<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 000-27376
---------------
ELCOM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3175156
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 OCEANA WAY
NORWOOD, MASSACHUSETTS 02062
(617) 440-3333
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
The registrant had 26,310,385 shares of common stock, $.01 par value,
outstanding as of April 30, 1996.
<PAGE> 2
INDEX
Part I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 1995
and March 31, 1996 (unaudited)...............................2
Consolidated Statements of Operations - Three Months Ended
March 31, 1995 and 1996 (unaudited)..........................3
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1995 and 1996 (unaudited)..........................4
Notes to Consolidated Financial Statements (unaudited).........5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................6
Part II - OTHER INFORMATION
ITEM 1. NONE.
ITEM 2. NONE.
ITEM 3. NONE.
ITEM 4. NONE.
ITEM 5. NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 9
SIGNATURES ..............................................................10
EXHIBITS
EXHIBIT 4.15 AMENDED AND RESTATED LANTEC STOCKHOLDERS AGREEMENT DATED
APRIL 6, 1996.
EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 27 FINANCIAL DATA SCHEDULE
1
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ELCOM INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
-------------- --------------
ASSETS (Note 2)
<S> <C> <S>
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 44,977 $ 32,325
Accounts receivable, net of allowance for doubtful
accounts of $1,709 and $1,643. 72,632 104,529
Inventory............................................................... 17,270 19,150
Prepaids and other current assets....................................... 1,902 1,395
-------------- --------------
Total current assets............................................. 136,781 157,399
-------------- --------------
PROPERTY, EQUIPMENT AND SOFTWARE, AT COST:
Computer hardware and software.......................................... 11,629 12,661
Leasehold improvements.................................................. 1,935 1,974
Furniture, fixtures and equipment....................................... 4,130 4,261
-------------- --------------
17,694 18,896
Less -- Accumulated depreciation and amortization....................... 8,740 9,309
-------------- --------------
8,954 9,587
-------------- --------------
GOODWILL, NET OF ACCUMULATED AMORTIZATION................................. 28,137 27,896
OTHER ASSETS AND DEFERRED COSTS, NET OF ACCUMULATED
AMORTIZATION.............................................................. 359 635
-------------- --------------
$174,231 $195,517
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lines of credit......................................................... $ 45,611 $57,549
Accounts payable........................................................ 33,417 35,044
Accrued expenses and other current liabilities.......................... 10,077 10,488
Current portion of capital lease obligations............................ 185 148
-------------- --------------
Total current liabilities........................................ 89,290 103,229
-------------- --------------
OTHER DEFERRED LIABILITIES................................................ 43 23
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION......................... 48 32
-------------- --------------
91 55
-------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; Authorized -- 10,000,000 shares --
Issued and outstanding -- None...................................... -- --
Common stock, $.01 par value
Authorized -- 50,000,000 shares --
Issued and outstanding -- 25,510,297 and 26,163,341 shares.......... 255 262
Additional paid-in capital.............................................. 91,113 97,441
Accumulated deficit..................................................... (6,494) (5,370)
Cumulative translation adjustment....................................... (24) (100)
-------------- --------------
Total stockholders' equity....................................... 84,850 92,233
-------------- --------------
$174,231 $195,517
============== ==============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
<PAGE> 4
ELCOM INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1995 1996
------------- -------------
(Note 2)
<S> <C> <C>
Net sales.......................................... $42,929 $141,416
Cost of sales...................................... 37,198 125,071
------------ ------------
Gross profit....................................... 5,731 16,345
Expenses:
Selling, general and administrative.............. 5,760 13,820
Research and development......................... 276 285
------------ ------------
Total expenses..................................... 6,036 14,105
------------ ------------
Operating profit (loss)............................ (305) 2,240
Interest expense................................... (211) (807)
Interest income and other, net..................... 21 565
------------ ------------
Income (loss) before income taxes.................. (495) 1,998
Provision for income taxes......................... 85 874
------------ ------------
Net income (loss).................................. $ (580) $ 1,124
============ ============
Net income (loss) per share........................ $(.04) $.04
============ ============
Weighted average common shares outstanding......... 15,781 29,142
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE> 5
ELCOM INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1995 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (Note 2)
Net income (loss)........................................ $ (580) $ 1,124
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization.......................... 373 1,302
Provision for doubtful accounts........................ 121 107
Other deferred liabilities............................. -- (20)
Changes in current assets and liabilities, net
of acquisitions --
Accounts receivable.................................. (5,256) (32,403)
Inventory............................................ 1,363 (2,034)
Prepaids and other current assets.................... 1 457
Accounts payable..................................... (4,863) 2,142
Accrued expenses and other current liabilities....... (8,166) 487
------------- -------------
Net cash used in operating activities............. (17,007) (28,838)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, equipment and software (374) (1,413)
Increase in other assets and deferred costs.............. (17) (585)
Purchase of Computerware, net of cash acquired........... 153 --
------------- -------------
Net cash used in investing activities.............. (238) (1,998)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of preferred stock.................................. 5,215 --
Net borrowings under lines of credit..................... 14,970 11,946
Sale of common stock..................................... -- 6,240
Repayment of capital lease obligations................... (46) (53)
Exercise of common stock options......................... -- 95
Repayment of Computerware stockholder loans.............. (5,000) --
------------- -------------
Net cash provided by financing activities.......... 15,139 18,228
------------- -------------
FOREIGN EXCHANGE EFFECT ON CASH............................ 10 (44)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS.................. (2,096) (12,652)
CASH AND CASH EQUIVALENTS, BEGINING OF PERIOD.............. 5,320 44,977
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 3,224 $ 32,325
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid............................................ $ 213 $ 814
============= =============
Income taxes paid........................................ $ -- $ 53
============= =============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Retirement of fully depreciated assets................... $ 1,304 $ --
============= =============
</TABLE>
(See Note 2 for noncash acquisition information)
The accompanying notes are an integral part
of these consolidated financial statements.
4
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ELCOM INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Elcom
International, Inc. and its wholly-owned subsidiaries (collectively, the
"Company"). All significant intercompany accounts and transactions have been
eliminated. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of March 31, 1996, and the results of operations and cash
flows for the periods ended March 31, 1995 and 1996. The results of operations
for these periods are not necessarily comparable to, or indicative of, results
of any other interim period or for the year as a whole. Certain financial
information that is normally included in financial statements prepared in
accordance with generally accepted accounting principles, but which is not
required for interim reporting purposes, has been omitted. For further
information, reference should be made to the consolidated financial statements
and accompanying notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 and the Company's report concerning the AMA
(U.K.) Limited acquisition on Form 8-K, which was filed on March 12, 1996 and
amended on May 3, 1996.
