ELCOM
INTERNATIONAL
March 20, 1998
To the Stockholders of Elcom International, Inc.:
The Annual Meeting of Stockholders of Elcom International, Inc. will be
held at 10:00 A.M. (EDT), on April 28, 1998, at Occasions Banquet Facility, 1369
Providence Highway, Norwood, Massachusetts.
We will be reporting on your Company's activities and you will have an
opportunity to ask questions about our technology and operations.
The Board of Directors hopes that you are planning to attend the Annual
Meeting personally, and we look forward to greeting you. Whether or not you
expect to attend in person, the return of the enclosed Proxy as soon as possible
would be greatly appreciated and will ensure that your shares will be
represented at the Annual Meeting. If you do attend the Annual Meeting, you may,
of course, withdraw your Proxy should you wish to vote in person.
On behalf of the Board of Directors and management of Elcom
International, Inc., I would like to thank you for choosing to be a stockholder
of our Company. We appreciate your continued support and confidence.
Sincerely yours,
Robert J. Crowell
Chairman and Chief Executive Officer
10 Oceana Way- Norwood, MA 02062 - voice (781) 440-3333 - fax (781) 762-1540
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ELCOM INTERNATIONAL, INC.
10 Oceana Way, Norwood, Massachusetts 02062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Elcom
International, Inc. (the "Company") will be held at Occasions Banquet Facility,
1369 Providence Highway, Norwood, Massachusetts, on April 28, 1998 at 10:00 A.M.
(EDT), for the following purposes:
1. To elect two Directors of the class whose term of office will
otherwise expire in 1998 for a three-year term ending at the
Annual Meeting of Stockholders in 2001;
2. To ratify, approve and adopt The 1997 Stock Option Plan of
Elcom International, Inc., as amended, and all options granted
thereunder to date;
3. To ratify, approve and adopt the Elcom International, Inc.
Executive Profit Performance Bonus Plan For Executive
Officers; and
4. To transact such other business as may properly come before
the Annual Meeting of Stockholders and any adjournments or
postponements thereof.
Holders of record of shares of Common Stock as of the close of business
on March 3, 1998 are entitled to receive notice of and to vote at the Annual
Meeting of Stockholders.
It is important that your shares be represented at the Annual Meeting.
For that reason we ask that you promptly sign, date and mail the enclosed Proxy
Card in the return envelope provided. Stockholders who attend the Annual Meeting
may revoke their Proxies and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS,
Laurence F. Mulhern
Secretary
Norwood, Massachusetts,
March 20, 1998.
<PAGE>
ELCOM INTERNATIONAL, INC.
10 Oceana Way Norwood, Massachusetts 02062
PROXY STATEMENT
Mailed on or about March 20, 1998
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 1998
--------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Directors of Elcom International, Inc., a Delaware
corporation (the "Company"), to be used at the 1998 Annual Meeting of
Stockholders (the "Annual Meeting") of the Company to be held on April 28, 1998,
and any adjournments or postponements thereof. The time, place and purpose of
the Annual Meeting are stated in the Notice of Annual Meeting of Stockholders,
which accompanies this Proxy Statement.
The accompanying Proxy is solicited by the Board of Directors of the
Company and will be voted in accordance with the instructions contained thereon,
if it is returned duly executed and is not revoked. If no choice is specified on
the Proxy, it will be voted FOR the election of the individuals nominated for
election to the Board of Directors, FOR the ratification, approval and adoption
of The 1997 Stock Option Plan of the Company, as amended, and the options
granted thereunder to date, and FOR the ratification, approval and adoption of
the Company's Executive Profit Performance Bonus Plan For Executive Officers. A
stockholder may revoke a Proxy at any time before it is exercised by delivery of
written notice to the Secretary of the Company or by delivery of a duly executed
Proxy bearing a later date.
The costs of soliciting Proxies will be borne by the Company. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
materials to the owners of stock held in their name and the Company will
reimburse them for their out-of-pocket expenses in connection therewith. In
addition to solicitation by mail, the Company's Directors, officers and
employees, without additional compensation, may solicit Proxies by telephone,
mail and personal interview.
The record date for determination of stockholders entitled to vote at
the Annual Meeting is the close of business on March 3, 1998. On that date,
there were 27,248,327 shares of Common Stock of the Company outstanding and
entitled to vote. The Company's Certificate of Incorporation does not provide
for cumulative voting rights, and each share of Common Stock is entitled to one
vote.
At the Annual Meeting, the inspectors of election appointed by the
Board of Directors for the Annual Meeting will determine the presence of a
quorum and will tabulate the results of stockholder voting. Pursuant to the
Company's By-Laws, the holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting, present in person or represented
by Proxy, constitute a quorum. The shares represented at the Annual Meeting by
Proxies which are marked, with respect to the election of Directors, "withheld"
or, with respect to any other proposals, "abstain," will be counted as shares
present for the purpose of determining whether a quorum is present. Under
applicable rules, brokers who hold shares in street name for beneficial owners
have the authority to vote on certain items when they have not received
instructions from such beneficial owners. Pursuant to such rules, brokers that
do not receive instruction are entitled to vote with respect to the election of
Directors, and with respect to the proposal to ratify, approve and adopt the
Elcom International, Inc. Executive Profit Performance Bonus Plan For Executive
Officers, but not with respect to the proposal to ratify, approve and adopt The
1997 Stock
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Option Plan of Elcom International, Inc., as amended. Under applicable Delaware
law, if a broker returns a Proxy and has not voted on a certain proposal, such
broker non-votes will count for purposes of determining a quorum.
Pursuant to the Company's By-Laws, at the Annual Meeting, a plurality
of the votes cast by the shares entitled to vote and present in person or
represented by Proxy is sufficient to elect a nominee as a Director. In the
election of Directors, votes may be cast in favor or withheld; votes that are
withheld and broker non-votes will have no effect on the outcome of the election
of Directors, so long as a plurality of the votes cast are cast for the Director
nominees.
In the case of the proposal to ratify, approve and adopt The 1997 Stock
Option Plan of Elcom International, Inc., as amended, the affirmative vote of
the majority of the votes cast by shares of Common Stock entitled to vote and
present in person or represented by Proxy at the Annual Meeting is required to
approve this proposal and a vote may be cast for, cast against or abstained
from, this proposal. Abstentions will count as present for purposes of this
proposal and will have the effect of a vote against the proposal. Broker
non-votes are not considered shares entitled to vote on this matter and
therefore, will have no effect on the outcome of this proposal, so long as a
plurality of the votes cast are cast for this proposal.
In the case of the proposal to ratify, approve and adopt the Elcom
International, Inc. Executive Profit Performance Bonus Plan For Executive
Officers, the affirmative vote of the majority of the votes cast by shares of
Common Stock entitled to vote and present in person or represented by Proxy at
the Annual Meeting is required to approve this proposal and a vote may be cast
for, cast against or abstained from, this proposal. Abstentions will count as
present for purposes of this proposal and will have the effect of a vote against
the proposal. Broker non-votes, however, are not counted as present and entitled
to vote for purposes of determining whether this proposal has been approved and
therefore, will have no effect on the outcome of this proposal, so long as a
plurality of the votes cast are cast for this proposal.
Unless otherwise directed, the persons named in the accompanying proxy
will vote FOR the election of the Director nominees, FOR the ratification,
approval and adoption of The 1997 Stock Option Plan of Elcom International,
Inc., as amended and the options granted thereunder to date, and FOR the
ratification, approval and adoption of the Company's Executive Profit
Performance Bonus Plan For Executive Officers.
All other questions and matters brought before the Annual Meeting shall
be decided by the vote of the holders of a majority of the outstanding shares
entitled to vote thereon present in person or represented by Proxy at the Annual
Meeting, unless otherwise provided by law or by the Certificate of Incorporation
or By-Laws of the Company. In voting for such other proposals, votes may be cast
in favor, against or abstained. Abstentions will count as present for purposes
of the proposal on which the abstention is noted and will have the effect of a
vote against such proposal. Broker non-votes, however, are not counted as
present and entitled to vote for purposes of determining whether a proposal has
been approved and therefore, will have no effect on the outcome of any such
proposal.
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ELECTION OF DIRECTORS
The members of the Company's Board of Directors are divided into three
classes with the term of office of one class expiring each year. At the Annual
Meeting, two Directors will be elected to serve a three-year term until the
Annual Meeting in 2001 and until their successors have been duly elected and
qualified. The Nominating Committee of the Board of Directors has nominated
Robert J. Crowell and William W. Smith to stand for election as Directors at the
Annual Meeting. Messrs. Crowell and Smith are presently Directors of the
Company.
Unless otherwise directed, the persons named in the accompanying Proxy
will vote for the election of the two nominees set forth in the table below as
Directors of the Company for a three-year term. In the event of the death or
inability to act of either of the nominees, the Proxies will be voted for the
election as a Director of such other person as the Board of Directors or its
Nominating Committee may recommend. In no event will the accompanying Proxy be
voted for more than two nominees or for persons other than those named below and
any such substitute nominee for either of them.
The following tables list the nominees for election at the Annual
Meeting and those Directors who will continue in office subsequent to the Annual
Meeting, and certain other information with respect to each individual.
Nominees for Election at the 1998 Annual Meeting
NAME AGE POSITION
- -------------------------- --- -------------------------------------------
Robert J. Crowell 46 Chairman of the Board of Directors and
Chief Executive Officer of the Company
William W. Smith (1)(2)(3) 46 Vice Chairman and a Director of the Company
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(1) Member of the Nominating Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
Robert J. Crowell, the Company's founder, has been the Chairman of the
Board of Directors and Chief Executive Officer of the Company since its
inception in 1992. Mr. Crowell has founded and managed several companies in the
PC industry since 1977. From May 1990 to April 1992, he was the Chairman, and
from May 1990 to January 1992, Chief Executive Officer also, of JWP Information
Services, Inc., a subsidiary of JWP, INC. ("JWP"), with approximately $1.4
billion in 1992 revenues. See "--JWP." From 1983 to 1990, Mr. Crowell was the
Chairman and Chief Executive Officer of NEECO, Inc. ("NEECO"), a publicly-held
national PC reseller which was acquired by JWP (forming JWP Information
Services, Inc.) in May 1990 for approximately $100 million. From 1977 to 1983,
Mr. Crowell founded and managed New England Electronics Co., Inc. (which was
renamed NEECO and became a public company in 1986), and Microamerica
Distributing Co., Inc. ("Microamerica"), a PC products distributor which Mr.
Crowell founded in 1979 as a subsidiary of NEECO. Microamerica was later
spun-off by its acquirer and subsequently merged with Softsel to form Merisel, a
PC products distributor. Mr. Crowell also founded Professional Software, Inc. in
1980, a PC-based word processing and database software company ("Professional
Software"), which was sold in 1986. In April 1992, Mr. Crowell entered into a
part-time employment relationship with Cumulus Corporation, a privately held
assembler and remarketer of IBM-compatible PCs located in Cleveland, Ohio. Mr.
Crowell was employed on a part-time basis to act as Vice Chairman of the Board
of Cumulus Corporation until he resigned on August 18, 1992. On January 7, 1993,
an involuntary petition for bankruptcy proceedings was filed against Cumulus
Corporation under Chapter 7 of the United States Bankruptcy Code. Mr. Crowell
holds a Magna Cum Laude Bachelor of Science degree in Accounting from the
University of Massachusetts and is a Vietnam veteran.
William W. Smith has been Vice Chairman and a Director of the Company since
March 1993. Mr. Smith develops real estate and has been semi-retired since
August 1991. Mr. Smith joined NEECO as a major stockholder in 1978 and served as
Chief Financial Officer until its acquisition by JWP in May 1990. Mr. Smith
continued to serve as Chief Financial Officer of JWP Information Services, Inc.
until December 1990, then he served as a
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consultant until he retired in August 1991. See "--JWP." Mr. Smith holds a Magna
Cum Laude Bachelor of Science degree in Accounting from the University of
Massachusetts.
Vote Required
The affirmative vote of a plurality of the shares of Common Stock
voting in person or represented by proxy shall be required for the election of
the Director nominees. Unless otherwise directed, the persons named in the
accompanying proxy will vote FOR the election of the Director nominees.
Directors Continuing In Office
NAME AGE POSITION
- ------------------------- ----- ---------------------
J. Richard Cordsen (1) 44 Director of the Company
Richard J. Harries, Jr. (1)(2) 60 Director of the Company
John W. Ortiz (2)(3) 74 Director of the Company
James Rousou 50 Director and a Corporate Executive
Vice President of the Company;
President and Chief Executive
Officer of Catalink Direct, Inc.
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(1) Member of the Nominating Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
J. Richard Cordsen, a Director of the Company since May 1995, has been
head of direct investments of United Gulf Management, Inc. ("United Gulf"), or
related entities, since September 1988 and has held various other positions with
the same group of entities since January 1983. United Gulf is a Boston,
Massachusetts-based investment management company. United Gulf's ultimate parent
entity is Kuwait Investment Projects Company (K.S.C.). Prior to his association
with United Gulf, Mr. Cordsen held various positions with Chase Manhattan Bank.
Mr. Cordsen holds an M.B.A. degree from Columbia University and a Bachelor of
Science degree from the University of Colorado.
Richard J. Harries, Jr., a Director of the Company since December 1993,
rejoined IBM North America as a Business Partner Executive in 1997. During 1996,
Mr. Harries was a Director of Sales of the Institute for Software Advancement.
From July 1992 to August 1995, upon retiring from IBM after twenty-five years of
service, Mr. Harries worked as the general manager of Tascor; was a sales and
marketing consultant; and was an independent distributor for Equinox, Inc. Prior
thereto, from 1988 to July 1992, Mr. Harries served as a National Account
Executive for IBM. During his career with IBM, Mr. Harries held a number of
executive marketing and sales management positions, including ten years of
experience in IBM's National Distribution Division Reseller Channel where he was
responsible for field sales and marketing programs. Mr. Harries holds a Bachelor
of Arts Degree in Political Science and a Master of Arts Degree in Economics
from Boston College.
John W. Ortiz, a Director of the Company since December 1993, is a
retired investor who was an executive at South Shore Bank where he was employed
from 1942 to 1989, most recently as Senior Vice President and Group Head of
Commercial Lending. Mr. Ortiz also presided as the president of the New England
Chapter of Robert Morris Associates and as a director of the Massachusetts
Higher Education Loan Corporation at times during his banking career. Mr. Ortiz
is a 1954 graduate of Northeastern University's Bachelor of Arts program.
James Rousou was Lantec's (as hereafter defined) Chairman and Chief
Executive Officer from September 1993 to March 1996 and, since November 1995,
has been a Corporate Executive Vice President of the Company. On April 1, 1996,
Mr. Rousou was appointed Chief Executive Officer of Catalink Direct, Inc.
("Catalink") a wholly-owned subsidiary of the Company, and subsequently also was
appointed President. From September 1991 to August 1993, Mr. Rousou was the
Managing Director of JWP Information Services Ltd. (a PC remarketer in the
United Kingdom) and from January 1991 to August 1991 he was Managing Director,
and from June 1990 to
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December 1990, Finance Director, of Businessland (U.K.) Ltd. (a PC remarketer),
until it was acquired by JWP. Mr. Rousou holds a Bachelor of Science Degree in
Economics and Finance from the London School of Economics and has been a Fellow
of the Institute of Chartered Accountants in England and Wales since 1973. See
"-- Board Observer."
JWP
JWP acquired NEECO in 1990 and operated its United States computer
reseller and system integration services businesses through an indirect
subsidiary, JWP Information Services, Inc. ("Information Services"). Mr. Crowell
and Mr. Smith were executive officers of Information Services until their
resignations in April, 1992 and December, 1990, respectively. On August 9, 1993,
JWP sold substantially all of its United States computer business operations,
comprising substantially all of the assets of Information Services, to Entex
Information Services, Inc., which is now a competitor of Catalink. In October
1993, following that sale, Information Services filed a voluntary petition under
Chapter 7 of the United States Bankruptcy Code.
