 80% of the then
current fair market value of the Common Stock, or (b) the Corporation's
1992 Stock Option Plan for Non-Employee Directors at exercise prices equal
to the then current fair market value of the Common Stock (the "Excluded
Options")), or issue any securities convertible into or exchangeable for
shares of Common Stock, for a consideration per share (determined by
dividing the Net Aggregate Consideration (as determined below) by the
aggregate number of shares of Common Stock that would be issued if all
such options, warrants, rights or convertible or exchangeable securities
were exercised, converted or exchanged to the fullest extent permitted by
their terms) less than the Conversion Price in effect immediately prior to
the issuance of such options, warrants, rights or convertible or
exchangeable securities, the Conversion Price in effect immediately prior
to the issuance of such options, warrants, rights or convertible or
exchangeable securities shall forthwith be reduced to an amount determined
by multiplying such Conversion Price by a fraction:
(A) the numerator of which shall be (i) the number of shares of
Common Stock of all classes outstanding immediately prior to the issuance
of such options, rights or convertible or exchangeable securities
(excluding treasury shares but including all shares of Common Stock
issuable upon conversion, exercise or exchange of any outstanding
Preferred Stock, options, warrants, rights or convertible securities
(including the Convertible Debentures)), plus (ii) the number of shares of
Common Stock which the total amount of consideration received by the
Corporation for the issuance of such options, warrants, rights or
convertible or exchangeable securities plus the minimum amount set forth
in the terms of such security as payable to the Corporation upon the
exercise, conversion or exchange thereof (the "Net Aggregate
Consideration") would purchase at the Conversion Price prior to
adjustment, and
(B) the denominator of which shall be (i) the number of shares of
Common Stock of all classes outstanding immediately prior to the issuance
of such options, warrants, rights or convertible or exchangeable
securities (excluding treasury shares but including all shares of Common
Stock issuable upon conversion, exercise or exchange of any outstanding
Preferred Stock, options, warrants, rights or convertible or exchangeable
securities (including the Convertible Debentures)), plus (ii) the
aggregate number of shares of Common Stock that would be issued if all
such options, warrants, rights or convertible or exchangeable securities
were exercised, converted or exchanged.
(IV) Expiration or Change in Price. If the
consideration per share provided for in any options, warrants or rights to
subscribe for shares of Common Stock or any securities exchangeable for or
convertible into shares of Common Stock changes at any time, the
Conversion Price in effect at the time of such change shall be readjusted
to the Conversion Price which would have been in effect at such time had
such options, warrants rights or convertible or exchangeable securities
provided for such changed consideration per share (determined as provided
in Section A.5(g)(III) hereof), at the time initially granted, issued or
sold; provided, that such adjustment of the Conversion Price will be made
only as and to the extent that the Conversion Price effective upon such
adjustment remains less than or equal to the Conversion Price that would
be in effect if such options, warrants, rights or convertible or
exchangeable securities had not been issued. No adjustment of the
Conversion Price shall be made under this Section A.5 upon the issuance of
any shares of Common Stock which are issued pursuant to the exercise of
any options, warrants or other subscription or purchase rights or pursuant
to the exercise of any conversion or exchange rights in any convertible or
exchangeable securities if an adjustment shall previously have been made
upon the issuance of such options, warrants, rights or convertible or
exchangeable securities. Any adjustment of the Conversion Price shall be
disregarded if, as, and when the rights to acquire shares of Common Stock
upon exercise or conversion of the options, warrants, rights or
convertible or exchangeable securities which gave rise to such adjustment
expire or are canceled without having been exercised, so that the
Conversion Price effective immediately upon such cancellation or
expiration shall be equal to the Conversion Price in effect at the time of
the issuance of the expired or cancelled warrants, options, rights or
convertible securities, with such additional adjustments as would have
been made to that Conversion Price had the expired or cancelled warrants,
options, rights or convertible securities not been issued.