2. ACQUISITION
AMA (U.K.) Limited
On February 29, 1996, the Company completed the acquisition of AMA (U.K.)
Limited ("AMA"), a remarketer of personal computer products in the United
Kingdom. As consideration for this acquisition, the Company issued 3,247,371
shares of common stock. The acquisition was a share-for-share exchange
transaction and has been accounted for as a pooling-of-interests. Accordingly,
the financial position and results of operations of the Company have been
combined with those of AMA in fiscal 1996 and retroactively restated for all
prior periods presented to give effect to the AMA acquisition.
The Company's unaudited pro forma condensed consolidated quarterly
statement of operations information for 1995 giving effect to the AMA
acquisition is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales...................... $ 42,929 $ 62,436 $ 97,898 $ 108,160 $ 311,423
Gross profit................... 5,731 8,027 12,353 13,271 39,382
Operating profit (loss) ....... (305) (108) 1,043 1,614 2,244
Net income (loss) ............. (580) (591) (83) 350 (904)
Pro forma net income (loss)
per share................... $(.04) $(.03) $(.--) $.01 $(.05)
Pro forma weighted average
common shares outstanding... 15,781 17,423 23,201 25,386 20,001
</TABLE>
5
<PAGE> 7
3. UNDERWRITER OVER-ALLOTMENT OPTION
On January 19, 1996, the underwriters of the Company's initial public
offering exercised their over-allotment option and purchased 800,000 shares of
common stock at $11 per share. Of the 800,000 shares sold, 629,489 were sold by
the Company and 170,511 were sold by certain stockholders of the Company.
Net proceeds to the Company as a result of this transaction amounted to $6.2
million.
4. NET INCOME (LOSS) PER SHARE
Net income (loss) per share during 1995 and 1996 are based on the weighted
average number of common and common equivalent shares outstanding during each
year restated to reflect the 3,247,371 shares issued in connection with the AMA
transaction as outstanding during all periods presented. For 1995, all shares,
options and warrants issued during the 12 months immediately preceding the
Company's initial public offering in December 1995, were treated as if they had
been outstanding for all periods, calculated in accordance with the treasury
stock method. In addition, 1995 share information assumes the conversion of
preferred stock into common stock (which occurred in connection with
consummation of the Company's initial public offering) as if the conversion
occurred on the earlier of January 1, 1995 or when such stock was issued.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OVERVIEW
To date, the Company's net sales have been derived substantially from the
sale of PC products by the Company's wholly-owned subsidiary, Catalink Direct,
Inc. ("Catalink") and its subsidiaries to corporate customers through the
Company's proprietary Personal Electronic Catalog and Ordering System ("PECOS")
technology and through telephone and facsimile orders. In addition, the Company,
through its wholly-owned subsidiary, Elcom Systems, Inc. ("Elcom"), generates
revenues from licensing its PECOS technology and providing related services to
other companies.
The Company commenced operations in December 1993 and has experienced rapid
growth. The Company achieved its growth by offering its PECOS technology to its
Catalink customers and via their subsequent use of PECOS, and various marketing
efforts including the expansion of its direct sales force nationwide and the
acquisition of four PC products remarketers. In October 1994, the Company
completed the acquisition of a Connecticut-based PC products remarketer, which
was accounted for on a pooling-of-interests basis. Accordingly, the results of
this entity (which was merged into Catalink in December 1995) have been included
with the Company's results since the date of the Company's organization. In
February 1995, the Company acquired Catalink Direct (Pennsylvania), Inc.,
formerly known as Computerware Business Trust ("Computerware"), a Bristol,
Pennsylvania-based PC products remarketer. In June 1995, the Company acquired
all of the equity of a PC products remarketer in the United Kingdom operating as
Lantec Holdings Limited ("Lantec"). The Computerware and Lantec acquisitions
have been accounted for as purchase transactions. In February 1996, the Company
completed the acquisition of AMA (U.K.) Limited ("AMA"), a remarketer of PC
products in the United Kingdom, which has been accounted for on a
pooling-of-interests basis. Accordingly, AMA's results have been included with
the Company's results since the date of the Company's organization. The
Company's acquisition strategy includes utilizing an acquired company's sales
force to offer PECOS to prospective customers in those new markets and, over a
period of time, to transition the acquired company's customers to the PECOS
system. The Company intends to acquire additional companies either to expand its
customer base and the use of PECOS or to complement its technology, although
there can be no assurance as to the success or timing of any such acquisitions.
6
<PAGE> 8
RESULTS OF OPERATIONS
Quarter ended March 31, 1996 compared to the quarter ended March 31, 1995.
Net Sales. Net sales for the quarter ended March 31, 1996 increased to
$141.4 million from $42.9 million in the same period of 1995, an increase of
$98.5 million or 230%. Net sales for the period ended March 31, 1996 included a
full quarter of sales for Computerware and Lantec which were acquired in
February 1995 and June 1995, respectively. Accordingly, Computerware's sales
were included for two months in the 1995 quarter, and no sales of Lantec were
included in the 1995 quarter. Net sales for Catalink alone, excluding the
results of Computerware, Lantec, Elcom Systems and AMA, grew from $16.5 million
in the 1995 quarter to $61.2 million in the 1996 quarter, a 271% increase. This
increase is generally attributable to increased sales staffing, the acceptance
of the Company's PECOS technology and the consequent generation of new customers
and related sales, and to a certain extent, from increased sales to existing
customers. Net sales of the Company's United Kingdom based operations increased
from $10 million in the 1995 quarter (AMA only) to $46 million in the first
quarter of 1996 (AMA and Lantec). The first quarter is typically the seasonally
strongest quarter for PC products sales in the United Kingdom, and accordingly,
net sales by the Company's United Kingdom group may be lower in one or more
subsequent quarters of 1996.