Board Observer
Pursuant to a stockholders agreement, originally entered into in
connection with the acquisition of a group of entities which owned a United
Kingdom PC products reseller ("Lantec") in June 1995 among certain of the former
stockholders of Lantec, the Company and Robert J. Crowell, and amended and
restated as of April 6, 1996 (the "Lantec Stockholders' Agreement"), until June
22, 2002, as long as the former stockholders of Lantec are the record owners of
at least 2,500,000 shares of Common Stock (including, on an
as-if-exercised-basis, any shares underlying warrants), such stockholders shall
have the right to designate an observer (the "Board Observer") to attend
meetings of the Company's Board of Directors and committees thereof. No Observer
has the right to vote on any matter presented to the Board of Directors or any
committee thereof. Since the election of James Rousou, a Corporate Executive
Vice President of the Company and President and Chief Executive Officer of
Catalink, as a Director in 1996, Mr. Rousou also has continued in his role as
Board Observer. The Lantec Stockholders' Agreement also provides that the former
stockholders of Lantec may renounce their Board Observer right.
Directors And Terms Of Office
The By-Laws of the Company provide that the Board of Directors shall
consist of such number of Directors, between five and fifteen, as are elected by
the stockholders from time to time. The number of Directors is currently fixed
at six. The Board is divided into three classes, with Directors serving
three-year staggered terms. John W. Ortiz and James Rousou serve as a Class I
Directors, and hold office until the 1999 Annual Meeting of Stockholders; J.
Richard Cordsen and Richard J. Harries, Jr., serve as Class II Directors, and
hold office until the 2000 Annual Meeting of Stockholders; and Robert J. Crowell
and William W. Smith, serve as Class III Directors, and hold office until the
1998 Annual Meeting of Stockholders. Messrs. Crowell and Smith are standing for
re-election to three year terms as Directors at the Annual Meeting.
Committees Of The Board Of Directors
The Board of Directors has three standing committees: a Compensation
Committee, an Audit Committee and a Nominating Committee. The Compensation
Committee has the authority to: (i) administer the Company's stock option plans,
including the selection of optionees and the timing of option grants; (ii)
review and/or approve compensation and bonus payments made to Company
Executives; and (iii) review and monitor key employee compensation and benefits
policies and administer the Company's management compensation plans. The
Compensation Committee did not meet during 1997, as the Compensation Committee's
actions are generally taken by unanimous written consent. The members of the
Compensation Committee are Messrs. Smith (Chairman), Harries and Ortiz.
The Audit Committee recommends the annual appointment of the Company's
auditors, with whom the Audit Committee reviews the scope of audit and non-audit
assignments and related fees, the accounting principles used by the Company in
financial reporting, internal financial control procedures and the adequacy of
such internal
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control procedures. The Audit Committee met two times during 1997 and also
conducted an additional meeting in early 1998 relative to the 1997 audit.
Messrs. Smith and Ortiz serve as the members of the Audit Committee.
The Nominating Committee reviews potential candidates for election as
Directors of the Company and makes recommendations to the Board of Directors as
to nominees for election. Messrs. Smith, Harries and Cordsen serve as the
members of the Nominating Committee. The Nominating Committee does not consider
stockholder nominations. The Nominating Committee did not meet during 1997,
having taken its action by unanimous written consent.
The Board of Directors met six times during the 1997 calendar year and
each Director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors during the period he served as a Director,
and (ii) the total number of meetings held by Committees of the Board on which
he served.
Director Compensation
Except for the grant of stock options as set forth in the following
paragraph, the Company's Directors are not compensated for any meetings that
they attend, but are reimbursed for expenses that are incurred in attending such
meetings.
1995 Non-Employee Director Stock Option Plan
Non-employee Directors are entitled to participate in the 1995
Non-Employee Director Stock Option Plan (the "Director Plan"), adopted by the
Board of Directors in October 1995, and approved by stockholders in November
1995. A total of 250,000 shares of Common Stock have been reserved for issuance
under the Director Plan. The Director Plan provides for an automatic grant of an
option to purchase 5,000 shares of Common Stock to each non-employee Director
serving as such on October 9, 1995 or for persons who become a non-employee
Director thereafter, on their date of election or appointment as applicable.
After the initial option is granted to the non-employee Director, he or she is
automatically granted an option to purchase 5,000 shares on June 1 of each
subsequent year that he or she is then a non-employee Director. Options granted
under the Director Plan have a term of ten years. One-third of the shares
subject to each option vest on each anniversary date of the grant of the option
so long as the optionee continues to serve as a Director on such dates. The
exercise price of the options is the fair market value per share of the
Company's Common Stock on the date of the grant of the option, which was $14.25
per share and $8.13 per share for the 20,000 options granted pursuant to the
Director Plan in 1996 and 1995, respectively. In addition, on December 20, 1996,
each of the non-employee Directors was granted an option to purchase 5,000
shares (an aggregate of 20,000 shares) under the Company's 1993 Stock Option
Plan (as hereinafter defined) at $7.50 per share. At an April 3, 1997 Board
meeting, all of such non-employee Director options were repriced to $6.57 per
share; see "-- Stock Option Repricing." On June 2, 1997, an aggregate of 20,000
additional options were granted under the Director Plan at a price of $5.875 per
share. Messrs. Cordsen, Harries, Ortiz and Smith are the Company's current
non-employee Directors who received such option grants and repricing thereof.
APPROVAL OF THE 1997 STOCK OPTION PLAN OF
ELCOM INTERNATIONAL, INC., AS AMENDED
The stockholders will be asked at the Annual Meeting to ratify, approve
and adopt The 1997 Stock Option Plan of Elcom International, Inc., as amended
(the "1997 Stock Option Plan") and all of the options granted thereunder to date
which was adopted by the Board of Directors on April 29, 1997, and amended by
the Board of Directors on February 17, 1998. As originally adopted, the 1997
Stock Option Plan covered 1,000,000 shares, and it was then amended to cover
2,000,000 shares of the Company's Common Stock. Pursuant to the 1997 Stock
Option Plan, "key personnel", which includes officers, employees and directors
of the Company, as well as other persons who render services as independent
contractors to the Company, or any of its affiliates, who in the judgment of the
Compensation Committee, are important to the successful operation of the Company
or a subsidiary, are eligible to receive incentive stock options ("ISOs") and/or
non-qualified stock options ("NQOptions").
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The Board of Directors believes that substantial benefits accrue to the
Company from the granting of stock options to key personnel. Such options
encourage employees to acquire a proprietary interest in the Company through
stock ownership and thereby afford them a greater incentive to enhance the value
of the Company's Common Stock through their own efforts in improving the
Company's business. The granting of options also has proven instrumental in
attracting and retaining key executives and other employees. Accordingly, the
Company will, from time to time during the effective period of the Plan, grant
to such key personnel as may be selected to participate in the 1997 Stock Option
Plan, options to purchase Common Stock on the terms and subject to the
conditions set forth in the 1997 Stock Option Plan. The Company had
approximately 1,000 employees as of December 31, 1997.
For these reasons, the Board of Directors adopted the 1997 Stock Option
Plan and, accordingly, believes that approval of the Plan is in the best
interests of the Company and recommends that stockholders vote FOR the proposal
to ratify, approve and adopt the 1997 Stock Option Plan, as amended, and all of
the options granted thereunder to date.
The full text of the 1997 Stock Option Plan, as amended, is attached
hereto as Exhibit A. Important details about specific provisions of the 1997
Stock Option Plan are more fully described below, but the following summary is
not intended to be complete and it is qualified in its entirety by reference to
the 1997 Stock Option Plan, as amended.
Duration and Administration of the 1997 Stock Option Plan
The 1997 Stock Option Plan is administered by the Compensation
Committee of the Board (the "Committee"), presently comprised of Messrs.
Harries, Ortiz and Smith. Members of the Committee are/shall be persons who
qualify as "outside directors" under Section 162(m) of the Internal Revenue Code
and who are "non-employee directors" under Rule 16(b)(3) of the Securities
Exchange Act of 1934. Subject to the terms and conditions of the 1997 Stock
Option Plan, and in addition to the other authorizations granted to the
Committee under the 1997 Stock Option Plan, the Committee shall have full and
final authority in its absolute discretion to (a) select the optionees to whom
options will be granted, (b) determine the number of shares of Common Stock
subject to any option, (c) determine the time when options will be granted, (d)
determine the option price of Common Stock subject to an option, (e) determine
the time when Common Stock subject to an option may be purchased, (f) prescribe
the form of the option agreements governing the options which are granted under
the 1997 Stock Option Plan and to set the provisions of such option agreements
as the Committee may deem necessary or desirable provided such provisions are
not contrary to the terms and conditions of the 1997 Stock Option Plan, (g)
adopt, amend and rescind such rules and regulations as, in the Committee's
opinion, may be advisable in the administration of the 1997 Stock Option Plan,
and (h) construe and interpret the 1997 Stock Option Plan, the rules and
regulations and the instruments evidencing options granted under the 1997 Stock
Option Plan and to make all other determinations deemed necessary or advisable
for the administration of the 1997 Stock Option Plan. If the 1997 Stock Option
Plan and the options granted thereunder to date are not ratified, approved and
adopted by stockholders at the Annual Meeting, all options previously or
hereafter granted thereunder will be NQOptions for federal income tax purposes
and furthermore, Directors and executive officers of the Company will not be
eligible to receive option grants under the 1997 Stock Option Plan.
Any decision made or action taken by the Committee in connection with
the administration, interpretation, and implementation of the 1997 Stock Option
Plan and of its rules and regulations, shall, to the extent permitted by law, be
conclusive and binding upon all optionees under the 1997 Stock Option Plan and
upon any person claiming under or through such an optionee. Neither the
Committee nor any of its members shall be liable for any action taken by the
Committee pursuant to the 1997 Stock Option Plan. No member of the Committee
shall be liable for the action of any other Committee member.
The 1997 Stock Option Plan will expire by its terms on April 29, 2007.
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Securities Subject to the 1997 Stock Option Plan
Subject to the following, not more than 2,000,000 shares of Common
Stock of the Company may be issued pursuant to the 1997 Stock Option Plan in the
aggregate. The maximum number of shares of Common Stock for which options may be
granted under the 1997 Stock Option Plan to any one individual in any one fiscal
year of the Company is 150,000 shares. As of December 31, 1997, options to
acquire 479,950 shares of Common Stock (none of which have vested as of December
31, 1997) reserved for issuance under the 1997 Stock Option Plan have been
granted; although no grants have been made to any of the Directors or executive
officers of the Company. In the event of stock splits, stock dividends,
combinations, exchanges of shares or similar capital adjustments, the Board or
the Compensation Committee must make an appropriate adjustment in the options
granted under the 1997 Stock Option Plan, and the aggregate number of shares
reserved for issuance thereunder also shall be adjusted accordingly. If any
option expires without having been fully exercised, the shares with respect to
which such option have not been exercised will be available for further options
as will any shares paid or withheld to satisfy an optionee's withholding tax or
option payment liability.
Grant and Method of Exercise
Subject to certain conditions, the duration of each option granted
under the 1997 Stock Option Plan will be determined by the Committee, provided
that no option shall be granted after the tenth anniversary of the establishment
of the 1997 Stock Option Plan and no option shall be exercisable later than the
tenth anniversary of the date the option was granted. Each option granted under
the 1997 Stock Option Plan may be subject to restrictions with respect to the
time and method of vesting as determined by the Committee. All options granted
under the 1997 Stock Option Plan as of December 31, 1997 have a duration of ten
years and vesting schedules which vary from one to four years.
ISOs granted under the 1997 Stock Option Plan are exercisable for a
period of up to 10 years from the date of grant at an exercise price that is not
less than the fair market value of the Common Stock on the date of the grant,
except that the term of an incentive stock option granted under the Stock Option
Plan to a stockholder owning more than 10% of the voting power of the Company on
the date of grant may not exceed five years and its exercise price may not be
less than 110% of the fair market value of the Common Stock on the date of the
grant. NQOptions may be granted at less than fair market value under the 1997
Stock Option Plan. Shares of Common Stock underlying an option shall be
purchased by the optionee (i) giving written notice to the Company of the
Optionee's exercise of the option accompanied by full payment of the purchase
price either in cash or, with the consent of the Committee (which may be
included in the option agreement), in whole or in part in shares of Common Stock
(either by delivery to the Company of already-owned shares or having the Company
withhold shares to be issued) having a fair market value on the date the option
is exercised equal to that portion of the purchase price for which payment in
cash is not made, and (ii) making appropriate arrangements acceptable to the
Company (which may be included in the option agreement) with respect to income
tax withholding, as required, which arrangements may include, at the absolute
discretion of the Committee, in lieu of other withholding arrangements, (a) the
Company withholding from issuance to the Optionee such number of shares of
Common Stock otherwise issuable upon exercise of the option as the Company and
the Optionee may agree, or (b) the Optionee's delivery to the Company of shares
of Common Stock having a fair market value on the date the option is exercised
equal to that portion of the withholding obligation for which payment in cash is
not made. The Committee has discretion to determine the transferability of
options granted under the 1997 Stock Option Plan, which otherwise generally are
not transferable other than upon an Optionee's death.
As of December 31, 1997, a total of 479,950 options (none of which were
exercisable) to acquire shares of the Company's Common Stock had been granted
(net of terminated options) under the 1997 Stock Option Plan at a weighted
average exercise price of $5.09 per share. All of such options were granted at
the fair market value of the Common Stock on the date of grant. None of the
options granted under the 1997 Stock Option Plan were granted to Directors or
executive officers of the Company. Because the 1997 Stock Option Plan was not
adopted until April 29, 1997, none of the options granted under the 1997 Stock
Option Plan were repriced at the April 3, 1997 meeting of the Board of
Directors; see "--Stock Option Repricing".
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<PAGE>
Income Tax Treatment
The Company has been advised that, under current law, certain of the
income tax consequences under the laws of the United States to the Company and
to optionees under the 1997 Stock Option Plan of options granted under the 1997
Stock Option Plan generally should be as set forth in the following summary. The
summary only addresses general United States federal income tax consequences for
optionees under the 1997 Stock Option Plan and the Company.
The options granted under the 1997 Stock Option Plan may be ISOs or
NQOptions for federal income tax purposes; however, if the 1997 Stock Option
Plan is not ratified, approved and adopted by stockholders at the Annual
Meeting, all options granted thereunder will be NQOptions for federal income tax
purposes. An optionee to whom an option is granted will not recognize income at
the time of grant of an ISO or NQOption, except in the event a NQOption is
granted at less than fair market value, in which case the recipient thereof will
recognize ordinary compensation income to the extent the total NQOption price is
less than the total fair market value of the shares of Common Stock covered by
the option on the date of grant. An optionee does not recognize income upon
exercise of an ISO and the optionee's tax basis is equal to the option price
paid. However, if an optionee disposes of shares acquired pursuant to an ISO
either within two years of the date of the ISO grant or within one year of the
ISO exercise (a "disqualifying disposition") the optionee will recognize
ordinary income equal to the difference, if any, between the option price paid
and the amount realized upon such disposition. Otherwise, the optionee's capital
holding period for shares acquired pursuant to an ISO commences on the option
exercise date. When an optionee exercises a NQOption, the optionee will
recognize ordinary compensation income equal to the difference, if any, between
the option price paid and the fair market value, as of the date of option
exercise, of the shares the optionee purchased. The tax basis of shares obtained
by the exercise of a NQOption to an optionee is equal to the option price paid,
plus ordinary compensation income recognized, and the optionee's capital holding
period for shares acquired commences on the option exercise date. Subject to
applicable provisions of the Internal Revenue Code and regulations thereunder,
the Company generally will be entitled to a federal income tax deduction in
respect of both ISOs disposed of in a disqualifying disposition and NQOptions
exercised, in an amount equal to the ordinary and/or compensation income
recognized by the optionee.
The discussion set forth above does not purport to be a complete
analysis of all potential tax consequences relevant to recipients of options or
the Company or to describe tax consequences based on particular circumstances.
It is based on general United States federal income tax law and interpretational
authorities as of the date of this Proxy Statement, which are subject to change
at any time. The discussion does not address state or local income tax
consequences or income tax consequences for taxpayers who are subject to
taxation in jurisdictions other than the United States.