(i) Other Adjustments. In the event the Corporation shall make or
issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a non-cash dividend or other distribution
payable in securities of the Corporation other than shares of Common
Stock, then and in each such event lawful and adequate provision shall be
made so that the holders of Convertible Preferred Stock shall receive upon
conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the number of securities of the Corporation which
they would have received had their Convertible Preferred Stock been
converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including
the Conversion Date (as that term is hereafter defined), retained such
securities receivable by them as aforesaid during such period.
If the Common Stock issuable upon the conversion of the Convertible
Preferred Stock shall be changed into the same or different number of
shares of any class or classes of stock, whether by reorganization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section
A.5), then and in each such event the holder of each share of Convertible
Preferred Stock shall have the right thereafter to convert such share into
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, by
holders of the number of shares of Common Stock into which such shares of
Convertible Preferred Stock might have been converted immediately prior to
such reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(j) Mergers and Other Reorganizations. If at any time or from
time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section A.5) or a merger or
consolidation of the Corporation with or into another corporation or the
sale of all or substantially all of the Corporation's properties and
assets to any other person, then, as a part of and as a condition to the
effectiveness of such reorganization, merger, consolidation or sale,
lawful and adequate provision shall be made so that the holders of the
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Convertible Preferred Stock the number of shares of
stock or other securities or property of the Corporation or of the
successor corporation resulting from such merger or consolidation or sale,
to which such holders would have been entitled upon such capital
reorganization, merger, consolidation or sale had such holders converted
their shares of Convertible Preferred Stock into Common Stock immediately
prior to such capital reorganization, merger, consolidation, or sale. In
any such case, appropriate provisions shall be made with respect to the
rights of the holders of the Convertible Preferred Stock after the
reorganization, merger, consolidation or sale to the end that the
provisions of this Section A.5 (including without limitation provisions
for adjustment of the Conversion Price and the number of shares
purchasable upon conversion of the Convertible Preferred Stock) shall
thereafter be applicable, as nearly as may be, with respect to any shares
of stock, securities or assets to be deliverable thereafter upon the
conversion of the Convertible Preferred Stock.
(k) Notices. In each case of an adjustment or readjustment of the
Conversion Price, the Corporation will furnish each holder of Convertible
Preferred Stock or any Convertible Debentures with a certificate, prepared
by the chief financial officer of the Corporation, showing such adjustment
or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based; provided, however, that the
Corporation shall be entitled to deliver any such notices to the
representative of the holders as set forth in Section 12.6 of the
Debenture Purchase Agreement.
6. Restrictions and Limitations. So long as the Convertible
Preferred Stock remains outstanding, the Corporation shall not without the
affirmative vote or written consent of the holders of a majority in
interest of the then outstanding shares of the Convertible Preferred Stock
(adjusted appropriately for stock splits, stock dividends and the like):
(i) Redeem, purchase or otherwise acquire for value (or pay into
or set aside for a sinking fund for such purpose), any share or shares of
stock other than redemption of the Redeemable Preferred Stock in
accordance with the terms thereof or pursuant to Section A.2 or Section
A.3 hereof; provided, however, that this restriction shall not apply to
the repurchase or redemption of shares of Common Stock issued pursuant to
stock repurchase or similar agreements under which the Company has the
option to repurchase such shares upon the occurrence of certain events,
including the termination of employment and involuntary transfers by
operation of law, provided that (unless the purchase is approved by
unanimous vote of the Board of Directors of the Corporation) the
repurchase price paid by the Corporation does not exceed the purchase
price paid to the Corporation for such shares;
(ii) Authorize or issue, or obligate itself to issue, any other
equity security senior to the Convertible Preferred Stock as to
liquidation preferences, redemptions, or dividend rights or with any
special voting rights (other than the Redeemable Preferred Stock);
(iii) Increase or decrease (other than by conversion as permitted