Gross Profit. Gross profit for the quarter ended March 31, 1996 increased to
$16.3 million from $5.7 million in the 1995 quarter, an increase of $10.6
million or 186%. The increase in gross profit dollars generated resulted from
the substantial growth in net sales. Gross profit, including the contribution
from acquisitions, as a percent of net sales decreased from 13.3% in the 1995
quarter to 11.6% in the 1996 quarter. The Company anticipates that its gross
profit percentage will continue to decline because Catalink's business strategy
includes generating substantial incremental revenue from both new and existing
large volume corporate accounts which typically generate lower margins than
other customers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the quarter ended March 31, 1996 increased to $13.8
million from $5.8 million in the 1995 quarter, an increase of $8 million or
138%. This increase is attributable primarily to the increase in the Company's
work force and the expenses of the acquired companies, and also reflects
approximately $650,000 of non-recurring expenses relative to the AMA transaction
which has been accounted for as a pooling-of-interests. Other selling, general
and administrative expenses also increased as the Company continued to invest in
administrative infrastructure to support its growth, including the ongoing
development and implementation of its new management information system. Until
such new system is operational, the Company will be required to maintain
additional personnel and manual support processes to facilitate its anticipated
growth in volume. Nonetheless, selling, general and administrative expenses
decreased as a percentage of net sales for the quarter ended March 31, 1996 to
9.8%, from 13.4% in the comparable 1995 quarter, reflecting the impact of the
increase in net sales, as the Company transitioned out from its development
stage.
Research and Development Expense. Research and development expense has
remained relatively constant between 1995 and 1996. The Company's research and
development expense is focused on developing incremental functionality and
features for its PECOS technology, including modifications to allow
communication using the Internet and the continued development of a browser
compliant version of its PECOS technology for license to other companies. The
Company expects to continue investing significant amounts in research and
development.
Interest Expense. Interest expense for the quarter ended March 31, 1996
increased to $807,000 from $211,000 in the comparable period of 1995. Interest
expense in both years reflects floor plan line of credit borrowings in support
of the Company's accounts receivable and inventory and for 1996 is reflective of
the substantial increase in the Company's net sales referred to above.
Interest Income and Other, Net. Interest income and other, net, for the
quarter ended March 31, 1996 increased from $21,000 in the 1995 quarter to
$565,000. This is a direct result of investment income generated by investment
of the net proceeds of both the sale of the Company's common stock in its
initial public offering in
7
<PAGE> 9
December 1995 and from the sale of an additional
629,489 shares of common stock upon exercise of the underwriters' over-allotment
option in January 1996.
Income Tax Provision. The income tax provision in 1995 primarily relates to
the income taxes of AMA, while the 1996 provision relates to income tax
provisions of AMA and Lantec, as well as certain current state income taxes
payable by the Company.
Net Income (Loss). The Company generated net income for the quarter ended
March 31, 1996 as a consequence of the results of the factors described herein.
After generating net losses in all previous quarters from its inception in 1992,
the March 31, 1996 quarter is the second consecutive quarter in which the
Company has generated net income since its initial public offering in December
1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the quarter ended March 31, 1996
was $28.8 million, including $32.4 million relating to increases in accounts
receivable, reflecting the Company's increase in net sales over the fourth
quarter of 1995. Net cash used for investing activities was $2.0 million,
consisting of $1.4 million in additions to property, equipment and software and
an increase of $.6 million in other assets and deferred costs. Net cash provided
by financing activities was $18.2 million, including $6.2 million in net
proceeds from the Company's sale of common stock to the underwriters upon
exercise of their over-allotment option and an $11.9 million net increase in
borrowings under floor plan lines of credit.
Net cash used in operating activities for the quarter ended March 31, 1995
was $17 million and included the net operating cash impact of Computerware's
operations after it was acquired, which occurred in February 1995. Net cash used
in operating activities also included $5.3 million relating to increases in
accounts receivable. Net cash used in 1995 investing activities was $238,000 and
included $374,000 for additions to property, equipment and software. The Company
received a net total of $15.1 million from financing activities in the first
quarter of 1995, including $5.2 million from the sale of Series B Convertible
Preferred Stock and $15 million from a net increase in borrowings under the
Company's lines of credit. Financing activities in 1995 also reflect a $5
million repayment of loans to the former shareholders of Computerware.
At March 31, 1996, the Company's principal sources of liquidity included
cash and cash equivalents of $32.3 million and a $60 million floor plan line of
credit from Deutsche Financial Services Corporation ("DFSC"). The DFSC facility
remains available, while a new line of credit is negotiated. Availability of
borrowings is based on DFSC's determination as to eligible accounts receivable
and inventory. At March 31, 1996, the Company's borrowings from DFSC on its
floor plan line of credit were $56.7 million, which approximated the Company's
availability based on eligible accounts receivable and inventory at that date.
Interest is payable monthly at the prime rate (8.25% at March 31, 1996) plus 1%,
although approximately one-half of the Company's initial borrowings do not bear
interest until after 30 days have lapsed. The DFSC line of credit is secured
primarily by the Company's inventory and accounts receivable, although
substantially all of the Company's other assets are also pledged in support of
the facility. The Company is dependent upon the DFSC line of credit to finance
increases in its eligible accounts receivable arising from sales of PC products
as well as its inventory purchases and hence, the Company expects that its
borrowings under such facility will need to continue to increase substantially
in order to support the Company's anticipated growth. There can be no assurance,
however, that the DFSC line of credit will continue to be available, or be
increased to support the Company's requirements. The DFSC line of credit limits
borrowings to defined percentages of eligible inventory and accounts receivable
and contains customary covenants, including financial covenants with respect to
the Company's net worth and debt-to-equity ratios, and customary default
provisions related to non-payment of principal and interest, default under other
debt agreements and bankruptcy. Computerware has a $2 million floor plan
financing agreement with IBM Credit Corporation ("IBMCC") to support purchases
of IBM products. The DFSC and IBMCC borrowing facilities relate to domestic
operations only.
8
<PAGE> 10
Lantec maintains a financing facility with Kellock Limited, an affiliate of
the Bank of Scotland, which provides for borrowings of up to approximately $6.9
million. Borrowings bear interest at the Bank of Scotland base rate (6.0% at
March 31, 1996) plus 1.375% and are primarily secured by accounts receivable.
As of March 31, 1996, the Company had borrowings aggregating approximately
$57.5 million outstanding under the aforementioned facilities.
The Company's principal commitments consist of leases on its office
facilities, obligations under lines of credit, which are demand facilities and
are treated as current liabilities, and capital leases. Future growth of the
Company will require ongoing investment in property, equipment and software.
The Company believes that its cash and cash equivalents, together with its
existing sources of liquidity and cash generated from operations, will be
sufficient to meet its working capital and capital expenditure requirements for
the next year, so long as its financing sources continue to make lines of credit
available. However, as the Company's business strategy includes growth through
acquisitions, additional sources of financing may be required to accomplish the
Company's growth plans.