Vote Required
The affirmative vote of the majority of the shares of Common Stock
voting in person or represented by proxy and entitled to vote thereon shall be
required for the adoption of the proposal to ratify, approve and adopt the 1997
Stock Option Plan of Elcom International, Inc., as amended, and the options
granted thereunder to date. Unless otherwise directed, the persons named in the
accompanying proxy will vote FOR the adoption of the proposal to ratify, approve
and adopt the 1997 Stock Option Plan of Elcom International, Inc. and the
options granted thereunder to date.
APPROVAL OF THE ELCOM INTERNATIONAL, INC. EXECUTIVE PROFIT
PERFORMANCE BONUS PLAN FOR EXECUTIVE OFFICERS
The stockholders will be asked at the Annual Meeting to ratify, approve
and adopt the Elcom International, Inc. Executive Profit Performance Bonus Plan
For Executive Officers ("the "Executive Performance Plan") which was approved by
the Board of Directors on September 4, 1997. If approved at the Annual Meeting,
the Executive Performance Plan will cover, for a fiscal year, those persons who,
on the ninetieth day of that particular fiscal year, are the executive officers
of the Company ("Executive Officers"). As such, the number of people covered
will
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<PAGE>
generally be limited to no more than ten, and in order to participate in the
Executive Performance Plan, the Executive Officer must be employed as of March
30th of the calendar year and must be awarded a participation (also by March
30th) by the Compensation Committee of the Board of Directors (the "Committee").
If the Executive Performance Plan is not ratified, approved and adopted at the
Annual Meeting, it will automatically terminate and no payments will accrue or
be paid thereunder.
The Executive Performance Plan provides for incentive compensation
payments (limited in amount to the lesser of: (a) two times the executive's base
salary or (b) one million dollars) to be made to covered Executive Officers
based upon the increase in the Company's reported operating income over the
prior year. Accordingly, the Board of Directors believes that the Executive
Performance Plan provides a substantial incentive to those Executives in the
best position to affect the Company's operating performance and that substantial
benefits will accrue to the Company from granting participations in the
Executive Performance Plan. Such participations afford the Executive a
substantial incentive to enhance the value of the Company's Common Stock through
their own efforts in improving the Company's operating results. The granting of
participations also is expected to be instrumental in attracting and retaining
key executives. Accordingly, the Company will, from time to time, grant
participations to such Executives as may be selected to participate in the
Executive Performance Plan in accordance with the terms thereof.
For these reasons, the Board of Directors adopted the Executive
Performance Plan and, accordingly, believes that approval of the Executive
Performance Plan is in the best interests of the Company and recommends that
stockholders vote FOR the proposal to ratify, approve and adopt the Executive
Performance Plan.
The full text of the Executive Performance Plan, is attached hereto as
Exhibit B. Important details about specific provisions of the Executive
Performance Plan are more fully described below, but the following summary is
not intended to be complete and it is qualified in its entirety by reference to
the Executive Performance Plan.
Duration and Administration of the Executive Performance Plan
The Executive Performance Plan is administered by the Compensation
Committee of the Board, presently comprised of Messrs. Harries, Ortiz and Smith.
Members of the Committee shall be comprised of persons who qualify as "outside
directors" under Section 162(m) of the Internal Revenue Code and who are
"non-employee directors" under Rule 16(b)(3) of the Securities Exchange Act of
1934. Subject to the terms and conditions of the Executive Performance Plan, and
in addition to the other authorizations granted to the Committee under the
Executive Performance Plan, the Committee shall have full and final authority in
its absolute discretion to (a) select the participants to whom participations
will be granted, (b) determine the percentage of participation granted to any
executive, (c) adopt, amend and rescind such rules and regulations as, in the
Committee's opinion, may be advisable in the administration of the Executive
Performance Plan, and (d) construe and interpret the Executive Performance Plan,
the rules and regulations and the instruments evidencing participations granted
under the Executive Performance Plan and to make all other determinations deemed
necessary or advisable for the administration of the Executive Performance Plan.
If the Executive Performance Plan is not ratified and approved by stockholders
at the Annual Meeting, it will automatically terminate and no payments will
accrue or be paid thereunder.
Any decision made or action taken by the Committee in connection with
the administration, interpretation, and implementation of the Executive
Performance Plan and of its rules and regulations, shall, to the extent
permitted by law, be conclusive and binding upon all participants under the
Executive Performance Plan and upon any person claiming under or through such a
participant. Neither the Committee nor any of its members shall be liable for
any action taken by the Committee pursuant to the Executive Performance Plan. No
member of the Committee shall be liable for the action of any other Committee
member.
Calculation of the Executive Performance Plan Bonuses
The Executive Performance Plan was not in place during 1997, and if
ratified, approved and adopted by stockholders at the Annual Meeting the
Executive Performance Plan will be effective as of January 1, 1998. If the
Executive Performance Plan is not ratified, approved and adopted by stockholders
at the Annual Meeting, it will
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<PAGE>
automatically terminate and no payments will accrue or be paid thereunder. The
Executive Performance Plan provides that a bonus pool of up to 20% of the
increase in the Company's reported operating profit (or a reduction in losses)
from one year to the next (the "Bonus Pool") be set aside for payment to the
Company's Executive Officers. The increase in reported operating profit and,
accordingly, the 20% Bonus Pool, is determined after giving effect to the
expense of the Bonus Pool. An Executive Officer's participation in the Bonus
Pool is limited to the lesser of two times his/her annual base salary or $1
million, in any particular year.
The amounts reflected in the table below as available to the Key
Personnel Performance Plan are available because, based on employment contracts
in place as of December 31, 1997, a total of 61.3% of the Executive Performance
Plan Bonus Pool was allocated to Executive Officers. The table below indicates
the amounts that would have been paid, based on employment contracts in place as
of December 31, 1997, had the Executive Performance Plan been in effect in 1997,
to (i) each of the Executive Officers; (ii) all Executive Officers of the
Company, as a group; (iii) all Directors who are not Executive Officers of the
Company, as a group; and (iv) all employees who are not Executive Officers of
the Company, as a group.
Executive Profit Performance Bonus Plan for Executive Officers
--------------------------------------------------------------
Proforma
1997 Individual
Proforma Gross Bonus
Name and Position Bonus Percentage
- ------------------------------------------------- ----------- ------------
Robert J. Crowell
Chairman of the Board of Directors and
Chief Executive Officer of the Company $445,100 35%
James Rousou
Director and a Corporate Executive Vice President
of the Company; President and Chief Executive
Officer of Catalink Direct, Inc. $111,900 8.8%
Laurence F. Mulhern
Corporate Executive Vice President and
Chief Financial Officer of the Company $222,600 17.5%
Executive Officers, as a group (3 persons) $779,600 61.3%
Non-Executive Directors, as a group (0 persons) -- --
Non-Executive Officer employees, as a group $492,400 (1) --
- ----------------
(1) As noted in the discussion below, this amount is available for allocation
to non-Executive Officers under the Key Personnel Performance Plan and,
accordingly, is subject to award under such plan, not under the Executive
Performance Plan.
Through December 31, 2000, the Executive Performance Plan may not be
terminated or amended in any way that would adversely impact any current
participant, without such participant's written consent. Thereafter, the Board
of Directors or the Committee may amend or terminate the Executive Performance
Plan.
The Company's reported operating profit increased from $11,288,000 in 1996
to $18,919,000 in 1997. If the Executive Performance Plan had been in effect in
1997, the reported operating profit in 1997 would have been $17,647,000 with the
difference of $1,272,000 representing the maximum 20% Bonus Pool which could be
awarded to Executive Officers. As shown in the table above, based on employment
contracts in place as of December 31, 1997, approximately $492,400 of the
available Bonus Pool would not have been allocated to Executive Officers.
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<PAGE>
Such amount would be available to non-Executive Officer personnel under the
Elcom International, Inc. Key Personnel Profit Performance Plan (the "Key
Personnel Performance Plan").
The Key Personnel Performance Plan, which is designed to operate in
conjunction with the Executive Performance Plan, is intended to provide a
substantial incentive to key personnel who are not Executive Officers, but who
can, in the performance of their duties, affect the Company's operating results.
The Key Personnel Performance Plan Bonus Pool is limited to that portion of the
20% Bonus Pool calculated under the terms of the Executive Performance Plan less
payments under the Executive Performance Plan. Accordingly, the bonus pool
available under the Key Personnel Performance Plan is generally limited to the
20% Bonus Pool calculated under the Executive Performance Plan which are either
unallocated to Executive Officers or are in excess of the payment limitations
under the Executive Performance Plan (the annual payment to any one individual
is limited in amount to the lesser of: (a) two times the executive's base salary
or (b) one million dollars). Thus, based on the proforma calculation for fiscal
1997, approximately 38.7% of the Bonus Pool would have been available for award
under the Key Personnel Performance Plan. Neither the number of personnel
covered nor the percentage allocation of the potential bonus pool have yet been
determined with respect to the Key Personnel Performance Plan. The terms and
administration of the Key Personnel Performance Plan generally correspond to
those of the Executive Performance Plan, except that in the case of the Key
Personnel Performance Plan, the annual payout to any one participant is limited
to the lesser of $500,000 or two times the participant's base salary. If the
Executive Performance Plan is not approved, ratified and adopted at the Annual
Meeting, both the Executive Performance Plan and Key Personnel Performance Plan
will automatically terminate and no payments will accrue or be paid under either
plan.
Income Tax Treatment
The Company has been advised that, under current law, certain of the
income tax consequences under the laws of the United States to the Company and
to participants in the Executive Performance Plan of participations granted
under the Executive Performance Plan generally should be as set forth in the
following summary. The summary only addresses general United States federal
income tax consequences for participants under the Executive Performance Plan
and the Company.
Section 162(m) of the Internal Revenue Code ("Section 162(m)") limits
the federal income tax deduction that the Company may take for compensation paid
to "Covered Employees" unless certain requirements are satisfied. Section 162(m)
places a $1,000,000 limit on the deduction that may be taken for compensation
paid to any Covered Employee unless the compensation satisfies the criteria for
an exemption. One exemption applies to compensation that is based on the
attainment of objective performance goals established in advance by a committee
of two or more outside directors if the material terms of the performance goal
under which the compensation is to be paid are disclosed to and approved by
stockholders. "Covered Employees" are the chief executive officer of the Company
and the four highest compensated officers (other than the chief executive
officer) as determined pursuant to the executive compensation disclosure rules
under the Securities Exchange Act of 1934, as amended. The Executive Performance
Plan is intended to preserve the deductibility of incentive compensation paid to
Executive Performance Plan participants all of whom are Covered Employees.
Accordingly, it is anticipated that bonuses paid under the Executive Performance
Plan will result in ordinary compensation income to participants, and will
constitute deductible business expenses to the Company.
The discussion set forth above does not purport to be a complete
analysis of all potential tax consequences relevant to recipients of
participations in the Executive Performance Plan or to the Company or to
describe tax consequences based on particular circumstances. It is based on
general United States federal income tax law and interpretational authorities as
of the date of this Proxy Statement, which are subject to change at any time.
The discussion does not address state or local income tax consequences or income
tax consequences for taxpayers who are subject to taxation in jurisdictions
other than the United States.
Vote Required
The affirmative vote of the majority of the shares of Common Stock
voting in person or represented by proxy and entitled to vote thereon shall be
required for the adoption of the proposal to ratify, approve and adopt the
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<PAGE>
Elcom International, Inc. Executive Profit Performance Bonus Plan For Executive
Officers. Unless otherwise directed, the persons named in the accompanying proxy
will vote FOR the adoption of the proposal to ratify, approve and adopt the
Elcom International, Inc. Executive Profit Performance Bonus Plan For Executive
Officers.
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock
as of March 3, 1998 by (i) each Director and nominee for election as a Director
of the Company, (ii) each executive officer named in the Executive Compensation
tables included elsewhere herein, (iii) all Directors and executive officers as
a group, and (iv) each person or group known by the Company to own beneficially
more than 5% of its outstanding shares of Common Stock. All information with
respect to beneficial ownership has been furnished by the respective Director or
executive officer, or by reference to a public filing, as the case may be.
Unless otherwise indicated below, each stockholder named below has sole voting
and investment power with respect to the number of shares set forth opposite his
or its respective name.
Number of
Shares
Beneficially Percentage of
Directors And Executive Officers (2) Owned (1) Common Stock (1)
------------ ----------------
Class III Directors - Term expires at the
1998 Annual Meeting
Robert J. Crowell(3) 4,824,599 17.3%
William W. Smith(4) 12,206 *
Class I Directors - Term expires at the
1999 Annual Meeting
John W. Ortiz(4) 11,666 *
James Rousou(5) 1,932,750 7.1%
Class II Directors - Term expires at the
2000 Annual Meeting
Richard J. Harries, Jr.(4) 11,666 *
J. Richard Cordsen(6) 1,284,344 4.7%
Executive Officers
Andres Escallon(4) 607,719 2.2%
Laurence F. Mulhern(4) 219,704 *
Peter F. McAree(4) 12,750 *
All Directors And Executive Officers
as a Group (9 Persons)(7) 8,516,904 29.4%
Other 5% Beneficial Owners
Shell Pensions Trust Ltd. (Trustee of the
Shell Contributory Pension Fund)
Shell Centre
London SE1 FNA United Kingdom(8) 1,640,000 6.0%
- ----------
* Less than 1%.
(1) In accordance with Securities and Exchange Commission (the "Commission")
rules, each beneficial owner's holdings have been calculated assuming
full exercise of outstanding options and warrants to acquire Common
Stock which are exercisable by such owner within 60 days after March 3,
1998, while assuming no exercise of outstanding options and warrants
covering Common Stock held by any other person.
(2) For purposes hereof, the address of the Company's Directors and
executive officers is the same as that of the Company: 10 Oceana Way,
Norwood, Massachusetts 02062.
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<PAGE>
(3) Mr. Crowell is Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Crowell's Common Stock ownership is
comprised of 3,773,928 shares which he owns directly; 188,401 shares
held in a revocable trust for the benefit of Mr. Crowell's daughter, for
which Mr. Crowell serves as Trustee; 161,616 shares held by the Crowell
Educational Foundation with respect to which Mr. Crowell shares the
power to vote and dispose of; and 700,654 shares which he has the right
to acquire within 60 days after March 3, 1998 through the exercise of
stock options.
(4) All of the Common Stock beneficially owned by such person is comprised
of shares which he has the right to acquire within 60 days after March
3, 1998 through the exercise of stock options.
(5) Mr. Rousou is an executive officer and Director of the Company. The
number of shares reflected as beneficially owned by Mr. Rousou includes
warrants to acquire up to an aggregate of 400,500 shares of Common Stock
originally issued in conjunction with the acquisition by the Company of
Lantec, which are exercisable, and 132,250 shares of Common Stock which
Mr. Rousou has the right to acquire within 60 days after March 3, 1998
through the exercise of stock options.
(6) As reported in a Schedule 13G filed with the Commission on February 13,
1996 by United Gulf, includes 1,226,451 shares with respect to which Mr.
Cordsen, a Director of the Company, participates in disposition and
investment decisions as an employee of United Gulf and as a director of
Permal Capital Management, Inc. ("Permal"). Mr. Cordsen also owns a
small limited partnership interest in the general partner of the Permal
Funds (as hereinafter defined). The shares reflected as beneficially
owned by Mr. Cordsen are comprised of 571,425 shares of Common Stock
owned by Permal Private Equity Holdings, L.P., a Cayman Islands limited
partnership ("PPEH"), and 655,026 shares of Common Stock owned by
Private Equity Holdings, L.P., a Cayman Island limited partnership
("PEH"). PPEH and PEH (collectively, the "Permal Funds") are equity
funds whose investments are managed, with respect to voting powers,
solely by Permal (or its affiliates), and with respect to dispositions
or investment powers, on a shared basis between Permal and its
investment co-manager, United Gulf, under a six-member investment
committee, with Mr. Cordsen being one of United Gulf's designees to such
committee. Permal's ultimate parent entity is Maison Worms & Cie. United
Gulf's ultimate parent entity is Kuwait Investment Projects Company
(K.S.C.). Mr. Cordsen disclaims beneficial ownership of these 1,226,451
shares. Mr. Cordsen owns 51,227 shares of Common Stock directly and has
the right to acquire 6,666 shares within 60 days after March 3, 1998
through the exercise of stock options.
