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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 26, 1997
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(Date of Earliest Event Reported)
ELCOM INTERNATIONAL, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 000-27376 04-3175156
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
10 Oceana Way, Norwood, Massachusetts 02062
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 440-3333
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Item 5. Other Events.
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On March 26, 1997, Elcom International, Inc., a Delaware Corporation (the
"Company") and certain of its subsidiaries entered into a Final Agreement of
Settlement and Mutual Release of All Claims and Demands with the former owners
of Computerware Business Trust ("Computerware"), which the Company acquired in
February 1995, including the dismissal of all litigation pending against the
principal former owners of Computerware (and related counterclaims against the
Company). The essence of the settlement includes a confirmation of the merger
transaction and confirms that the 1,326,417 shares of Elcom common stock issued
in 1995 is the appropriate and final amount of stock due and payable in
connection with the transaction. In addition, the principal former owners of
Computerware have agreed to certain volume and manner-of-sale limitations on
their ability to resell their shares of Elcom common stock. The settlement of
these disputes and related litigation will not have any adverse affect on
Elcom's financial position or results of operations.
Item 7. Financial Statements and Exhibits
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(c) Exhibit
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Exhibit No.
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2.1 Final Agreement of Settlement and Mutual Release of All Claims and
Demands
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELCOM INTERNATIONAL, INC.
/s/ Laurence F. Mulhern
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Laurence F. Mulhern
Chief Financial Officer and Treasurer
DATE: April 8, 1997
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EXHIBIT 2.1
FINAL AGREEMENT OF SETTLEMENT AND MUTUAL RELEASE
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OF ALL CLAIMS AND DEMANDS
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This Agreement is entered into as of March 26, 1997 by and among John R.
Kovalcik, Sr., John R. Kovalcik, Jr., James R. Kovalcik, Thomas M. Kovalcik and
David E. Kovalcik (all of whom shall be collectively referred to as the
"Kovalcik Parties"), Dolores Kovalcik, Alan Shafer, Lucy Shafer, Mary Ingraham,
Seth Ingraham and Seth Ingraham, as Trustee and Natural Guardian for Addison
Ingraham (collectively, the "Other Computerware Parties" and, together with the
Kovalcik Parties, the "Computerware Shareholders"), Elcom International, Inc.
("Elcom"), Catalink Direct, Inc. ("CDI"), and Catalink Direct (Pennsylvania),
Inc. ("CDI-PA") (Elcom, CDI and CDI-PA shall be collectively referred to as the
"Elcom Parties"). Collectively, the Computerware Shareholders and the Elcom
Parties shall be referred to as the "Parties."
WHEREAS, the Parties desire to amend the terms of the Agreement and Plan of
Merger dated as of February 6, 1995 (the "Merger Agreement"), by and among
Elcom, CDI-PA, Computerware Business Trust, a Pennsylvania business trust (the
"Trust"), and each of the Computerware Shareholders, in accordance with the
terms set forth herein (with capitalized terms not defined herein having the
meaning set forth therein);
WHEREAS, the Merger Agreement provides for several calculations to be made
to determine the amount of the Merger Proceeds which the Computerware
Shareholders will receive under the terms of the Merger Agreement, denominated
in Parent Common Shares, and the Parties have been discussing the amount of the
proceeds (including any amounts relating to Parent's retention of the retail
assets) to be paid to the Computerware Shareholders pursuant to the Merger
Agreement ("the Merger Proceeds");
WHEREAS, the Parties at this time desire to settle the amount of the Merger
Proceeds which the Computerware Shareholders shall receive in full and final
satisfaction of all of the current and any possible future adjustments, claims,
disputes or otherwise; and
WHEREAS, various disputes have arisen between one or more of the Elcom
Parties on the one hand and one or more of the Kovalcik Parties on the other
hand, including several lawsuits filed in the Court of Common Pleas of Bucks
County, Pennsylvania, encaptioned ELCOM INTERNATIONAL, INC., ET AL. V. JOHN R.