hereby) the total number of authorized shares of Convertible Preferred
Stock or Redeemable Preferred Stock;
(iv) Pay any dividends on any of its capital stock or otherwise
make any payments to any holders of its Common Stock, except as otherwise
expressly permitted in the Debenture Purchase Agreement;
(v) Authorize any merger or consolidation of the Corporation or
SEA, Inc. with or into any other corporation, partnership or entity (other
than a wholly-owned subsidiary of the Corporation or in connection with an
acquisition which is permitted under the terms of a certain Debenture
Purchase Agreement dated December 19, 1995 by and among the holders of the
Corporation's Convertible Debentures issued thereunder and the Corporation
(the "Debenture Purchase Agreement"), authorize or permit the liquidation,
dissolution or winding up of the Corporation, SEA, Inc. of Delaware or
Narrowband Network Systems, Inc. or authorize or permit the sale of all or
any substantial portion of the capital stock or assets of the Corporation,
SEA, Inc. of Delaware or Narrowband Network Systems, Inc. (except as
permitted pursuant to Sections 5.11 and 5.12 of the Debenture Purchase
Agreement); or
(vi) Amend the Amended and Restated Articles of Incorporation or
By-Laws of the Corporation in a manner which, or take any other action or
enter into any other agreements which, could prohibit or conflict with the
Corporation's obligations hereunder with respect to the holders of the
Convertible Preferred Stock.
7. No Reissuance of Convertible Preferred Stock. No share or
shares of the Convertible Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be canceled, retired, and eliminated from the
shares which the Corporation shall be authorized to issue. The
Corporation may from time to time take such appropriate corporate action
as may be necessary to reduce the authorized number of shares of the
Convertible Preferred Stock accordingly.
8. Notices of Record Date. In the event (i) the Corporation
establishes a record date to determine the holders of any class of
securities who are entitled to receive any dividend or other distribution,
or (ii) there occurs any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation, and any
transfer of all or substantially all of the assets of the Corporation to
any other Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to the representative of the holders of Convertible
Preferred Stock as set forth in Section 12.6 of the Debenture Purchase
Agreement at least twenty (20) days prior to the record date specified
therein, a notice specifying (a) the date of such record date for the
purpose of such dividend or distribution and a description of such
dividend or distribution, (b) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (c) the
time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
B. Redeemable Preferred Stock. This series of Preferred Stock of
the Corporation shall be comprised of 2,000 shares designated as
"Redeemable Preferred Stock" (hereinafter referred to as "Redeemable
Preferred Stock"). The relative rights, preferences, restrictions and
other matters relating to the Redeemable Preferred Stock are as follows:
1. Dividends. The holders of the Redeemable Preferred Stock shall
be entitled to receive, and the Corporation shall be bound to pay on the
earlier of the RPF Redemption Date or the Optional Redemption Date (unless
sooner paid at the election of the Company), cumulative dividends in an
amount per share determined by (i) accruing dividends for each calendar
year or portion thereof that any shares of the Redeemable Preferred Stock
are outstanding (A) through December 31, 1996 at the per annum rate of
$100.00, (B) during calendar year 1997 at the per annum rate of $110.00,
(C) during calendar year 1998 at the per annum rate of $120.000, (D)
during calendar year 1999 at the per annum rate of $140.00, and (E) during
calendar year 2000 and thereafter at the per annum rate of $150.00, and
(ii) compounding such dividends on each calendar year end until paid (or
through any date on which such dividends are to be paid) at the per annum
dividend rate for such year.
2. Preference on Liquidation.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, the holders of the Redeemable Preferred Stock shall be
entitled to receive in cash and prior and in preference to any
distribution of any assets, capital, surplus or earnings of the
Corporation to the holders of any other capital stock of the Corporation
(including the Convertible Preferred Stock and the Common Stock), the
amount of $1,000.00 per share for each share of Redeemable Preferred Stock
then held by them (adjusted for any stock split, combination,
consolidation, or stock distributions or stock dividends with respect to
such shares) together with all accrued but unpaid cumulative dividends on
the Redeemable Preferred Stock (the "Liquidation Preference Amount"). If
the assets and funds thus distributed among the holders of the Redeemable
Preferred Stock shall be insufficient to permit the payment to such
holders of the full Liquidation Preference Amount then the entire assets
and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Redeemable Preferred Stock.