(7) Includes 2,115,781 shares of Common Stock which the Directors and
executive officers of the Company have the right to acquire within 60
days after March 3, 1998 through the exercise of warrants and stock
options.
(8) As reported in a Schedule 13D filed with the Commission on
February 2, 1996.
MANAGEMENT - EXECUTIVE OFFICERS
The name, age and position of the Company's Executive Officers are as
follows:
Name Age Position
------------------- --- -----------------------------------------
Robert J. Crowell 46 Chairman of the Board of Directors and
Chief Executive Officer of the Company
James Rousou 50 Director and a Corporate Executive Vice
President of the Company;
President and Chief Executive Officer
of Catalink Direct, Inc.
Andres Escallon 43 Corporate Executive Vice President and
Chief Technology Officer of the Company
Laurence F. Mulhern 43 Corporate Executive Vice President,Chief
Financial Officer, Treasurer and
Secretary of the Company
Peter F. McAree 33 Vice President, Finance of the Company;
Acting President of Elcom Systems, Inc.
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<PAGE>
A brief resume for each of the Company's Executive Officers is set forth
below. The brief resumes of Messrs. Crowell and Rousou are set forth above under
the heading "Election of Directors."
Andres Escallon has been the Company's Chief Technology Officer and a
Corporate Executive Vice President since November 1995. From October 1992 until
November 1995, Mr. Escallon was the Company's Vice President and Chief
Technology Officer, or acted in similar positions. From June 1991 to September
1992, Mr. Escallon served in the technology group of JWP Information Services,
Inc. (See "Election of Directors --JWP") and from January 1989 to April 1991, he
was General Manager at Praco Computadores, Bogota, Columbia, a software
development company. Prior thereto, from 1980 to 1989, Mr. Escallon was employed
with NEECO and Professional Software, Inc. where he was the senior technology
officer. Mr. Escallon holds a Bachelor of Science degree in Mechanical
Engineering from Universidad de los Andes and a Masters of Science degree in
Systems Engineering from Boston University. As of January 1, 1998, Mr. Escallon
is the Chief Technology Officer and a Vice President of the Company's
wholly-owned technology subsidiary, Elcom Systems, Inc., and is no longer an
Executive Officer of the Company.
Laurence F. Mulhern has been the Company's Chief Financial Officer,
Treasurer, Secretary and a Corporate Executive Vice President, or has acted in
similar positions, since July 1993. From 1985 through December 1992, Mr. Mulhern
was Vice President, Finance of Pacific Gateway Properties, Inc., an AMEX-listed
public company which owns and operates income producing real estate. In this
position, Mr. Mulhern was responsible for all financial aspects of the company.
Prior to joining Pacific Gateway Properties, Mr. Mulhern was an Audit Manager
with Arthur Andersen LLP. Mr. Mulhern holds a Bachelor of Science degree in
Accounting from Villanova University and has been a Certified Public Accountant
since 1979.
Peter F. McAree is the acting President of Elcom Systems, Inc., and is
also Vice President, Finance of the Company. As the President of Elcom Systems,
Mr. McAree is responsible for all the subsidiary's operational, financial and
administrative matters. Prior to joining Elcom, Mr. McAree served as Vice
President and Chief Financial Officer for Geerlings and Wade, Inc., a
publicly-held national direct marketer of premium wines. In this position, he
was responsible for the operations, finance and administrative functions of the
company. Prior to 1995, Mr. McAree served in the Enterprise Group of Arthur
Andersen LLP, specializing in providing services to growth-oriented high
technology and consumer product companies. Mr. McAree is a graduate of Bentley
College, Waltham, MA, and is a Certified Public Accountant.
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<PAGE>
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and long-term
compensation for services in all capacities with respect to those persons who
were (i) the Chief Executive Officer, and (ii) the other executive officers of
the Company (collectively, the "Named Executive Officers"), at December 31,
1997.
Summary Compensation Table
Long-Term
Annual Compensation
Compensation(1) Awards
--------------- ------------
Shares of
Common Stock
Underlying
Name And Principal Position(1) Year Salary Grants(#)
- ------------------------------ ---- -------- ------------
Robert J. Crowell 1997 $ 76,000 325,000
Chairman of the Board of Directors and 1996 $202,000 204,500
Chief Executive Officer of the Company (2) 1995 $ 58,000 100,000
James Rousou 1997 $190,000 99,750
Director and a Corporate Executive 1996 $170,000 32,500
Vice President of the Company; 1995 $ 81,000 --
President and Chief Executive Officer
of Catalink Direct, Inc.(3)
Andres Escallon 1997 $146,000 35,000
Corporate Executive Vice President and 1996 $120,000 --
Chief Technology Officer of the Company (4) 1995 $120,000 --
Laurence F. Mulhern 1997 $161,000 21,000
Corporate Executive Vice President, 1996 $142,000 82,500
Chief Financial Officer, Treasurer and 1995 $117,000 32,000
Secretary of the Company (5)
Peter F. McAree 1997 $ 90,000 45,000
Corporate Executive Vice President 1996 -- --
of the Company; President of 1995 -- --
Elcom Systems, Inc. (6)
- ----------
(1) No Named Executive Officer received a bonus with respect to each of the
three years in the period ended December 31, 1997 and unless otherwise
indicated herein, no Named Executive Officer received perquisites or other
personal benefits in excess of the lesser of $50,000 or 10% of such
individual's salary plus annual bonus.
(2) On June 1, 1997, the Company and Mr. Crowell entered into an Amended
Employment Agreement (the "1997 Crowell Agreement"), pursuant to which Mr.
Crowell has been retained for a term ending on May 31, 2000 as the Chairman
and Chief Executive Officer of the Company. The 1997 Crowell Agreement
amended and restated the employment agreement between Mr. Crowell and the
Company entered into in September 1995 (the "1995 Crowell Agreement") which
was due for renewal in 1997. The 1997 Crowell Agreement provides for a
minimum annual base salary of $325,000, whereas the 1995 Crowell Agreement
provided for a minimum annual base salary of $275,000. Mr. Crowell was not
paid any salary prior to October 1, 1995, when he began receiving an annual
salary pursuant to the 1995 Crowell Agreement. Mr. Crowell elected to forgo
approximately $228,000 and $73,000 of his annual minimum base salary during
1997 and 1996, respectively. See "--Executive Profit Performance Bonus
Plan", "-- Option Grants in 1997" and "-- Employment Contracts."
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<PAGE>
(3) James Rousou became an executive officer of the Company in June 1995 in
connection with the Company's acquisition of Lantec, of which he was
Chairman and Chief Executive Officer through March 1996. Since November
1995, Mr. Rousou also has served as a Corporate Executive Vice President of
the Company and since April 1, 1996, has served as the Chief Executive
Officer of Catalink and was appointed President of Catalink in June of
1996. As of April 1, 1996, the Company and Mr. Rousou entered into an
employment agreement which entitled Mr. Rousou to an annual base salary of
$190,000 and provided a bonus opportunity of up to 30% of his base salary.
Mr. Rousou's agreement was amended effective as of December 15, 1997 to
provide a base salary of $300,000 until April 15, 1998, at which time such
base salary is reduced to $120,000 and to replace Mr. Rousou's bonus
opportunity with an 8.8% participation in the proposed Executive
Performance Plan. Under his previous Lantec Services Agreement, which
terminated in March 1996 upon his resignation from all his Lantec
positions, Mr. Rousou received an annual base salary of 100,000 pounds
sterling. The 1996 compensation noted above includes amounts paid under
both agreements, but does not include a Lantec pension contribution of
approximately $3,000 and the attributed value of a Lantec company car of
$5,000. The 1995 compensation noted above is for the period from the
acquisition of Lantec (June 1995) to December 31, 1995, and does not
include a pension contribution of $6,000 and the attributed value of a
company car amounting to $8,000 for such period. Mr. Rousou elected to
forgo annual minimum base salary and bonus amounts totaling $63,000 and
$54,000 during 1997 and 1996, respectively. See "-- Executive Profit
Performance Bonus Plan", "-- Option Grants in 1997" and "-- Employment
Contracts."
(4) As of December 31, 1997, the Company had loaned Mr. Escallon a total of
$600,000 pursuant to a demand note which accrues interest at a rate of
prime plus 1% and is secured by the underlying value of Mr. Escallon's
Company stock options.
(5) On June 1, 1997, the Company and Mr. Mulhern entered into an Amended
Employment Agreement (the "1997 Mulhern Agreement") pursuant to which Mr.
Mulhern has been retained for a term ending on May 31, 2000 as the Chief
Financial Officer and a Corporate Executive Vice President of the Company.
The 1997 Mulhern Agreement amended and restated the employment agreement
between Mr. Mulhern and the Company entered into in July 1996 (the "1996
Mulhern Agreement"). The 1997 Mulhern Agreement provides for a minimum
annual base salary of $275,000 and a participation in the proposed
Executive Performance Plan, whereas the 1996 Mulhern Agreement provided for
a minimum annual base salary of $142,000 and a bonus opportunity of up to
30% of base salary. Mr. Mulhern elected to forgo approximately $58,000 of
his annual minimum base salary during 1997. See "-- Executive Profit
Performance Bonus Plan", "-- Option Grants in 1997" and "-- Employment
Contracts."
(6) Mr. McAree joined the Company on March 24, 1997 and has been the acting
President of Elcom Systems since August 22, 1997.
Stock Option Plans
In addition to the 1995 Non-Employee Director Stock Option Plan (the
"Director Plan"), the Company has adopted The Stock Option Plan of Elcom
International, Inc. (the "1993 Stock Option Plan"), the 1995 (Computerware)
Stock Option Plan of the Company (the "Computerware Stock Option Plan"), The
1996 Stock Option Plan of the Company (the "1996 Stock Option Plan"), and the
1997 Stock Option Plan, collectively hereinafter the "Stock Option Plans"
covering 5,000,000, 1,000,000, 2,400,000 and 2,000,000 shares, respectively, of
the Company's Common Stock, pursuant to which officers, employees and directors
of the Company, as well as other persons who render services as independent
contractors to the Company, or any of its affiliates, are eligible to receive
ISOs and/or NQOptions and which generally operate otherwise in a manner similar
to the 1997 Stock Option Plan, as described above. The maximum number of options
that can be granted to any one participant during any one fiscal year is 500,000
under the 1993 Stock Option Plan, 210,000 under the Computerware Stock Option
Plan, 300,000 under the 1996 Stock Option Plan and 150,000 under the 1997 Stock
Option Plan.
The 1993 Stock Option Plan was adopted by the Board of Directors in
February 1993, was approved by the Company's stockholders, and terminates on
February 23, 2003. Of the 5,000,000 shares of Common Stock reserved for issuance
thereunder, as of December 31, 1997, options covering 916,737 shares of Common
Stock have been
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<PAGE>
exercised, and options to acquire an aggregate of 3,936,890 shares of Common
Stock (2,479,676 of which were exercisable at December 31, 1997) were
outstanding at exercise prices ranging from $.11 to $8.80 per share, and
accordingly, options covering 146,373 shares of Common Stock may be granted
under such option plan. The Computerware Stock Option Plan was adopted by the
Board of Directors in February 1995, was approved by the Company's stockholders,
and terminates on February 5, 2005. Of the 1,000,000 shares of Common Stock
reserved for issuance under the Computerware Stock Option Plan, options to
acquire all 1,000,000 shares have been granted at an exercise price of $4.00 per
share, 91,800 of which have been exercised as of December 31, 1997, and 808,200
of which were exercisable as of December 31, 1997. An aggregate of 56,319 shares
of previously owned Common Stock were submitted in payment of the exercise price
and withholding tax obligations with respect to the options exercised under the
Computerware Stock Option Plan, and accordingly, options covering such shares
may be granted under such option plan. See "Certain Transactions." The 1996
Stock Option Plan was adopted by the Board of Directors in August 1996, was
approved by the Company's stockholders and terminates on August 19, 2006. Of the
2,400,000 shares of Common Stock reserved for issuance under the 1996 Stock
Option Plan, as of December 31, 1997, options covering 30,599 shares of Common
Stock have been exercised, and options to acquire an aggregate of 2,345,385
shares of Common Stock (357,671 of which were exercisable at December 31, 1997)
were outstanding as of December 31, 1997, at exercise prices ranging from $5.03
to $7.69 per share, and accordingly, options covering 24,016 shares of Common
Stock may be granted under such option plan. The 1997 Stock Option Plan was
adopted by the Board of Directors in April 1997, amended in February 1998, and
is subject to ratification, approval and adoption at the Annual Meeting. See "--
Option Repricing" and "Certain Transactions."
Change of Control Feature
Generally, all option agreements under the Stock Option Plans,
including those relative to the Named Executive Officers, contain provisions
accelerating the exercisability of the options, or otherwise requiring the cash
payment of the value of the options (represented by the difference between the
option exercise price and the then-current fair market value of the underlying
Common Stock), upon certain defined changes in control or sales of substantially
all of the Company's assets. Such changes of control occur if the Company is
reorganized, consolidated or merged with another company and the Company is not
the surviving company, or if 50% or more of the shares of the capital stock of
the Company which are then issued and outstanding are purchased by a single
person or entity.
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<PAGE>
Option Grants In 1997
Shown below is information relating to grants of stock options pursuant
to the Stock Option Plans during the fiscal year ended December 31, 1997 to the
Named Executive Officers. Such grants also are reflected in the Summary
Compensation Table above.
<TABLE>
Individual Grants Potential
------------------------------------------------------------------------- Realizable Value At
% of Total Assumed Annual
Options Exercise Rates of Stock Price
No. of Granted To or Base Appreciation for the
Securities Employees Price Option Term (3)
Underlying In Fiscal ($ per Grant Expiration ------------------------
Name Options(1) Year share)(2) Date Date 5% 10%
- ---- ------------ -------------- ---------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. 12,500 0.61% $8.80(4) 01/15/97 01/15/02 $ 30,000 $ 68,000
Crowell (5) 122,500 5.94% 8.00 01/15/97 01/15/07 616,000 1,562,000
125,000 6.06% 5.03 04/30/97 04/30/07 396,000 1,002,000
65,000 3.15% 5.28 06/06/97 06/06/07 216,000 547,0000
James Rousou (5) 99,750 4.83% 8.00 01/15/97 01/15/07 502,000 1,272,000
Andres 35,000 1.70% 5.03 04/30/97 04/30/07 111,000 281,000
Escallon (6)
Laurence F. 21,000 1.02% 8.00 01/15/97 01/15/07 106,000 268,000
Mulhern (5)
Peter F. 15,000 0.73% 6.50 03/31/97 03/31/07 61,000 155,000
McAree (7) 30,000 1.45% 5.03 04/30/97 04/30/07 95,000 241,000
- ----------
<FN>
(1) The options become fully vested upon certain "changes in control" of the
Company, as described in the Stock Option Plans, and the relevant
agreements thereunder. See "--Change of Control Feature."
(2) This price represents the fair market value at the date of grant pursuant
to the terms of the Stock Option Plans.
(3) Potential Realizable Value is based on certain assumed rates of
appreciation pursuant to rules prescribed by the Commission. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the stock. There can be no assurance that the amounts reflected in this
table will be achieved. In accordance with rules promulgated by the
Commission, Potential Realizable Value is based upon the exercise price of
the options.
(4) This price represents 110% of the fair market value at the date of grant
pursuant to the terms of the Stock Option Plans.
(5) All options granted to these individuals in 1997 become fully vested on the
first anniversary of the option grant date.
(6) 45% of these options vest on the first anniversary of the grant date and
the balance vest on the second anniversary.
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<PAGE>
(7) The options granted to Mr. McAree on March 31, 1997 vest over four years
(15%; 20%; 30%, 35%) commencing on the first anniversary of the date of
grant. The options granted to Mr. McAree on April 30, 1997 vest over two
years (35%; 65%) commencing on the first anniversary of the date of grant.