KOVALCIK, SR., ET AL., Civil Action No. 96004108-22-5, and ELCOM INTERNATIONAL,
INC., ET AL. V. JOHN R. KOVALCIK, SR., ET AL., Civil Action No. 9701035-18-1
(collectively the "Litigation"), and the Parties hereto have decided to settle
all Litigation, disputes and claims of whatever nature that have heretofore
arisen or that may hereafter arise and the Elcom Parties and the Kovalcik
Parties will agree to settle any and all Litigation, all on the terms herein
contained and referred to as the "Settlement Agreement."
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NOW, THEREFORE, based on the foregoing mutual premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
confirmed, the Parties do hereby agree as follows:
The Parties have agreed to enter into this Settlement Agreement in order to
put to rest this dispute and to avoid further expense in connection with
protracted and costly litigation; the Parties do not in any way acknowledge any
unilateral or bilateral fault or liability; and the Parties have denied and
continue to deny all charges of wrong-doing or liability whatsoever. Nothing
contained in this Settlement Agreement, or in the attachments hereto, may be
used or construed by any person as an admission of liability of any person by
any of the Parties in any amount whatsoever, and neither this Settlement
Agreement, nor any attachment hereto, nor the contents thereof shall be offered
or received in evidence in any action or proceeding in any court, or other
tribunal, as an admission or concession of liability or wrong-doing of any
nature on the part of any of the Parties. Nothing contained in this Settlement
Agreement, or the attachments hereto, may be used or construed by any person as
an admission on the part of any of the Parties of any lack of merit of any
actions related hereto.
In the event that this Settlement Agreement does not become effective
(under Section 16), it shall become null and void and have no further force and
effect and this document as well as any and all copies and drafts shall be
returned to Elcom immediately.
1. FINAL DETERMINATION AND DISTRIBUTION OF MERGER PROCEEDS. The Parties
hereby agree that this Settlement Agreement shall establish the total amount of
the Merger Proceeds, or any other claims, adjustments or compensation, including
for retail assets, arising out of or relating to any of the matters that are the
subject of the Merger Agreement or this Settlement Agreement which the
Computerware Shareholders or Elcom Parties will receive (or to which the Parties
are entitled) and that there shall be no further adjustments to the amount of
the Merger Proceeds, or any other claims, adjustments, payments or compensation
of any type, including for retail assets, for indemnification matters or for any
other reasons, under the terms of the Merger Agreement or otherwise arising out
of or relating to any of the matters that are the subject of the Merger
Agreement or this Settlement Agreement, except as specifically set forth herein.
The Parties hereby agree that the total amount of the Merger Proceeds
(including, without limitation, the Post-Closing Portion of the Merger Proceeds)
which the Computerware Shareholders shall receive under the Merger Agreement
shall be $4,808,261.63, consisting of 1,326,417 Parent Common Shares valued at
$3.625 per share. Prior to the execution of this Agreement, the Kovalcik Parties
confirm and Elcom represents that it has duly and validly issued to the
Computerware Shareholders, or into the Escrow Fund in the names of the
Computerware Shareholders, an aggregate of 1,326,417 Parent Common Shares,
having an agreed-upon value of $3.625 per share and an aggregate value of
$4,808,261.63. Since the aggregate value of the Parent Common Shares which have
been issued to the Computerware Shareholders equals the amount of the Merger
Proceeds which the Computerware Shareholders shall receive under the
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terms of the Merger Agreement (as amended hereby), no further shares or other
payments are due to the Elcom Parties or the Computerware Shareholders.
The Parties agree that this provision shall serve as the Adjustment Notice
required to be delivered to the Shareholders or to the Shareholders'
Representative under Section 1.3.3 of the Merger Agreement, and otherwise
satisfies all procedures set forth therein. Any term not otherwise defined in
this Agreement shall have the meaning ascribed to such term in the Merger
Agreement. The Parties further agree to provide written notice to the Escrow
Agent, in accordance with Section 1.4 of the Escrow Agreement, of the amount of
Parent Common Shares to be delivered to each of the Shareholders out of the
Escrow Fund.