(b) The following shall be deemed to be a liquidation, dissolution
or winding up within the meaning of this Section B.2 (with each such event
being referred to herein as a "Corporate Disposition"): (i) a
consolidation or merger of this Corporation with or into any other
corporation or corporations (other than a wholly-owned subsidiary or in
connection with an acquisition permitted under the Debenture Purchase
Agreement); (ii) the sale, transfer or other disposition of all or
substantially all of the assets of this Corporation; or (iii) the
effectuation by the Corporation or its shareholders of a transaction or
series of related transactions in which more than 50% of the voting power
of the Corporation is disposed of (other than as permitted under the
Debenture Purchase Agreement).
3. Redemption.
(a) Mandatory Redemption. The Corporation shall redeem all of the
shares of Redeemable Preferred Stock then outstanding on December 19,
2000. On or prior to June 30, 1999, the Corporation shall give written
notice by mail, postage prepaid, to the holders of the then outstanding
Redeemable Preferred Stock at the address of each such holder appearing on
the books of the Corporation or given by such holder to the Corporation
for the purpose of notice. Such notice shall set forth the date specified
for redemption (December 19, 2000) and the Redemption Price (which shall
be the Liquidation Preference Amount). The notice shall further call upon
such holders to surrender to the Corporation on or before the applicable
redemption date at the place designated in the notice such holder's
certificate or certificates representing the shares to be redeemed on
December 19, 2000 (the "RPF Redemption Date") or an indemnification and
loss certificate. On or before the applicable RPF Redemption Date, each
holder of shares of Redeemable Preferred Stock called for redemption shall
surrender the certificate evidencing such shares, or such indemnification
and loss certificate, to the Corporation. At such time, the Corporation
shall pay to each of the holders of Redeemable Preferred Stock a per share
cash price equal to the Redemption Price.
(b) Optional Redemption. The Corporation may, in its sole
discretion, at any time after December 19, 1997, redeem all of the shares
of Redeemable Preferred Stock then outstanding. The Corporation shall
give the holders of the then outstanding Redeemable Preferred Stock not
less than sixty (60) days prior written notice by mail, postage prepaid,
at the address of each such holder appearing on the books of the
Corporation or given by such holder to the Corporation for the purpose of
such notice. Such notice shall set forth the date specified for
redemption (the "Optional Redemption Date") and the Redemption Price
(which shall be the Liquidation Preference Amount). The notice shall
further call upon such holders to surrender to the Corporation on or
before the Optional Redemption Date at the place designated in the notice
such holder's certificate or certificates representing the shares to be
redeemed on the Optional Redemption Date or an indemnification and loss
certificate. On or before the applicable Optional Redemption Date, each
holder of shares of Redeemable Preferred Stock called for redemption shall
surrender the certificate evidencing such shares, or such indemnification
and loss certificate, to the Corporation. At such time, the Corporation
shall pay to each of the holders of Redeemable Preferred Stock a per share
cash price equal to the Redemption Price.
(c) Termination of Rights. From and after any applicable RPF
Redemption Date or Optional Redemption Date, unless there shall have been
a default in payment or tender by the Corporation of the Redemption Price,
all rights of the holders with respect to such redeemed shares of
Redeemable Preferred Stock (except the right to receive the Redemption
Price upon surrender of their certificate) shall cease and such shares
shall not thereafter be transferred on the books of this Corporation or be
deemed to be outstanding for any purpose whatsoever.