</FN>
</TABLE>
Fiscal Year-End Option Value Table
The following table shows the number of shares of Common Stock acquired
during 1997 by the exercise of options and the related value realized, as well
as the number of shares of Common Stock and values represented by outstanding
stock options held by each of the Named Executive Officers as of December 31,
1997.
<TABLE>
Number Of Securities Value Of Unexercised
Underlying In-The-Money
Unexercised Options at Options At
Shares December 31, 1997(#) December 31, 1997($)(1)(2)
Acquired on Value --------------------------- ----------------------------
Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Crowell -- $ -- 440,654(3) 325,000(4) $ 742,000 $ 269,000
James Rousou -- -- 32,500 99,750(5) 27,000 --
Andres Escallon 20,000 104,000 611,969 35,000 3,908,000 52,000
Laurence F. Mulhern -- -- 198,704(6) 41,800(7) 511,000 31,000
Peter F. McAree -- -- -- 45,000 -- 45,000
<FN>
(1) Options are "in-the-money" if the fair market value of the Common Stock
exceeds the exercise price.
(2) Represents the total gain which would be realized if all in-the-money
options beneficially held at December 31, 1997 were exercised, determined
by multiplying the number of shares underlying the options by the
difference between the per share option exercise price and $6.53, the
average of the high and low sales prices per share of the Company's Common
Stock on the NASDAQ Stock Market on December 31, 1997 (the last day of
trading in 1997).
(3) Includes options covering a total of 147,000 shares of Common Stock at a
weighted average exercise price of $7.72 per share which are not
"in-the-money" as of December 31, 1997 and therefore are excluded from the
table of Value Of Unexercised In-The-Money Options.
(4) Includes options covering a total of 135,000 shares of Common Stock at a
weighted average exercise price of $8.07 per share which are not
"in-the-money" as of December 31, 1997 and therefore are excluded from the
table of Value Of Unexercised In-The-Money Options.
(5) These options have an exercise price of $8.00 per share and therefore which
are not "in-the-money" as of December 31, 1997 are excluded from the table
of Value Of Unexercised In-The-Money Options.
(6) Includes options covering 62,500 shares at an exercise price of $7.31 per
share which are not "in-the-money" as of December 31, 1997 and therefore
are excluded from the table of Value Of Unexercised In-The-Money Options.
(7) Includes options covering 21,000 shares at an exercise price of $8.00 per
share which are not "in-the-money" as of December 31, 1997 and therefore
are excluded from the table of Value Of Unexercised In-The-Money Options.
</FN>
</TABLE>
Option Repricing
As reported in last year's proxy materials, on April 3, 1997, the Board
approved the repricing of all stock options, except those granted to Named
Executive Officers, granted under the Stock Option Plans (excluding the 1997
Stock Option Plan) at a price in excess of $6.57 per share, to a price of $6.57
per share, which approximated
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<PAGE>
the average trading price of the Company's Common Stock during the month of
March 1997. The Board, with Non-Employee Directors abstaining, also repriced
options granted to Non-Employee Directors under the 1993 Stock Option Plan and
the Director Plan (through an amendment to the Director Plan) on the same basis.
The Board took this action in light of the decline in the Company's Common Stock
price which, in its view, was frustrating the purpose of the Stock Option Plans,
since most employees' options were priced well above the current market value of
the Company's Common Stock. This situation was further exacerbated by the very
tight employment markets, particularly for technical personnel, in the Northeast
United States and in the United Kingdom. The repricing was not applicable to the
1997 Stock Option Plan, as it was not approved by the Board of Directors until
April 29, 1997 and accordingly, no options were granted thereunder as of April
3, 1997.
The Board believes that by taking this repricing action it has, to a
certain extent, restored the incentive that the Stock Option Plans were designed
to provide, and has generated a renewed enthusiasm in the Company's effected
personnel. Accordingly, the Board believes that the repricing action was in the
best interests of the Company.
The repricing action had no impact on vesting schedules or any other
option term and does not apply to any options held by Named Executive Officers.
It is also expected that the repricing action will not have any material impact
on the Company's calculation of diluted earnings per share. The following table
sets forth summary information relative to the stock option repricing based on
options outstanding as of December 31, 1997.
<TABLE>
Total Options
Outstanding
Weighted Average
Exercise Price (1)
-------------------
Total Options Total Options
Option Plan Outstanding(1) Repriced (1)(2) Original Repriced
- ------------------------------ -------------- --------------- -------- --------
<S> <C> <C> <C> <C>
Director Plan 60,000 40,000 $9.42 $6.34
1993 Stock Option Plan 3,936,890 931,295(3) 4.62 4.33
Computerware Stock Option Plan 908,200 -- 4.00 4.00
1996 Stock Option Plan 2,345,385 83,280 5.58 5.53
1997 Stock Option Plan 479,950 -- 5.09 5.09
-------------- -------------- -------- --------
Total of all plans 7,730,424 1,054,575 $4.91 $4.72
-------------- -------------- --------- --------
<FN>
(1) Does not include options which were repriced covering 7,050 shares
originally priced at a weighted average exercise price of $7.57 per share
which were exercised during 1997 and does not include options which were
repriced covering 230,495 shares originally priced at a weighted average
exercise price of $7.94 per share which were forfeited during 1997.
(2) The price of all such options was reduced to $6.57 per share.
(3) Includes options covering an aggregate of 20,000 shares originally granted
to Non-Employee Directors at a price of $7.50 per share. Does not include
options covering 340,250 shares granted to Named Executive Officers at a
weighted average exercise price of $7.90 per share which were not repriced.
</FN>
</TABLE>
Employment Contracts
Effective June 1, 1997, the Company entered into the 1997 Crowell
Agreement pursuant to which Mr. Crowell has been retained for a term ending May
31, 2000, as the Chairman and Chief Executive Officer of the Company. The 1997
Crowell Agreement amended and restated the employment agreement between Mr.
Crowell and the Company entered into in September 1995 (the "1995 Crowell
Agreement") which was due for renewal in 1997. The 1997 Crowell Agreement
provides for a minimum annual base salary of $325,000, whereas the 1995 Crowell
Agreement provided for a minimum annual base salary of $275,000. Mr. Crowell was
not paid any salary prior to October 1, 1995, when he began receiving an annual
salary pursuant to the 1995 Crowell Agreement. The
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<PAGE>
1997 Crowell Agreement provides that Mr. Crowell is entitled to participate in
all Company compensation plans and fringe benefit plans, on terms at least as
favorable as other executives of the Company and that Mr. Crowell will
participate in the Executive Performance Plan or similar plan implemented by the
Company at a minimum rate of 35% of any bonus pool generated by such plan. Under
the 1997 Crowell Agreement, Mr. Crowell also is entitled to receive annual
grants of options under the Company's Stock Option Plans to be made no later
than July of each year in amounts commensurate with Mr. Crowell's position and
performance as determined by the Compensation Committee and on terms no less
favorable than the terms for options granted to other executives. The options
generally will be exercisable within a maximum of one year from date of grant,
and, to the maximum extent allowable, shall be ISOs. All options which are ISOs
will have a per share exercise price of 110% of the fair market value of such
shares (so long as Mr. Crowell owns at least 10% of the Company's outstanding
stock) on the date of the grant, and all other options, including ISOs, if any,
granted after he ceases to be a 10% stockholder, will have an exercise price per
share equal to fair market value on the date of grant.
During 1997, Mr. Crowell elected to forgo approximately $228,000 of his
minimum base salary, which was considered, among other factors, by the
Compensation Committee in determining the quantity of options to be granted to
Mr. Crowell in 1997. Such grants are set forth under the caption "--Option
Grants in 1997".
If Mr. Crowell should die, become disabled (as defined) or be
terminated other than "for cause" (as defined), he becomes entitled to receive
(i) cash equal to two times his then annual base salary, payable in 12 equal
monthly installments, (ii) his bonus for that year if such termination occurs
after March 1 of the respective fiscal year, and (iii) all other compensation
and benefits to which he otherwise would have been entitled through the
remaining term of the 1997 Crowell Agreement. After his employment ends under
the 1997 Crowell Agreement, Mr. Crowell is automatically retained as a
consultant for two years (at $125,000 per year) and is precluded from
"competing" (as defined therein) against the Company for a period of three
years. The Crowell Agreement automatically renews for additional one-year terms
unless terminated by either party more than three months prior to the end of the
initial term or any renewal term thereof.
In April 1996, the Company entered into an employment agreement
covering an initial period of eighteen months, under which James Rousou was
appointed Chief Executive Officer of Catalink and continued as a Corporate
Executive Vice President of the Company. Mr. Rousou also was subsequently
appointed President of Catalink. The Agreement with Mr. Rousou was amended
effective December 15, 1997 (`the Rousou Agreement"), to increase the base
salary thereunder to $300,000 until April 15, 1998, when the base salary will
decrease to $120,000; to provide Mr. Rousou an 8.8% participation in the
proposed Executive Performance Plan; and to put the agreement on a calendar year
basis. These amendments were made because Mr. Rousou will cease to be President
and Chief Executive Officer of Catalink on April 15, 1998 (the Company is in the
process of hiring a new President and CEO for Catalink's U.S. operations), but
will continue as a Director and Corporate Executive Vice President of the
Company. Mr. Rousou will continue to have specific responsibility for directing
and reviewing the strategies, policies and operational performance of the
Company's non-U.S. operations. The Rousou Agreement is subject to automatic
renewal at the conclusion of each calendar year unless Mr. Rousou or the Company
provides notice to the contrary at least six months prior to the conclusion of
each calendar year term. The Rousou Agreement also provides that Mr. Rousou is
entitled to participate in all Company compensation plans and fringe benefit
plans, on terms at least as favorable as other executives. If Mr. Rousou is
terminated by the Company other than "for cause" (as defined), he is entitled to
continue to receive his base salary for a period of 12 months plus a lump sum
payment equal to 12 months base salary, together with any accrued performance
bonus to which he is entitled.
During 1997, Mr. Rousou elected to forgo approximately $5,000 of his
minimum base salary and a bonus of $58,000, which was considered, among other
factors, by the Compensation Committee in determining the quantity of options to
be granted to Mr. Rousou in 1997. The 1997 grants are set forth under the
caption "--Option Grants in 1997."
On June 1, 1997, the Company and Mr. Mulhern entered into the 1997
Mulhern Agreement pursuant to which Mr. Mulhern has been retained for a term
ending on May 31, 2000 as the Chief Financial Officer and a Corporate Executive
Vice President of the Company. The 1997 Mulhern Agreement amended and restated
the employment agreement between Mr. Mulhern and the Company entered into in
July 1996 (the "1996 Mulhern
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<PAGE>
Agreement"). The 1997 Mulhern Agreement provides for a minimum annual base
salary of $275,000 and a 17.5% participation in the proposed Executive
Performance Plan, whereas the 1996 Mulhern Agreement provided for a minimum
annual base salary of $142,000 and a bonus opportunity of up to 30% of base
salary. Mr. Mulhern elected to forgo approximately $58,000 of his annual minimum
base salary during 1997. The 1997 Mulhern Agreement is subject to automatic
renewal at the conclusion of each term for a one year period unless Mr. Mulhern
or the Company provides notice to the contrary at least three months prior to
the conclusion of each employment year ending May 31. The Mulhern Agreement also
provides that Mr. Mulhern is entitled to participate in all Company compensation
plans and fringe benefit plans, on terms at least as favorable as other
executives. If Mr. Mulhern dies, becomes disabled (as defined) or is terminated
by the Company other than "for cause" (as defined), he is entitled to receive an
amount equal to two times his base salary which would be paid over a period of
12 months.
In August 1997, the Company entered into an Employee Benefits Agreement
with Andres Escallon (the "Escallon Agreement") pursuant to which Mr. Escallon
continues to be a Vice President and the Chief Technology Officer of Elcom
Systems, at a base salary of $165,000. The Escallon Agreement provides that if
Mr. Escallon is terminated without cause within twelve months of a change in
control of the Company, he shall be entitled to receive severance payments equal
to twenty-four months' base salary.
In August 1997, the Company entered into an Employee Benefits Agreement
with Peter F. McAree (the "McAree Agreement") pursuant to which Mr. McAree
continues to be the Vice President, Finance of the Company and the Acting
President of Elcom Systems, at a base salary of $130,000. The McAree Agreement
provides that if Mr. McAree is terminated without cause within twelve months of
a change in control of the Company, he shall be entitled to receive severance
payments equal to twelve months' base salary.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee describes the
philosophy, objectives and components of the Company's executive compensation
programs for 1997 and discusses the determinations concerning the compensation
for the Chief Executive Officer for 1997.
The members of the Compensation Committee are William W. Smith, Richard J.
Harries, Jr., and John W. Ortiz. Each of Messrs. Smith, Harries and Ortiz are
Non-Employee Directors of the Company.
Compensation Philosophy
In reviewing and overseeing the Company's compensation programs, the
Compensation Committee adheres to a compensation philosophy which provides
executive compensation programs that are designed to: (i) attract and retain key
executives crucial to the long-term success of the Company; (ii) relate to the
achievement of operational and strategic objectives; and (iii) be commensurate
with each executive's performance, experience and responsibilities. In making
its recommendations concerning salaries and awards under compensation plans, the
Committee considers the financial condition and operational performance of the
Company during the prior year, the Company's success in achieving strategic
objectives that may have a long-term beneficial effect on the Company's results
of operations and financial condition, and its assessment of the contributions
of the individual executive officer to the Company's performance and to the
achievement of its strategic objectives. The Committee, however, does not
specifically focus on the compensation levels of executives in peer group
companies in making compensation decisions. The Committee's decisions concerning
compensation are primarily based on subjective decisions concerning the
appropriate levels of compensation and are not the result of a highly
formalistic process. The Committee does not rely extensively on objective
criteria in measuring individual performance.
Compensation Program
As a means of implementing these compensation philosophies and
objectives, the Company's compensation program for executive officers consists
of the following primary elements: salary and participation in
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<PAGE>
the Company's Stock Option Plans, as well as the proposed Executive Performance
Plan. These particular elements are further explained below.
Salaries - Salary levels for executive officers reflect the Committee's
subjective judgments of appropriate salaries in light of the duties and
responsibilities inherent in the executives' respective positions. The
particular qualification of an individual holding the position and his or her
level of experience are considered in establishing a salary level when the
individual is first appointed to a given position. The performance and
contribution of the individual to the Company, as well as Company performance,
are the primary criteria influencing salary administration. Salaries of
executive officers are generally reviewed each year. In many instances, the
primary factor in setting salary levels was the Company's desire to provide
compensation in amounts sufficient to induce these individuals to join the
Company.
Executive Performance Plan - The proposed Executive Performance Plan
reflects the Committee's desire to provide the Company's executives an
opportunity to earn bonuses based upon actual reported improvements in the
Company's performance. Accordingly, the Committee believes that the Executive
Performance Plan provides a substantial incentive to the executives who are in
the best position to affect the Company's operating performance. The Committee
believes that by granting participations in the Executive Performance Plan, the
executives will have a substantial incentive to enhance the value of the
Company's Common Stock through their own efforts in improving the Company's
operating results.
Stock Options - The Company uses stock options as a long-term incentive
program for executives. Stock options are used because they directly relate the
amounts earned by the executive to the amount of appreciation realized by the
Company's stockholders over comparable periods. Stock options also provide
executives with the opportunity to acquire and build a meaningful ownership
interest in the Company. The Committee considers possible grants of stock
options throughout the year. In determining the number of options awarded to an
individual executive, the Committee generally establishes a level of award based
upon the position of the individual and his or her level of responsibility. The
Committee also considers amounts of base salary and/or bonus payments which
executives and other personnel elect to forgo, in determining the quantity of
options to be granted.
Benefit Programs - The executive officers also participate in various
welfare and benefit programs that are generally made available to all salaried
employees. Executive officers also receive certain traditional perquisites,
which are customary for their positions.
Chief Executive Officer Compensation
The compensation arrangements for Mr. Crowell with respect to the 1997
fiscal year were primarily based upon the terms of his employment agreement with
the Company, as described under "Executive Compensation--Employment Contracts."