2. STOCK OPTIONS. Based on the Parties' mutual understandings as to, and
difficulty in documenting, the attainment by CDI-PA of the Gross Profit Targets,
as contemplated in the respective stock option agreements of Elcom dated
February 6, 1995 with each of John R. Kovalcik, Sr., John R. Kovalcik, Jr.,
James R. Kovalcik, Thomas M. Kovalcik, David E. Kovalcik, Seth Ingraham and Alan
Shafer, as amended (the "Option Agreements"), the Parties hereto agree that the
stock options granted under said Option Agreements shall vest and become
exercisable as follows: (i) to the extent of 60% of the total number of options
granted under each of the respective Option Agreements as of March 15, 1996; and
(ii) to the extent of an additional 30% of the total number of options granted
(whether vested or unvested) as of March 15, 1997; and (iii) the remaining 10%
of the options granted under any of said Option Agreements (whether vested or
unvested) shall thereafter vest and become exercisable on March 15, 1998. In all
other respects, said Option Agreements shall remain in effect and unchanged.
3. TERMINATION WITHOUT CAUSE. The Parties hereto agree to treat, and
shall deem, the termination of employment of each of James R. Kovalcik, Thomas
M. Kovalcik and David E. Kovalcik by the Elcom Parties on May 29, 1996 as a
termination "without cause" to determine the exercise period of the options
granted to them under the respective Option Agreements applicable to such
individuals. Elcom covenants and agrees that within twenty (20) days from the
effective date of this Agreement, it shall provide a binding effective
resolution from the 1995 Computerware Stock Option Committee under the Option
Agreements for said individuals to confirm that all the options granted under
the Option Agreements, once vested and exercisable, shall remain exercisable
through February 5, 2005, the term of the Option Agreements.
4. JOHN KOVALCIK, JR. MOVING EXPENSES. John Kovalcik, Jr. agrees to
execute and deliver back to Elcom the Stock Option Agreement as of June 30, 1995
under Elcom's Stock Option Plan providing for the grant of an incentive stock
option to acquire up to an aggregate of 25,000 shares of Common Stock (the
"Additional Option"). Within five (5) business days following such execution and
delivery, Elcom shall pay to John Kovalcik, Jr. an aggregate of $50,000.00 in
full and final satisfaction of any amounts to be paid to John Kovalcik, Jr. for
expenses associated with his relocations to and from the Boston area, as
applicable.
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5. FUTURE OPTION EXERCISES. Notwithstanding any other provision of any
stock option agreement between Elcom and any of the Computerware Shareholders
(collectively the "Stock Option Agreements"), each of the Computerware
Shareholders agrees and covenants that payment of the exercise price and
withholding tax obligations upon any future exercises under the Stock Option
Agreements shall be accomplished by the payment, in whole or in part, in cash
(including by personal check or by way of a broker's cashless exercise program),
or using already-owned shares of Common Stock of Elcom which that particular
Computerware Shareholder has held on a continuous basis for at least six (6)
months, and Elcom agrees that any such payment shall be appropriate under the
respective Stock Option Agreement. Elcom agrees that any of the 1,326,417 Elcom
Common Shares referred to in Section 1 hereof shall (to the extent allocated to
the Kovalcik Party pursuant to the Merger Agreement or this Agreement) be deemed
to be held continuously for six months in accordance with the previous sentence.
Elcom further agrees that no "standing election" in respect of Section 16 of the
Securities Exchange Act of 1934, as amended, or the regulations thereunder,
shall be required in connection with any exercise pursuant to an Option
Agreement. The Parties agree that the shares of Common Stock delivered on
account of all or any part of the payment of the exercise price and/or
withholding taxes under the Stock Option Agreements shall be valued at the
closing price reported on the NASDAQ National Market System for the last trading
day immediately prior to the date on which the Company receives such shares
together with payment in full of such exercise price and, subject to the
foregoing, withholding taxes and the properly completed exercise form and option
agreement.
6. THOMAS M. KOVALCIK AGREEMENT. Thomas M. Kovalcik hereby acknowledges,
consents and agrees that, commencing as of February 6, 1995, he was employed
under and pursuant to the Employment Agreement in the form attached hereto as
Exhibit A, as amended hereby, and that he is and was subject to all of the terms
and conditions of said Agreement, other than as amended hereby. On or before the
close of business (5:00 p.m. EST) on March 28, 1997, Thomas M. Kovalcik may
exercise up to 17% of his stock options in accordance with the Agreement of July
12, 1996 among Elcom and James R. Kovalcik, David E. Kovalcik and Thomas M.