PRIVATE SECURITIES LITIGATION REFORM ACT
Except for the historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-Q are forward looking statements
that involve a number of risks and uncertainties which could cause the Company's
future results of operations to differ materially from those anticipated,
including: the continued acceptance of the Company's PECOS technology, the
impact of competitive products and pricing, business conditions and growth in
the PC industry, general economic and stock market conditions and the other
risks detailed from time to time in this Quarterly Report on Form 10-Q and in
the Company's SEC reports, including the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 and the prospectus included as part of the
S-1 Registration Statement declared effective under the Securities Act of 1933
on December 19, 1995.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
(4.15) Amended and Restated Lantec Stockholders Agreement
dated April 6, 1996.
(11) Statement re: computation of per share earnings.
(27) Financial Data Schedule
(B) REPORTS ON FORM 8-K.
During the three month period ended March 31, 1996, the Company filed a
Current Report on Form 8-K dated January 15, 1996 with respect to the
Company's anticipated fourth quarter 1995 revenues. The Company also
filed a Current Report on Form 8-K dated February 29, 1996 with respect
to its acquisition of AMA (UK) Limited and subsequently amended such
filing on May 3, 1996 on Form 8-K/A-1 to include certain financial
statements and pro forma financial information of AMA and the Company.
9
<PAGE> 11
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Elcom International, Inc.
(Registrant)
Date: May 13, 1996 By: /s/ Laurence F. Mulhern
------------------------------
Laurence F. Mulhern
Chief Financial Officer and Treasurer
10
<PAGE> 1
EXHIBIT 4.15
AMENDED AND RESTATED
LANTEC STOCKHOLDERS AGREEMENT
THIS AGREEMENT is effective as of the 6th day of April, 1996,
by and among (i) Elcom International, Inc., a Delaware corporation formerly
known as Catalink Direct, Inc. (the "Company"), (ii) Robert J. Crowell
("Crowell"), (iii) Conqueror Investments Limited, a Jersey corporation
("Conqueror"), and (iv) each of the other persons or entities who, at any time,
are signatories to this Agreement as set forth on the signature pages hereto or
Exhibit A attached hereto (such persons or entities being hereinafter referred
to, as the context requires, individually as a "Stockholder" and collectively as
"Stockholders," as such term is further defined in Article 1 of this Agreement).
RECITALS
A. Conqueror and the Stockholders other than James Rousou
("Rousou") were the record and beneficial owners of all of the issued and
outstanding shares of capital stock (collectively, the "Stock") of each of the
"Lantec Holding Companies," as such term is defined in the Share Purchase
Agreement dated June 12, 1995, by and among the Company and the Stockholders
(the "Share Purchase Agreement"); and
B. The Company has acquired all of the Stock (the
"Acquisition") in consideration for, among other things, shares of common stock
of the Company ("Company Stock") and warrants to acquire Company Stock ("Company
Warrants") in accordance with the terms and subject to the conditions of the
Share Purchase Agreement; and
C. The Company, Crowell, Conqueror and the Stockholders other
than Rousou are parties to the Lantec Stockholders Agreement dated as of June
22, 1995 (the "Original Stockholders Agreement"), which provides that upon the
consummation of a Public Offering (as such term is defined in the Original
Stockholders Agreement), the provisions in the Original Stockholders Agreement
relating to restrictions on transfer, pre-emptive rights, "drag-along" rights
and "tag-along" rights, and the obligations contained in Articles 2, 3, 4 and 6
thereof, shall terminate and be of no further force or effect.
D. The Company has successfully concluded a Public Offering
and the parties desire to amend the Original Stockholders Agreement to delete
those provisions that terminated upon the consummation of such Public Offering.
E. The parties desire to further amend the Original
Stockholders Agreement to provide that the determination as to whether the
Stockholders hold a sufficient number of shares of Company Stock to exercise
their right to appoint an observer to the Board of Directors of the Company
shall take into account any stock split, stock dividend, reclassification,
reorganization or other
<PAGE> 2
similar change affecting the number or kind of issued and outstanding shares of
capital stock of the Company.
F. The parties desire to reflect the transfer from Conqueror
to Rousou of 1,400,000 shares of Company Stock and Company Warrants to purchase
up to an additional 534,000 shares of Company Stock, all of which securities are
being reissued in Rousou's name as of the date hereof (collectively, the "Rousou
Securities"), by adding Rousou as a party to this Agreement as a Stockholder
with respect to the Rousou Securities and by eliminating Conqueror as a party
hereto.
In consideration of the premises and mutual covenants
contained herein, in the Share Purchase Agreement and in the Warrant Agreements,
the parties hereby agree as follows:
ARTICLE 1. DEFINITIONS
When used in this Agreement, the following terms in all of
their tenses and cases shall have the meanings assigned to them below or
elsewhere in this Agreement as indicated below:
"AAA" is defined in Section 7.4.
"Acquisition" is defined in Recital B.
"Affiliate" of a Person shall mean any Person which is
controlling, controlled by or under common control with any such Person (in the
case of a corporation, as measured by the ability to elect a majority of the
directors of such corporation).
"Company" means Elcom International, Inc., a Delaware
corporation formerly known as Catalink Direct, Inc..
"Company Stock" is defined in Recital B.
"Company Warrants" is defined in Recital B.
"Complete Disability" means any physical or mental ailment
which prevents a Stockholder from engaging in any substantial gainful activity
and because of which the Stockholder is eligible for and receives a disability
benefit under Title II of the Federal Social Security Act or any equivalent
benefit in any other jurisdiction.
"Conqueror" is defined in the introductory paragraph.
"Crowell" is defined in the introductory paragraph.
"Elcom Group" is defined in Section 3.1.
"Majority Holders" is defined in Section 3.1.
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"Observer" is defined in Section 3.1.
"Original Stockholders" means the Individual Constituents (and
in the case of the death of any Individual Constituent, his personal
representative) and the Corporate Constituents (as those terms are defined in
the Share Purchase Agreement).
"Person" means an individual, trust, corporation, partnership,
joint venture or other entity.
"Piggy-Back Holders" is defined in Section 2.1.
"Registration Statement" is defined in Section 2.1.
"Rousou" is defined in Recital A.
"Rousou Securities" is defined in Recital F.
"SEC" is defined in Section 2.1.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shares" means shares of voting and nonvoting common stock,
par value $.01 per share, of the Company (whether presently or hereafter issued)
now or hereafter owned, legally or beneficially, by any Stockholder, as a result
of (i) any of the issuances described in or contemplated by the Share Purchase
Agreement (including under Section 4.5 of the Share Purchase Agreement),
including without limitation the issuance of the Rousou Securities, or (ii) any
exercise of the Company Warrants, including without limitation any exercise of
the Rousou Securities, and shall also mean any securities issued in connection
therewith or as a result of the conversion or exchange of such Shares (i.e., via
merger, stock split, stock dividend, recapitalization or similar event), except
to the extent such Shares or securities are released from the restrictions
contained in this Agreement pursuant to the terms hereof.