(d) Insufficient Funds. If the funds of the Corporation legally
available for redemption of shares of Redeemable Preferred Stock on the
applicable RPF Redemption Date or Optional Redemption Date are
insufficient to redeem the total number of shares of Redeemable Preferred
Stock on such redemption date, the Corporation shall use those funds which
are legally available to redeem the maximum possible number of such shares
ratably among the holders of such shares to be redeemed. At any time
thereafter when additional funds of the Corporation are legally available
for the redemption of shares of Redeemable Preferred Stock, such funds
will immediately be used to redeem the balance of the shares which the
Corporation has become obligated to redeem on the applicable RPF
Redemption Date or Optional Redemption Date, but which it has not
redeemed, at the Redemption Price together with any accrued interest
thereon as provided below. If any shares of Redeemable Preferred Stock
are not redeemed for the foregoing reason or because the Corporation
otherwise failed to pay or tender to pay the aggregate Redemption Price on
all outstanding shares of Redeemable Preferred Stock, all shares which
have not been redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein, and the Corporation shall pay
interest on the unpaid portion of the Redemption Price for the unredeemed
portion at an aggregate per annum rate equal to twenty percent (20%) or
the maximum rate permitted by applicable law, whichever is less.
4. Voting. Except as required by law, the shares of the
Redeemable Preferred Stock shall not have any voting rights or powers.
5. No Reissuance of Redeemable Preferred Stock. No share or
shares of the Redeemable Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be canceled, retired, and eliminated from the
shares which the Corporation shall be authorized to issue. The
Corporation may from time to time take such appropriate corporate action
as may be necessary to reduce the authorized number of shares of the
Redeemable Preferred Stock accordingly.
IRREVOCABLE PROXY
Each of the undersigned agrees to, and hereby grants to Alta
Subordinated Debt Partners III, L.P. ("ASDP III"), an irrevocable proxy to
vote, or to execute and deliver written consents or otherwise act with
respect to, all shares of common stock, par value $.01 per share (the
"Stock"), of Datamarine International, Inc. (the "Company") now owned or
hereafter acquired by the undersigned as fully, to the same extent and
with the same effect as the undersigned might or could do under any
applicable laws or regulations governing the rights and powers of
stockholders of a Massachusetts corporation, in connection with the
election of one director (an "ASDP Designee") of the Company, designated
for such directorship by ASDP III as provided in Section 5.10 of that
certain Debenture Purchase Agreement (the "Agreement"), dated as of
December __, 1995, among the Company, SEA Inc. of Delaware, Narrowband
Network Systems, Inc., and ASDP III.
With respect to each of the foregoing proxies, each of the
undersigned further agrees to vote his shares of Stock for the removal of
any ASDP Designee upon the request of ASDP III and for the election of a
substitute ASDP Designee nominated by ASDP III. Each of the undersigned
further agrees to vote his shares of Stock in such manner as shall be
necessary or appropriate so as to ensure that any vacancy occurring for
any reason in a position on the board of directors of the Company held by
an ASDP Designee shall be filled only by an individual who is nominated
directly or indirectly by ASDP III.
The undersigned hereby affirms that these proxies are given as a
condition of the Agreement, and as such are coupled with an interest and
are irrevocable. It is understood by the undersigned and ASDP III that
each proxy may be exercised during only the period beginning the date
hereof and ending on the earliest date that ASDP III (or its permitted
successors, assigns or transferees under Section 12.2 of the Agreement) do
not hold any Debentures and/or Preferred Shares obtained under the
Agreement, unless sooner terminated by mutual agreement of ASDP III (or
its permitted successors, assigns or transferees under Section 12.2 of the
Agreement) and each of the undersigned. Notwithstanding the foregoing,
this irrevocable proxy will terminate immediately upon such time as none
of Debentures, Redeemable Preferred Stock or Convertible Preferred Stock
remains outstanding.
Any defined terms used herein and not otherwise defined shall have
the meaning ascribed to them in the Agreement.
This irrevocable proxy may be executed simultaneously in any number
of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute
but one and the same document.
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