Kovalcik, by delivery of written notice to that effect to the Company. Such
exercise will be deemed to occur for all purposes at $9.75 per share of common
stock (including for purposes of determining the amount of tax owed and the
value of shares used to pay the exercise price and/or withholding tax
obligations). Said exercise shall be null and void if a valid notice of
exercise, together with payment in full of the exercise price and all
withholding tax obligations (including by way of "mature" stock certificates at
said $9.75 value) has not been received by the Company on or before the close of
business (5:00 p.m. EST) on Monday, March 31, 1997. Said exercise shall not be
subject to the provisions of paragraph 10 below. For Thomas M. Kovalcik, after
March 28, 1997, and for all other Kovalcik Parties, from the effective date
hereof, any further exercise (or exercises) and payment of applicable
withholding tax obligations may only be made with cash or with "mature" stock
valued at then-current market values, in which case a then-currently dated stock
certificate (or certificates) will be issued by the Company and any further
exercises by any of the Kovalcik Parties shall be pursuant to this Agreement and
not pursuant to said July 12, 1996 Agreement.
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7. RESTRICTIVE COVENANTS. In consideration of the resolution of the
various disputes set forth herein, each of the Kovalcik Parties confirms and
agrees to be bound by all of the restrictive covenants set forth on Exhibit B
attached hereto and incorporated herein, as if each one of the Kovalcik Parties
was the "Executive," and the Elcom Parties was the "Company," as therein
contemplated. For purposes thereof, the respective dates of cessation of
employment of the Kovalcik Parties with the Elcom Parties shall be deemed to be
as follows: John R. Kovalcik, Sr. = November 10, 1995; John R. Kovalcik, Jr. =
April 25, 1996 although his salary has continued to be paid through the date
hereof and is to continue to be paid through May 9, 1998; and James R. Kovalcik,
Thomas M. Kovalcik and David E. Kovalcik = May 29, 1996.
8. MUTUAL RELEASES:
(a) ELCOM RELEASES: For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each of the Elcom
Parties, for and on behalf of itself, its successors, assigns,
representatives and agents, does hereby release, discharge and absolve
each of the Computerware Shareholders, his or her successors, assigns,
representatives and agents (collectively, "Computerware Released
Persons"), from any and all claims, charges, liabilities, obligations,
actions, causes of action, fees, expenses, damages or other matters,
whether at law or in equity, whether known or unknown, and whether
accrued or to accrue, that any of the Elcom Parties has ever had, now
has, may have or hereafter may acquire against the Computerware
Released Persons or any of the Computerware Released Persons because
of, arising out of, or in any way connected with any matter, event or
occurrence whatsoever from the beginning of the world to the effective
date hereof; including but not limited to, any claims asserted in or
which could have been asserted in the Litigation; except as
specifically set forth in Section 9 below.
(b) COMPUTERWARE SHAREHOLDERS: For good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each of the
Computerware Shareholders, for and on behalf of himself or herself
individually, his or her successors, assigns, heirs, representatives
and agents, does hereby release, discharge and absolve the Elcom
Parties and each of their respective successors, predecessors,
assigns, parents, subsidiaries, sister corporations, affiliates and
divisions, together with its and their respective present and former
agents, representatives, employees, officers, directors and
stockholders (collectively, "Elcom Released Persons"), from any and
all claims, charges, liabilities, obligations, actions, causes of
action, fees, expenses, damages or other matters, whether at law or in
equity, whether known or unknown, and whether accrued or to accrue,
that any of the Computerware Shareholders has ever had, now has, may
have or hereafter may acquire against the Elcom Released Persons or
any of the Elcom Released Persons because of,
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arising out of, or in any way connected with any matter, event or
occurrence whatsoever from the beginning of the world to the effective
date hereof, including but not limited to, any claims asserted in or
which could have been asserted in the Litigation, except as
specifically set forth in Section 9 below.