"Stock" is defined in Recital A.
"Stockholder" means each Person, other than Crowell, Conqueror
or the Company, who executes this Agreement at any time, and each other Person
who becomes bound by this Agreement, and any executor, administrator, guardian,
custodian or other legal representative of any Person (other than Crowell or the
Company) who obtains legal or beneficial ownership of any Shares and the ability
to transfer the same in the event of another's death, Complete Disability or
other incapacity; provided, in any event, that a Person who no longer owns any
Shares shall not be deemed to be a "Stockholder."
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"Transfer" means sell, give, assign, pledge, bequeath,
exchange, dispose of, hypothecate or otherwise transfer, whether by testamentary
disposition, survivorship arrangement or otherwise, encumber in any respect, or
grant any interest in (whether voluntarily or involuntarily or by operation of
law and whether with or without consideration), and specifically includes all
transfers upon divorce, in bankruptcy or by way of execution, seizure or sale by
legal process.
"Warrant Agreements" means the Warrant Agreements, each dated
as of June 22, 1995, between the Company and each of the corporate Stockholders,
and the Warrant Agreement dated as of the date hereof between Rousou and the
Company, as any of such Warrant Agreements may be amended from time to time.
ARTICLE 2. REGISTRATION RIGHTS
2.1 "Piggy-Back" Registration Rights. If, at any time prior to
June 22, 2002, the Company shall file with the Securities and Exchange
Commission (the "SEC") a registration statement under the Securities Act with
respect to a public offering for cash of any Company Stock by the Company or any
of its stockholders, other than a registration filed on Form S-4 or S-8 or any
successor form to such forms or filed in connection with an exchange offer or an
offering of securities solely to the existing stockholders or employees of the
Company, then the Company will, at least forty-five (45) days prior to filing
such registration statement (a "Registration Statement"), notify the
Stockholders in writing of its intention to make such filing. Upon the written
request of any Stockholder, stating the number of Shares desired to be
registered by such Stockholder, given within thirty (30) days after the mailing
of such notice by the Company in accordance with Section 5.1 hereof, and subject
to the approval of the managing underwriter of the Company Stock to be sold
under such filing and subject to any required adjustments (all in accordance
with Section 2.8 hereof), the Company shall, subject to the provisions of this
Article 2, use its best efforts to cause to be included in such Registration
Statement for registration under the Securities Act, all the Shares that each
such Stockholder has requested to be registered; provided, however, that unless
the Company's Board of Directors and managing underwriter agree to an increased
limit, all Piggy-Back Holders (as hereinafter defined) shall be entitled to have
registered in the aggregate no more than twenty percent (20%) of the total
number of shares of Company Stock offered in any such public offering (exclusive
of any over-allotment option). Further, it shall be a condition precedent to the
registration of any Shares hereunder that are issuable upon the exercise of
Company Warrants that such Company Warrants first be exercised in accordance
with the terms of the Warrant Agreement(s), and only to the extent such Warrant
Agreement(s) are then currently exercisable, with respect to such Shares. The
right of any Stockholder to request the inclusion in a registration of any
Shares pursuant to this Section 2.1 shall not apply to any Shares held by a
Stockholder to whom the
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Company shall deliver an opinion of its counsel that such Shares which such
Stockholder proposes to sell may lawfully be sold or distributed publicly
without registration within a period of six months commencing on the date which
is sixty (60) days after the date of such Stockholder's registration request.
Except as contemplated in the Placing (as defined in the Share Purchase
Agreement), the Company agrees not to grant any "piggy-back" or other
registration rights to any Person with respect to any equity securities of the
Company on terms that are in cumulative effect more favorable to any such Person
than those set forth herein. Notwithstanding the foregoing sentence, the Company
may grant "piggy-back" registration rights to Persons on the same or similar
terms as those set forth herein.
Whenever required under this Article 2 to use its best efforts
to effect the registration of any Shares, the Company shall, as expeditiously as
reasonably possible (i) prepare and file with the SEC the Registration Statement
with respect to such Shares and use its best efforts to cause such Registration
Statement to become and remain effective; provided, however, that the Company
shall in no event be obligated to cause any such registration to remain
effective for more than ninety (90) days, or such shorter period as is required
to dispose of all securities covered by such Registration Statement, (ii)
prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement, (iii) furnish to the Stockholders such number of copies
of a prospectus in conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order to facilitate the
disposition of the Shares owned by them, and (iv) use its best efforts to
register and qualify the securities covered by such Registration Statement under
such other securities or Blue Sky laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered by the
Registration Statement, provided that the Company shall not be required in
connection therewith or as a condition thereto to register any of the Shares
under any securities laws of any state in which the Company is not otherwise
registering its securities in connection with such registration or to qualify to
do business or to file a general consent to service of process in any state or
jurisdiction. Notwithstanding the foregoing, all Shares desired to be sold by
the holders thereof may not necessarily be included in the Registration
Statement pursuant to this Article 2, because of the procedures set forth in
Section 2.8. As used herein, all holders of piggy-back registration rights with
respect to Company securities (which includes holders of: (a) all of the
currently outstanding capital stock of the Company (other than certain common
stock holders and option holders, including holders of the shares sold in the
Public Offering), (b) common stock into which any such securities may be
converted, (c) the Shares, and (d) any securities issued subsequent
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hereto to which similar piggy-back rights apply) shall be referred
to as "Piggy-Back Holders."
The Company shall have the right to terminate or withdraw any
registration initiated by it under this Article 2 prior to the effectiveness of
such registration without any liability to the Stockholders who would have
participated in such registration in the event it had not been terminated or
withdrawn by the Company.
2.2 Stockholders' Condition; Obligation to Furnish
Information. It shall be a condition precedent to the obligations of the Company
to take any action pursuant to this Article 2 that the Stockholders shall
furnish to the Company such information regarding them, the Shares held by them,
and the intended method of disposition of such Shares as the Company shall
reasonably request or as shall be necessary in order to properly enable the
Company to take any such actions.
2.3 Expenses of Registration. All registration and
qualification fees, printers' and accounting fees, and underwriters' discounts
and commissions and brokerage or dealer commissions incurred in connection with
a registration pursuant to this Article 2 shall be borne pro rata among the
Company and each Piggy-Back Holder in the proportion that the securities
included in the registration by the Company or a Piggy-Back Holder relate to all
of the securities included in the registration. Fees and disbursements of legal
counsel for the Company and other expenses of the Company shall be borne
exclusively by the Company. Fees and disbursements of legal counsel to
Piggy-Back Holders participating in the registration and other expenses of such
Piggy-Back Holders shall be borne on a pro rata basis exclusively among such
participating Piggy-Back Holders or as mutually agreed among such Piggy-Back
Holders.