Pursuant to the 1997 Crowell Agreement, Mr. Crowell is entitled to an annual
minimum base salary of $325,000 per year, which amount may be increased but not
decreased at the discretion of the Compensation Committee (which did not occur
during 1997). The Compensation Committee did not conduct any surveys of
competitive, industry or revenue peer groups, but still believes that this
annual base salary would place Mr. Crowell's compensation in the bottom half of
comparable companies' chief executives.
In addition, the 1997 Crowell Agreement provides that Mr. Crowell is
entitled to participate in all of the other Company compensation plans and
fringe benefit plans, on terms at least as favorable as other executives of the
Company and that he will participate in the proposed Executive Performance Plan
at a minimum rate of 35% of any bonus pool generated by such plan. Under the
1997 Crowell Agreement, Mr. Crowell also is entitled to receive annual grants of
options under the Company's Stock Option Plans to be made no later than July of
each year in amounts commensurate with Mr. Crowell's position and performance as
determined by the Compensation Committee and on terms no less favorable than the
terms for options granted to other executives. Certain additional option grants
were made to Mr. Crowell by the Committee in January and April of 1997 which
considered, among other factors, his decision to forgo a significant portion of
his 1997 annual minimum base salary.
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<PAGE>
The Compensation Committee reviews and recommends the number of shares
subject to stock options awarded to Mr. Crowell annually, no later than July of
each year based upon a number of factors, but does not utilize pre-established,
specific performance goals in making such decisions. Factors considered included
sales and equity growth, market position, product placement and acceptance,
acquisitions and strategic growth strategies, employee attitudes and the
balancing of short-term and long-term goals. In determining the number of stock
options granted to Mr. Crowell in 1997, the Committee considered its conclusions
from an objective and subjective evaluation, with an emphasis on the impact on
the Company's sustainability and competitiveness within its industry, as well as
his position within the Company, the fact that Mr. Crowell elected to forgo
$228,000 of his 1997 minimum base salary, industry stock option grant
comparisons and the ongoing belief that Mr. Crowell is significantly
under-compensated. In 1997, Mr. Crowell was granted options to acquire an
aggregate of 325,500 shares of Common Stock at a weighted average exercise price
of $6.35 per share.
Section 162(m)
Section 162(m) of the Internal Revenue Code (the "Section") disallows a
tax deduction for any publicly traded company for individual compensation
exceeding $1 million in any year for any of the Named Executive Officers, unless
the compensation is performance-based or otherwise meets an applicable
exemption. Since the aggregate compensation of each of the Company's executive
officers is below the $1 million threshold and since the Committee believes that
any options granted under the Company's Stock Option Plans will meet the
performance based provisions under the Section, the Committee currently believes
that the Section will not reduce the tax deduction available to the Company for
compensation paid in 1997 to the Company's executive officers.
Compensation Committee
William W. Smith, Chairman
Richard J. Harries, Jr.
John W. Ortiz
Compensation Committee Interlocks And Insider Participation
The Company's Compensation Committee was formed to review, monitor and
approve the compensation and benefits for the Company's executive officers
(including bonuses, if any), administer the Company's stock option plans and
other management compensation plans and make recommendations to the Board of
Directors regarding such matters. No employees or executive officers of the
Company serve on the Committee. The Committee is currently composed of Messrs.
Harries, Ortiz, and Smith. No interlocking relationship exists between the
Company's Board of Directors or Compensation Committee and the board of
directors or compensation committee of any other company.
CERTAIN TRANSACTIONS
Executive Loan - As of December 31, 1997, the Company had loaned Mr.
Escallon, a Corporate Executive Vice President, Chief Technology Officer and a
Named Executive Officer of the Company, a total of $600,000 pursuant to a demand
note which accrues interest at a rate of prime plus 1% and is secured by the
underlying value of Mr. Escallon's Company stock options.
Transactions With and Related to Affiliated Company - The Company owns
approximately 22% of the equity of ShopLink Incorporated ("ShopLink"), a
development stage entity that has licensed the Company's PECOS.cm technology to
provide an electronic commerce system to market products to the home consumables
market. The Company accounts for this investment under the equity method, with
its losses limited to its $4,000 investment. In 1996, ShopLink paid $437,500 for
a perpetual license of the Company's PECOS.cm technology and also granted the
Company warrants to acquire 200,000 shares of ShopLink common stock at $2.20 per
share as partial consideration for certain exclusivity rights. In 1997, the
license agreement was amended to eliminate certain ongoing user and transaction
fees in exchange for a supplemental license fee of $350,000, which was paid to
the Company, and cancellation by the Company of all its warrants to acquire
ShopLink common stock. Under the
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Amended License Agreement and related Development Agreement, Extended
Maintenance Agreement and Professional Services Agreement, ShopLink is required
to pay additional amounts based on advertising revenues it receives, and for
services rendered by the Company in customizing and maintaining the ShopLink
implementation, as well as annual maintenance fees. During 1997, Elcom Systems
recognized license and maintenance fees totaling $648,000 (including the
aforementioned supplemental license fee) and professional services revenues of
$1,215,000 related to ShopLink, as well as $54,000 of computer sales. The
Company also was reimbursed by ShopLink for the actual cost of certain rental
expense relative to Company office space occupied by ShopLink and for the cost
of employee benefit expenses that specifically relate to ShopLink's employees.
In addition to the Company's ownership position, Mr. Crowell, the
Company's Chairman and Chief Executive Officer, also is Chairman of ShopLink's
Board of Directors and beneficially owns approximately 11% of ShopLink.
As of September 30, 1997 the Company sold options to acquire its entire
equity ownership interest in ShopLink. The Company received $418,000 in payment
for the options which may be exercised through March 31, 1999. If all such
options are exercised, the Company could receive payments of up to an additional
$4.2 million. The $418,000 received in payment for the options includes $165,000
from Mr. Crowell and $30,000 from the Permal Funds.
Litigation Settlement - On March 26, 1997, the Company and certain of
its subsidiaries entered into a Final Agreement of Settlement and Mutual Release
of All Claims and Demands (the "Settlement") 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 Company Common Stock
issued in 1995 is the appropriate and final amount of stock due and payable in
connection with the transaction. Pursuant to the Settlement, the Company and the
former owners of Computerware also agreed, that based on the level of gross
profit generated by the former Computerware platform, the 1,000,000 options
granted under the Computerware Stock Option Plan would be 90% vested as of March
15, 1997 and fully vested as of March 15, 1998. 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 Company Common Stock.
The five principal former owners of Computerware agreed not to sell any
Company Common Stock owned by them until June 14, 1997. Thereafter, for a period
of three months, up to 1,500 shares per day, in the aggregate, may be sold;
then, for the three months following that, up to 5,000 shares per day, in the
aggregate, may be sold; and thereafter, up to 10,000 shares per day, in the
aggregate, may be sold. The Settlement also provides for monthly sale limits of
twenty times the daily sale maximum.
Pursuant to the Settlement, the Company also agreed to pay John R.
Kovalcik, Jr. $50,000 for expenses associated with his relocation to and from
the Boston area. Mr. Kovalcik was a Director and a Corporate Executive Vice
President of the Company until his employment was terminated in May 1996. Since
that time, the Company has and will continue to pay Mr. Kovalcik his $150,000
annual salary until May 1998, in accordance with his employment agreement. The
Settlement of these disputes and related litigation did not have any adverse
affect on the Company's financial position or results of operations. In
connection with the Computerware acquisition, the Company and Robert J. Crowell
entered into a Stockholders' Agreement dated February 6, 1995 (the "Computerware
Stockholders' Agreement") with all of the former shareholders of Computerware,
including John R. Kovalcik, Jr., covering all shares of Common Stock issuable as
a result of the acquisition or issuable upon exercise of stock options that
certain of such shareholders received in connection with their ongoing
employment by the Company and/or Computerware (collectively, the "Covered
Shares"). The Computerware Stockholders' Agreement grants the holders of the
Covered Shares "piggyback" registration rights until February 6, 2002.
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Stockholder Agreements
On June 22, 1995, the Company acquired all of the equity of Lantec from
its former stockholders, including James Rousou. In connection with the Lantec
acquisition, the Company and Robert J. Crowell entered into the Lantec
Stockholders' Agreement with the former stockholders of Lantec covering all
2,899,820 shares of Common Stock (346,289 of which were sold in the initial
public offering) issued and the 750,000 shares of Common Stock issuable upon
exercise of warrants (the "Lantec Warrants"). The Lantec Stockholders' Agreement
grants "piggyback" registration rights with respect to the aforementioned
shares, including those issuable upon exercise of the Lantec Warrants. In
addition, the Lantec Stockholders' Agreement provides the former Lantec
stockholders with the right to designate an observer to attend meetings of the
Company's Board of Directors and its committees (the "Board Observer Right").
See "Election of Directors--Board Observer." The provisions of the Lantec
Stockholders' Agreement, other than the piggyback registration rights provisions
and the Board Observer Right, terminated in connection with the Company's
initial public offering in December 1995. The piggyback registration rights
expire June 22, 2002 and the Board Observer Right terminates on the earlier to
occur of: (i) June 22, 2002, (ii) such time as all of the former Lantec
stockholders own less than 2,500,000 shares of Common Stock (treating the Lantec
Warrants on an as-if-exercised basis), or (iii) renouncement of the Board
Observer Right by such stockholders.
The Company and Robert J. Crowell have entered into a Securities
Agreement, dated December 10, 1993 and amended on February 1, 1994 (the "Crowell
Securities Agreement"). Pursuant to the Crowell Securities Agreement, Robert J.
Crowell was granted limited preemptive rights to purchase securities of the
Company (which rights have expired) and, until February 2001, "piggyback"
registration rights with respect to 5,000,000 shares of his Common Stock. The
balance of Mr. Crowell's ownership in the Company (including 359,000 shares of
Common Stock) was acquired in conjunction with a 1993 Preferred Stock offering
and is subject to the Preferred Agreements as hereinafter defined. Mr. Crowell
has sold 275,000 shares of such Common Stock, which were transferred with
associated rights, in third party sales, and 887,072 shares have been
transferred with associated rights as gifts and in conjunction with estate and
family planning matters. An additional 450,000 of such shares of Common Stock
were sold in the Company's initial public offering.
Substantially all of the current holders of Common Stock that
originally represented the 7,987,296 shares of Preferred Stock (which were
converted into Common Stock in connection with the Company's December 1995
initial public offering) issued by the Company, including Robert J. Crowell, J.
Richard Cordsen and Shell Pensions Trust, Ltd. (which is a greater than 5%
beneficial owner of the Company's voting securities) originally entered into
stock purchase agreements with the Company with respect to the shares of Common
Stock, which they purchased as Preferred Stock from the Company thereunder in
1993, 1994 and 1995 (the "Preferred Agreements"). Pursuant to the terms of the
respective Preferred Agreements, holders of Preferred Stock were granted limited
"piggyback" registration rights with respect to such shares (and the Common
Stock into which the Preferred Stock has been converted) for a period of seven
years after purchase of the Preferred Stock.
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PERFORMANCE GRAPH
Set forth below is a line graph and a table of the related underlying
data comparing the percentage change in the cumulative total stockholders'
return on the Company's Common Stock against the cumulative total return of the
Total Return Index for The Nasdaq Stock Market - U.S. and Foreign ("NASDAQ
Total"), and the index for NASDAQ Computer and Data Processing Services Stocks
("Industry") for the period beginning with the Company's initial public offering
on December 20, 1995, and as of the last trading day on the NASDAQ in 1995, 1996
and 1997. The Industry index includes all NASDAQ listed securities with a
Standard Industrial Classification (SIC) of 737. The graph assumes that the
value of the investment in Elcom International, Inc.'s Common Stock, at its
initial public offering price, and each index was $100 on December 20, 1995 and
that all dividends, if any, were reinvested.
Comparison of Elcom International, Inc.'s Common Stock,
the Total Return Index for The Nasdaq Stock Market - U.S. and Foreign
and the Index for Nasdaq Computer and
Data Processing Services Stocks (SIC Code 737)
12/20/95 12/29/95 12/31/96 12/31/97
----------- ----------- ----------- -----------
The Company 100 139 72 64
NASDAQ Total 100 103 126 154
Industry 100 103 127 156
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OTHER MATTERS
Representatives of Arthur Andersen LLP, the Company's independent
auditors, will be present at the Annual Meeting. They will be afforded the
opportunity to make a statement at the Annual Meeting if they so desire, and are
expected to be available to respond to appropriate questions. The Board of
Directors is not aware of any matter to come before the Annual Meeting other
than those set forth in the Notice of Annual Meeting of Stockholders. If other
matters, however, properly come before the Annual Meeting, it is the intention
of the persons named in the accompanying Proxy to vote in accordance with their
best judgment on such matters insofar as the Proxies are not limited to the
contrary.
SECTION 16(a)
BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Officers and Directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities (i.e., the
Common Stock), to file reports of ownership and changes in ownership of such
securities with the Commission. Officers, Directors and greater-than-ten-percent
beneficial owners are required by applicable regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of the forms furnished to the
Company during or with respect to 1997, and written representations from certain
reporting persons, the Company believes that no Officer, Director or
greater-than-ten-percent beneficial owner failed to file on a timely basis
during the year ended December 31, 1997 any report required by Section 16(a) of
the Securities Exchange Act of 1934.
DATE TO SUBMIT STOCKHOLDER
PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder who wishes to submit a proposal for inclusion in the
proxy materials to be distributed by the Company in connection with its Annual
Meeting of Stockholders to be held in 1999 must do so no later than November 20,
1998. To be eligible for inclusion in the 1999 Annual Meeting proxy materials of
the Company, proposals must conform to the requirements set forth in Regulation
14A under the Securities Exchange Act of 1934.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
Upon the receipt of a written request from any stockholder, the Company
will mail, at no charge to the stockholder, a copy of the Company's Annual
Report on Form 10-K, including the financial statements and schedules required
to be filed with the Commission pursuant to Rule 13a-1 under the Securities
Exchange Act of 1934, for the Company's most recent fiscal year. Written
requests for such Report should be directed to:
Chief Financial Officer
Elcom International, Inc.
10 Oceana Way
Norwood, MA 02062
You are urged to sign and return your Proxy promptly in the enclosed
return envelope to make certain your shares will be voted at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Laurence F. Mulhern
Secretary
March 20, 1998
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<PAGE>
Exhibit A
THE 1997 STOCK OPTION PLAN
OF ELCOM INTERNATIONAL, INC.
April 29, 1997
Elcom International, Inc. hereby adopts a stock option plan
for the benefit of certain persons and subject to the terms and provisions set
forth below.
1. Definitions. The following terms shall have the meanings set forth below
whenever used in this instrument:
(a) The word "Affiliate" shall mean any
corporation which, on the effective date
of the Plan, is, within the meaning of
Section 1563(a) of the Code, a member of a
controlled group of corporations which
includes the Company.
(b) The word "Board" shall mean the Board
of Directors of the Company.
(c) The word "Code" shall mean the United States
Internal Revenue Code (Title 26 of the
United States Code) as the same may be
amended from time to time.
(d) The word "Committee" shall mean the
Compensation Committee appointed by the
Board.
(e) The words "Common Stock" shall mean the
common stock, par value $.01 per share, of
the Company.
(f) The word "Company" shall mean Elcom
International, Inc., a Delaware corporation,
and its Subsidiaries, if any, and any
successor thereto which shall maintain this
Plan.
(g) The words "Incentive Stock Option" shall
mean any option which qualifies as an
incentive stock option under the terms of
Section 422 of the Code.
(h) The words "Key Personnel" shall mean any
person whose performance as an employee
(whether or not as Director) or as an
independent contractor or outside Director
of the Company or an Affiliate of the
Company is, in the judgment of the
Committee,
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<PAGE>
important to the successful
operation of the Company or a Subsidiary.
(i) The word "Optionee" shall mean any Key
Personnel, or the nominee designated by such
Key Personnel and acceptable to the
Committee, to whom a stock option has been
granted pursuant to this Plan, or the
transferee thereof, as allowed by the
Committee and/or the Board.
(j) The word "Plan" shall mean The 1997 Stock
Option Plan of Elcom International, Inc., as
it was originally adopted, and as it may be
amended.