(c) LITIGATION DISMISSAL: The Parties shall instruct and authorize their
respective legal counsel to execute and file a Stipulation of
Dismissal With Prejudice which shall dismiss with prejudice the
Litigation and the Kovalcik Parties' counterclaim(s) and provide that
each Party shall bear its own court costs, litigation expenses and
attorneys' fees in the Litigation. Said Stipulations of Dismissal With
Prejudice shall be filed in the Court of Common Pleas of Bucks County,
Pennsylvania, within two business days after the effective date of
this Agreement.
9. EXCEPTIONS TO MUTUAL RELEASES. Notwithstanding the foregoing releases
contained in Section 8 hereof, said releases shall not abrogate, limit,
interfere, restrict, amend or otherwise alter any of the undertakings,
responsibilities, relationships, obligations or liabilities that any one or more
of the Elcom Parties on the one hand and any one or more of the Computerware
Shareholders on the other hand, had, have or may have with respect to each other
under any of the following:
(a) This Settlement Agreement;
(b) The Merger Agreement as amended by this Settlement Agreement;
(c) The Stock Option Agreements, and the related Stock Option plans, or
Employment Agreements, in each case as amended by this Settlement
Agreement, or any other binding written agreements entered into in
connection with the Merger Agreement except to the extent the same are
amended by this Settlement Agreement;
(d) The Stipulation executed as of June 5, 1996, by counsel on behalf of
the Elcom Parties and by counsel on behalf of the Kovalcik Parties;
(e) The Agreement, effective as of July 12, 1996, among Elcom, James R.
Kovalcik, David E. Kovalcik and Thomas M. Kovalcik, as amended hereby;
and
(f) With respect to the ongoing employment of Seth Ingraham and Alan
Shafer by CDI-PA.
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10. RESTRICTIONS ON TRANSFER. None of the Kovalcik Parties shall sell,
give, assign, transfer, hypothecate, pledge or otherwise dispose of (hereinafter
"Sell," or a "Sale") any shares of Common Stock of Elcom (or options (including
shares sold through a broker's "cashless exercise" program), warrants or rights
with respect thereto) now or hereafter owned or borrowed by any of the Kovalcik
Parties, including upon exercise of any of the Option Agreements (collectively,
"Shares"), except in accordance with the requirements of Rule 144 and any other
applicable requirements of law, or contract, and within the following amounts:
(a) FIRST THREE MONTH PERIOD: During the first three months following
March 14, 1997, none of the Kovalcik Parties may sell any Shares.
(b) SECOND THREE MONTH PERIOD: During the period commencing on the date
that is three months following March 14, 1997, and ending on the date
that is six months following March 14, 1997, the Kovalcik Parties
collectively shall be entitled to sell up to an aggregate of 1,500
Shares per trading day; provided, however, that in no event shall the
Kovalcik Parties collectively be entitled to sell more than an
aggregate of 30,000 Shares during any one month period.
(c) THIRD THREE MONTH PERIOD: During the period commencing on the date
that is six months following March 14, 1997, and ending on the date
that is nine months following March 14, 1997, the Kovalcik Parties
collectively shall be entitled to sell up to an aggregate of 5,000
Shares per trading day; provided, however, that in no event shall the
Kovalcik Parties collectively be entitled to sell more than an
aggregate of 100,000 Shares during any one month period.
(d) AFTER THE THIRD THREE MONTH PERIOD: At any time following the date
that is nine months following March 14, 1997, the Kovalcik Parties
collectively shall be entitled to sell up to an aggregate of 10,000
Shares per trading day; provided, however, that in no event shall the
Kovalcik Parties collectively be entitled to sell more than an
aggregate of 200,000 Shares during any one month period.
The Kovalcik Parties shall be entitled to make any such Sales only through
one brokerage firm in any particular calendar month and each of the Kovalcik
Parties shall instruct that brokerage firm to provide written reports by
telecopy to Elcom by the close of business on Monday of each week of the amount
and manner of sale of any Shares sold during the prior week, broken down on a
daily basis. The Company shall be entitled to take whatever reasonable actions
it deems appropriate to enforce the foregoing restrictions, including the
issuance of "stop transfer" instructions to its transfer agent. Notwithstanding
the foregoing, a transfer of Shares by any of the Kovalcik Parties to Elcom,
including as payment of the exercise price or withholding tax obligations in
connection with the exercise under the Option Agreements, shall not be
considered a Sale for purposes of these limitations. Further, any of the
Kovalcik Parties may
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apply to Elcom for Elcom's consent to the sale of any Shares in any transaction
not effected through a market maker on the NASDAQ National Market System
(including pursuant to any tender offer or exchange offer for Elcom Common
Shares or any merger, consolidation or other sale of Elcom) or otherwise under
Rule 144, including by way of example, a sale through the Kovalcik Parties'
brokerage firm, to an identified third party, which consent shall not be
unreasonably withheld, and none of such sales shall be considered a Sale for
purposes of the above limitations. The Parties agree that it shall be reasonable
for Elcom to withhold consent if, for example (and without limitation), it
determines that such sale may have a negative impact on the market for its
common stock. In addition, any Sale by any of the Kovalcik Parties in a
registered public offering of Shares pursuant to their "piggy-back" registration
rights, or in connection with their sale in a transaction subject to Section 12
below, shall not be considered a Sale subject to the limitations herein
described.
If Elcom is reorganized, consolidated or merged with another company and
Elcom is not the surviving company, or if 50% or more of the shares of the
capital stock of Elcom which are then issued and outstanding are purchased by a
single person (as the word "person" is defined in Section 7701(a)(1) of the
Code), or if all or substantially all of the assets are acquired by any such
person requiring the vote of stockholders of the Company (an "Asset Sale"), the
restrictions on transfer shall not apply.
11. REGISTRATION RIGHTS. The Parties hereto acknowledge and confirm that
the Kovalcik Parties shall continue to have the "piggy-back" registration rights
on and subject to the terms and conditions contained in Article 5 of the
Computerware Stockholders Agreement dated as of February 6, 1995. In
consideration therefor and the other provisions herein, each of the Kovalcik
Parties hereby covenants and agrees that, as a condition of participation in
such "piggyback" registration rights, he will, at the request of an underwriter,
promptly execute and deliver to Elcom, in connection with any registered public
offering that includes shares of common stock of Elcom, the same form of
"lock-up" agreement that the underwriters in any such offering are requesting to
be signed by any selling stockholders.
12. Tag Along Rights.
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(a) At any time prior to the second anniversary of the effective date of
this Agreement that Robert J. Crowell ("RJC") shall have received a
bona fide offer ("Purchase Offer") and RJC intends to sell for value
shares of Common Stock of Elcom having a then fair market value of at
least $1 million ($1,000,000) in any one transaction or series of
related transactions, to any Person that is not then an Affiliate (as
those terms are hereinafter defined) of RJC (hereinafter, an
"Applicable RJC Transfer"), then RJC shall give Elcom and the Kovalcik
Parties at least fifteen (15) days advance written notice at the
address set forth on Exhibit C hereto (hereinafter called a "Tag-Along
Notice"):
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(i) Attaching a copy of the Purchase Offer, identifying the offeror
thereof, and the aggregate number of shares of Common Stock of
Elcom ("Company Stock") to be sold by RJC (the "RJC Sale
Amount"), and stating RJC's desire to sell such shares of Company
Stock to such offeror at the price per share (hereinafter called
the "Purchase Price") and on the terms (hereinafter called the
"Purchase Terms") set forth in the Purchase Offer including the
time and place for the consummation ("Closing") of the sale of
the RJC Sale Amount; and
(ii) Stating that the Kovalcik Parties shall have the right to
participate in such sale by selling their Tag-Along Pro Rata
Amount (as hereinafter defined) at the Purchase Price and on the
Purchase Terms, including the Closing.
(b) For a period of ten (10) days after the giving of the Tag-Along
Notice, if permitted by law, each of the Kovalcik Parties shall have
the right exercisable by written notice to RJC and Elcom, to sell at
the Closing up to the Tag-Along Pro Rata Amount (as hereinafter
defined) to the Person making the Purchase Offer at the Purchase Price
and on the Purchase Terms.
(c) For purposes of this Agreement, the Tag-Along Pro Rata Amount for each
of the Kovalcik Parties shall be equal to (i) the total number of
shares of the Company Stock proposed to be sold to the Person making
the Purchase Offer, multiplied by (ii) a fraction, the numerator of
which is the aggregate number of shares of Company Stock owned of
record by such Kovalcik Party, and the denominator of which is the
aggregate total of (x) all of the shares of Company Stock owned of
record by RJC, plus (y) all of the shares of Company Stock owned of
record by all of the Kovalcik Parties. At the Closing, the Kovalcik
Parties desiring to exercise their Tag-Along rights hereunder and who
have properly given notice thereof under Section 12 (b) shall be
required to make the deliveries in connection with the sale of their
Shares hereunder that are otherwise provided for in Section 12 (d)
hereof.
(d) If a purchase and sale obligation arises under the provisions of this
Section 12, then upon consummation of the sale by any of the Kovalcik
Parties pursuant to their Tag-Along rights, each respective Kovalcik
Party selling Shares shall be required to make the deliveries
hereinbelow specified at the Closing:
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(i) Certificates representing the shares of Company Stock which are
being sold and purchased, which certificates shall be duly
endorsed in blank and accompanied by stock powers endorsed in
blank with signatures guaranteed and otherwise in proper form for
transfer; and
(ii) Representations and warranties of such Kovalcik Party to the
effect that (a) such Person is the record and beneficial owner of
the shares of Company Stock being sold and purchased, has good
and marketable title thereto and the absolute right to transfer
same, and upon transfer, the shares of Company Stock will be free
and clear of all claims, liens, pledges, restrictions or
encumbrances of any nature whatsoever, and (b) such Person has
full power and capacity to perform the terms of this Agreement
and any other agreement relating to such sale and purchase.
(e) Notwithstanding the foregoing, this Section 12 shall not apply to any
merger or consolidation of Elcom with or into another Person or a sale
of all or substantially all of the assets of Elcom followed by a
dissolution, provided that all shares of Company Stock are treated the
same in such transaction. Further, this Section 12 shall not apply to
any Applicable RJC Transfer that is for estate planning or charitable
purposes and not for the purpose of liquefying RJC's investment in
such shares. This Section 12 shall terminate and shall be of no
further force and effect on the date that is the second anniversary of
the effective date of this Agreement.
(f) For purposes hereof, an Affiliate of a Person shall mean (a) Elcom or
the Affiliates of Elcom, (b) the parents, siblings, spouse or issue
(including, without limitation, adopted issue) of the Person or a
trust or partnership for the exclusive benefit of any one or more of
that Person, his (or her) parents, siblings, spouse or issue, and (c)
any Person which is controlling, controlled by or under common control
with any such Person. "Person" shall mean an individual, trust,
corporation, partnership, joint venture, or other entity.
13. CONFIDENTIALITY. Subject to applicable law, regulation, or legal
process, the Parties hereto agree not to disclose or discuss any of the
underlying allegations, facts or circumstances relating in any way to the
Litigation or any of the other matters contemplated herein with any other Person
except their respective spouses, legal counsel, or financial advisor as needed,
and under terms of strict confidentiality, and except for the dissemination by
Elcom of a press release, substantially in the form as attached hereto as
Exhibit D which has been approved by the Kovalcik Parties, and any conforming
description in Elcom's filings with the Securities and Exchange Commission, to
which this Agreement may be appended. Specifically, the Kovalcik Parties agree
to hold in the strictest confidence and shall not disclose to any Person
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<PAGE> 11
under any circumstances any employee related information, including, without
limitation, information regarding Robert Curry, an ex-employee of CDI-PA. Each
of the Parties agree that they will take reasonable steps to see that neither
their spouses, immediate family members, or their other advisers disclose or
discuss any of the underlying allegations, facts or circumstances relating in
any way to the Litigation or any of the other matters contemplated herein with
any other person or entity. Within five (5) business days after the effective
date of this Settlement Agreement, the Kovalcik Parties shall deliver to the
Elcom Parties copies of all documents produced or transmitted by the Elcom
Parties to any of the Kovalcik Parties or their agents or representatives in
connection with the Litigation. It is further agreed that if any of the Parties
fail to comply with any of the covenants contained in this paragraph, such
failure shall constitute a breach of this Agreement. If such breach occurs, any
non-breaching party may seek enforcement of this paragraph against any breaching
party by any method of judicial enforcement and may elect to seek either
compensatory damages, or liquidated damages in the amount of $10,000.00. In
addition, the non-breaching party is entitled to an award of attorney's fees,
all court costs, and other expenses related to any enforcement of this
paragraph.
14. REPRESENTATIONS AND WARRANTIES. The Parties hereto agree and warrant
to, and with each other, as follows: (a) they have each made such investigations
of the facts pertaining to this Agreement, and to all matters pertaining thereto
as they deem necessary; (b) the terms of this Agreement are contractual and the
result of negotiation among them; and (c) this Agreement has been carefully
read, and the contents hereof are known and understood by them and it is signed
freely by each Person executing this Agreement after consultations with their
legal and other advisers, and each Person executing this Agreement in a
representative capacity is empowered to do so.
15. ENFORCEMENT; GOVERNING LAW. This Agreement shall be governed by the
laws of the Commonwealth of Pennsylvania, without regard to conflicts of law
principles, these transactions bearing a reasonable relation to said
Commonwealth. Any breach of this Agreement may be enforced by any method of
judicial enforcement, including but not limited to application to the Court of
Common Pleas of Bucks County, Pennsylvania for immediate injunctive relief.
16. COUNTERPARTS; EFFECTIVENESS; FURTHER ASSURANCES. This Agreement may be
executed in any number of separate counterparts by the Parties, but no
counterpart need be executed by more than one party. This Agreement may also be
executed by facsimile signatures which shall be binding on and against the party
so executing this Agreement. Any such party executing this Agreement shall, and
hereby covenants, to execute and deliver the original signatures within ten (10)
days, as described below. Each counterpart, when so executed and delivered,
shall be an original, and all counterparts together shall constitute one and the
same instrument. This Agreement shall only become effective as of March 26,
1997, if at all, when executed copies, signed by all Parties hereto have been
delivered and are in the physical possession of Howard D. Scher, Esquire. March
26, 1997, except as otherwise noted in paragraph 10, shall be considered the
effective date hereof. The Parties agree to take any and all reasonable actions
and use their respective best efforts including execution and delivery of any
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<PAGE> 12
additional documents, as may be necessary or helpful in finalizing each of the
covenants contemplated by this Agreement.
[THE REST OF THIS PAGE WAS INTENTIONALLY LEFT BLANK.]
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<PAGE> 13
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the effective day herein contained.
ELCOM INTERNATIONAL, INC. /s/ John R. Kovalcik, Sr.
-------------------------------
JOHN R. KOVALCIK, SR.
By: /s/ Robert J. Crowell /s/ John R. Kovalcik, Jr.
--------------------------- -------------------------------
Title: Chief Executive Officer JOHN R. KOVALCIK, JR.
/s/ James R. Kovalcik
-------------------------------
JAMES R. KOVALCIK
CATALINK DIRECT, INC.
/s/ Thomas M. Kovalcik
By: /s/ Robert J. Crowell -------------------------------
--------------------------- THOMAS M. KOVALCIK
Title: Chairman
/s/ David E. Kovalcik
-------------------------------
DAVID E. KOVALCIK
CATALINK DIRECT (PENNSYLVANIA), INC. /s/ Dolores M. Kovalcik
-------------------------------
By: /s/ Robert J. Crowell DOLORES M. KOVALCIK
---------------------------
Title: Chairman /s/ Alan M. Shafer
-------------------------------
ALAN M. SHAFER
/s/ Lucy Shafer
-------------------------------
LUCY SHAFER
/s/ Seth Ingraham
-------------------------------
SETH INGRAHAM
(INDIVIDUALLY)
/s/ Seth Ingraham
-------------------------------
SETH INGRAHAM AS TRUSTEE
AND NATURAL GUARDIAN FOR
ADDISON INGRAHAM
/s/ Mary Ingraham
-------------------------------
MARY INGRAHAM
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