2.4 Delay of Registration. No Stockholder shall have any right
to take any action to restrain, enjoin or otherwise delay any Registration
Statement under this Article 2 as the result of any controversy that might arise
with respect to the interpretation or implementation of this Article 2.
2.5 Indemnification. In the event any Shares are
included in a Registration Statement under this Article 2:
2.5.1 Indemnification of Stockholders. To the extent
permitted by law, the Company will indemnify and hold harmless each
Stockholder requesting or joining in any in Registration Statement under this
Article 2, and each Person, if any, who controls such Stockholder within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based on any
untrue or alleged untrue statement of any
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material fact contained in such Registration Statement, including any prospectus
contained therein or any amendments or supplements thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, or arise out of any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required by the Company in connection with any
such registration; and will reimburse each such Stockholder or controlling
Person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Subsection 2.5.1 shall be subject to Subsection 2.5.3, shall not apply to
amounts (including expenses) paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld) nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
(including expenses) to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such Registration Statement, any prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by or on behalf of the Stockholder or controlling Person. It is
expressly understood among the parties to this Agreement that in no event shall
the Company be obligated to agree to indemnify or indemnify, in any respect, any
underwriter, broker, dealer or other Person effecting the sale, purchasing or
otherwise distributing or Transferring any of the Shares.
2.5.2 Indemnification of the Company.
To the extent permitted by law, each Stockholder requesting or joining in any
Registration Statement under this Article 2 will indemnify and hold harmless the
Company, each of its Directors, each of its officers who have signed the
Registration Statement, each Person, if any, who controls the Company within the
meaning of the Securities Act, and each agent for the Company (within the
meaning of the Securities Act) against any losses, claims, damages or
liabilities to which the Company or any such Director, officer, controlling
Person or agent may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions taken in respect thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such Registration Statement, including any
prospectus contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such Registration Statement, any prospectus,
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or amendments or supplements thereto, in reliance upon and in conformity with
written information furnished by or on behalf of such Stockholder or his or her
controlling Persons for use in connection with such registration; and each such
Stockholder will reimburse any legal or other expenses reasonably incurred by
the Company or any such Director, officer, controlling Person or agent in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Subsection 2.5.2 shall be subject to Subsection 2.5.3 and shall not
apply to amounts (including expenses) paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of such Stockholder (which consent shall not be unreasonably withheld).
2.5.3 Notification of and Participation in
Claims. Promptly after receipt by an indemnified party under this Section 2.5 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 2.5, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties. The failure to notify an indemnifying
party promptly of the commencement of any such action, if prejudicial to his or
her ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.5, but the omission so
to notify the indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party otherwise than under this
Section 2.5.
2.6 Market Stand-Off Agreement. Each Piggy-Back Holder hereby
agrees, so long as such Piggy-Back Holder beneficially owns at least one percent
(1.0%) of the Company's then outstanding securities (treating any exercisable or
convertible securities on an as-if-converted basis), in connection with a public
offering by the Company of such securities, upon the request of the Company or
the underwriters managing such offering, not to Transfer, grant any option for
the purchase of, or otherwise dispose of any Shares without the prior written
consent of the Company or the underwriters, for such period of time not to
exceed one hundred eighty (180) days following the effective date of such
Registration Statement as the Company or the underwriters may require or
specify.
2.7 Transfer of Registration Rights. The registration rights
of the Stockholders under this Article 2 may not be Transferred to any third
party, except to a transferee of such Shares that (a) provides evidence
satisfactory to the Company that such transferee owns Shares covered hereby, and
(b) agrees in a binding commitment with the Company to be subject to all the
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provisions under this Agreement relating to registration rights and obligations;
provided, however, that such rights will inure to the benefit of the
Stockholders' respective heirs and personal representatives.
2.8 Underwriting Requirements. If the total amount of Shares
requested by Piggy-Back Holders to be included in any registration pursuant to
the provisions of this Article 2 exceeds the twenty percent (20%) limit referred
to in Section 2.1 or exceeds the amount of securities which the managing
underwriter, in the case of an underwritten public offering, determines in its
discretion to be compatible with the success of the offering, then
notwithstanding any other provision of this Agreement, the Company shall be
required to include in the offering only that number of Shares which conform to
the twenty percent (20%) limit or such lesser amount as the underwriters believe
will not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the Piggy-Back Holders according to the total
amount of Shares requested to be included therein owned by each Piggy-Back
Holder desiring to sell Shares or in such other proportions as shall mutually be
agreed to by the Piggy-Back Holders).
2.9 Rule 144. The Company agrees to take all reasonable
actions within its control to file all of the reports that it is required to
file pursuant to Rule 144(c) of the Securities Act.
ARTICLE 3. APPOINTMENT OF OBSERVER TO BOARD OF DIRECTORS
3.1 Appointment of Observer. The Stockholders amongst
themselves shall be entitled to appoint a natural person who is either an
Individual Constituent or an employee of a Lantec Group Company (as those terms
are defined in the Share Purchase Agreement) (the "Observer") to attend by
telephone, or by invitation of the Chairman and CEO of the Company, to attend in
person, and to address meetings of the Directors of the Company, and to report
from time to time to the Original Stockholders upon the affairs of the Company
and its subsidiaries and other interests (together, the "Elcom Group"), and to
disclose to the Original Stockholders only such information concerning the Elcom
Group obtained at such meetings, subject to the provisions of Section 3.3 below,
as the Observer thinks fit, provided that the Observer shall not be entitled to
vote or otherwise take action at any meeting of such Directors or of any
committee thereof. For these purposes, the Observer may be appointed and removed
and (subject to such removal) replaced from time to time by notice in writing
given to the Company signed by Stockholders holding of record among them a
majority of all the Shares (including the Shares, on an as-if-exercised basis,
for the Warrant Shares issuable upon exercise of any exercisable Warrants held
of record by the Stockholders) (collectively, the "Majority Holders"). Without
limiting the foregoing:
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(A) the same notice shall be given to the Observer of all
meetings of the Directors and committees of the Directors
of the Company as is given to the Company's Directors
generally and shall specify the material business to be
transacted thereat and the Observer shall be supplied
with copies of all papers and documents to be considered
thereat that are provided to the Company's Directors
generally; and
(B) the Observer shall be reimbursed by the Company for all
reasonable out of pocket expenses incurred in connection with
attendance at meetings of the Directors of the Company or any
committees thereof (including the cost of travel to and from
the United States for that purpose when invited to attend in
person) against production of proper vouchers and receipts.
It is also hereby declared and acknowledged by the Company and the Stockholders
and Crowell that the Observer shall not by virtue of his status as such owe any
fiduciary or other similar duties to them or any of them. The Stockholders
hereby reappoint Rousou as the Observer.
3.2 Expiration of Right to Appoint Observer. On the
earlier to occur of either of the following:
(a) the Stockholders are not the
record owners of at least 2,500,000 Shares (including, on an as-if-exercised
basis, the Warrant Shares issuable upon exercise of any then-exercisable
Warrants held of record by them); or
(b) the Company receives a notice
signed by the Majority Holders that they no longer desire to, or renounce their
right to, appoint the Observer;
then, in any such case, the Stockholders right to appoint the Observer, and the
Observer's rights (including the right to attend meetings of the Board of
Directors and committees thereof) under this Article 3, shall forthwith expire
and be of no further force and effect.
For purposes of this Section 3.2, in the event that, subsequent to June 22,
1995, the outstanding Shares have been or are, as a result of a stock split,
stock dividend, combination or exchange of shares, exchange for other
securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization, spin-off, split-off, split-up or other such
change, or a special dividend or other distribution to the Stockholders,
increased or decreased or changed into or exchanged for a different number or
kind of shares of capital stock or other securities of the Company, then the
number of Shares which the Stockholders must own (currently, 2,500,000 Shares)
in order to exercise their right to appoint an Observer to the Company's Board
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of Directors automatically shall be appropriately adjusted to put the
Stockholders in the same position as they were prior to such event with respect
to such required threshold ownership.
3.3 Confidentiality Agreement. The Stockholders
acknowledge and agree that it shall be a condition precedent to the Observer's
rights under this Article 3 that any such Observer shall first have entered into
a confidentiality agreement with the Company, in the form attached hereto as
Exhibit B, with regard to any information received as a result of being the
Observer.
ARTICLE 4. TRANSFER OF ROUSOU SECURITIES;
TERMINATION OF ORIGINAL STOCKHOLDERS AGREEMENT
4.1 Transfer of Rousou Securities. Conqueror and Rousou agree
that all of the Rousou Securities have been Transferred from Conqueror to Rousou
pursuant to a series of transactions described in the Letter of Representation
attached hereto as Exhibit C. The parties to this Agreement hereby consent to
such Transfer and acknowledge that such Transfer was permitted under the terms
of the Original Stockholders Agreement and is permitted under the terms of this
Agreement. As a consequence of such Transfer, Rousou shall be deemed to be a
"Stockholder" for purposes of this Agreement with respect to the Rousou
Securities and Conqueror shall no longer be a party to this Agreement; provided,
however, that Conqueror shall execute a counterpart signature page to this
Agreement to consent to the amendment and restatement of the Original
Stockholders Agreement, as required under Section 10.2 of the Original
Stockholders Agreement.
4.1 Termination of Original Stockholders Agreement.
Effective as of the date of this Agreement, this Agreement shall
supersede the Original Stockholders Agreement, which Original
Stockholders Agreement is hereby terminated and of no further force
or effect.
ARTICLE 5. TERM OF AGREEMENT
This Agreement shall remain in effect until terminated (a) by
written agreement of the Company's Board of Directors and those holders holding
a majority of the Shares then outstanding (as measured by the ability to elect
Directors) subject to this Agreement, (b) by cessation of the Company's business
and winding up of its affairs, (c) by any merger or consolidation of the Company
in which the Company is not the surviving corporation, unless such merger or
consolidation is with another entity that is controlled by, under the control of
or in common control with, the Company, or (d) at the close of business on June
22, 2002.
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ARTICLE 6. MISCELLANEOUS
6.1 Notices. All notices pursuant to this Agreement
shall be in writing, delivered as follows:
If to the Company, to:
Elcom International, Inc.
10 Oceana Way
Norwood, Massachusetts 02062
Attention: Chairman
with a copy to:
Douglas A. Neary, Esq.
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
If to a Stockholder, to the address for such Stockholder
listed in the stockholder records of the Company or to such
other address as may have been designated by such Stockholder
in a prior written notice to the Company and all other
Stockholders
with a copy to:
Adam C. Greaves, Esq.
Gouldens
22 Tudor Street
London EC4Y OJJ, England
Notices delivered by registered mail or a national overnight air courier service
shall be deemed to have been given three business days and one business day,
respectively, after the day of registration or documented acceptance by the
national overnight air courier service, as the case may be, and otherwise
notices shall be deemed to have been given when received.
6.2 Further Assurances. From time to time after the date
hereof, upon reasonable notice and without further consideration, each
Stockholder shall execute and deliver any other document or instrument and shall
take any other action as may be advisable in the reasonable discretion of the
Board of Directors of the Company to give effect to the provisions of this
Agreement. Each Stockholder agrees to approve and implement any plan which is
approved by counsel for the Company as a valid means of carrying out this
Agreement.
6.3 Insurance. The Company shall have the right to
obtain insurance on the life of any Stockholder, whenever, in the
opinion of the Company, insurance may be required for the benefit
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of the Company or to enable it to carry out its obligations hereunder. Each
Stockholder shall submit to any medical examination requested by the Company for
the purpose of obtaining or maintaining any such policy. No Stockholder shall
have any rights in or to any such policy, and the Company shall be free at any
time to dispose of or retain any such policy in any manner it desires.
6.4 Assignment. No Stockholder may assign rights or delegate
duties or obligations hereunder without the prior written consent of all other
parties, and any assignment or delegation of any right, duty or claim arising
hereunder without such consent shall be void.
6.5 Injunctive Relief. Each Stockholder acknowledges that it
will be impossible to measure in money the damage to the Company and to the
other Stockholders if there is a failure to comply with this Agreement. It is
therefore agreed that the Company or any other Stockholder, in addition to any
other rights or remedies which they may have, shall be entitled to immediate
injunctive relief and to specific performance to enforce this Agreement and that
if any action or proceeding is brought in equity to enforce it, no party will
urge, as a defense, that there is an adequate remedy at law.
6.6 Securities Act Legend. The Shares have not been registered
under the Securities Act and may not be sold, transferred or otherwise disposed
of except in compliance therewith. Each Stockholder acknowledges that the Shares
may not be sold, transferred or otherwise disposed of except after compliance
with the provisions of the following legend, which shall be placed on each
certificate representing Shares:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and may not be sold,
transferred or otherwise disposed of unless such securities
are registered and qualified in accordance with the Securities
Act or unless it is otherwise established to the satisfaction
of the Company that such registration and qualification is not
required and, in any such case, such sale, transfer or other
disposition must be accomplished in accordance with the
requirements of Regulation S under the Securities Act."
ARTICLE 7. CONSTRUCTION
7.1 Entire Agreement. Except as may be provided in the
Share Purchase Agreement or the Warrant Agreements, all
negotiations among or between any of the Company and the
Stockholders with respect to the subject matter hereof are
superseded by this Agreement, and there are no representations,
promises, understandings or agreements, oral or written, in
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relation thereto among or between any of them other than those incorporated
herein.
7.2 Modification and Waiver. No amendment, modification or
waiver of this Agreement shall be effective unless made in a written instrument
which specifically references this Agreement and which is signed by the Company
and all of the Stockholders (except those whose rights hereunder would not be
affected by such amendment, modification or waiver) and Crowell. Except as
expressly provided herein, the failure of the Company or any Stockholder to
enforce at any time, or for any period of time, any provision of this Agreement
shall not be construed as a waiver of any provision or the right of any such
Person to enforce each and every provision of this Agreement.
7.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Stockholders and their successors-in-interest, legal
representatives and permitted assigns and shall be binding upon and inure to the
benefit of the Company, its successors and assigns.
7.4 Governing Law; Consent to Jurisdiction; Arbitration. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without giving effect to the conflict of law provisions
thereof. Each of the parties hereto agrees that all disputes arising in
connection with this Agreement shall be governed by and finally settled under
the rules of binding arbitration of the American Arbitration Association (the
"AAA") by a panel of three arbitrators familiar with Delaware corporate law (at
least one of whom shall be an attorney) appointed by the AAA. Any such claim or
controversy hereunder shall first be promptly submitted to the AAA under its
minitrial procedures. All arbitration proceedings shall take place in Boston,
Massachusetts.
7.5 Severability and Reformation. If any provision of this
Agreement, or the application thereof to any Person or circumstance would, for
any reason and to any extent, be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other Persons or
circumstances shall not be affected thereby, but rather shall be enforced to the
greatest extent permitted by law.
7.6 Headings. The Article and Section headings contained
herein are intended solely for convenience of reference and shall not be
considered in interpreting this Agreement.
7.7 Gender and Number. Whenever the context requires
herein, the masculine gender includes the feminine or neuter, and
the singular number includes the plural.
7.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same document.
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7.9 Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer on any
Person, other than the Company and the Stockholders, any rights
hereunder.
7.10 Exhibits. The Exhibits referenced in this Agreement
constitute an integral part of this Agreement as if fully rewritten
herein.
7.11 Time Periods. Any action required hereunder to be taken
within a certain number of days shall be taken within that number of calendar
days; provided, however, that if the last day for taking such action falls on a
Saturday, Sunday, or a holiday observed by the Company, the period during which
such action may be taken shall be automatically extended to the next business
day.
15
<PAGE> 16
INTENDING TO BE LEGALLY BOUND, the parties hereto have
executed this Agreement or have caused this Agreement to be executed by their
duly authorized representatives as of the day first above written.
ELCOM INTERNATIONAL, INC.
(the "Company")
By: /s/ Robert J. Crowell
-----------------------------------
Robert J. Crowell
Title: Chairman of the Board and
Chief Executive Officer
/s/ Robert J. Crowell
-----------------------
ROBERT J. CROWELL
("Crowell")
Directors of Elcom International, Inc.:
/s/ Robert J. Crowell
-----------------------
Robert J. Crowell
/s/ William W. Smith
-----------------------
William W. Smith
/s/ Richard J. Harries, Jr.
-----------------------------
Richard J. Harries, Jr.
/s/ John W. Ortiz
-------------------
John W. Ortiz
/s/ John R. Kovalcik, Jr.
---------------------------
John R. Kovalcik, Jr.
/s/ J. Richard Cordsen
------------------------
J. Richard Cordsen
AN ADDITIONAL SIGNATURE PAGE IS ATTACHED HERETO.
16
<PAGE> 17
ADDITIONAL SIGNATURE PAGE TO THE STOCKHOLDERS AGREEMENT
CONQUEROR INVESTMENTS LIMITED
("Conqueror")
By: /s/ Paul J. Matthams
----------------------
Its: Director
---------------------
STOCKHOLDERS:
CONTROL INVESTMENTS LIMITED
By: /s/ Paul J. Matthams
-----------------------
Its: Director
---------------------
BEST INVESTMENTS LIMITED
By: /s/ Paul J. Matthams
-----------------------
Its: Director
---------------------
CHAMPION INVESTMENTS LIMITED
By: /s/ Paul J. Matthams
------------------------
Its: Director
---------------------
/s/ James Rousou
-----------------------------
JAMES ROUSOU
("Rousou")
359/22823AAE.395
17
<PAGE> 1
EXHIBIT 11
ELCOM INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1995 1996
------------- ----------
<S> <C> <C>
Net Income (Loss) $ (580) $ 1,124
============= ==========
Weighted Average Common Stock and Common
Equivalent Shares Outstanding During the Period 13,915 26,022
Dilutive Effect of Common Equivalent Shares (1) 1,866 3,120
------------- ----------
Weighted Average Common Shares Outstanding 15,781 29,142
============= ==========
Net Income (Loss) Per Share $ (.04) $ .04
============= ==========
</TABLE>
- - -----------------
(1) Pursuant to Securities and Exchange Staff Accounting Bulletin No. 83, stock
options issued at prices below the initial public offering price per share
("cheap stock") during the twelve month period immediately preceding a
company's initial public offering have been included as outstanding for the
1995 period presented. The dilutive effect of the common and common
equivalent shares were computed in accordance with the treasury stock
method in the periods presented.
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 32,325
<SECURITIES> 0
<RECEIVABLES> 104,529
<ALLOWANCES> 1,643
<INVENTORY> 19,150
<CURRENT-ASSETS> 157,399
<PP&E> 18,896
<DEPRECIATION> 9,309
<TOTAL-ASSETS> 195,517
<CURRENT-LIABILITIES> 103,229
<BONDS> 0
0
0
<COMMON> 262
<OTHER-SE> 91,971
<TOTAL-LIABILITY-AND-EQUITY> 195,517
<SALES> 141,416
<TOTAL-REVENUES> 141,416
<CGS> 125,071
<TOTAL-COSTS> 125,071
<OTHER-EXPENSES> 14,105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 807
<INCOME-PRETAX> 1,998
<INCOME-TAX> 874
<INCOME-CONTINUING> 1,124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,124
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