(k) The word "Subsidiary" shall mean any entity
at least 50% of the equity of which is owned
directly or indirectly by the Company.
(l) The words "Substantial Stockholder" shall
mean any Key Personnel who owns more than
10% of the total combined voting power of
all classes of stock of the Company.
Ownership shall be determined in accordance
with Section 424(d) of the Code and lawful
applicable regulations.
2. Purpose of the Plan. The purpose of the Plan is to provide
Key Personnel with greater incentive to serve and promote the interests of the
Company and its stockholders. The premise of the Plan is that, if such Key
Personnel acquire a proprietary interest in the business of the Company or
increase such proprietary interest as they may already hold, then the incentive
of such Key Personnel to work toward the Company's continued success will be
commensurately increased. Accordingly, the Company will, from time to time
during the effective period of the Plan, grant to such Key Personnel as may be
selected to participate in the Plan, options to purchase Common Stock on the
terms and subject to the conditions set forth in the Plan.
3. Effective Date of the Plan. The Plan shall become effective
as of April 29, 1997. In the event the Plan is not approved by the requisite
vote of the holders of the outstanding shares of voting capital stock of the
Company by April 29, 1998, any purported Incentive Stock
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<PAGE>
Options granted hereunder shall be thereafter treated as non-qualified stock
options for all purposes hereunder.
4. Administration of the Plan. The Plan shall be administered
by the Committee. Each member of the Committee shall be a "Non-Employee
Director" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or any amendment of or successor to such Rule as may be in
effect from time to time and an "outside director" within the meaning of Section
162(m) of the Code or any amendment of or successor to such provision as may be
in effect from time to time. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by all of the members,
shall be acts of the Committee. Subject to the terms and conditions of the Plan,
and in addition to the other authorizations granted to the Committee under the
Plan, the Committee shall have full and final authority in its absolute
discretion:
(a) to select the Key Personnel to whom options will be
granted;
(b) to determine the number of shares of Common Stock
subject to any option;
(c) to determine the time when options will be granted;
(d) to determine the option price of Common Stock subject
to an option, including any repricing thereof;
(e) to determine the time or times when each option may be
exercised, and the duration of the exercise period;
(f) to determine whether and to what extent an option is an
Incentive Stock Option; provided, however, that
Incentive Stock Options may only be granted to
employees of the Company;
(g) to prescribe the form of the option agreements
governing the options which are granted under the Plan
and to set the provisions of such option agreements as
the Committee may deem necessary or desirable provided
such provisions are not contrary to the terms and
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<PAGE>
conditions of either the Plan or, where the option is
an Incentive Stock Option, Section 422 of the Code;
(h) to adopt, amend and rescind such rules and regulations
as, in the Committee's opinion, may be advisable in the
administration of the Plan; and
(i) to construe and interpret the Plan, the rules and
regulations and the instruments evidencing options
granted under the Plan and to make all other
determinations deemed necessary or advisable for the
administration of the Plan.
Any decision made or action taken by the Committee in connection with the
administration, interpretation, and implementation of the Plan and of its rules
and regulations, shall, to the extent permitted by law, be conclusive and
binding upon all Optionees under the Plan and upon any person claiming under or
through such an Optionee. Neither the Committee nor any of its members shall be
liable for any act taken by the Committee pursuant to the Plan. No member of the
Committee shall be liable for the act of any other member.
5. Persons Eligible for Options. Subject to the restrictions
herein contained, options may be granted from time to time in the discretion of
the Committee only to such Key Personnel as designated by the Committee (or
their designees acceptable to the Committee, in its sole discretion), whose
initiative and efforts contribute or may be expected to contribute to the
continued growth and future success of the Company and/or its Subsidiaries.
Notwithstanding the preceding sentence, any Key Personnel who renounces in
writing any right he or she may have to receive stock options under the Plan
shall not be eligible to receive any stock options under the Plan. The Committee
may grant more than one option to the same Key Personnel.
6. Shares Subject to the Plan. Subject to the provisions of
the next succeeding provisions of this Section 6, the aggregate number of shares
of Common Stock for
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<PAGE>
which options may be granted under the Plan shall be 2,000,000(1) shares of
Common Stock. The maximum number of shares of Common Stock for which options may
be granted under the Plan to any one Key Personnel in any one fiscal year of the
Company is 150,000, subject to the other provisions of this Section 6. Either
treasury or authorized and unissued shares of Common Stock, or both, in such
amounts, within the maximum limit of the Plan, as the Committee shall from time
to time determine, may be so issued. All shares of Common Stock which are the
subject of any lapsed, expired or terminated options may be made available for
reoffering under the Plan to any Key Personnel. In addition, any shares of
Common Stock which are retained to satisfy an Optionee's withholding tax
obligations or which are transferred to the Company by an Optionee to satisfy
such obligations or to pay all or any portion of the option price in accordance
with the terms of the Plan, may be made available for reoffering under the Plan
to any Key Personnel. If an option granted under this Plan is exercised, any
shares of Common Stock which are the subject thereof shall not thereafter be
available for reoffering under the Plan, except in accordance with the preceding
sentence.
In the event that subsequent to the date of adoption of the Plan by
the Board, the outstanding shares of Common Stock 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 or other such change, including without
limitation any transaction described in Section 424(a) of the Code, increased or
decreased or changed into or exchanged for a different number or kind of shares
of stock or other securities of the Company, then (i) there shall automatically
be substituted for each share of Common Stock subject to an unexercised option
granted under the Plan and each share of Common Stock
- --------------------
(1) Originally 1,000,000 shares, amended by the Board of Directors on
February 17, 1998, subject to stockholder approval, to cover 2,000,000 shares.
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<PAGE>
subject to an unexercised option granted under the Plan and each share of Common
Stock available for additional grants of options under the Plan the number and
kind of shares of stock or other securities into which each outstanding share of
Common Stock shall be exchanged, (ii) the option price per share of Common Stock
or unit of securities shall be increased or decreased proportionately so that
the aggregate purchase price for the securities subject to the option shall
remain the same as immediately prior to such event, and (iii) the Committee
shall make such other adjustments to the securities subject to options, the
provisions of the Plan, and option agreements as may be appropriate, equitable
and in compliance with the provisions of Section 424(a) of the Code to the
extent applicable and any such adjustment shall be final, binding and conclusive
as to each Optionee. Any such adjustment shall provide for the elimination of
fractional shares.
7. Option Provisions.
(a) Option Price. The option price per share of Common
Stock which is the subject of an Incentive Stock Option shall be determined by
the Committee at the time of grant but shall not be less than one hundred
percent (100%) of the fair market value of a share of Common Stock on the date
the option is granted; provided, however, that if any Key Personnel to whom an
Incentive Stock Option is granted is, at the time of the grant, a Substantial
Stockholder, the option price per share of Common Stock shall be determined by
the Committee but shall not be less than one hundred ten percent (110%) of the
fair market value of a share of Common Stock on the date the option is granted.
The option price per share of Common Stock under each option granted pursuant to
the Plan which is not an Incentive Stock Option shall be determined by the
Committee at the time of grant. Such fair market value shall be determined in
accordance with
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<PAGE>
procedures to be established by the Committee. The day on which the Committee
approves the granting of an option shall be deemed for all purposes hereunder
the date on which the option is granted, unless another effective date for such
grant is specified by the Committee.
(b) Period of Option. The Committee shall determine when
each option is to expire but no option shall be exercisable after ten (10) years
have elapsed from the date upon which the option is granted; provided, however,
that no Incentive Stock Option granted to a person who is a Substantial
Stockholder at the time of the grant of such option shall be exercisable after
five (5) years have elapsed from the date upon which the option is granted.
(c) Limitation on Exercise and Transfer of Option. Except as
otherwise provided in the event of an Optionee's death, or as otherwise
determined by the Committee in any particular instance, whether before or after
the date of grant of an option and subject to any and all terms and conditions
as determined by the Committee in its absolute discretion, only the Optionee may
exercise an option; provided, that a guardian or other legal representative who
has been duly appointed for such Optionee may exercise an option on behalf of
the Optionee. Except as it may otherwise be determined by the Committee in any
particular instance, whether before or after the date of grant of an option and
subject to any and all terms and conditions as determined by the Committee in
its absolute discretion, (a) no option granted hereunder shall be transferable
except as otherwise provided in the event of an Optionee's death or, to the
extent approved by the Committee, pursuant to a qualified domestic relations
order as defined by the Code, or the rules thereunder, and (b) no option granted
hereunder may be pledged or hypothecated, nor shall any such option be subject
to execution, attachment or similar process.
(d) Conditions Governing Exercise of Option. The Committee
may, in its absolute discretion, either require that, prior to the exercise of
any option granted hereunder, the
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<PAGE>
Optionee shall have been an employee or independent contractor for a specified
period of time after the date such option was granted, or make any option
granted hereunder immediately exercisable. Each option shall be subject to such
additional or different restrictions or conditions with respect to the time and
method of exercise as shall be prescribed by the Committee. Upon satisfaction of
any such conditions, the option may be exercised in whole or in part at any time
during the option period. Options shall be exercised by the Optionee (i) giving
written notice to the Company of the Optionee's exercise of the option
accompanied by full payment of the purchase price either in cash or, with the
consent of the Committee (which may be included in the option agreement), in
whole or in part in shares of Common Stock (either by delivery to the Company of
already-owned shares or having the Company withhold shares to be issued) having
a fair market value on the date the option is exercised equal to that portion of
the purchase price for which payment in cash is not made, and (ii) making
appropriate arrangements acceptable to the Company (which may be included in the
option agreement)with respect to income tax withholding, as required, which
arrangements may include, at the absolute discretion of the Committee, in lieu
of other withholding arrangements, (a) the Company withholding from issuance to
the Optionee such number of shares of Common Stock otherwise issuable upon
exercise of the option as the Company and the Optionee may agree, or (b) the
Optionee's delivery to the Company of shares of Common Stock having a fair
market value on the date the option is exercised equal to that portion of the
withholding obligation for which payment in cash is not made. Certain
dissolutions or liquidations of the Company or, unless the surviving corporation
assumes said options, mergers or consolidations in which the Company is not the
surviving corporation, may, but need not, cause each outstanding option to
terminate, provided that during the option period each Optionee shall have the
right during the period, if any, prescribed in the option agreement prior to
such dissolution or liquidation, or merger
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<PAGE>
or consolidation in which the Company is not the surviving corporation, to
exercise the then exercisable portion of his or her option in whole or in part
without regard to any limitations contained in the Plan or the option agreement.
Additional provision with respect to acquisitions, mergers, liquidations or
dissolutions may be made in the option agreement.
(e) Termination of Employment, Etc. If an Optionee ceases
to be either an employee, outside Director or independent contractor, of the
Company and all Subsidiaries, as applicable (the "Cessation Date"), then the
Committee shall have absolute discretion to establish, in the option agreement
or otherwise, the restrictions on the exercisability of options granted
hereunder. An Optionee's employment shall not be deemed to have terminated while
he is on a military, sick or other bona fide approved leave of absence from the
Company or a Subsidiary as such a leave of absence is described in Section
1.421-7(h) of the Federal Income Tax Regulations or any lawful successor
regulations thereto. If the stock option is an Incentive Stock Option, no option
agreement shall:
(i) permit any Optionee to exercise any
Incentive Stock Option more than three (3)
months after the date the Optionee ceased to
be employed by the Company or any Subsidiary
if the reason for the Optionee's cessation
of employment was other than his death or
his disability (as such term is defined
by Section 105(d)(4) of the Code); or
(ii) permit any Optionee to exercise any
Incentive Stock Option more than one (1)
year after the date the Optionee ceased to
be employed by the Company or any Subsidiary
if the reason for the Optionee's cessation
of employment was the Optionee's disability
(as such term is defined by Section
105(d)(4) of the Code); or
(iii) permit any person to exercise any Incentive
Stock Option more than one (1) year after
the date the Optionee ceased to be employed
by the Company or any Subsidiary if either
(A) the reason for the Optionee's cessation
of employment was his death or (B) the
Optionee died within three (3) months after
ceasing to be employed by the Company or any
Subsidiary.
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<PAGE>
If any option is by terms of the option agreement exercisable following the
Optionee's death, then such option shall be exercisable by the Optionee's
estate, or the person designated in the Optionee's Last Will and Testament, or
the person to whom the option was transferred by the applicable laws of descent
and distribution or by approval of the Committee.
(f) Limitations on Grant of Incentive Stock Options.
In no event may Incentive Stock Options be granted hereunder to any person other
than an employee of the Company. During the calendar year in which any Incentive
Stock Option first becomes exercisable, the aggregate fair market value of the
shares of Common Stock which are subject to Incentive Stock Options (determined
as of the date the Incentive Stock Options were granted) shall not exceed the
sum of One Hundred Thousand Dollars ($100,000). Options which are not designated
as Incentive Stock Options shall not be subject to the limitations described in
the preceding sentence and shall not be counted when applying such limitation.
(g) Prohibition of Alternative Options. It is intended
that Key Personnel who are employees may be granted, simultaneously or from time
to time, Incentive Stock Options or other stock options, but no eligible Key
Personnel shall be granted alternative rights in Incentive Stock Options and
other stock options so as to prevent options granted as Incentive Stock Options
from qualifying as such within the meaning of Section 422 of the Code.
(h) Waiver by Committee of Conditions Governing Exercise
of Option. The Committee may, in its sole discretion, waive, alter or amend any
restrictions or conditions set forth in an option agreement concerning an
Optionee's right to exercise any option and/or the time and method of exercise.
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8. Amendments to the Plan. The Committee is authorized to
interpret the Plan and from time to time adopt any rules and regulations for
carrying out the Plan that it may deem advisable. Subject to the approval of the
Board, the Committee may at any time amend, modify, suspend or terminate the
Plan. In no event, however, without the approval of the Company's stockholders,
shall any action of the Committee or the Board result in:
(a) amending, modifying or altering the
eligibility requirements provided in Section
5 hereof; or
(b) increasing or decreasing, except as provided
in Section 6 hereof, the maximum number of
shares for which options may be granted; or
(c) decreasing the minimum option price per
share at which options may be granted under
the Plan, as provided in Section 7(a)
hereof; or
(d) extending either the maximum period during
which an option is exercisable as provided
in Section 7(b) hereof or the date on which
the Plan shall terminate as provided in
Section 12 hereof; or
(e) changing the requirements relating to the
Committee;
except as necessary to conform the Plan and/or the option agreements to changes
in the Code or other governing law. No option may be granted during any
suspension of this Plan or after this Plan has terminated and no amendment,
suspension or termination shall, without the Optionee's consent, alter or impair
any of the rights or obligations under an option theretofore granted to such
Optionee under this Plan.
9. Investment Representation, Approvals and Listing. The
Committee may condition its grant of any option hereunder (or any transfer
allowed in its discretion) upon receipt of an investment representation from the
Optionee which shall be substantially similar to the following:
"Optionee agrees that any shares of Common Stock of
Elcom International, Inc. which may be acquired by virtue of
the
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<PAGE>
exercise of this option shall be acquired for investment
purposes only and not with a view to distribution or resale;
provided, however, that this restriction shall become
inoperative in the event the shares of Common Stock of Elcom
International, Inc. which are subject to this option shall be
registered under the Securities Act of 1933, as amended, for
issuance to the Optionee or in the event there is presented to
Elcom International, Inc. an opinion of counsel or other
evidence, in either case, satisfactory to Elcom International,
Inc. to the effect that the offer and sale of the shares of
Common Stock of Elcom International, Inc. which are subject to
this option may lawfully be made without registration under
the Securities Act of 1933, as amended".
The Company shall not be required to issue any certificates for shares of Common
Stock upon the exercise of an option granted under the Plan prior to (i)
obtaining any approval from any governmental agency which the Committee shall,
in its sole discretion, determine to be necessary or advisable, (ii) the
admission of such shares to listing on any national securities exchange or the
Nasdaq National Market on which the shares of Common Stock may be listed, (iii)
completion of any registration or other qualification of the shares of Common
Stock under any state or federal law or ruling or regulations of any
governmental body which the Committee shall, in its sole discretion, determine
to be necessary or advisable, or the determination by the Committee, in its sole
discretion, that any registration or other qualification of the shares of Common
Stock is not necessary or advisable, and (iv) obtaining an investment
representation from the Optionee in the form set forth above or in such other
form as the Committee, in its sole discretion, shall determine to be adequate.
10. General Provisions.
(a) Option Agreements Need Not Be Identical.
The form and substance of option agreements, whether granted at the same or
different times, need not be identical.
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<PAGE>
(b) No Right To Be Employed, Etc. Nothing in
the Plan or in any option agreement shall confer upon any Optionee any right to
continue in the employ of the Company or a Subsidiary, or to serve as a member
of the Board or as an independent contractor, or to be entitled to receive any
remuneration or benefits not set forth in the Plan or such option agreement, or
to interfere with or limit either the right of the Company or a Subsidiary to
terminate the employment of, or independent contractor relationship with, such
Optionee at any time or the right of the stockholders of the Company to remove
him as a member of the Board with or without cause.
(c) Optionee Does Not Have Rights Of Stockholder.
Nothing contained in the Plan or in any option agreement shall be construed as
entitling any Optionee to any rights of a stockholder as a result of the grant
of an option until such time as shares of Common Stock are actually issued to
such Optionee pursuant to the exercise of an option.
(d) Successors In Interest. The Plan shall be binding
upon the successors and assigns of the Company.
(e) No Liability Upon Distribution of Shares.
The liability of the Company under the Plan and any distribution of shares of
Common Stock made hereunder is limited to the obligations set forth herein with
respect to such distribution and no term or provision of the Plan shall be
construed to impose any liability on the Company or the Committee in favor of
any person with respect to any loss, cost or expense which the person may incur
in connection with or arising out of any transaction in connection with the
Plan, including, but not limited to, any liability to any Federal, state or
local tax authority and/or any securities regulatory authority.
(f) Taxes. Appropriate provisions shall be made for
all taxes required to be withheld and/or paid in connection with the options or
the exercise thereof, and the transfer of
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<PAGE>
Common Stock pursuant thereto, under the applicable laws or other regulations of
any governmental authority, whether Federal, state or local and whether domestic
or foreign.
(g) Use of Proceeds. The cash proceeds received by the
Company from the issuance of shares of Common Stock pursuant to the Plan will be
used for general corporate purposes, or in such other manner as the Board deems
appropriate.
(h) Expenses. The expenses of administering the Plan shall
be borne by the Company.
(i) Captions. The captions and section numbers appearing
in the Plan are inserted only as a matter of convenience. They do not define,
limit, construe or describe the scope or intent of the provisions of the Plan.
(j) Number. The use of the singular or plural herein shall
not be restrictive as to number and shall be interpreted in all cases as the
context may require.
(k) Gender. The use of the feminine, masculine or neuter
pronoun shall not be restrictive as to gender and shall be interpreted in all
cases as the context may require.
11. Termination of the Plan. The Plan shall terminate on April
29, 2007, and thereafter no options shall be granted under the Plan. All options
outstanding at the time of termination of the Plan shall continue in full force
and effect according to the terms of the option agreements governing such
options and the terms and conditions of the Plan.
12. Governing Law. The Plan shall be governed by and construed
in accordance with the laws of the State of Delaware and any applicable federal
law.
13. Venue. The venue of any claim brought hereunder by an
Optionee shall be Boston, Massachusetts.
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<PAGE>
14. Changes in Governing Rules and Regulations. All references
herein to the Code or sections thereof, or to rules and regulations of the
Department of Treasury or of the Securities and Exchange Commission, shall mean
and include the Code sections thereof and such rules and regulations as are now
in effect or as they may be subsequently amended, modified, substituted or
superseded.
IN WITNESS WHEREOF, Elcom International, Inc., by its
appropriate officer duly authorized, has executed this document as of the 29th
day of April, 1997
ELCOM INTERNATIONAL, INC.
By: /s/ Robert J. Crowell
Robert J. Crowell
Chairman of the Board and Chief
Executive Officer
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<PAGE>
Exhibit B
ELCOM INTERNATIONAL, INC.
EXECUTIVE PROFIT PERFORMANCE BONUS PLAN
FOR EXECUTIVE OFFICERS
SECTION 1. Purpose. The purpose of the Elcom International, Inc. Executive
Profit Performance Bonus Plan for Executive Officers (the "Plan") is to provide
incentives for specified executive officers whose performance in fulfilling the
responsibilities of their positions can have a major impact on the profitability
and future growth of Elcom International, Inc. (the "Company") and its
subsidiaries.
SECTION 2. Definitions. For the purposes of the Plan, the following terms
shall have the meanings indicated:
(a) "Aggregate Bonus Pool" shall mean with respect to any
Fiscal Year (as defined below) an amount equal to twenty percent (20%) of the
Positive Change in Operating Profit (Loss) (as such terms are defined below), if
any.
(b) "Applicable Law" shall mean 26 U.S.C. ss. 162(m) and
regulations and rulings lawfully promulgated thereunder by an agency of the
federal government.
(c) "Base Salary" shall mean for any Covered Employee (as
defined below) in respect of any Fiscal Year his annual base salary effective on
the ninetieth (90th) day of such Fiscal Year, as determined by the Committee (as
defined below) (including, without limitation, pursuant to any written agreement
with a Covered Employee) and without regard to any waivers of payment by the
Covered Employee.
(d) "Board of Directors" shall mean the Board of Directors of
the Company.
(e) "Bonus Award" shall mean the amount payable to a Covered
Employee under the Plan in respect of any Fiscal Year.
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<PAGE>
(f) "Committee" shall mean the Compensation Committee of the
Board of Directors, which shall be comprised solely of two or more Outside
Directors (as defined below); provided, that if any member of the Committee does
not qualify as an Outside Director, a subcommittee of the Committee shall be
established comprised only of two or more Outside Directors and such
subcommittee shall act as the Committee hereunder and be vested with all of the
authorities and responsibilities of the Committee.
(g) "Covered Employee" shall mean in respect of any Fiscal
Year those of the Eligible Personnel (as defined below) as are listed on Exhibit
A hereto prior to the ninetieth (90th) day of such Fiscal Year, as determined by
the Committee.
(h) "Eligible Personnel" shall mean in respect of any Fiscal
Year, those persons who were the Company's executive officers on the ninetieth
(90th) day of such Fiscal Year.
(i) "Fiscal Year" shall mean any fiscal year of the Company,
commencing with the fiscal year which begins on January 1, 1998.
(j) "Individual Gross Bonus Percentage" shall mean, with
respect to each Fiscal Year, the percentage of the Aggregate Bonus Pool for each
respective Covered Employee as set forth on Exhibit A attached hereto as
established by the Committee by no later than the ninetieth (90th) day of such
Fiscal Year, subject to Section 7 hereof.
(k) "Operating Profit (Loss)" shall mean, for any Fiscal Year,
the Operating Profit (Loss) as shown on the Company's financial statement as
certified by the Company's independent certified public accountants which shall
be net of any charges for amounts earned relative to such Fiscal Year relating
to the Plan or the Elcom International, Inc. Key Personnel Performance Bonus
Plan.
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<PAGE>
(l) "Outside Director" shall mean an outside director
under the Applicable Law.
(m) "Plan" shall mean the Elcom International, Inc.
Executive Profit Performance Bonus Plan for Executive Officers as set forth in
this document and as later amended in accordance with the terms hereof.
(n) "Positive Change" shall mean, in respect of any Fiscal
Year, the increase (including, for this purpose, the reduction of a loss) in the
Operating Profit (Loss) from the prior Fiscal Year.
SECTION 3. Administration.
(a) Committee. The Plan shall be administered by the Committee. The
Committee shall have full authority to interpret the Plan and from time to time
to adopt such rules and regulations for carrying out the Plan as it may deem
best.
(b) Committee Determinations. All determinations by the Committee shall
be made by the affirmative vote of a majority of its members, but any
determination reduced to writing and signed by a majority of the members shall
be fully as effective as if it had been made by a majority vote at a meeting
duly called and held. All decisions by the Committee pursuant to the provisions
of the Plan and all orders or resolutions of the Committee pursuant thereto
shall be final, conclusive and binding on all persons, including the Covered
Employees, the Company, its subsidiaries, and its stockholders.
SECTION 4. Determination, etc. of Bonus Awards.
(a) Determination of Bonus Awards. Subject to the next sentence, the
Bonus Award of any Covered Employee for any Fiscal Year shall be the Individual
Gross Bonus Percentage of
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<PAGE>
the Aggregate Bonus Pool as set forth for such Covered Employee in the attached
Exhibit A. Notwithstanding the preceding sentence:
(i) the sum of the Bonus Awards of all Covered Employees for
any Fiscal Year shall not exceed the Aggregate Bonus Pool for the Fiscal Year;
and
(ii) in no event shall a Bonus Award for a particular Covered
Employee exceed the lesser of (a) One Million Dollars ($1,000,000); or (b) two
(2) times the Covered Employee's Base Salary in respect of such Fiscal Year.
(b) Announcement of Bonus Awards. No later than ninety (90) days after
the close of a Fiscal Year, the Committee shall inform each Covered Employee of
his respective Bonus Award for the Fiscal Year.
(c) Payment of Bonus Awards. Bonus Awards shall be paid in cash to the
Covered Employees promptly following the announcement of the Bonus Awards.
(d) Certification of Bonus Awards. Prior to paying any Bonus Award in
respect of any Fiscal Year, the Committee shall certify in writing to the Board
of Directors the amount of such Bonus Award and that such Bonus Award was
determined in accordance with the terms of the Plan. For this purpose, approved
minutes of the Committee meeting in which the certification is made shall be
treated as a written certification.
SECTION 5. Effective Date and Stockholder Approval. The Plan shall
become effective for the Fiscal Year commencing on January 1, 1998; provided,
however, that the Plan shall be of no force and effect, and no bonus or other
payment shall be made hereunder, unless it is approved by the Company's
stockholders as provided in the Applicable Law at the Company's 1998 annual
meeting of stockholders, or any special meeting of stockholders, in either case
on or before the date specified in the Applicable Law.
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<PAGE>
SECTION 6. Effect of Agreements with Covered Employee. The payment of
any Bonus Award to a Covered Employee shall be subject to any limitations that
may be set forth in any written agreement between the Company and the Covered
Employee including, without limitation, any employment agreement, and this Plan
shall not be construed as superseding or modifying the terms of any such
agreement.
SECTION 7. Amendment and Termination of the Plan. This Plan (including
Exhibit A hereto) may not be terminated, modified or amended in any way that may
have any adverse effect on any Covered Employee without the written consent of
any affected Covered Employee until after December 31, 2000; provided that
additional Eligible Personnel and their respective percentage(s) may be added to
Exhibit A. Thereafter, the Board of Directors may at any time terminate, in
whole or in part, or from time to time amend the Plan; provided, that no such
amendment or termination shall adversely affect the rights of any Covered
Employee with respect to Bonus Awards in respect of a Fiscal Year which has
commenced. The Board of Directors may at any time and from time to time delegate
to the Committee any or all of its authority under this Section 7.
SECTION 8. General Provisions.
(a) No Assignment. No portion of any Bonus Award may be assigned or
transferred other than by will or by the laws of descent and distribution prior
to the payment thereof.
(b) Tax Requirements. All payments of Bonus Awards shall be subject to
withholding in respect of income and other taxes required by law to be withheld,
in accordance with the Company's customary procedures.
(c) No Additional Rights. A Covered Employee shall not have any right
to be retained in the employ of the Company or any of its subsidiaries by reason
of any provision of
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<PAGE>
the Plan, and the right of the Company or any such subsidiary to dismiss or
discharge any such Covered Employee or to terminate any arrangement pursuant to
which any such Covered Employee provides services to the Company or a subsidiary
specifically is not hereby changed or altered in any respect.
(d) Liability. The Board of Directors and the Committee shall be
entitled to rely on the advice of counsel and other experts, including the
Company's independent certified public accountants. No member of the Board of
Directors or of the Committee shall be, nor shall any officers of the Company or
its subsidiaries be, liable for any act or failure to act under the Plan, except
in circumstances involving bad faith on the part of such member or officer.
(e) Other Compensation Arrangements. Nothing contained in the Plan
shall prevent the Company or any subsidiary or affiliate of the Company from
adopting or continuing in effect other compensation arrangements, which
arrangements may be either generally applicable or applicable only to designated
individuals, including the Covered Employees.
IN WITNESS WHEREOF, Elcom International, Inc., by its appropriate
officer duly authorized, has executed this document as of the 4th day of
September, 1997.
ELCOM INTERNATIONAL, INC.
By: /s/ William W. Smith
William W. Smith
Vice Chairman of the Board
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<PAGE>
Schedule A
----------
Individual Gross
Bonus Percentage
Name and Title of Executive of 20% Total Pool
- --------------------------- -----------------
Robert J. Crowell - Chairman and Chief Executive Officer 35 %
James Rousou - Corporate Executive Vice President and
President and CEO, Catalink Direct, Inc. 8.8 %
Laurence F. Mulhern - Corporate Executive Vice President,
Chief Financial Officer, Treasurer and Secretary 17.5 %
---------
TOTAL 61.3 %
<PAGE>
PROXY
ELCOM INTERNATIONAL, INC.
Proxy Solicited on Behalf of the Board of Directors
of the Company for the 1998 Annual Meeting of
Stockholders, April 28, 1998
The undersigned hereby constitutes and appoints Laurence F. Mulhern and
Michael J. McEachern, and each of them, his or her true and lawful agents and
proxies, with full power of substitution in each, to represent and vote all of
the shares of Common Stock, $.01 par value per share, of Elcom International,
Inc. held of record as of March 3, 1998 by the undersigned at the Annual Meeting
of Stockholders of Elcom International, Inc. to be held at Occasions Banquet
Facility, 1369 Providence Highway, Norwood, Massachusetts at 10:00 a.m. (E.D.T.)
on April 28, 1998, and at any adjournment or postponement thereof, on all
matters coming before said meeting.
You are encouraged to specify your choice by marking the appropriate box,
SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot vote
your shares unless you sign and return this card.
This proxy, when properly executed, will be voted in the manner directed
herein and authorizes the Proxies to take action in their discretion upon
other matters that may properly come before the meeting. If no direction
is made, this proxy will be voted FOR the election of both nominees as
Directors; FOR the ratification, approval and adoption of The 1997 Stock
Option Plan of Elcom International, Inc., as amended, and all options
granted thereunder to date; and FOR the ratification, approval and
adoption of the Elcom International, Inc. Executive Profit Performance
Bonus Plan For Executive Officers.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Stockholders, you
can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
The Board of Directors recommends a vote FOR the election of both nominees for
Director, FOR ratification, approval and adoption of The 1997 Stock Option Plan
of Elcom International, Inc., as amended, and all options granted thereunder to
date and FOR ratification, approval and adoption of the Elcom International,
Inc. Executive Profit Performance Bonus Plan For Executive Officers.
1. ELECTION OF DIRECTORS - To elect two Directors of the class whose term of
office will otherwise expire in 1998 for a three-year term ending at the
Annual Meeting of Stockholders in 2001.
Nominees for Director: Class III: Robert J. Crowell and William W. Smith
------ FOR BOTH ------ WITHHELD FROM BOTH
------ For, except vote withheld from the following nominee: --------------
2. RATIFICATION, APPROVAL AND ADOPTION OF THE 1997 STOCK OPTION PLAN OF ELCOM
INTERNATIONAL, INC., AS AMENDED, AND ALL OPTIONS GRANTED THEREUNDER TO
DATE.
------ FOR ------AGAINST ------ ABSTAIN
3. RATIFICATION, APPROVAL AND ADOPTION OF THE ELCOM INTERNATIONAL, INC.
EXECUTIVE PROFIT PERFORMANCE BONUS PLAN FOR EXECUTIVE OFFICERS.
------ FOR ------AGAINST ------ ABSTAIN
4. IN THEIR DISCRETION TO ACT ON ANY OTHER MATTER OR MATTERS WHICH MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ---------------------------------
Please sign exactly as your name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, or guardian, please
give full title as such.
Signature: Date: Signature: Date:
