As filed with the Securities and Exchange Commission on January 14, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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Elcom International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
04-3175156
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(I.R.S. Employer Identification No.)
10 Oceana Way, Norwood, Massachusetts 02026, telephone (781) 440-3333
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Copy to:
Robert J. Crowell Douglas A. Neary
Elcom International, Inc. Calfee, Halter & Griswold LLP
10 Oceana Way 1400 McDonald Investment Center
Norwood, Massachusetts 02026 800 Superior Avenue
(781) 440-3333 Cleveland, Ohio 44114
(216) 622-8200
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of the Registration Statement and after
compliance with applicable state and federal laws.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for he same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
<TABLE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Amount to be Proposed maximum Proposed maximum Amount of
Title of shares to be registered registered aggregate price per aggregate offering price registration fee
unit (1) (1)
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- --------------------------------- ---------------- ------------------------ -------------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value(2) 2,500,000 $20.31 $50,775,000 $13,404.60
Common Stock, $.01 par value(3) 750,000 $20.31 $15,232,500 $ 4,021.38
Common Stock, $.01 par value(4) 353,418 $20.31 $ 7,177,920 $ 1,894.97
TOTAL 3,603,418 $20.31 $73,185,420 $19,320.95
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<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), using the average of the high and low sales prices
of the Common Stock of the Registrant as reported on the Nasdaq National
Market on January 13, 2000.
(2) Consists of shares of common stock issuable pursuant to the terms of the
Structured Equity Line Flexible Financing Agreement, dated as of December
30, 1999 (the "Equity Line"), between the Company and Cripple Creek
Securities, LLC.
(3) Consists of shares of common stock issuable upon exercise of warrants
issuable to Cripple Creek Securities, LLC in connection with the Equity
Line.
(4) Consists of shares of common stock issuable upon exercise of warrants
issued to Wit Capital Corporation, the financial advisor, in connection
with the Equity Line.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 14, 2000
PROSPECTUS
ELCOM INTERNATIONAL, INC.
3,603,418 Shares of Common Stock
This prospectus relates to the offer and sale of our common stock by
Cripple Creek Securities, LLC and Wit Capital Corporation, the selling
stockholders, as follows:
Up to a maximum of 2,500,000 shares issuable from time to time to
Cripple Creek, under a structured equity line flexible financing
agreement that we entered into with Cripple Creek, dated as of
December 30, 1999;
Up to a maximum of 750,000 shares issuable upon the exercise of
warrants that are issuable to Cripple Creek under the equity line
agreement; and
Up to 353,418 shares issuable upon the exercise of warrants
issued to Wit Capital Corporation, the financial advisor, in
connection with the equity line agreement.
Under the terms of the equity line agreement, the amount of shares that
we issue to Cripple Creek may be significantly less than the maximum amount set
forth in this prospectus. In any event, we may not issue more than $10 million
of common stock to Cripple Creek in any one-month investment period or more than
an aggregate of $50 million of common stock over the course of the 18-month
period of the equity line agreement, excluding shares issued upon exercise of
warrants.
The selling stockholders may sell the common stock offered by this
prospectus from time to time. We will not receive any proceeds from the sale of
the common stock by the selling stockholders, but we will receive proceeds upon
the issuance of the shares, if any, to Cripple Creek under the equity line
agreement and upon exercise of the warrants by the selling stockholders.
The selling stockholders have not advised us of any specific plans for
the distribution of the common stock being offered by this prospectus, but they
anticipate that the common stock will be sold from time to time primarily in
transactions on the Nasdaq National Market at the market price prevailing at the
time of sale. Cripple Creek is an "underwriter" as defined in the Securities Act
of 1933 in connection with the sale of the shares offered by this prospectus.
Our common stock is quoted on the Nasdaq National Market under the
symbol "ELCO." On January 10, 2000, the last reported sale price for the common
stock was $28.75 per share.
Our principal executive offices are located at 10 Oceana Way, Norwood,
Massachusetts, and our telephone number is (781) 440-3333.
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Investing in our common stock involves certain risks. See "Risk
Factors" beginning on page 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS..................................................................3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS..............................10
ABOUT ELCOM..................................................................10
USE OF PROCEEDS..............................................................11
SELLING STOCKHOLDERS.........................................................12
EQUITY LINE..................................................................13
PLAN OF DISTRIBUTION.........................................................14
LEGAL MATTERS................................................................16
EXPERTS......................................................................16
WHERE YOU CAN FIND MORE INFORMATION..........................................16
INFORMATION INCORPORATED BY REFERENCE........................................16
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. The information contained in this prospectus
is accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock.
We have not taken any action to permit a public offering of the shares
of common stock outside the United States or to permit the possession or
distribution of this prospectus outside the United States. Persons outside the
United States who come into possession of this prospectus must inform themselves
about and observe any restrictions relating to the offering of the shares of
common stock and the distribution of this prospectus outside of the United
States.
In this prospectus, "Elcom," "we," "us" and "our" refer to Elcom
International, Inc. "Cripple Creek" refers to Cripple Creek Securities, LLC and
"Wit Capital" refers to Wit Capital Corporation, each a selling stockholder
under this prospectus. Cripple Creek and Wit Capital are collectively referred
to as "the selling stockholders" under this prospectus.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks before
buying shares of our common stock. The risks described are not the only ones
facing our company. Additional risks may impair our business operations. If any
of the following risks occur, our business, results of operations or financial
condition could be adversely affected. In that case, the trading price of our
common stock could decline, and you may lose all or part of your investment. You
should also refer to the other information contained in this prospectus or
incorporated herein by reference, including our consolidated financial
statements and the notes to those statements.
We have incurred significant net losses in each of our last four fiscal
quarters.
We have incurred significant net losses in each of our last four fiscal
quarters, including a net loss of approximately $25.6 million for the year ended
December 31, 1998 and approximately $31.7 million for the nine months ended
September 30, 1999. As of September 30, 1999, we had an accumulated deficit of
approximately $47.9 million. We cannot assure you that we will be able to
achieve profitability on an annual or quarterly basis in the short term, or, if
we achieve profitability, that it will be sustainable. The extent of our future
losses will depend, in part, on the rate of growth, if any, of sales of our
business-to-business automated procurement software applications, as well as
sales of business products, including PCs and other related products and office
supplies, and on the level of our expenses. We anticipate significant increased
expenditures relating to the marketing and branding of our business-to-business
automated procurement applications and Internet storefront. If we are unable to
generate significant additional revenue and gross profits in the short term, our
commercial viability could be called into question and we will need additional
financing.
We may need to raise additional capital on terms unfavorable to investors in
this offering if we do not generate enough revenue.
We require substantial working capital to fund our business and may
need more in the future. We currently have a secured line of credit with
Deutsche Financial Services Corporation, under which borrowings are limited to
defined percentages of eligible inventory and accounts receiveable, up to a
maximum amount of $80 million. We anticipate that we will be in default of the
net income covenant of our line of credit with Deutsche Financial as of December
31, 1999. Accordingly, we will require a waiver of this default from Deutsche
Financial, similar to the waiver we received in respect of calendar year 1998.
We cannot assure you that we will be able to obtain the waiver from Deutsche
Financial or that receipt of a waiver will not be conditioned upon less
favorable financing terms than currently in existence. If we fail to obtain the
waiver or if we accept less favorable financial terms to obtain the waiver, our
financial condition could be harmed. We depend upon the Deutsche Financial line
to finance our eligible accounts receivable arising from sales of computer
products as well as United States inventory purchases. At September 30, 1999,
our borrowings from Deutsche Financial were $30.8 million, which approximated
the maximum amount available to us, based upon eligible inventory and accounts
receivable at that time. We cannot assure you that the Deutsche Financial line
will continue to be available to us or that it would be increased to support our
requirements with respect to eligible inventory and accounts receivable.
The net proceeds from the sale of common stock under the equity line,
together with our available funds, should be sufficient to meet our needs for
working capital and capital expenditure needs for the next twelve months. If,
however, we need to raise additional funds through the issuance of equity,
equity-related or debt securities, your rights may be subordinate to other
investors and your stock ownership percentage may be diluted. We cannot be
certain that additional financing will be available to us. If we
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cannot raise funds on acceptable terms, if and when needed, we may not be able
to develop or enhance our products and services, continue our marketing and
branding campaign, take advantage of future opportunities, grow our business or
respond to competitive pressures or unanticipated requirements, which could
seriously harm our business.
Our revenues and operating results have varied in the past and are likely to
continue to do so in the future.
Our quarterly and annual revenues and operating results have varied
significantly in the past and are likely to continue to vary in the future.
Revenues and operating results may fluctuate as a result of the demand for our
products and services, the introduction of new hardware or software technologies
offering improved features, the introduction of new services by us and our
competitors, changes in the level of operating expenses, the timing of major
customer projects, inventory adjustments, competitive conditions and economic
conditions generally. In particular, our operating results are highly sensitive
to changes in the mix of our product and professional services revenues, product
margins and interest rates. Further, the purchase of our products and services
in large quantities generally involves a significant commitment of capital, with
the attendant delays frequently associated with large capital expenditures and
authorization procedures within our customers' organizations. For these and
other reasons, our operating results are subject to a number of significant
risks over which we have little or no control, including customers' technology
life cycle needs, budgetary constraints and internal authorization reviews. In
addition, in the event that the growth in our business does not meet our
expectations, we may be unable to adjust our spending levels rapidly enough to
avoid an adverse effect upon operating results. Accordingly, we believe that
period-to-period comparisons of our operating results should not be relied upon
as an indication of future performance. In addition, the results of any
quarterly period are not necessarily indicative of results to be expected for a
full fiscal year. It is possible that in certain future periods, our operating
results may be below the expectations of public market analysts and investors.
In such event, the price of our common stock would likely decline.
We have recently increased the focus of our business on developing and providing
our PECOS (Personal Electronic Catalog Ordering System) automated procurement
software applications. If we are unable to successfully execute our strategy to
market our PECOS applications, our business prospects could be seriously harmed.
Historically, we have derived substantially all of our net sales from
our computer remarketing business. We have recently increased the focus of our
business on developing and providing PECOS.pm, our intranet and Internet-based
business-to-business automated procurement software applications. We are placing
particular emphasis on the Internet version of our software, which we host as a
service provider for our licensees. We expect to derive an increasingly larger
portion of our net sales from the licensing and/or hosting of our PECOS
applications.
The market for Internet-based automated procurement applications and
hosting services is at an early stage of development. Our success depends on a
significant number of customer/client organizations implementing PECOS and
linking with their suppliers over the Internet through our applications. Our
ability to attract additional customers for our PECOS applications will depend
on using our existing customers as reference accounts, as well as the
effectiveness of our marketing and branding campaign. As of December 31, 1999,
only 5 customers had licensed our current PECOS intranet and Internet-based
applications, for renewable periods of no less than six-months, generally with
90-day acceptance periods. Accordingly, these procurement applications have not
yet achieved, and may not achieve, significant market acceptance. In addition to
our PECOS applications, we are relying on the growth of our Starbuyer.com
Internet storefront, where we market and sell business products, including
computers and related products and office supplies, to provide significant
revenue growth. As Internet
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commerce continues to evolve, and competition for on-line commerce applications
and hosting thereof intensifies, we must continue to invest in branding our
applications and Internet storefront in order to gain market share. Unless a
critical mass of buying organizations and their suppliers utilize our PECOS
applications, our applications may not achieve widespread market acceptance and
our business prospects would be seriously harmed.
We depend on enhancing the functionality of our PECOS products and services to
keep pace with the rapid technological change associated with our business.
If we are unable to develop new products or services or enhancements to
our existing products and services on a timely and cost-effective basis, or if
our new products or services or enhancements do not achieve market acceptance,
our business prospects would be seriously harmed. The life cycles of our
products and services are difficult to predict because the market for our
products and services is relatively new and emerging, and is characterized by
rapid technological change, changing customer needs and evolving industry
standards. The introduction of products and services employing new technologies
and emerging industry standards could render our existing products or services
obsolete and unmarketable in a very short time frame.
To be successful, our products and services must keep pace with
technological developments and emerging industry standards, address the
ever-changing and increasingly sophisticated needs of our customers and achieve
market acceptance.
In developing new enhancements and/or products and services, we may:
Fail to develop and market products that respond to technological
changes or evolving industry standards in a timely or
cost-effective manner;
Encounter products, capabilities or technologies developed by
others that rapidly render our products and services obsolete or
noncompetitive or that shorten the life cycles of our existing
products and services;
Experience difficulties that could delay or prevent the
successful development, introduction and marketing of these
enhancements and/or new products and services;
Fail to develop new products and services that adequately meet
the requirements of the marketplace or achieve market acceptance;
or
Fail to adequately protect our proprietary rights in new
technology that we develop.
Any one or a combination of these failures could seriously harm our
business prospects.
The markets that we compete in are very competitive and we face intense
competition from many participants in this industry. If we are unable to compete
successfully, our business prospects will be seriously harmed.
The markets that we compete in are intensely competitive, evolving and
subject to rapid technological change. We expect the intensity of competition to
increase in the future. Increased competition is likely to result in price
reductions, reduced gross profits and loss of market share, any one of which
could seriously harm our business prospects. Competitors vary in size and in the
scope and breadth of the products and services offered. With respect to our
business and computer products remarketing business, we compete with direct
manufacturers of such products, other major remarketers, computer mail order
companies, systems integrators, computer superstores and electronics superstores
and local computer stores, among others. With respect to our PECOS procurement
software applications,
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we compete with vendors of prepackaged electronic commerce software, vendors of
software tools for developing electronic commerce applications and system
integrators. Potential customers also may elect to develop their own interactive
commerce solutions. In addition, we expect additional competition from other
established and emerging companies, as the market for electronic commerce
applications continues to develop and expand. Our principal competitors for the
sale of business products, including computers and related supplies and office
products, offered through our Starbuyer.com web site include companies such as
Value America, Insight Enterprises, Inc., Cyberian Outpost, Inc. and other
traditional resellers of computers and related products. We also experience
competition from companies such as eBay, Inc. and uBid Inc. with respect to the
Internet auction activity conducted through our Starbuyer.com web site. Our
principal competitors for the licensing of our PECOS procurement applications
include companies such as Ariba, Inc., Commerce One, Inc., Clarus Corporation,
PurchasePro.com, Inc. and others.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources than us, significantly greater name recognition and a larger installed
base of customers. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address customer
needs. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. We also
expect that competition will increase as a result of industry consolidations. We
may not be able to compete effectively with current and future competitors. As a
result, current and future competitive pressures may have a material adverse
effect on our business, results of operations and financial condition.
We may be unable to maintain favorable relationships with our key vendors.
Substantially all of our revenue is derived from the remarketing of
business products, including computers and related supplies and office products
and associated hardware, peripherals and software (including products of various
major vendors). Our agreements with those vendors from which we purchase
products directly or for whom we are authorized to resell their products
generally contain provisions for periodic renewals and for termination by the
vendor without cause, generally upon relatively short notice. Although we
believe our vendor relationships are good, there can be no assurance that our
relationships will continue as presently in effect. The loss of a major vendor,
the deterioration of our relationship with a major vendor or the failure to
establish good relationships with major new vendors could seriously harm our
business. As is typical in our industry, we receive funds from most of our
vendors for market development, which are used to offset a portion of our sales
and marketing expense. Availability of such funds has been substantially reduced
in recent years and any further reductions in the availability of these credits
could harm our operating results. We are also dependent, in part, upon vendor
financing for working capital requirements. In these instances, the vendors pay
Deutsche Financial to provide us with interest free financing for specified
periods of time. We cannot assure you that vendor financing will continue to be
available to us on satisfactory terms and conditions, if at all. If we are
unable to obtain vendor financing on satisfactory terms and conditions our
business, financial condition and results of operations could be harmed.
Holding inventory poses inventory obsolescence risks.
The computer industry is characterized by rapid product improvement and
technological change resulting in relatively short product life cycles and rapid
product obsolescence, which can place inventory at considerable valuation risk.
We have recently reduced the level of inventory we stock, but continue to stock
inventory. Although it is industry practice for our suppliers to provide
selected aspects of price protection that are intended to reduce the risk of
inventory devaluation, such policies have been substantially curtailed in recent
years. We also may have the option of returning, subject to limitations, a
percentage of our current product inventories each quarter to certain
manufacturers as we assess each
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product's current and forecasted demand. The amount of inventory that can be
returned to suppliers varies under our agreements and these return policies, if
available, provide only limited protection against excess inventory. Some of our
suppliers do not accept any inventory returns. We cannot assure you that
suppliers will continue supporting return policies, that unforeseen new product
developments will not materially adversely affect our business prospects or that
we can successfully manage our existing and future inventories.
We may be unable to hire, retain and integrate key management and technical
personnel.
Our success depends to a large extent on our ability to attract and
retain senior management and technical personnel. Loss of members of our senior
management team or other key technical employees would hurt our business.
Competition for technical personnel is intense. We may be unable to retain our
present senior management team or other key technical employees or to attract,
assimilate or retain additional qualified employees in the future. In addition,
we may experience difficulty in hiring and retaining skilled employees with
appropriate qualifications. Our business prospects will be harmed if we fail to
attract and retain key employees.
We face uncertainty regarding Year 2000 compliance.
Elcom and third parties with which we do business rely on numerous
computer programs for day-to-day operations. Many currently installed computer
systems and software products are not capable of distinguishing 21st century
dates from 20th century dates. As a result, beginning on January 1, 2000, many
computer systems and software products could produce erroneous results or fail
unless they have been modified or upgraded to process date information
correctly. In addition, the Year 2000 is a leap year, and some computer systems
and software products may not properly provide for February 29, 2000. We have
completed the process of evaluating our computer systems and software and
believe our systems and software are Year 2000 compliant. We have yet to
experience any significant problems internally or with customers, clients or
electronic trading partners in connection with Year 2000 compliance.
Nevertheless, additional dates in the future exist, including February 29, 2000,
which could potentially cause computer system failures if we or our customers,
clients and electronic trading partners are not Year 2000 compliant. Failure of
our internal computer systems or software, or of systems maintained by our
customers, clients and electronic trading partners, to operate properly with
regard to the Year 2000 and thereafter could require us to incur significant
expenses to remedy any such problems, could result in a loss of revenues, and
otherwise adversely affect our business.
We depend on customers' increasing use of the Internet and on the growth of
electronic commerce. If the use of the Internet and electronic commerce does not
grow as anticipated, our business will be seriously harmed.
Our Internet PECOS software applications and Starbuyer.com Internet
storefront depend on the increased acceptance and use of the Internet as a
medium of commerce. Rapid growth in the use of the Internet is a recent
phenomenon. As a result, acceptance and use may not continue to develop and
expand at recent growth rates and a sufficiently broad base of business
customers may not adopt or continue to use the Internet as a medium of commerce.
Demand and market acceptance for recently introduced services and products over
the Internet are subject to a high level of uncertainty, and there exist few
proven services and products.
Our business prospects would be seriously harmed if:
Use of the Internet and other on-line services does not continue
to increase or increases more slowly than expected;
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The technology underlying the Internet and other on-line services
does not effectively support any expansion that may occur; or
The Internet and other on-line services do not create a viable
commercial marketplace, inhibiting the development of electronic
commerce and reducing the need for our products and services.
Security risks and concerns may deter the use of the Internet for conducting
electronic commerce.
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. Advances
in computer capabilities, new discoveries in the field of encryptography or
other events or developments could result in compromises or breaches of the
software security systems we license or those of other web sites to protect
proprietary information. If any well-publicized compromises of security were to
occur, it could have the effect of substantially reducing the use of the
Internet for commerce and communications. Anyone who circumvents our software
security systems could misappropriate proprietary information or cause
interruptions in our services or operations. The Internet is a public network,
and data is sent over this network from many sources. In the past, computer
viruses, software programs that disable or impair computers, have been
distributed and have rapidly spread over the Internet. Computer viruses could be
introduced into our systems or those of our customers or suppliers, which could
disrupt our Starbuyer.com network or make our PECOS applications inaccessible to
customers or suppliers. We may be required to expend significant capital and
other resources to protect against the threat of security breaches or to
alleviate problems caused by breaches. To the extent that our activities may
involve the storage and transmission of proprietary information, such as credit
card numbers, security breaches could expose us to a risk of loss or litigation
and possible liability. Our security systems may be inadequate to prevent
security breaches, and our business would be harmed if we do not prevent them.
Recently, our stock price has been extremely volatile and could continue to be
highly volatile, as is typical of technology and Internet-related companies.
The stock market has experienced significant price and volume
fluctuations, and the market prices of securities of technology companies,
particularly Internet-related companies, have been highly volatile. Many of the
factors that might cause volatility in the market price of our common stock are
beyond our control. Some of these factors include:
actual or anticipated variations in our quarterly operating
results;
announcements of technological innovations or new products or
services by us or our competitors;
changes in financial estimates by securities analysts;
conditions or trends in electronic commerce;
changes in the economic performance or market valuations of other
Internet, electronic commerce or business-to-business companies;
announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments;
additions or departures of key personnel;
release of lock-up or other transfer restrictions on our
outstanding shares of common stock or sales of additional shares
of common stock; and
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potential litigation.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company. The institution of such litigation against us
could result in substantial costs to us and a diversion of our management's
attention and resources.
Our stock price could be affected by shares of our common stock becoming
available for sale in the future.
Under the equity line, we may issue to Cripple Creek up to $10 million
of common stock and Cripple Creek may require us to issue up to an additional
$10 million of common stock during each monthly investment period (or up to an
aggregate of $50 million during the term of the equity line) at a price equal to
100% of the lowest volume-weighted average sale price during the five days
immediately preceding the notice of purchase delivered to us by Cripple Creek.
We will also issue to Cripple Creek warrants to purchase up to an aggregate of
750,000 shares of common stock at a price equal to 120% of the price paid by
Cripple Creek for the common stock purchased under the equity line. In addition,
we have granted warrants to purchase 353,418 shares of common stock, at an
exercise price equal to $28.71 per share to Wit Capital Corporation, the
financial advisor, in connection with the equity line agreement. The resale by
the selling stockholders of the common stock that they acquire could depress the
market price of the common stock. In addition, because all of the shares
issuable in connection with the equity line, including the shares received upon
exercise of any warrants, will be available for immediate resale by the selling
stockholders, the prospects of such sales could further cause the price of the
common stock to decline.
In addition, as of December 31, 1999, we had an aggregate of 28,876,821
shares of common stock outstanding, of which 23,521,793 shares were held by
non-affiliates and are freely tradeable in the public market without
restriction. The remaining 5,355,028 shares are held by affiliates of Elcom and
are considered "restricted securities" subject to the resale limitations of Rule
144. Sales of a substantial number of shares of common stock in the public
market after this offering could depress the market price of the common stock
and could impair our ability to raise capital through the sale of additional
equity securities.
You are unlikely to receive dividends for the foreseeable future.
We have never declared or paid cash dividends on our common stock. We
currently intend to retain all available funds and future earnings, if any, for
use in the operation and expansion of our business and do not anticipate paying
any cash dividends in the foreseeable future.
Our management's broad discretion in the use of proceeds from the equity line
may adversely affect your investment.
We have no current specific plans for the use of the net proceeds from
the equity line. Although we generally intend to use the net proceeds for
marketing and branding expenditures in support of our PECOS procurement system
and Starbuyer.com, for general corporate purposes, including working capital,
and for expenses incurred in connection with the equity line agreement, we have
not yet determined the actual expected expenditures and thus, cannot estimate
the amounts to be used for each specified purpose. The actual amounts and timing
of these expenditures will vary significantly depending upon a number of
factors, including, but not limited to, the amount of cash generated by our
operations and the market response to our services. Depending on future
developments and circumstances, we may
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use some of the proceeds for uses other than those described above. Our
management will therefore have significant flexibility in applying the net
proceeds from the equity line. Our success and growth depends on the effective
use of the net proceeds.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements that involve risks and uncertainties. These forward-looking
statements have been made pursuant to the provisions of the Private Securities
Litigation Reform Act of 1995. These statements are not historical facts, but
rather refer to our future plans and current objectives, expectations and
intentions. Words such as "believes," "may," "will," "expects," "anticipates,"
"intends," "plans," and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other factors, some of
which are beyond our control, are difficult to predict and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. Factors that could contribute to these differences
include, but are not limited to, those discussed in "Risk Factors" and elsewhere
in this prospectus. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. We are not
obligated to update these statements or publicly release the result of any
revision to them to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
ABOUT ELCOM
We develop and license automated procurement software applications that
facilitate business-to-business electronic commerce and, through our computer
remarketing subsidiaries, which are the source of substantially all of our net
sales since inception, use versions of our technology as well as Internet-based
technologies and other traditional reselling methods to sell and market computer
products. Through elcom.com, inc., our eBusiness technology subsidiary, we
developed our PECOS(R) (Personal Electronic Catalog and Ordering System)
technologies, which enable companies to communicate, market, sell and buy
various goods and services electronically. We license our PECOS technology
product line to companies in a broad range of industries.
elcom.com, inc.
Our eBusiness technology subsidiary, elcom.com, is a provider of
intranet- and Internet-based applications that automate the procurement
processes for businesses. Through elcom.com, we also operate our Starbuyer.com
Internet on-line business-to-business store and auction site, where we market
and sell over 150,000 business products, including computer products, office
supplies, and other commodity-type products. Our procurement software
applications and Internet storefront, which were commercially introduced in
1999, are designed to enable buying organizations to control expenditures for
non-production goods and services commonly referred to as "operating resources,"
which include office products, computers and other products necessary for the
day-to-day operation of most business enterprises. We intend to be a leading
provider of remotely-hosted automated procurement applications and a premier
business-to-business Internet storefront supplier of operating resources to
companies.
PECOS Procurement Manager, or PECOS.PM, is our software application
that enables our customers to be able to automate substantially all of their
operating resources procurement process. PECOS.PM is designed to reduce internal
product acquisition costs by eliminating the inefficiencies associated with
traditional paper-based purchasing processes. PECOS.PM helps to automate the
internal processes required to identify and select products, check pricing,
solicit approvals, place orders electronically and track orders through the
fulfillment process. PECOS.PM can be deployed either within
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a company's intranet (internal computer networks that are based on Internet
protocol) through PECOS.EPM, or can be remotely-hosted through elcom.com by use
of our PECOS Internet Procurement Manager, or PECOS.ipm. Due to the substantial
benefits of remote-hosting, both to the client and to us, we expect to focus a
substantial majority of our marketing efforts on PECOS.ipm.
We launched elcom.com's Internet storefront, Starbuyer.com, on March 2,
1999. Starbuyer is targeted to business customers that desire to purchase
operating resources on-line from a single source and do not need high levels of
overall procurement automation. We offer more than 150,000 business, office and
computer products through our Internet storefront at Starbuyer.com. Our
elcom.com Internet storefront reported net sales of $2.0 million in the first
quarter of 1999, $14.5 million in the second quarter, $12.2 million in the third
quarter and $19.6 million in the two-month period ending November 30, 1999.
Elcom Services Group, Inc.
Through our subsidiary, Elcom Services Group, Inc.(R), we use our PECOS
technology, as well as traditional methods, to market and sell computer-related
products to business customers, which has generated substantially all of our net
sales to date. We believe that the use of our PECOS applications differentiates
us from other computer remarketers. We commenced operations in December 1993,
and experienced rapid growth through the end of 1997. We achieved our growth by
offering our PECOS technology to our customers and by various marketing efforts,
including the expansion of our direct sales force nationwide and by the
acquisition of six computer remarketers. Our computer remarketer acquisition
strategy included utilizing an acquired company's sales force to offer PECOS to
prospective customers in those new markets and, over time, to transition the
acquired company's customers to the PECOS system, thereby generating increasing
revenues through the PECOS system. A portion of our revenues are generated by
several companies we acquired that have not converted their customers' orders to
a PECOS system and these entities continue to use traditional methods of selling
and order taking.
Through Elcom Services Group, we offer over 23,000 products
manufactured by leading companies such as Compaq, IBM, Toshiba, Hewlett-Packard
and Apple through PECOS.cm, our "sell-side" application, and 62,000 products
through PECOS.web, our Internet-based sell-side application. We are currently
finalizing development of a version of PECOS. web for use by our United Kingdom
subsidiary. Several product manufacturers have paid marketing fees to Elcom
Services Group to advertise their products in PECOS.cm and PECOS. web. Orders
placed through PECOS.cm and PECOS. web for products that are in stock generally
are fulfilled from our inventory or the inventory of one of our distribution
fulfillment partners, which include Ingram Micro, Inc., and Tech Data
Corporation, two of the largest computer product distributors in the world. We
also offer a wide range of professional services to our customers, and have
recently increased our focus on attempting to grow this business segment. We
operate seven field sales and support offices in the U.S. and two in the U.K.,
and maintain configuration and distribution facilities in Canton, MA; Irvine,
CA; and Hounslow, Middlesex, U.K. We also utilize an outsourced facility in
Hartford, CT.
USE OF PROCEEDS
We will not receive any of the proceeds from the resale by the selling
stockholders of the shares offered by this prospectus. However, we will receive
proceeds:
from the original issuance of the shares, if any, to Cripple
Creek under the equity line and
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from the cash payment, if any, upon exercise of any warrants that
have been or may be issued to the selling stockholders.
We could receive, before expenses, up to $50 million in proceeds under
the equity line. In addition, Cripple Creek will receive warrants to purchase up
to 750,000 shares of common stock. The amount of gross proceeds, if any,
received upon exercise of the warrants issuable to Cripple Creek will depend on
the exercise price of the warrants, which is specified in the equity line as
120% of the weighted average purchase price of the common stock purchased during
the commitment period. Wit Capital Corporation has received warrants to purchase
353,418 shares of common stock having an exercise price of $28.71 per share.
Cripple Creek and, with our consent, Wit Capital may effect a "cashless"
exercise of the warrants by requesting that shares with a value equal to the
exercise price of the warrants be withheld to pay the exercise price, in which
case we will not receive any proceeds from the exercise of the warrant.
The actual amount of proceeds from the equity line and the warrants, if
any, will depend upon
the market price of the common stock,
whether the selling stockholders elect to exercise the warrants
and, if so, whether they elect and, in the case of Wit Capital,
are permitted, to effect a "cashless" exercise of their warrants,
whether we elect to require Cripple Creek to purchase common
stock as permitted under the terms of the equity line; and
whether Cripple Creek elects to purchase common stock as
permitted under the terms of the equity line.
However, there can be no assurance that we will issue any shares or receive any
proceeds from the equity line or the exercise of warrants and, under the terms
of the equity line, it is possible that no shares will be issued.
We expect that any net proceeds from the equity line and the warrants
will be used for:
marketing and branding expenditures in support of our PECOS
procurement system and Starbuyer.com;
general corporate purposes, including working capital; and
expenses incurred in connection with the equity line agreement,
including the payment of the placement fee to Wit Capital, as
described below in "Selling Stockholders."
SELLING STOCKHOLDERS
Cripple Creek has not had a material relationship with Elcom within the
past three years, other than as a result of entering into the equity line
agreement and related agreements. As of the date of this prospectus, Cripple
Creek does not own any shares of common stock. Cripple Creek is offering by this
prospectus up to 2,500,000 shares that it may acquire under the equity line
agreement and up to 750,000 shares issuable upon the exercise of warrants that
may be issued to Cripple Creek under the equity line agreement. See "Equity
Line" below.
Wit Capital has not had a material relationship with Elcom within the
past three years, other than in its capacity as financial advisor for Elcom
pursuant to a letter agreement dated July 8, 1999. In that capacity, Wit Capital
introduced Elcom to Cripple Creek and, in addition to the 353,418 warrants it
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received, will be paid a cash placement fee equal to 7% of the amount of
proceeds received by Elcom from sales of the shares of common stock under the
equity line, but in no event will Wit Capital receive less than $700,000 as its
cash placement fee. As of the date of this prospectus, Wit Capital does not own
or have an interest in any shares of our common stock, other than the 353,418
shares being offered by this prospectus upon exercise of warrants, which, as of
December 31, 1999, represented approximately 1% of the outstanding shares of our
common stock on a fully diluted basis. Eighty percent of the warrants became
exercisable upon issuance and the remaining 20% became exercisable upon the date
of this prospectus. The warrants held by Wit Capital expire on December 30,
2002.
EQUITY LINE
We entered into a Structured Equity Line Flexible Financing Agreement
and a related registration rights agreement with Cripple Creek, each dated
December 30, 1999. The shares covered by this prospectus are being issued under
the equity line agreement or upon exercise of warrants issued in connection with
the equity line, including warrants issued to our financial advisor.
Under the equity line agreement, we may require Cripple Creek to
purchase shares of our common stock over a period of 18 months beginning on the
eleventh day following the date of this prospectus. The equity line provides for
monthly investment periods commencing on that date. During any monthly
investment period, we may, in our sole discretion, require Cripple Creek to
purchase between $1 million and $10 million of common stock by delivering a "put
notice" to Cripple Creek on or before the third trading day before the beginning
of the investment period. During any investment period for which we have issued
a put notice, Cripple Creek may deliver a "call notice" at any time prior to the
twentieth day of such investment period. Cripple Creek's call notice would
require us to sell to Cripple Creek an additional amount of common stock up to
the amount set forth in our put notice during such investment period, but in no
event less than $1 million. The maximum amount of common stock that may be
purchased under the equity line may not exceed $50 million, excluding warrants.
The purchase price per share for the common stock issued under the
equity line will be equal to the lowest daily volume-weighted average stock
price of the five trading days preceding the put notice or the call notice, as
the case may be. However, we may set a minimum purchase price per share by
delivering notice thereof on or before three trading days before the beginning
of any investment period. In calculating the purchase price, if the
volume-weighted average stock price for a given trading day in the five-day
period before delivery of the put notice or call notice, as the case may be, is
below the minimum price that we set, then, upon notice from Cripple Creek, the
stock price for that trading day will be deemed to be the minimum purchase
price. If no notice is given by Cripple Creek, the stock price for such trading
day will be excluded from the determination of the purchase price.
Cripple Creek's obligation to purchase shares of common stock during
any investment period is subject to the satisfaction of various conditions,
including:
our registration statement must remain effective under the
Securities Act of 1933;
our common stock must continue to trade on the Nasdaq National
Market; and
Cripple Creek may not become the beneficial owner, at any time,
of more than 9.9% of the outstanding shares of our common stock.
The equity line agreement also provides limitations on the amount of
common stock that may be issued to Cripple Creek, which may be less than the
amount indicated in the put notice and call notice. Specifically, the amount of
common stock issuable during each monthly investment period will be equal to the
lesser of (i) the amount indicated in the put notice and call notice, if any,
(ii) an amount equal to 8%
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of the average daily value of open market trading during the investment period
immediately preceding the current investment period times the number of days
during such investment period that the volume-weighted average of the common
stock is above the minimum price for such investment period or (iii) an amount
equal to 8% of the average daily value of open market trading during the current
investment period times the number of days during such investment period that
the volume-weighted average of the common stock is above the minimum price for
the current investment period. In addition, the equity line also provides for a
pro rata reduction in the amount of common stock that we may issue if there are
any trading days during the period in which the volume-weighted average of the
common stock is below the minimum price that we set for the period. In such
event, the amount of common stock issuable during the period will be equal to
the amount issuable, after adjustment in accordance with the second sentence of
this paragraph, times a fraction, the numerator of which is the number of days
that the stock price is above the minimum price and the denominator is the total
number of trading days in the month.
We also have agreed to issue to Cripple Creek warrants to purchase
15,000 shares for every $1 million in gross proceeds from the sale of common
stock under the equity line agreement. We are obligated to issue warrants to
purchase a minimum of 150,000 shares of common stock, regardless of the amount
of common stock sold under the equity line. However, up until the time of the
effectiveness of this prospectus, under limited circumstances involving our
termination of the equity line agreement, the minimum amount of warrants that we
would have been required to issue to Cripple Creek would have been reduced from
150,000 to 100,000. In those limited circumstances, Wit Capital would have been
entitled to exercise only 80% of its warrant.
The warrants to Cripple Creek will be issued after the end of 18-month
period or upon early termination, if any. The warrants are exercisable for 5
years from the date they are issued at an exercise price equal to 120% of the
weighted average price at which shares of common stock were sold under the
equity line or, if the warrants are issued to satisfy the minimum amount, the
exercise price will equal 120% of the volume-weighted price of the common stock
for the five trading days before the termination of the agreement.
We may terminate the equity line at any time without further obligation
(beyond the minimum warrants) to Cripple Creek. Cripple Creek may terminate the
equity line without further obligation to us only if Cripple Creek determines,
in its reasonable discretion, that the adoption of, or change in, or any change
in the interpretation or application of, any law, regulation, rule, guideline or
treaty makes it illegal or materially impractical for Cripple Creek to fulfill
its obligations under the equity line agreement.
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell all or a portion
of the shares:
on the Nasdaq National Market, or such other exchange on which
the common stock may from time to time be trading;
in privately negotiated transactions or otherwise;
at fixed prices that may be changed;
at market prices prevailing at the time of sale; or
at prices related to such market prices or at negotiated prices.
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The selling stockholders are not restricted as to the price at which
they may sell the shares of common stock offered by this prospectus. The shares
may be sold by the selling stockholders by one or more of the following methods,
without limitation:
block trades in which the broker or dealer will attempt to sell
the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
an exchange distribution in accordance with the rules of such
exchange;
ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
privately negotiated transactions;
short sales; and
a combination of any of the above methods of sale.
In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling stockholders, or,
if any broker-dealer acts as agent for the purchaser of the shares, from the
purchaser, in amounts to be negotiated that are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the selling stockholders to sell a specified number of shares at a stipulated
price per share. To the extent a broker-dealer is unable to sell a specified
number of shares acting as agent for the selling stockholders, it will purchase
as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the selling stockholders. Broker-dealers who acquire
shares as principal may resell the shares from time to time in transactions that
may involve block transactions of the nature described above, in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices related to the then-current market price or in
negotiated transactions. In connection with resales, broker-dealers may pay to
or receive from the purchasers of the shares commissions as described above. The
selling stockholders also may sell the shares in accordance with Rule 144 under
the Securities Act, rather than under this prospectus.
Cripple Creek is an "underwriter" as defined in the Securities Act of
1933 in connection with the sale of the shares offered by this prospectus. Any
broker-dealers or agents that participate with Cripple Creek in sales of the
shares may be considered to be "underwriters" within the meaning of the
Securities Act in connection with sales in which they participate. If any
broker-dealers or agents are considered to be "underwriters," then any
commissions they receive and any profit on the resale of the shares purchased by
them may be considered to be underwriting commissions or discounts under the
Securities Act.
From time to time the selling stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in our common
stock, and may sell and deliver the shares in connection with these transactions
or to settle securities loans. If the selling stockholders engage in such
transactions, the price of our common stock may be affected. Under the equity
line agreement, Cripple Creek may not make any sales with the intention of
reducing the price of our common stock. From time to time the selling
stockholders may pledge their shares pursuant to the margin provisions of their
agreements with their brokers. Upon a default by the selling stockholder, the
broker may offer and sell the pledged shares from time to time.
The selling stockholders and any other persons participating in the
sale or distribution of the shares will be subject to the Securities Exchange
Act of 1934 and the related rules and regulations,
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including Regulation M, to the extent it applies. The Exchange Act and related
rules may limit the timing of purchases and sales of any of the shares by the
selling stockholders or any other such person that may affect the marketability
of the shares. The selling stockholders also must comply with the applicable
prospectus delivery requirements under the Securities Act in connection with the
sale or distribution of the shares.
We are required to pay certain fees and expenses incident to the
registration of the shares.
We have agreed to indemnify the selling stockholders in certain
circumstances against certain liabilities, including liabilities under the
Securities Act. Cripple Creek has agreed to indemnify us in certain
circumstances against certain liabilities, including liabilities under the
Securities Act.
We have agreed to use our best efforts to keep the registration
statement, of which this prospectus is a part, effective until the shares may be
or have been sold under Rule 144(k) of the Securities Act.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon for Elcom International, Inc. by Calfee, Halter & Griswold LLP,
Cleveland, Ohio.
EXPERTS
The financial statements and schedules incorporated by reference in
this prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their reports. In those reports, that firm states
that with respect to certain subsidiaries its opinion, during the year ended
December 31, 1996, is based on the reports of other independent public
accountants, namely Deloitte & Touche. The financial statements and supporting
schedules referred to above have been included herein in reliance upon the
authority of those firms as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy these reports, proxy statements and other
information at the Commission's public reference room located at 450 Fifth
Street, N.W., Washington, D.C 20549. Please call the Commission at
1-800-SEC-0330 for more information about the operation of the public reference
room. You can request copies of these documents by writing to the Commission and
paying a fee for the copying cost. Our filings with the Commission are also
available at the Commission's Web site at "http://www.sec.gov." We also maintain
a Web Site at "www.elcominternational.com", which provides additional
information about our company. The information set forth on our Web site is not
a part of this prospectus.
We have filed a registration statement on Form S-3 with the Commission
under the Securities Act of 1933, as amended, relating to the common stock
offered by this prospectus. This prospectus does not contain all of the
information set forth in the registration statement. Some information has been
omitted in accordance with the rules and regulations of the Commission. For
further information, please refer to the registration statement and the exhibits
and schedules filed with it.
INFORMATION INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" into this
prospectus the information in documents that we file with the Commission. This
means that we can disclose important information to you by referring you to
other documents that we have filed separately with the Commission. The
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information incorporated by reference is an important part of this prospectus,
and the information that we file with the Commission after the date hereof will
automatically update and may supersede this information. Until the termination
of the offering of the common stock by this prospectus, we incorporate by
reference the documents listed below and any future filings that we make with
the Commission under section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, except for portions of those documents that
are not deemed to be filed with the Commission or are not required to be filed
with the Commission by statute, designation or otherwise.
(a) Our Annual Report on Form 10-K for the year ended December 31,
1998 (the audited financial statements incorporated herein by
reference should be read in conjunction with the discussion on
page 3 that we will be in default of the net income covenant of
our secured line of credit);
(b) Our Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999, June 30, 1999 and September 30, 1999;
(c) Our Current Report on Form 8-K, dated October 26, 1999 and
Amendment No. 1 thereto, dated December 8, 1999; and
(d) The description of our common stock set forth in our Registration
Statement on Form 8-A, filed with the Commission on December 12,
1995.
We will provide to you at no cost a copy of any and all of the
information incorporated be reference into the registration statement of which
this prospectus is a part. You may make a request for copies of this information
in writing or by telephone. Requests for copies should be directed to:
Elcom International, Inc.
Attention: Chief Financial Officer
10 Oceana Way
Norwood, Massachusetts 02062
Telephone: (781) 440-3333
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===============================================================================
ELCOM INTERNATIONAL, INC.
3,603,418 Shares
Common Stock
PROSPECTUS
, 2000
===============================================================================
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS.
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses payable by the
Company in connection with the sale and distribution of the Common Stock
registered hereby:
SEC Registration Fee..........................................$ 19,321
Accounting Fees (for the Company and selling stockholders)....$ 140,000
Fees and Expenses of Counsel (for the Company
and selling stockholders).............................$ 200,000
Nasdaq Additional Listing Fee.................................$ 17,500
Placement Fee ................................................$3,500,000*
Miscellaneous.................................................$ 23,179
Total......................................................$3,900,000
- ----------------
*The Company is required to pay a placement fee to its financial advisor in an
amount equal to the greater of $700,000 or 7% of the gross proceeds received by
the Company in connection with the equity line agreement. See "Selling
Stockholders." The estimate set forth assumes the issuance of $50 million of
Common Stock, the maximum amount issuable under the equity line agreement.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporate Law (the "Delaware GCL")
sets forth the conditions and limitations governing the indemnification of
officers, directors and other persons. Section 145 provides that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or contemplated action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation in a similar
capacity with another corporation or other entity, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement incurred in
connection therewith if the person acted in good faith and in a manner that the
person reasonably believed to be in the best interests of the corporation. With
respect to a suit by or in the right of the corporation, indemnity may be
provided to the foregoing persons under Section 145 on a basis similar to that
set forth above, except that no indemnity may be provided in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
the corporation unless and to the extent that the Delaware Court of Chancery or
the court in which such action, suit or proceeding was brought determines that
despite the adjudication of liability, but in view of all the circumstances of
the case, such person is entitled to indemnity for such expenses as the court
deems proper. Moreover, Section 145 provides for mandatory indemnification of a
director, officer, employee or agent of the corporation to the extent that such
person has been successful in defense of any such action, suit or proceeding and
provides that a corporation may pay the expenses of an officer or director in
defending an action, suit or proceeding upon receipt of an undertaking to repay
such amounts if it is ultimately determined that such person is not entitled to
be indemnified. Section 145 establishes provisions for determining that a given
person is entitled to indemnification, and also provides that the
indemnification provided by or granted under Section 145 is not exclusive of any
rights to indemnity or advancement of expenses to which such person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 102 (b) of the Delaware GCL permits corporations to eliminate
or limit the personal liability of a Director to the corporation or its
stockholders for monetary damages for breach of the Director's duty of care.
Accordingly, the Article SEVENTH of the Company's Second Restated Certificate of
Incorporation (the "Certificate") provides that a Director of the Company shall
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a Director, except for liability (i) for any
breach of the Director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith that
<PAGE>
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware GCL or (iv) for any transaction from which the
Director derived an improper personal benefit.
Article EIGHTH of the Certificate provides in part that the Company
shall indemnify any Director or officer who was or is a party or is threatened
to be made a party to, or is involved in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, be reason of the fact that he or she is or was a director or
officer of the Company, or is or was serving at the request of the Company, as a
director or officer or certain other entities, against all expense, liability
and loss (including attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid or to be paid in settlement) actually or reasonably incurred or
suffered by such person in connection with such action, suit or proceeding.
The Company has also entered into indemnity agreements (the "Indemnity
Agreements") with its directors and executive officers that expand the
protection provided to the Company's directors and officers and are based upon
sections of the Delaware GCL and Article EIGHTH of the Certificate that
recognize the validity of additional indemnity rights granted by agreement. The
substantive content of the Indemnity Agreements and Article EIGHTH of the
Certificate is substantially the same, except that, pursuant to the Indemnity
Agreements, indemnity is expressly provided for settlements in derivative
actions and partial indemnification is permitted in the event that the director
or executive officer is not entitled to full indemnification.
Both the Delaware GCL and Article EIGHTH of the Certificate provide
that the Company may maintain insurance to cover losses incurred pursuant to
liability of Directors and officers of the Company. The Company has purchased a
Directors and Officers Liability Insurance Policy, which insures the directors
and officers against certain liabilities that might arise in connection with
their respective positions with the Company.
Item 16. Exhibits.
See the Exhibit Index at page E-1 of this Registration Statement.
Item 17. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during the period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or event arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities
offered (if the total dollar value of securities
offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(iii)To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is
<PAGE>
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(b) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes that for the purpose
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted for Directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norwood and the State of Massachusetts, as of the
14th day of January, 2000.
ELCOM INTERNATIONAL, INC.
By: /s/ Robert J. Crowell
Robert J. Crowell
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 14, 2000.
Signature Title
/s/ Robert J. Crowell Chairman of the Board of Directors
Robert J. Crowell and Chief Executive Officer
(Principal Executive Officer)
/s/ Peter A. Rendall Chief Financial Officer
Peter A. Rendall (Principal Financial and Accounting Officer)
*
Richard J. Harries, Jr. Director
*
John W. Oritz Director
*
William W. Smith Director
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named directors of the Company and which are being filed herewith with the
Securities and Exchange Commission on behalf of such directors.
/s/ Robert J. Crowell
Robert J. Crowell, Attorney-in-Fact
<PAGE>
EXHIBITS
Exhibit No. Description
4.4 Specimen certificate of Registrant's Common Stock. (1)
5.1 Opinion of Calfee, Halter & Griswold LLP as to the validity of
the shares of Common Stock. (x)
10.7 Structured Equity Line Flexible Financing Agreement, dated
December 30, 1999, between the Registrant and Cripple Creek
Securities, LLC. (x)
10.8 Registration Rights Agreement, dated December 30, 1999,
between the Registrant and Cripple Creek Securities, LLC. (x)
10.9 Form of Warrant and Minimum Commitment Warrant of the
Registrant issuable to Cripple Creek Securities, LLC. (x)
10.10 Warrant Agreement, dated as of December 30, 1999,
between the Company and Wit Capital Corporation. (x)
10.42 Wit Capital Corporation Engagement Letter, dated July 8, 1999. (2)
23.1 Consent of Calfee, Halter & Griswold LLP (included in
Exhibit 5.1 of this Registration Statement).
23.2 Consent of Arthur Andersen LLP. (x)
23.3 Consent of Deloitte & Touche. (x)
24.1 Powers of attorney. (x)
- -----------
(1) Previously filed as an exhibit to Registration Statement No. 33-98866 on
Form S-1 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's quarterly report on
Form 10-Q for the quarterly period ended September 30, 1999 and
incorporated herein by reference.
(x) Filed herewith.
E-1
Exhibit 5.1
[Calfee, Halter & Griswold LLP Letterhead]
January 14, 2000
Elcom International, Inc.
10 Oceana Way
Norwood, Massachusetts 02602
We are familiar with the proceedings taken by Elcom International,
Inc., a Delaware corporation (the "Company"), with respect to 3,603,418 shares
of the Company's Common Stock, par value $.01 per share (the "Common Stock"),
consisting of (i) up to 2,500,000 shares of Common Stock (the "Shares") issuable
from time to time, under certain circumstances, to Cripple Creek Securities,
LLC, a Delaware limited liability company ("Cripple Creek"), pursuant to the
terms of the Structured Equity Line Flexible Financing Agreement (the "Equity
Line Agreement"), dated as of December 30, 1999, between the Company and Cripple
Creek, (ii) up to 750,000 shares of Common Stock issuable upon exercise of
warrants (the "Cripple Creek Warrants") issuable to Cripple Creek pursuant to
the Equity Line Agreement and (iii) up to 353,418 shares of Common Stock
issuable upon exercise of warrants (together with the Cripple Creek Warrants,
the "Warrants") issued to Wit Capital Corporation in connection with its
activities as financial advisor to the Company (the shares of Common Stock
issuable to Cripple Creek or Wit Capital Corporation upon exercise of the
Warrants are hereinafter referred to as "Warrant Shares"). As counsel for the
Company, we have assisted in the preparation of a Registration Statement on Form
S-3 (the "Registration Statement") to be filed by the Company with the
Securities and Exchange Commission to effect the registration of the Shares and
the Warrant Shares under the Securities Act of 1933, as amended.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion, and based thereon we are of the
opinion that (i) the Shares, when issued and delivered against payment therefor
all in accordance with the terms of the Equity Line Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and (ii) the Warrant
Shares, when issued and delivered against payment therefor all in accordance
with the terms of the Warrants, will be duly authorized, validly issued, fully
paid and non-assessable.
This opinion is limited to the General Corporation Law of the State of
Delaware, and we express no view as to the effect of any other law on the
opinions set forth herein. In rendering this opinion, we have assumed, without
independent verification, the truth and accuracy of all of the representations
and warranties in the Equity Line Agreement and the Warrants.
This opinion is intended solely for your use in connection with the
filing of the Registration Statement with respect to the Shares and the Warrant
Shares, and may not be reproduced, filed publicly or relied upon by any other
person for any purpose without the express written consent of the undersigned.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, and to the reference to us under the caption "Validity
of Shares" in the Prospectus comprising part of the Registration Statement.
Very truly yours,
/s/ CALFEE, HALTER & GRISWOLD LLP
CALFEE, HALTER & GRISWOLD LLP
Exhibit 10.7
STRUCTURED EQUITY LINE FLEXIBLE FINANCING(SM) AGREEMENT dated as of
December 30, 1999 (the "Agreement"), between Cripple Creek Securities, LLC, a
limited liability company organized and existing under the laws of the State of
New York (the "Investor"), and Elcom International, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company").
W I T N E S S E T H :
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may elect to issue to the Investor,
and, at the Company's option, the Investor shall purchase from the Company, from
time to time as provided herein, shares of the Company's Common Stock, $.01 par
value (the "Common Stock"), for a maximum aggregate Purchase Price of
$50,000,000 (the "Maximum Offering Amount"); and
WHEREAS, such investments, if made, will constitute issuances of
Common Stock not subject to a requirement of registration under the Securities
Act of 1933, as amended (the "Securities Act"), other than registration in
connection with resale of the Common Stock by the Investor.
NOW, THEREFORE, the parties hereto agree as follows:
I.
CERTAIN DEFINITIONS
1.1 Defined Terms. As used in this Agreement (including the
recitals above), the following terms shall have the following meanings specified
or indicated (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Affiliate" shall mean, with respect to a specified Person, a
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person.
"Applicable Quantity" shall mean the number of shares of Common
Stock that is determined by dividing the Investment Amount by the Purchase
Price, rounded up or down to the nearest whole number of shares.
"Balance Sheet" shall mean the unaudited consolidated balance sheet
of the Company as of September 30, 1999.
"Benefit Plan" shall have the meaning set forth in Section 5.12
hereof.
"Blocking Event" shall have the meaning set forth in Section 2.5(a)
hereof.
<PAGE>
"Bloomberg" shall mean Bloomberg Financial Press.
"Blue Sky Laws" shall mean the United States state securities and
takeover laws.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
any and all equivalent ownership interests in a Person (other than a
corporation).
"Closing" shall mean the consummation of each purchase and sale of
Common Stock pursuant to Section 2.4 hereof.
"Closing Date" shall mean, with respect to each purchase and sale
of Common Stock, subject to the conditions contained herein, the second Trading
Day following the date of receipt of an Investor Notice to the Company of its
election to purchase Common Stock from the Company (as extended pursuant to this
Agreement).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment Period" shall mean the period commencing on the date
that the first Investment Period begins and expiring on the earliest to occur of
(a) the election by the Company or the Investor to terminate the Investor's
obligation to purchase Common Stock pursuant to Section 10.4 herein, (b) the
date on which the Investor shall have made purchases of Common Stock pursuant to
this Agreement in an aggregate Purchase Price of $50,000,000 or such lesser
maximum purchase amount as determined pursuant to Section 2.2, (c) the date this
Agreement is terminated pursuant to Section 2.5, and (d) the date occurring 18
months (subject to extension as provided by Section 2.5(a)(ii)) after the date
that the first Investment Period begins.
"Common Stock" shall have the meaning set forth in the recitals
above.
"Company Assets" shall have the meaning set forth in Section 5.16
hereof.
"Company Put Amount" shall have the meaning set forth in Section
2.1(a) hereof.
"Company Put Notice" shall have the meaning set forth in Section
2.3(a) hereof.
"Company Put Purchase Date" shall mean any Trading Day upon which
the Investor notifies the Company by delivery of an Investor Notice of the
Investor's election to purchase all or a portion of a Company Put Amount.
"Compensation Plans" shall mean any stock or option or similar
equity-based compensation plans.
"Condition Satisfaction Date" shall have the meaning set forth in
Section 3.2 hereof.
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<PAGE>
"Effective Date" shall mean December 30, 1999, or such later date
as all of the three following conditions shall have occurred: (i) the Company
shall have delivered the fully executed Registration Rights Agreement, and any
other documents required to be delivered pursuant to the terms of this
Agreement, (ii) the Company shall have indicated to the Investor in writing that
the Exhibits to this Agreement are in final form and delivered such Exhibits to
the Investor, and (iii) the Registration Statement shall have become effective.
"Environmental Laws" shall mean all federal, state, local and
foreign laws and regulations primarily relating to pollution or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws and
regulations primarily relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise primarily relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Equity Offering" shall mean the issuance and sale by the Company,
(a) in a registered public offering or (b) in a transaction exempt from or not
subject to the registration requirements of the Securities Act, of any shares of
Common Stock or securities which are convertible into or exchangeable for the
Company's Common Stock or any warrants, options or other rights to subscribe for
or purchase its Common Stock or any such convertible or exchangeable securities
(other than securities issued or issuable to any present or future or former (at
the time of issuance) employee, officer, director or consultant of the Company
or its Subsidiaries pursuant to any Compensation Plans), upon the conversion or
exchange of convertible or exchangeable securities or upon the exercise of
warrants (excluding the Warrants), or other rights, or upon the issuance of any
shares of Common Stock issued upon exercise of options, conversion or exchange
of convertible or exchangeable securities, warrants or other rights outstanding
on the date of execution and delivery of this Agreement, but other than (i)
those listed or described in the SEC Documents on file with the SEC (other than
the Warrants), (ii) shares of Common Stock which may be issued upon exercise of
options granted under the Compensation Plans, (iii) shares of Common Stock which
may be issued upon exercise of the Warrants, (iv) shares of Common Stock or
securities which are convertible into or exchangeable for Common Stock or any
warrants, options or other rights to subscribe for or purchase Common Stock or
any such convertible or exchangeable securities, in each case which are issued
in strategic corporate partnering transactions that do not result in any
acquisition or other change in control of the Company, (v) shares of Common
Stock which may be issued upon exercise of the warrants issued by the Company
pursuant to the Amended and Restated Lantec Stockholders Agreement, dated as of
April 6, 1996 among the Company, Robert J. Crowell, James Rousou and the selling
stockholders named therein and (vi) shares of Common Stock which may be issued
upon exercise of warrants issued by the Company pursuant to the letter
agreement, dated July 8, 1999, between the Company and Wit Capital Corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Floor Price" shall be $8.00, or the higher or lower dollar amount
designated after the date hereof by the Company in a Floor Price Notice. In the
event a Floor Price Notice is not
3
<PAGE>
received with respect to a certain Investment Period, the Floor Price set for
the preceding Investment Period will continue to be the Floor Price.
"Floor Price Notice" shall mean a written notice delivered by the
Company to the Investor on, or as of, the third (3rd) Trading Day preceding the
commencement of an Investment Period which sets forth the Floor Price for such
Investment Period.
"4.9% Limit" shall have the meaning specified in Section 2.2(d)
hereof.
"GAAP" shall have the meaning set forth in Section 5.9(a).
"Governmental Entity" shall mean any federal, state, local or
foreign legislative body, court, government, department or instrumentality, or
governmental, administrative or regulatory authority or agency.
"Included Day" shall have the meaning set forth in Section 2.4(b)
hereof.
"Investment Amount" shall mean the dollar amount paid by the
Investor for the Common Stock on any Closing Date.
"Investment Period" shall mean each successive one-month period
(subject to extension as provided by Section 2.5(a)(ii)) commencing on (a) in
the case of the first Investment Period, the eleventh (11th) Trading Day
following the date the Registration Statement is declared effective, provided
that the first Investment Period may start as of a different date upon the
mutual written consent of the Company and Investor, and (b) in the case of
subsequent Investment Periods, commencing on the first Trading Day subsequent to
the expiration of the immediately preceding Investment Period.
"Investor Call Amount" shall have the meaning set forth in Section
2.1(b) hereof.
"Investor Call Notice" shall have the meaning set forth in Section
2.3(b) hereof.
"Investor Call Purchase Date" shall mean any Trading Day on which
the Investor notifies the Company by delivery of an Investor Notice of the
Investor's election to purchase all or a portion of an Investor Call Amount.
"Investor Notice" shall have the meaning set forth in Section 2.3c)
hereof.
"Knowledge of the Company" shall mean the actual knowledge, without
independent inquiry, of any of the executive officers of the Company.
"Knowledge of the Investor" shall mean the actual knowledge,
without independent inquiry, of any of the executive officers of the Investor.
"Liens" shall have the meaning set forth in Section 5.16 hereof.
4
<PAGE>
"Material Adverse Effect" shall mean any effect on the business,
operations, properties or financial condition of the Company which is material
and adverse to the Company or to the Company and any other entities controlled
by the Company, taken as a whole, or any condition or situation which could
prohibit, impair or otherwise interfere with the ability of the Company to enter
into and perform its obligations under this Agreement, the Registration Rights
Agreement or the Warrants.
"Materials of Environmental Concern" shall mean hazardous
substances as defined under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. and hazardous wastes
as defined under the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901,
et seq. and petroleum and petroleum products and such other chemicals, materials
or substances as are listed as "hazardous wastes", "hazardous materials", "toxic
substances", or words of similar import under any similar federal, state, local
or foreign laws.
"Maximum Offering Amount" shall have the meaning set forth in the
introductory paragraphs hereof.
"Minimum Commitment Warrant" shall have the meaning set forth in
Section 2.6(b).
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Person" shall mean an individual, partnership, corporation,
limited liability company, trust or unincorporated organization, or a government
or agency or subdivision thereof.
"Principal Market" shall mean the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market, or any similar organization
or agency succeeding such market or exchange's functions of reporting prices,
whichever is at the time the principal trading exchange or market for the Common
Stock.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any Prospectus supplement, including
post-effective amendments, and all material incorporated by reference in such
Prospectus.
"Purchase Price" shall have the meaning set forth in Section 2.4(b)
hereof.
"Registration Rights Agreement" shall have the meaning set forth in
Section 2.6(d) hereof.
"Registration Statement" shall have the meaning set forth in
Section 3.2(a) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 5.9
hereof.
"Securities Act" shall have the meaning set forth in the recitals
above.
5
<PAGE>
"Stock Price" on a given Trading Day shall mean the volume-weighted
average trading price for the Common Stock on the Principal Market during such
Trading Day, calculated in the manner utilized by Nasdaq as reported by
Bloomberg.
"Subsidiary" shall mean, with respect to any Person, any
corporation, limited or general partnership, trust, association or other
business entity of which 50% or more of the outstanding Capital Stock or other
interests entitled to vote in the election of the board of directors of such
corporation (irrespective of whether, at the time, Capital Stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency), managers, trustees or other
controlling persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more Subsidiaries of such Person.
"Tax Return" shall mean any report, return, information statement
or other information required to be supplied to any federal, state, local or
foreign taxing authority, or any election permitted to be made, in connection
with Taxes.
"Taxes" shall mean all taxes, charges, fees, levies, duties or
other assessments, including without limitation all net income, gross income,
gross receipts, franchise, value added, sales, use, property, ad valorem,
transfer, withholding, profits, license, employee, payroll, social security,
unemployment, excise, estimated, severance and any other taxes, duties,
withholdings, fees, assessments or charges of any kind whatsoever, including any
interest, penalties or additional amounts attributable thereto, imposed by any
federal, state, local or foreign taxing authority.
"Trading Day" shall mean any day during which the New York Stock
Exchange shall be open for business and on which trading of the Common Stock on
the Principal Market shall not have been suspended or limited.
"Value of Open Market Trading" shall mean, with respect to any
Trading Day, the product of the reported trading volume of the Common Stock on
the Principal Market, multiplied by the weighted average trading price (by
trading volume) of the Common Stock on such day (each as determined by Bloomberg
or any other reputable pricing service chosen by the Investor and reasonably
acceptable to the Company); provided, however, that in the event that the
Company consummates a registered public offering of Common Stock (whether
primary or secondary), the Trading Day on which such transaction is consummated
shall be excluded from any calculation under this Agreement based upon the Value
of Open Market Trading; provided further, that any block trades of 20,000 shares
or more of Common Stock shall not be included in the calculation when
determining reported trading volume and weighted average trading price.
"Volume Limit" shall have the meaning specified in Section 2.2(b)
hereof.
"Warrant" shall have the meaning set forth in Section 2.6(a)hereof.
"Warrants" shall have the meaning set forth in Section 2.6(a)hereof.
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<PAGE>
"Warrant Exercise Price" shall have the meaning set forth in
Section 2.6(a) hereof.
"Warrant Share Amount" shall have the meaning set forth in Section
2.6(a) hereof.
"Warrant Shares" shall have the meaning set forth in Section 2.6(d)
hereof.
II.
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Investments. Subject to the terms and conditions set
forth herein (including, without limitation, the provisions of Article III
hereof), during the Commitment Period:
(a) Company Put. If the Company, in its sole discretion, elects to
deliver a Company Put Notice with respect to any Investment Period in accordance
with Section 2.3(a) hereof, then upon the Company's delivery of such Company Put
Notice, the Investor shall be obligated in such Investment Period to purchase
from the Company shares of Common Stock during such Investment Period for an
aggregate Purchase Price specified in such Company Put Notice, which Purchase
Price shall be between $1,000,000 and $10,000,000 (with any amount in excess of
$1,000,000 in a multiple of $50,000), subject to the adjustments and limitations
imposed by this Agreement (the "Company Put Amount"). Upon receipt of a Company
Put Notice, subject to the terms and conditions contained herein, the Investor
shall be obligated to purchase on one or more Closing Dates in respect of each
such Company Put Purchase Date or Company Put Purchase Dates as the Investor
elects during the Investment Period, shares of Common Stock for an aggregate
Purchase Price equal to the Company Put Amount.
(b) Investor Call. For any Investment Period with respect to which the
Company has timely delivered a Company Put Notice, the Investor may deliver to
the Company one or more Investor Call Notices in accordance with Section 2.3(b)
hereof at any time prior to the twentieth calendar day following the
commencement of such Investment Period. Upon delivery of such an Investor Call
Notice, the Company shall be obligated to sell shares of Common Stock to the
Investor (in addition to the Company Put Amount) during the corresponding
Investment Period for an aggregate Purchase Price specified by Investor in such
Investor Call Notice, but in no event less (when aggregated with the purchase
prices of all other purchases of Common Stock made pursuant to Investor Call
Notices with respect to such Investment Period) than $1,000,000 or greater (when
aggregated with the purchase prices of all other purchases of Common Stock made
pursuant to Investor Call Notices with respect to such Investment Period) than
the Company Put Amount, subject to the adjustments and limitations imposed by
this Agreement (the "Investor Call Amount"). Upon delivery of such Investor Call
Notice, the Investor shall be obligated to purchase on each Closing Date in
respect of each such Investor Call Purchase Date or Investor Call Purchase Dates
as the Investor elects during the Investment Period to which such Investor Call
Notice relates, shares of Common Stock for an aggregate Purchase Price equal to
the Investor Call Amount.
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<PAGE>
(c) Purchase of Less Than or More Than the Company Put Amount and
Investor Call Amounts. Upon delivery of a Company Put Notice to the Investor
and/or delivery of an Investor Call Notice or Investor Call Notices to the
Company, the Investor may purchase an amount of Common Stock in any Investment
Period equal to up to five percent (5%) more than, or less than, the aggregate
dollar amount of the Company Put Amount and the Investor Call Amounts, if any,
with respect to such Investment Period, and any such purchases shall be treated
for purposes of this Agreement as satisfying the Investor's obligations with
respect to the Company Put Amount and the Investor Call Amounts, if any,
respectively.
Section 2.2. Limitations on Investment Amount.
(a) Overall Maximum. In no event shall the aggregate dollar amount of
the purchases of Common Stock made by the Investor at Closings in all Investment
Periods pursuant to Section 2.1 exceed the Maximum Offering Amount; provided,
however, that the Investor may purchase Common Stock in excess of the Maximum
Offering Amount with the prior written consent of the Company.
(b) Investment Period Limits. Notwithstanding the obligation of the
Investor to purchase shares of Common Stock pursuant to Section 2.1(a), the sum
of the Investment Amounts for any Investment Period (whether pursuant to a
Company Put Amount or Investor Call Amount(s) or both) shall not exceed the
lesser of (x) the Company Put Amount plus the sum of all Investor Call Amounts,
if any, (y) an amount equal to the product of (I) 8% of the average daily Value
of Open Market Trading of the Common Stock on the Principal Market for each
Trading Day during the Investment Period immediately preceding such Investment
Period times (II) the sum of (A) the number of Trading Days in which the Stock
Price is above the Floor Price, and (B) the number of Trading Days that are
designated by the Investor as Included Days pursuant to Section 2.4(b), in each
of cases (A) and (B), in such immediately preceding Investment Period, (III)
rounded up to the next increment of $10,000, and (z) an amount equal to the
product of (I) 8% of the average daily Value of Open Market Trading of the
Common Stock on the Principal Market for each Trading Day during such Investment
Period times (II) the sum of (A) the number of Trading Days in which the Stock
Price is above the Floor Price, and (B) the number of Trading Days that are
designated by the Investor as Included Days pursuant to Section 2.4(b), in each
of cases (A) and (B), in such Investment Period, (III) rounded up to the next
increment of $10,000 (the lower of the amounts referred to in clauses (y) and
(z), the "Volume Limit"); provided, however, that the Investor may waive, in
whole or in part, the Volume Limit in any Investment Period.
(c) Floor Price and Pro Rata Reduction of Investor's Obligation.
Notwithstanding anything to the contrary contained herein, the Investor's
obligation to acquire shares of Common Stock shall be reduced in any Investment
Period during which there is one or more Trading Days that the Stock Price is
below the Floor Price (other than Included Days), so that the aggregate number
of shares of Common Stock required to be purchased by the Investor during such
Investment Period shall be that number of shares determined pursuant to Section
2.1, after taking into account any reduction pursuant to Section 2.2(b) hereof,
multiplied by a fraction, the numerator of which shall be the sum of (i) the
number of Trading Days that the Stock Price is
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<PAGE>
above the Floor Price and (ii) the number of Included Days, and the denominator
of which shall be the total number of Trading Days during such Investment
Period.
(d) 4.9% Limit. Notwithstanding anything herein to the contrary, the
Investor shall not be required or entitled to purchase shares of Common Stock
pursuant to this Agreement on any Closing Date to the extent such purchase, when
aggregated with all other shares of Common Stock then beneficially owned by the
Investor, all purchases of Common Stock pursuant to this Agreement or otherwise
within the previous sixty days, and with the shares of Common Stock beneficially
or deemed beneficially owned by the Investor pursuant hereto, and the Warrant
Shares (if then issued and outstanding) theretofore issued to the Investor
pursuant to Section 2.6 and still owned by the Investor, would result in the
Investor or any Affiliate of the Investor beneficially owning more than 4.9% of
all the issued and outstanding Common Stock on such Closing Date, as determined
in accordance herewith and Section 13(d) of the Exchange Act (the "4.9% Limit").
Notwithstanding the foregoing, the Investor shall have the right to waive the
4.9% Limit, in whole or in part, upon 61 days' prior written notice to the
Company; provided, however, that such waiver shall not be permitted to the
extent that, if the Investor were to acquire additional shares of Common Stock
pursuant to such waiver, such notice and/or purchase would result in the
Investor or any Affiliate of the Investor beneficially owning more than 9.9% of
all the issued and outstanding Common Stock.
Section 2.3. Mechanics of Notification
(a) Company Put Notice. On or before the third (3rd) Trading Day
preceding the commencement of an Investment Period, unless otherwise agreed by
the parties to this Agreement, the Chief Executive Officer or the Senior Vice
President of the Company (or such other person as designated by either in
writing) may, at the Company's sole discretion, deliver a written notice to the
Investor (each such notice being a "Company Put Notice") which specifies the
Company Put Amount and states that the Investor shall be obligated to purchase
the Company Put Amount during such Investment Period subject to the terms and
conditions contained herein. A Company Put Notice shall be irrevocable.
(b) Investor Call Notices. If the Company has delivered a Company Put
Notice with respect to an Investment Period, the Investor may, in the Investor's
sole discretion, deliver one or more written notices to the Company at any time
prior to the twentieth calendar day following the commencement of such
Investment Period (each such notice being an "Investor Call Notice") which
states that the Investor shall purchase an Investor Call Amount during such
Investment Period subject to the terms and conditions contained herein. An
Investor Call Notice shall be irrevocable.
(c) Investor Notices. During any Investment Period in which the
Investor has an obligation to purchase Common Stock pursuant to a Company Put
Notice and/or an Investor Call Notice, the Investor may deliver a written notice
to the Company at any time during such Investment Period (each such notice being
an "Investor Notice") which specifies one or more Company Put Purchase Dates
and/or Investor Call Purchase Dates.
(d) Date of Delivery of Notices.
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(i) Notices to the Investor. A Company Put Notice or any other
notice sent by the Company to the Investor shall be deemed to be delivered on
the Trading Day it is transmitted by facsimile with confirmation of acceptance
or otherwise received in writing via courier, hand delivery or first-class mail
(return receipt requested) by the Investor, or, if received on any day which is
not a Trading Day, shall be deemed to be delivered on the immediately succeeding
Trading Day.
(ii) Notices to the Company. An Investor Call Notice, Investor
Notice or any other notice sent by the Investor to the Company shall be deemed
to be delivered on the Trading Day it is transmitted by facsimile with
confirmation of acceptance or otherwise received in writing via courier, hand
delivery or first-class mail (return receipt requested) by the Company, or, if
received on any day which is not a Trading Day, shall be deemed to be delivered
on the immediately succeeding Trading Day.
Section 2.4. Closings
(a) Deliveries at Closings. On each Closing Date (i) the Company shall
deliver to the Investor one or more certificates representing the Applicable
Quantity of shares of Common Stock registered in the name of the Investor or, at
the Investor's option, deposit such certificate(s) into such account or accounts
previously designated by the Investor, and (ii) the Investor shall deliver to
the Company the Investment Amount (less any amounts withheld pursuant to Section
11.2) by federal funds wire transfer or transfer of New York Clearing House
funds. In addition, on or prior to each Closing Date, each of the Company and
the Investor shall deliver all documents, instruments and writings required to
be delivered or reasonably requested by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated herein.
(b) Purchase Price Per Share. The purchase price per share of the
Company's Common Stock (the "Purchase Price") shall be the lowest Stock Price of
the Stock Prices on each of the five (5) Trading Days immediately prior to but
excluding a Company Put Purchase Date or Investor Call Purchase Date, as the
case may be; provided, however, that (i) upon Investor's prior notice to the
Company, which notice may be provided orally, any Stock Price on a Trading Day
below the Floor Price may be considered to be equal to the Floor Price for
purposes of determining the Purchase Price, and (ii) if no such notice is
provided, any Stock Price on a Trading Day below the Floor Price shall not be
considered in determining the Purchase Price, and the Purchase Price shall be
determined solely by reference to the remaining Trading Days in such five (5)
Trading Day period. A Trading Day with respect to which the Investor provides
notice that the Stock Price shall be considered to be equal to the Floor Price
in accordance with clause (i) above shall be deemed an "Included Day."
Section 2.5. Termination, Suspension and Modification of Investment
Obligation
(a) (i) Blocking Events. The Investor shall not purchase any shares of
Common Stock from the Company on any Closing Date, nor shall a Company Put
Notice or an Investor Call Notice be delivered at any time during the Commitment
Period when there shall exist any
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one or more of the following: (A) the withdrawal of the effectiveness of the
Registration Statement, (B) the Company's failure to satisfy the requirements of
Section 3.2 or 3.3, or (C) any failure or interruption in the compliance by the
Company with the covenants provided in Article VI (each of (A), (B), and (C), a
"Blocking Event").
(ii) Reduction or Elimination of Investor Obligation to
Purchase and Extension of Investment Period. In the event that a Blocking Event
occurs during an Investment Period, the obligation of the Investor to purchase
shares of Common Stock (pursuant to either a Company Put Notice or an Investor
Call Notice) during such Investment Period shall, unless such Blocking Event is
waived in writing by the Investor, be reduced (but in no event shall such
reduction result in a negative number) by subtracting an amount calculated by
multiplying the amount which the Investor would otherwise be obligated to
purchase by a fraction, the numerator of which shall be 1-1/2 times the number
of Trading Days within such Investment Period that such event or events exist
and the denominator of which shall be the number of Trading Days within such
Investment Period (without adjustment pursuant to Section 2.2(c) reflecting the
Stock Price being below the Floor Price) from the Investor's obligation during
such Investment Period. If such event remains uncured for a period of greater
than five (5) Trading Days or exists during the last five (5) Trading Days of
the Investment Period, the remaining obligation of the Investor to purchase
shares of Common Stock pursuant to a Company Put Notice or an Investor Call
Notice shall be canceled for the remainder of the Investment Period. If such
event exists on the last day preceding an Investment Period with respect to
which the Company has delivered a Company Put Notice, the Company shall, unless
waived in writing by the Investor, have five (5) Trading Days in which to cure,
and if cured within such period, the commencement of the Investment Period shall
be postponed for such number of days during such period as the event remained
uncured, but in no event shall such Investment Period be postponed for a period
in excess of five (5) Trading Days.
(b) Additional Events of Termination of Investor Obligation. The
obligation of the Investor to purchase shares of Common Stock under this
Agreement may, if the Investor in its sole and absolute discretion so elects, be
terminated (including with respect to a Closing Date which has not yet occurred)
in the event that (i) the Registration Statement shall not have been declared
effective by the SEC on or before one hundred twenty (120) days from the date of
this Agreement; (ii) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement, or any withdrawal of the
effectiveness of the Registration Statement for a period greater than twenty
(20) Trading Days in any Investment Period for any reason other than as a result
of subsequent corporate developments which would require such Registration
Statement to be amended to reflect such event in order to maintain its
compliance with the disclosure requirements of the Securities Act; or (iii) the
Company shall at any time fail to comply with the requirements of Sections 6.2,
6.3, 6.4, 6.6 or 6.7 and the Company shall fail to cure such noncompliance
within (A) five (5) Trading Days after receipt of notice from the Investor of
its election to terminate this Agreement, provided that the Investor has been
notified by the Company of such noncompliance within two (2) Trading Days of the
occurrence of such noncompliance or, if the noncompliance relates to a failure
of the Company to comply with the provisions of Section 6.6, the Investor
otherwise becomes aware of such noncompliance or (B) otherwise within five (5)
Trading Days of the occurrence of such noncompliance; provided, however, that
notwithstanding the foregoing, the Investor may, in its sole and absolute
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discretion, terminate this Agreement if the Company shall fail to maintain the
listing of the Common Stock on a Principal Market, or if trading of the Common
Stock on a Principal Market shall have been suspended for a period of ten (10)
consecutive Trading Days.
Section 2.6. Warrants
(a) Warrants.
(i) On or before five (5) business days following the
notification by the Investor of its calculation of the Warrant Share Amount, the
Company shall issue to the Investor a warrant which gives the Investor the right
to purchase, on the terms and conditions set forth in this Section 2.6(a), that
number of shares of Common Stock equal to the Warrant Share Amount (as defined
in Section 2.6(a)(iii) below) (the "Warrant," and collectively with the Minimum
Commitment Warrant, the "Warrants").
(ii) The Warrant shall entitle the holder thereof to purchase
Common Stock from time to time within five (5) years from the date the Warrant
is issued at an exercise price per share equal to 120% of the weighted average
of the Purchase Prices at which shares of Common Stock were purchased at the
Closings of all purchases of Common Stock by the Investor during the Commitment
Period (the "Warrant Exercise Price").
(iii) "Warrant Share Amount" shall mean the number of shares
equal to 15,000 times a fraction, of which the denominator is $1,000,000 and the
numerator is the aggregate Purchase Price of Common Stock purchased at the
Closings of all purchases of Common Stock by the Investor during the Commitment
Period (rounded to the nearest $100,000 increment).
(b) Minimum Commitment Warrant. In the event, but only in the event,
that after the end of the Commitment Period the aggregate dollar amount of all
purchases of Common Stock by the Investor during the Commitment Period is less
than $10,000,000, within five (5) Trading Days of the end of the Commitment
Period, the Company will issue to the Investor a warrant, exercisable by the
Investor in its sole and absolute discretion from time to time within five (5)
years from the date of issuance (the "Minimum Commitment Warrant") to purchase
that number of shares of Common Stock equal to 150,000 less the number of shares
issuable upon exercise of any and all Warrants issued pursuant to Section
2.6(a), at an exercise price per share equal to 120% of the average of the Stock
Price for the five (5) Trading Days preceding the termination of this Agreement
in accordance with its terms; provided, however, that notwithstanding the
foregoing, in the event the Board of Directors of the Company sends notice to
the Investor that it has reasonably determined that the review by the SEC of the
Registration Statement may have an adverse effect on the timing or marketability
of a public offering of securities by elcom.com, inc., a Subsidiary of the
Company, this Agreement shall terminate and the Minimum Commitment Warrant may
be exercised at the above price to purchase 100,000 shares of Common Stock.
(c) Form of Warrant. Each of the Warrant and the Minimum Commitment
Warrant shall be substantially in the form of Exhibit A hereto.
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(d) Registration Rights for Warrant Shares. The resale by the Investor
of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares")
shall be subject to a registration rights agreement (the "Registration Rights
Agreement") entered into between the Company and the Investor on the date of
execution of this Agreement.
III.
CONDITIONS PRECEDENT
3.1 Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
Common Stock to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below, which conditions cannot be waived without the prior written consent
of the Company.
(a) Accuracy of the Investor's Representations and
Warranties. The representations and warranties of the Investor set forth in this
Agreement shall be true and correct in all material respects as of the date of
each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Investor at or prior to such Closing.
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which, in the reasonable opinion of the Company and its legal
counsel, prohibits or adversely affects any of the transactions contemplated by
this Agreement, and no proceeding shall have been commenced which would be
reasonably likely to have the effect of prohibiting or adversely affecting any
of the transactions contemplated by this Agreement.
3.2 Conditions Precedent to the Obligation of the Investor to
Purchase Pursuant to a Company Put Notice. The obligation of the Investor to
purchase pursuant to a Company Put Notice and the right of the Company to
deliver a Company Put Notice and the obligation of the Investor hereunder to
acquire and pay for Common Stock incident to a Closing is subject to the
satisfaction, on the date of delivery of a Company Put Notice, and on the
applicable Closing Date (each a "Condition Satisfaction Date") of each of the
following conditions, which conditions cannot be waived without the prior
written consent of the Company and the Investor.
(a) Registration of the Common Stock with the SEC. The
Company shall have filed with the SEC a registration statement (the
"Registration Statement") for the registration of the resale by the Investor of
Common Stock to be acquired pursuant to this Agreement, including Common Stock
to be issued upon exercise of the Warrants (in accordance
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with the Registration Rights Agreement), under the Securities Act, which
Registration Statement shall have been filed as early as practicable, but in no
event later than thirty (30) days following the date of this Agreement and which
Registration Statement shall have been declared effective by the SEC no later
than one hundred twenty (120) days following the date of this Agreement.
Furthermore, the Company shall have filed (i) with the applicable state
securities commissions such blue sky filings as shall have been reasonably
requested by the Investor, and (ii) any required filings with the NASD or
exchange or market where the Common Stock is traded.
(b) Effective Registration Statement. The Registration
Statement shall be in effect and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investor shall have
received notice that the SEC has issued or intends to issue a stop order with
respect to the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened to do so, and (ii) no other suspension
of the use of the Registration Statement or related Prospectus shall exist.
(c) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company as set forth in
this Agreement and the Registration Rights Agreement shall be true and correct
in all material respects as of each Condition Satisfaction Date as though made
at each such time (except for representations and warranties made as of a
specific date).
(d) Performance by the Company. The Company shall have
performed, satisfied and complied with in all material respects all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits or adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced
which may have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
(f) Adverse Changes. Since September 30, 1999, the
date through which the most recent quarterly report of the Company on Form 10-Q
has been prepared and filed with the SEC, no event which had or is reasonably
likely to have a Material Adverse Effect has occurred, except as disclosed in
the SEC Documents or Company press releases subsequent to such date.
(g) No Suspension of Trading In or Delisting of Common
Stock. The trading of the Common Stock shall not have been suspended by the SEC,
the Principal Market or the NASD, and the Common Stock shall have been approved
for listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market.
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(h) Legal Opinions. Except as otherwise provided in
this Section 3.2(h), the Company shall have caused to be delivered to the
Investor, (i) within five (5) Trading Days following the effective date of the
Registration Statement, (ii) as of a date within five (5) Trading Days after the
date of the Company's filing of its most recent quarterly report on Form 10-Q
(or the date by which such report is required to be filed), (iii) as of a date
within five (5) Trading Days after the date on which the Company announces,
whether on a preliminary or definitive basis, its fourth quarter or full-year
financial results, (iv) to the extent provided by (and only at the times
provided by) Section 3.3, and (v) as of a date within five (5) Trading Days of
the beginning of an Investment Period as to which the Company has delivered a
Company Put Notice (provided, however, that in no event shall such delivery by
the Company be required more than one (1) time during any given Investment
Period unless such delivery is reasonably requested by Investor), a letter of
the Company's independent counsel containing the opinions and statements set
forth in Exhibit B hereto, addressed to the Investor (but not rendering an
opinion) stating also, inter alia, that, without independently checking the
accuracy of or completeness of, or otherwise verifying any statements of fact
contained in the Registration Statement, no facts have come to such counsel's
attention that would cause it to believe that the Registration Statement (as
amended, if applicable), contains an untrue statement of material fact or omits
a material fact required to make the statements contained therein, not
misleading or that the underlying Prospectus (if applicable, as so amended or
supplemented) contains an untrue statement of material fact or omits a material
fact required to make the statements contained therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
in the event that such a letter cannot be delivered by the Company's independent
counsel to the Investor, the Company shall promptly notify the Investor and
promptly revise the Registration Statement, and the Company shall not deliver a
Company Put Notice or, if a Company Put Notice shall have been delivered in good
faith without knowledge by the Company that a letter of independent counsel
cannot be delivered as required, shall postpone, if necessary, any pending
Closing Date (including a Closing Date with respect to an Investor Call Notice)
for a period of up to five (5) Trading Days until such a letter is delivered to
the Investor (or such Closing shall otherwise be canceled). In the event of such
a postponement, the Purchase Price of the Common Stock to be issued at such
Closing as determined pursuant to Section 2.4 shall be the lower of such
Purchase Price as calculated as of the originally scheduled Closing Date or
calculated as of the actual Closing Date. Notwithstanding the foregoing, the
Company's independent counsel shall also deliver to the Investor, on or before
the Effective Date, an opinion in form and substance reasonably satisfactory to
the Investor addressing the matters specified in Exhibit C hereto; provided,
however, that no opinions shall be required to be delivered pursuant to this
Section 3.2(h) unless and until the Company delivers a Company Put Notice with
respect to an Investment Period.
(i) Accountant's Letter.
(i) The Company shall have furnished to the
Investor a comfort letter of its independent auditors in customary form,
including a statement to the effect that they have performed the procedures in
accordance with the provisions of Statement on Auditing Standards No. 71, as
amended, as agreed to by the parties hereto, and reports thereon as shall have
been reasonably requested by the Investor with respect to certain financial
information
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contained in the Registration Statement and shall have delivered to the Investor
a report addressed to the Investor, (x) within five (5) Trading Days following
the effective date of the Registration Statement and (y) within ten (10) Trading
Days following the filing with the SEC of each SEC Document containing unaudited
financial statements of the Company which is deemed to be incorporated by
reference in the Registration Statement; provided, however, that no "agreed upon
procedures" report shall be required to be delivered pursuant to this Section
3.2(i) unless and until the Company delivers a Company Put Notice with respect
to an Investment Period.
(ii) In the event that the Investor shall have
requested delivery of an "agreed upon procedures" report pursuant to Section
3.3, the Company shall engage its independent auditors to perform certain agreed
upon procedures and report thereon as shall have been reasonably requested by
the Investor with respect to certain financial information of the Company and
the Company shall deliver to the Investor a copy of such report addressed to the
Investor.
(iii) In the event that a report required by
this Section 3.2 cannot be delivered by the Company's independent auditors,
the Company shall, if necessary, promptly revise the Registration Statement and
the Company shall not deliver a Company Put Notice or, if a Company Put Notice
shall have been delivered in good faith without knowledge by the Company that a
report of its independent auditors cannot be delivered as required, postpone
such Closing Date for a period of up to five (5) Trading Days until such a
report is delivered (or such Closing shall otherwise be canceled). In the event
of such a postponement, the Purchase Price of the Common Stock to be issued at
such Closing as determined pursuant to Section 2.4 shall be the lower of such
Purchase Price as calculated as of the originally scheduled Closing Date and as
of the actual Closing Date.
(j) Officer's Certificate. The Company shall have
delivered to the Investor, on each Closing Date, a certificate in form and
substance reasonably acceptable to the Investor, executed by an executive
officer of the Company and to the effect that all the conditions to such Closing
shall have been satisfied as at the date of each such certificate.
(k) Due Diligence. No dispute between the Company and
the Investor shall exist pursuant to Section 3.3 as to the adequacy of the
disclosure contained in the Registration Statement.
3.3 Due Diligence Review. The Company shall make available, during
normal business hours, for inspection and review by the Investor, advisors to
and representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the Investor
pursuant to the Registration Statement or amendments or supplements thereto or
any blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers, directors and employees, within a
reasonable time period, to supply all such information reasonably requested by
the Investor or any such representative, advisor or underwriter in
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connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
The Company shall not disclose nonpublic information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
nonpublic information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
nonpublic information for review. The Company may, as a condition to disclosing
any nonpublic information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement (including an
agreement with such advisors and representatives prohibiting them from trading
in Common Stock during such period of time as they are in possession of
nonpublic information) in form reasonably satisfactory to the Company and the
Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate nonpublic information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
nonpublic information (whether or not requested of the Company specifically or
generally during the course of due diligence by any such persons or entities),
which, if not disclosed in the Prospectus included in the Registration
Statement, would cause such Prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 3.3 shall be construed to mean
that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain
nonpublic information in the course of conducting due diligence in accordance
with the terms of this Agreement; provided, however, that in no event shall the
Investor's advisors or representatives disclose to the Investor the nature of
the specific event or circumstances constituting any nonpublic information
discovered by such advisors or representatives in the course of their due
diligence without the written consent of the Investor prior to disclosure of
such information. The Investor's advisors or representatives shall make complete
disclosure to the Investor's independent counsel of all events or circumstances
constituting nonpublic information discovered by such advisors or
representatives in the course of their due diligence upon which such advisors or
representatives form the opinion that the Registration Statement contains an
untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in the light of the circumstances in which they were made,
not misleading. Upon receipt of such disclosure, the Investor's independent
counsel shall consult with the Company's independent counsel in order to
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address the concern raised as to the existence of a material misstatement or
omission and to discuss appropriate disclosure with respect thereto; provided,
however, that such consultation shall not constitute the advice of the Company's
independent counsel to the Investor as to the accuracy of the Registration
Statement and related Prospectus. In the event after such consultation the
Investor's independent counsel reasonably believes that the Registration
Statement contains an untrue statement or a material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make
the statements contained therein, in light of the circumstances in which they
were made, not misleading, (a) the Company shall file with the SEC an amendment
to the Registration Statement responsive to such alleged untrue statement or
omission and provide the Investor, as promptly as practicable, with copies of
the Registration Statement and related Prospectus, as so amended, (b) if the
Company disputes the existence of any such material misstatement or omission,
(i) and the dispute relates to information other than financial statements,
schedules and other financial or statistical information included or
incorporated by reference therein, the Company's independent counsel shall
provide the Investor's independent counsel with a letter (customary in form and
scope as provided to an underwriter in an underwritten public offering) stating
that, without independently checking the accuracy or completeness of, or
otherwise verifying, any statements of fact contained in the Registration
Statement, nothing has come to their attention that would lead them to believe
that the Registration Statement or the related Prospectus, as of the date of
such letter, contains an untrue statement of a material fact or omits a material
fact required to be stated in the Registration Statement or the related
Prospectus or necessary to make the statements contained therein, in light of
the circumstances in which they were made, not misleading or (ii) in the event
the dispute relates to the adequacy of financial disclosure and the Investor
shall reasonably request, the Company's independent auditors shall provide to
the Company a letter outlining the performance of such "agreed upon procedures"
as shall be reasonably requested by the Investor and the Company shall provide
the Investor with a copy of such letter, or (c) if the Company disputes the
existence of any such material misstatement or omission, and the dispute relates
to the timing of disclosure of a material event and the Company's independent
counsel is unable to provide the letter referenced in clause (b)(i) above to the
Investor, then this Agreement shall be suspended for a period of up to thirty
(30) days, at the end of which, if the dispute still exists between the
Company's independent counsel and the Investor's independent counsel, the
Company shall either (i) amend the Registration Statement as provided above,
(ii) provide to the Investor the Company's independent counsel letter or a copy
of the letter of the Company's independent auditors referenced above, as
applicable, or (iii) the obligation of the Investor to purchase shares of Common
Stock pursuant to this Agreement shall terminate.
IV.
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company as follows:
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4.1 No Present Arrangement. The Investor is entering into this
Agreement for its own account and the Investor has no present arrangement
(whether or not legally binding) at any time to sell the Common Stock to or
through any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold the Common Stock for
any minimum or other specific term and reserves the right to dispose of the
Common Stock at any time in accordance with federal and state securities laws
applicable to such disposition.
4.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D under the
Securities Act) and an accredited investor (as defined in Rule 501 of Regulation
D under the Securities Act), and the Investor has such experience in business
and financial matters that it is capable of evaluating the merits and risks of
an investment in Common Stock. The Investor acknowledges that an investment in
the Common Stock is speculative and involves a high degree of risk, and that the
Investor is able to afford the loss of its entire investment herein.
4.3 Authority. The Investor has full power and authority as a
limited liability company to execute and deliver this Agreement, the
Registration Rights Agreement and the Warrants, and to consummate the
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by the
Investor. No other proceedings on the part of Investor are necessary to approve
and authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby in accordance with the terms hereof.
This Agreement has been validly executed and delivered by the Investor and is a
valid and binding agreement of the Investor enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
4.4 No Brokers. The Investor has taken no action that would give
rise to any claim by any person for brokerage commission, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
4.5 Not an Affiliate. The Investor is not an officer, director or
Affiliate of the Company.
4.6 Organization and Standing. The Investor is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the State of New York, and has all requisite power and authority as a limited
liability company to carry on its business as now being conducted, and is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualifications necessary,
except where the failure to be so qualified or in good standing would not
reasonably be expected to have a material adverse effect.
4.7 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated hereby and thereby, and
compliance with the requirements hereof and
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thereof, will not violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Investor, or the provision of any
indenture, instrument or agreement to which the Investor is a party or is
subject, or by which the Investor or any of its assets is bound, or conflict
with or constitute a material default thereunder, or result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by the Investor
to any third party, or require the approval of any third party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which the Investor is subject or to which
any of its assets, operations or management may be subject.
4.8 Disclosure: Access to Information. The Investor has received
all documents, records, books and other information pertaining to the Investor's
investment in the Company that have been requested by the Investor. The Investor
further acknowledges that it understands that the Company is subject to the
periodic reporting requirements of the Exchange Act, and the Investor has
reviewed or received copies of any such reports that have been requested by it
and that it considers necessary or appropriate for deciding whether to enter
into this Agreement and perform its obligations hereunder. The Investor further
represents that it had an opportunity to ask questions and receive answers from
the Company regarding the terms and conditions of the purchase of the Common
Stock and the Warrants, and the business, properties, prospects and financial
condition of the Company.
4.9 Manner of Sale. At no time was the Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
4.10 Financial Capability. The Investor presently has the financial
capacity and the necessary capital to perform on a timely basis all of its
obligations hereunder. The Investor has, or has available to it, sufficient
funds to satisfy all of its financial obligations under the Agreement. The
Investor will promptly notify the Company of any event or circumstance that
could be reasonably expected to hinder the Investor's ability to perform its
obligations hereunder.
4.11 No NASD Proceedings. To the Knowledge of the Investor, there
are no disciplinary proceedings involving the Investor or any of its employees
pending before the NASD.
4.12 Not a Broker or Dealer. The Investor is not a "broker" or a
"dealer" (as such terms are defined in the Securities Act or the Exchange Act).
4.13 Not a Member of the NASD. The Investor is not a "member" of
the NASD or a "person associated with a member" of the NASD (as such terms are
defined in the By-laws and rules of the NASD).
4.14 No Hedging or Short Selling. (a) During the period sixty (60)
days prior to the date of this Agreement the Investor has not engaged in any
short sales or hedging of any kind in anticipation of this Agreement, and (b)
during the term of this Agreement the Investor may
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make sales in anticipation of Company Put Notices, but may not make any sales
with the intention of reducing the price of the Common Stock to Investor's
benefit.
4.15 Compliance with Securities Laws. The Investor acknowledges and
agrees that any transactions in the Common Stock effected by the Investor shall
comply with all applicable securities laws, including, without limitation, if
applicable, Regulation M promulgated under the Exchange Act.
4.16 No Transactions below Floor Price. During each Investment
Period, the Investor will not engage in any transaction in the Common Stock in
which the per share price of the Common Stock is below the Floor Price with
respect to such Investment Period.
V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the SEC Documents, Company press releases or
in the Disclosure Schedule delivered by the Company to the Investor on the date
hereof, the Company represents and warrants to the Investor as follows:
5.1 Corporate Organization. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and, if
applicable, in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to be so qualified or in good standing would not reasonably be
expected to have a Material Adverse Effect. The Company has made available to
the Investor or its agents complete and correct copies of the Certificate of
Incorporation, as amended, and by-laws of the Company as in effect on the date
hereof.
5.2 Capitalization.
(a) The authorized Capital Stock of the Company
consists of (i) 50,000,000 shares of Common Stock and (ii) 10,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock"). As of December 24,
1999, there were (i) 29,134,559.5 shares of Common Stock issued, all of which
are duly authorized and validly issued, fully paid and nonassessable, (ii)
257,739 shares of Common Stock owned by the Company in its treasury and (iii)
8,796,238 shares of Common Stock reserved for issuance pursuant to stock options
granted or which may be granted under the Compensation Plans. The Company has
not issued any Common Stock since December 24, 1999, except pursuant to the
exercise of stock options or pursuant to the Company's Compensation Plans, nor
has the Company since such date repurchased or redeemed or acquired any such
shares. No shares of Capital Stock of the Company are entitled to preemptive
rights.
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(b) Except as set forth in Section 5.2(a) above,
the Company does not have outstanding any Capital Stock or securities
convertible into or exchangeable for any shares of Capital Stock or any options,
warrants or other rights, agreements, arrangements or commitments of any
character to which the Company is a party or otherwise obligating the Company to
issue or sell or entitling any Person to acquire from the Company, and the
Company is not a party to any agreement, arrangement or commitment obligating it
to repurchase, redeem or otherwise acquire, any shares of its Capital Stock or
securities convertible into or exchangeable for any of its Capital Stock.
(c) Upon issuance of the Common Stock, and payment
of the Purchase Price therefor, pursuant to a purchase and sale in accordance
with the terms of this Agreement, the Company will transfer to the Investor good
and valid title to the Common Stock, free and clear of any material Lien, other
than Liens, if any, created by the Investor and such Common Stock will be duly
authorized, fully paid and nonassessable.
5.3 Subsidiaries.
(a) The Company does not have any Subsidiaries
that own material assets or are subject to material liabilities, other than
those listed on Schedule 5.3(a) of the Disclosure Schedule. Each Subsidiary is,
directly or indirectly, wholly-owned by the Company.
(b) (i) All the outstanding stock or other equity
or ownership interests of each Subsidiary is owned free and clear of all
material Liens and is validly issued and (ii) there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to which
any Subsidiary is a party or otherwise obligating any Subsidiary to issue or
sell, or entitling any Person to acquire from any Subsidiary, and no Subsidiary
is a party to any agreement, arrangement or commitment obligating it to
repurchase, redeem or otherwise acquire, any shares of the Capital Stock or any
securities convertible into or exchangeable for the Capital Stock of any such
Subsidiary.
5.4 Authorization. The Company has full corporate power and
authority to execute and deliver this Agreement, the Registration Rights
Agreement and the Warrants, to issue the Common Stock pursuant to this Agreement
and the Warrants, and to consummate the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof. The execution and
delivery of this Agreement, the Registration Rights Agreement and the Warrants,
and the issuance of the Common Stock issuable upon a Closing and pursuant to the
Warrants, and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of the Company. To
the Knowledge of the Company, no other corporate proceedings on the part of the
Company are necessary to approve and authorize the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants, and the
issuance of the Common Stock issuable upon a Closing and pursuant to the
Warrants, and the consummation of the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof, except for any approval
of the Company's shareholders that may be required pursuant to Rule 4460 of the
Marketplace Rules of the Nasdaq Stock Market. This Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Company, and the Common Stock issuable in accordance with the terms of
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this Agreement or upon exercise of the Warrants, upon the payment of the
purchase price therefor in accordance with the terms hereof and thereof, will be
duly and validly issued, fully paid and nonassessable, and each of this
Agreement, the Registration Rights Agreement and the Warrants, when executed and
delivered constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
5.5 No Violation; Consents.
(a) Assuming the making or receipt of all filings,
notices, registrations, consents, approvals, permits and authorizations
described in this Section 5.5, the execution and delivery of this Agreement, the
Registration Rights Agreement and the Warrants, and the issuance of the Common
Stock, the consummation of the transactions contemplated hereby, by the
Registration Rights Agreement and the Warrants, the compliance by the Company
with any of the provisions hereof or of the Registration Rights Agreement and
the Warrants, will not (i) conflict with, violate or result in any breach of the
Certificate of Incorporation, as amended, or by-laws of the Company or its
Subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default or give rise to any right
of termination, cancellation or acceleration under, or result in the creation of
any Lien on or against any of the properties of the Company or any of its
Subsidiaries pursuant to any of the terms or conditions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which any of them
or any of their properties or assets may be bound, or (iii) violate any statute,
law, rule, regulation, writ, injunction, judgment, order or decree of any
Governmental Entity, binding on the Company or any of its Subsidiaries or any of
their properties or assets, excluding from the foregoing clauses (i), (ii) and
(iii) conflicts, violations, breaches, defaults, rights of termination,
cancellation or acceleration, and liens which, individually or in the aggregate,
would not have a Material Adverse Effect, would not prevent or materially delay
consummation of the transactions contemplated hereby and would not affect the
validity of the issuance of the Common Stock.
(b) Except for (i) applicable requirements, if any,
under Blue Sky Laws, (ii) the filing of additional listing applications with
Nasdaq, and (iii) the filing of the Registration Statement, no filing, consent,
approval, permit, authorization, notice, registration or other action of or with
any Governmental Entity is required to be made or obtained by or with respect to
the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement, the Registration Rights Agreement and the Warrants,
the issuance of the Common Stock or the consummation by the Company of the
transactions contemplated hereby and thereby.
5.6 Compliance With Applicable Law. The businesses of the Company
are not being conducted in violation of any law, ordinance, rule, regulation,
judgment, decree or order of any Governmental Entity, except for possible
violations which, individually or in the aggregate, would not have a Material
Adverse Effect. The Company and each of its Subsidiaries possess all domestic
and foreign governmental licenses, permits, authorizations and approvals and
have made all registrations and given all notifications required under federal,
state, local or foreign
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law to carry on in all respects their businesses as currently conducted, except
as otherwise disclosed in writing by the Company to the Investor on or prior to
the date hereof, and except where the failure to have any such licenses,
permits, authorizations or approvals, individually or in the aggregate, would
not have a Material Adverse Effect. No investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company, threatened, other than those the
outcome of which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
5.7 Year 2000 Compliance. The Company's computer systems (both
hardware and software) and telephone systems (collectively, the "Computer
System") are in good working order. The Computer System (i) shall accurately
input, process and output all date and time data, from years in the same century
or in different centuries, including by yielding correct results in arithmetic
operations, comparisons and sorting of date and time data and in leap year
calculations, and (ii) will not abnormally cease to operate, return an error
message or otherwise fail due to date- or time-related processing or due to the
then-current date being before, on or after January 1, 2000 or any other date,
except, in any case, where any error or malfunction, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
5.8 Litigation. There is no claim, action or proceeding (including
any condemnation proceeding) pending or, to the Knowledge of the Company,
threatened against or relating to the Company or any of its Subsidiaries by or
before any Governmental Entity or arbitrator that if adversely determined,
individually or in the aggregate, would have a Material Adverse Effect, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Company or any of its Subsidiaries that
has had, or would reasonably be expected in the future to have, a Material
Adverse Effect or which reasonably could be expected to materially adversely
affect the transactions contemplated by this Agreement.
5.9 SEC Documents, Financial Statements.
(a) The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and the Company has filed all reports,
schedules, forms, statements and other documents, together with all exhibits,
financial statements and schedules thereto required to be filed by it with the
SEC pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) (all of the foregoing, and all
other documents and registration statements, whether heretofore or hereafter
filed by the Company with the SEC since January 1, 1996, and the Registration
Statement, when declared effective, being hereinafter referred to as the "SEC
Documents"). The Common Stock is currently listed or quoted on the Principal
Market, which is, as of the date hereof, the Nasdaq National Market. The Company
has delivered or made available to the Investor true and complete copies of the
SEC Documents through December 30, 1999. The Company has not provided to the
Investor any material information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
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Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated herein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of the
date of delivery by the Investor of the Prospectus contained in the Registration
Statement in connection with sales of Common Stock by the Investor, such
Prospectus will comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder,
and other federal, state and local laws, rules and regulations applicable to
such Prospectus. The financial statements of the Company included (or
incorporated by reference) in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(b) During the three (3) years preceding the date
hereof, the SEC has not issued an order preventing or suspending the use of
any prospectus relating to the offering of any shares of Common Stock or
instituted proceedings for that purpose.
5.10 No Undisclosed or Contingent Liabilities. Neither the Company
nor any of its Subsidiaries has any claims, liabilities or obligations of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that would be required to be reflected or reserved
against on a consolidated balance sheet of the Company and its consolidated
Subsidiaries under GAAP, except for claims, liabilities or obligations (i)
reflected or reserved against on the Balance Sheet, (ii) disclosed in the
Company's most recent Form 10-K or any SEC Document filed subsequent to such
Form 10-K or (iii) incurred by the Company or any of its Subsidiaries since
September 30, 1999 in the ordinary course of business and consistent with past
practice and that, individually or in the aggregate, would not have a Material
Adverse Effect.
5.11 Taxes. The Company and its Subsidiaries have timely filed all
necessary Tax Returns and notices and have paid all federal, state, county,
local and foreign taxes of any nature whatsoever for all the tax years through
December 31, 1998 indicated on such Tax Returns as being due and payable, to the
extent such taxes have become due (other than taxes which are being challenged
in good faith by the Company and have been adequately reserved for by the
Company), except where any failure to file or pay would not have a Material
Adverse Effect. There are no tax deficiencies which would reasonably be expected
to have a Material Adverse Effect; the Company and its Subsidiaries have paid
all Taxes which have become due and payable by the Company (other than Taxes
that are being challenged in good faith or have been adequately reserved for by
the Company), whether pursuant to any assessments, or
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otherwise, except where any failure to pay would not have a Material Adverse
Effect, and there is no further liability (whether or not disclosed on such
returns) or assessments for any such Taxes, and no interest or penalties accrues
or accruing with respect thereto; the amounts currently set up as provisions for
Taxes or otherwise by the Company and its Subsidiaries on their books and
records are sufficient in all material respects for the payment of all their
unpaid federal, foreign, state, county and local taxes accrued through the dates
as of which they speak, except where such insufficiency would not have a
Material Adverse Effect, and for which the Company and its Subsidiaries may be
liable in their own right, or as transferee of the assets of, as successor to
any other corporation, association, partnership, joint venture or other entity.
5.12 Employee Benefit Plans. All employee benefit plans and other
benefit arrangements covering the employees of the Company and its Subsidiaries
(the "Benefit Plans") have been operated and administered in all material
respects in compliance with their terms and applicable law, and there are no
claims, liabilities or obligations of any kind whatsoever relating to the
Benefit Plans which individually or in the aggregate would have a Material
Adverse Effect.
5.13 Absence of Certain Changes. Since September 30, 1999, the
business of the Company and its Subsidiaries has been conducted in the ordinary
course consistent with past practices and except in the ordinary course of
business consistent with past practice there has not been:
(i) to the Knowledge of the Company, any
event, occurrence, development or state of circumstances or facts which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment
of any dividend or other distribution with respect to any shares of Capital
Stock of the Company or any repurchase, redemption or other acquisition by the
Company or any Subsidiary of any outstanding shares of Capital Stock or other
securities of, or other ownership interests in, the Company or any Subsidiary;
(iii) any amendment of any material term of
any outstanding security of the Company or any Subsidiary;
(iv) any incurrence, assumption or guarantee
by the Company or any Subsidiary of any indebtedness for borrowed money, other
than (i) working lines of credit or borrowings under existing lines of credit or
floor plan financing arrangements, (ii) any license fees and royalties and (iii)
pursuant to any lease;
(v) any creation or assumption by the Company
or any Subsidiary of any Lien on any material asset other than in the ordinary
course of business consistent with past practice;
(vi) any making of any loan, advance or
capital contributions to or investment in any Person in excess of $500,000
other than loans, advances or capital
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contributions to or investments in wholly-owned Subsidiaries made in the
ordinary course of business consistent with past practice;
(vii) any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of the Company or any Subsidiary which, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect;
(viii) any transaction or commitment made, or
any contract or agreement entered into, by the Company or any Subsidiary
relating to its assets or business (including the acquisition or disposition of
any assets) or any relinquishment by the Company or any Subsidiary of any
contract or other right, in any such case, material to the Company and the
Subsidiaries, taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practice and those contemplated
by this Agreement; or
(ix) any material change in any method of
accounting or accounting practice by the Company or any Subsidiary.
5.14 Environmental Matters.
(a) The Company and its Subsidiaries have obtained
all permits, licenses and other authorizations, and have made all registrations
and given all notifications, that are required with respect to the operation of
their respective businesses under all applicable Environmental Laws other than
those permits, licenses, other authorizations, registrations and notifications
the failure of which to obtain or make, individually or in the aggregate, would
not have a Material Adverse Effect.
(b) The Company and its Subsidiaries are in
compliance in all material respects with all terms and conditions of the
required permits, licenses and other authorizations referred to in subsection
(a) of this Section 5.14, and also in compliance in all material respects with
any other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, settlement agreement, notice or demand letter issued,
entered, promulgated or approved thereunder, other than where the failure to be
in such compliance, individually or in the aggregate, would not have a Material
Adverse Effect.
(c) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter (collectively, "Actions") pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries relating in any way to Environmental Laws or any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder other than Actions that, if
determined adversely to the Company or such Subsidiaries, would not reasonably
be expected to have a Material Adverse Effect.
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5.15 Material Contracts.
(a) Neither the Company nor any Subsidiary is a
party to or bound by any agreement or arrangement material to the Company and
its Subsidiaries taken as a whole ("Material Contracts").
(b) Each Material Contract is in full force and
effect and constitutes a legal, valid and binding obligation of the Company or
the Subsidiary party thereto and, to the Knowledge of the Company, each other
party thereto, and is enforceable against the Company or its Subsidiaries and,
to the Knowledge of the Company, each other party thereto in accordance with its
terms, except to the extent that such enforceability is limited by (i)
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity, and neither the Company nor any of its
Subsidiaries, nor, to the Knowledge of the Company, any other party thereto is
in conflict therewith or in violation or breach thereof or default thereunder,
except for such conflicts, violations, breaches and defaults which, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
5.16 Properties; Encumbrances. Subject to the next succeeding
sentence, each of the Company and its Subsidiaries has good and valid title, and
in the case of real property, insurable title, to all material properties and
assets which it purports to own (real, personal and mixed, tangible and
intangible, including all forms of goodwill, rights, intellectual property and
intellectual property rights) (collectively, the "Company Assets"), including,
without limitation, all the material properties and assets reflected on the
Balance Sheet (except for (i) real and personal property sold since the date of
the Balance Sheet or which was obsolete or no longer useful in connection with
the businesses of the Company and its Subsidiaries and (ii) capital leases
reflected on the Balance Sheet), and all material properties and assets
purchased by the Company and its Subsidiaries since the date of the Balance
Sheet. All Company Assets are free and clear of all liens, mortgages, claims,
interests, charges, security interests or other encumbrances or adverse
interests of any nature whatsoever and other title or interest retention
arrangements ("Liens"), except (A) as reflected on the Balance Sheet, (B) as set
forth on Schedule 5.16 of the Disclosure Schedule, (C) statutory Liens of
carriers, warehousemen, mechanics, workmen and materialmen for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice that are not yet delinquent or being contested in good faith, (D) such
defects, irregularities, encumbrances and other imperfections of title as
normally exist with respect to property similar in character and that,
individually or in the aggregate together with all other such exceptions, do not
have a Material Adverse Effect, (E) Liens for Taxes and (F) Liens that do not
interfere with the present use of the property subject to the Lien.
5.17 Insurance. All current primary, excess and umbrella policies
of insurance owned or held by or on behalf of or providing insurance coverage to
the Company or any of its Subsidiaries are in full force and effect. With
respect to all such insurance policies purchased by the Company or any of its
Subsidiaries, no premiums are in arrears and no notice of cancellation or
termination has been received with respect to any such policy, other than
notices of cancellation or termination routinely sent at the end of a policy
term. To the Knowledge of the
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Company, the insurance coverage of the Company and its Subsidiaries is
consistent with the coverage generally maintained by corporations of similar
size and engaged in similar lines of business.
5.18 Employee Claims; Labor Matters. There are no claims or actions
pending or, to the Knowledge of the Company, threatened between the Company or
any of its Subsidiaries and any of their respective employees, unions, or former
employees that would be reasonably likely to, individually or in the aggregate,
have a Material Adverse Effect. The Company and each of its Subsidiaries have no
collective bargaining agreements covering employees of the Company or any
Subsidiary.
5.19 Material Disclosure. To the Knowledge of the Company, there is
no fact, transaction or development which the Company has not disclosed to the
Investor in writing (including pursuant to the SEC Documents filed prior to the
date hereof) which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. This Agreement (including any
Exhibit or Schedule hereto) and any written statements, documents or
certificates furnished to the Investor by the Company or its Subsidiaries prior
to the date hereof in connection with the transactions contemplated hereby,
taken as a whole, do not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated herein or therein or
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
5.20 Intellectual Property. The Company and its Subsidiaries own or
possess adequate patent rights or licenses or other rights to use patent rights,
inventions, trademarks, service marks, trade names and copyrights material to
the general business now operated by them and neither the Company nor any of its
Subsidiaries has received any notice of infringement or conflict with asserted
rights of others with respect to any patent, patent rights, inventions,
trademarks, service marks, trade names or copyrights which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect.
5.21 No General Solicitation in Regard to this Transaction. Neither
the Company nor any of its Subsidiaries or Affiliates nor any distributor or any
person acting on its or their behalf has conducted any general solicitation (as
that term is used in Rule 502(c) of Regulation D under the Securities Act) with
respect to any of the Common Stock offered hereby, nor have they made any offers
or sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Common Stock offered hereby
under the Securities Act.
5.22 No Undisclosed Events or Circumstances. To the Knowledge of
the Company, since September 30, 1999, no event or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company.
5.23 No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any
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offers or sales of any security or solicited any offers to buy any security,
other than pursuant to this Agreement, under circumstances that would require
the offering of such other securities to be integrated with the offering of the
shares of Common Stock to be issued under this Agreement.
5.24 No Brokers. The Company has taken no action which would give
rise to any claim by any Person for brokerage commissions, finder's fees or
similar payments by the Investor relating to this Agreement for the transactions
contemplated hereby.
5.25 No Violation of Covenants. To the Knowledge of the Company, no
event of default has occurred and is continuing (or event which with the lapse
of time or notice or both would constitute such an event) which has not
otherwise been waived under any revolving credit facility, indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument for money
borrowed or any other material agreement to which the Company or any of its
Subsidiaries is bound, or to which any of the property or assets of the Company
or any of its Subsidiaries is subject, and in any case, which the failure to
cure or obtain a waiver with respect to such default would have a Material
Adverse Effect.
VI.
COVENANTS OF THE COMPANY
6.1 Registration Rights. The Company shall comply in all respects
with the terms of the Registration Rights Agreement.
6.2 Reservation of Common Stock. Except as disclosed in the SEC
Documents, the Company has reserved and will continue to reserve and keep
available at all times in any Investment Period, such number of shares of Common
Stock, free of preemptive rights, necessary to enable the Company to satisfy any
obligation to issue shares of its Common Stock incident to the Closings in such
Investment Period and incident to the exercise of the Warrants issued hereunder;
such amount of shares of Common Stock to be reserved to be calculated based upon
the Floor Price therefor under the terms of this Agreement, and assuming the
full exercise of the Warrants. The number of shares so reserved from time to
time, as theretofore increased or reduced as hereinafter provided, may be
reduced by the number of shares actually delivered hereunder and the number of
shares so reserved shall be increased to reflect (a) potential increases in the
Common Stock which the Company may thereafter be so obligated to issue by reason
of adjustments to the Purchase Price therefor and the issuance of the Warrants
and (b) stock splits and stock dividends and distributions.
6.3 Listing of Common Stock. During the term of this Agreement, the
Company hereby agrees to maintain the listing of the Common Stock on a Principal
Market, and as soon as reasonably practicable but in any event prior to the
commencement of the Commitment Period to list the additional shares of Common
Stock issuable under this Agreement (including Common Stock issuable upon
exercise of the Warrants). The Company further agrees that, if the Company
applies to have the Common Stock traded on any other
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Principal Market, it will include in such application the Common Stock issuable
under this Agreement (including Common Stock issuable upon exercise of the
Warrants), and will take such other action as is necessary or desirable to cause
the Common Stock to be listed on such other Principal Market as promptly as
possible. If the Principal Market is the Nasdaq National Market, the Company
shall maintain sufficient net tangible assets to satisfy the requirements of the
NASD for the listing of the Common Stock on the Nasdaq National Market.
6.4 Exchange Act Registration. During the term of this Agreement,
the Company will cause its Common Stock to continue to be registered under
Section 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under the Exchange Act. If
required, the Company will take all action to continue the listing and trading
of its Common Stock on the Principal Market and will comply in all material
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASD and the Principal Market.
6.5 Registration on Form S-3. If the Company does not initially
file the Registration Statement on Form S-3, the Company shall use its best
efforts to refile and amend the Registration Statement on Form S-3.
6.6 Legends. Except as otherwise provided by Section 7.1 hereof,
the certificates evidencing the Common Stock to be issued to the Investor at
each Closing and upon the exercise of the Warrants shall be free of legends or
stop transfer or other restrictions.
6.7 Corporate Existence. During the term of this Agreement, the
Company will take all steps necessary to preserve and continue the corporate
existence of the Company; provided, however, that nothing herein shall be
construed to limit the ability of the Company to partake in any merger, asset
sale or acquisition transaction involving the Company, subject to the Company
complying with the terms of this Agreement.
6.8 Additional SEC Documents. During the term of this Agreement,
the Company will notify the Investor, as and when all SEC Documents are
submitted to the SEC for filing.
6.9 "Blackout Period". During the term of this Agreement, the
Company will immediately notify the Investor upon the occurrence of any of the
following events in respect of a registration statement or related Prospectus in
respect of an offering of securities required to be registered under this
Agreement or the Registration Rights Agreement: (a) receipt of any request for
additional information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the registration statement for
amendments or supplements to the registration statement or related Prospectus;
(b) the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose; (c) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of such registrable securities for sale in any
jurisdiction or the initiation or threatening of any proceeding
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for such purpose; (d) the happening of any event which makes any statement made
in the registration statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect
or which requires the making of any changes in the registration statement,
related Prospectus or documents so that, in the case of the registration
statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the related
Prospectus, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and (e) the Company's reasonable determination that a
post-effective amendment to the registration statement would be appropriate, in
which event the Company will promptly make available to the Investor any such
supplement or amendment to the related Prospectus. The Investor shall not be
obligated to purchase any shares pursuant to a Company Put Notice during the
Investment Period in which any of the foregoing events continued.
VII.
LEGENDS AND DELIVERY OF CERTIFICATES
7.1 Legends and Delivery of Certificates. The Warrants and, unless
otherwise provided below, the certificates evidencing the Common Stock to be
issued to the Investor at any Closing and upon exercise of the Warrants, will
bear the following legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
In the event shares of Common Stock are issued incident to a
Closing or upon exercise of the Warrants in circumstances pursuant to which
shares of Common Stock are either required to bear the Legend or are not to bear
the Legend, such certificates (bearing or not bearing the Legend, as
appropriate) shall be issued and delivered to the Investor or as otherwise
directed by the Investor on the applicable Closing Date or within two Trading
Days of the surrender of the Warrants for exercise (together with all other
documentation required to be delivered to effect such exercise), as applicable,
in each case against payment therefor.
The Company shall cause the transfer agent for the Common Stock to
issue and deliver to the Investor or as otherwise directed by the Investor,
shares of Common Stock not bearing the Legend, during the following periods and
under the following circumstances and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Investor:
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(a) At any time from and after the effective date
of the applicable registration statement: (i) incident to the issuance of any
shares of Common Stock pursuant to a Closing; (ii) incident to the exercise of
the Warrants; and (iii) upon any surrender of one or more certificates
evidencing Common Stock and which bear the Legend, to the extent accompanied by
a notice requesting the issuance of new certificates free of the Legend to
replace those surrendered; provided that in connection with such event the
Investor confirms to the transfer agent in a writing that the Company and its
counsel are entitled to rely upon that the Investor intends to sell such Common
Stock to a third party which is not an Affiliate of the Company or the Investor,
and the Investor agrees to redeliver such Common Stock to the transfer agent to
add the Legend in the event the Common Stock is not sold; and
(b) At any time from and after the Closing Date, upon
any surrender of one or more certificates evidencing Common Stock and which
bear the Legend, to the extent accompanied by a notice requesting the issuance
of new certificates free of the Legend to replace those surrendered and
containing or also accompanied by representations, in a writing that the Company
and its counsel are entitled to rely upon, that (i) the then holder thereof is
permitted to dispose of such Common Stock pursuant to Rule 144(k) under the
Securities Act, (ii) such holder intends to effect the sale or other disposition
of such Common Stock whether or not pursuant to the Registration Statement, to a
purchaser or purchasers who will not be subject to the registration requirements
of the Securities Act or (iii) such holder is not then subject to such
requirements; provided that in the case of surrenders described in clauses (ii)
and (iii) thereof, the holder provides an opinion of counsel in form and
substance reasonably satisfactory to the Company.
7.2 No Other Legend or Stock Transfer Restrictions. No legend has
been or shall be placed on the share certificates representing the Common Stock
and no instructions or stop transfers or other restrictions on transfer have
been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article VII.
7.3 Investor's Compliance. Nothing in this Article VII shall affect
in any way the Investor's obligations under any agreement or otherwise to comply
with all applicable securities laws upon resale of the Common Stock.
VIII.
OTHER ISSUANCES OF COMMON STOCK
8.1 Equity Offering Adjustment to Purchase Price. In the event that
the Company makes an Equity Offering during an Investment Period, then
notwithstanding anything herein to the contrary, the purchase price per share of
Common Stock for any Investment Amount made solely within such Investment Period
but following the consummation of the Equity Offering shall be the lower of (a)
the lowest effective purchase price per share of Common Stock received by the
Company in any such Equity Offering, and (b) the price per
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share of Common Stock determined hereunder with respect to purchases of Common
Stock effected by the Investor during such Investment Period.
8.2 Other Adjustments to Purchase Price and Floor Price. The daily
low trading or closing sale price, as applicable, of the Common Stock for any
Trading Day used to calculate the Purchase Price and the Floor Price shall be
adjusted proportionally to reflect any stock splits, stock dividends,
reclassifications, combinations and similar transactions involving the Company's
Common Stock.
IX.
CHOICE OF LAW AND VENUE, WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR
CHOICE OF LAW. The parties hereby agree that all actions or proceedings arising
directly or indirectly from or in connection with this Agreement shall, at the
option of either party, be litigated only in the United States District Court
for the Southern District of New York located in New York County, New York,
unless such District Court declines jurisdiction, in which case such actions or
proceedings shall be litigated only in the state court located in New York
County, New York. The parties consent to the jurisdiction and venue of the
foregoing courts and consent that any process or notice of motion or other
application to said courts or a judge thereof may be served inside or outside
the State of New York or the Southern District of New York by registered mail,
return receipt requested, directed to the party for which it is intended at its
address set forth in this Agreement (and service so made shall be deemed
complete five (5) Trading Days after the same has been posted as aforesaid) or
by personal service or in such other manner as may be permissible under the
rules of said court. The parties hereto hereby irrevocably waive any and all
right to a trial by jury with respect to any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
X.
ASSIGNMENT, ENTIRE AGREEMENT, AMENDMENT, TERMINATION
10.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, the Investor's rights and obligations
under this Agreement may be assigned at any time, in whole, with the prior
written consent of the Company (which consent shall not be unreasonably
withheld) to any Affiliate of the Investor (a "Permitted Transferee"). The
rights and obligations of the Investor under this Agreement shall inure to the
benefit of, and be enforceable by and against, any such Permitted Transferee.
10.2 Entire Agreement; Amendment. This Agreement, the Registration
Rights Agreement, the Warrants and the other documents delivered pursuant hereto
constitute the full
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and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
10.3 Publicity. Each of the Company and the Investor agree that
they will not disclose, and will not include in any public announcement, the
name of the other without its prior consent, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. Except as may be required by law, each of the Company and the
Investor shall consult with the other before issuing any press release or
otherwise making any public statements with respect to this Agreement and shall
not issue any such press release or make any such public statement prior to such
consultation.
10.4 Termination. (a) The Company may, in its sole discretion,
terminate this Agreement and Investor's obligation to purchase any Investment
Amount for the remainder of the Commitment Period.
(b) The Investor may terminate this Agreement as a result of (i) a
breach by the Company of any material representation, warranty, covenant or
other obligation in this Agreement or the Registration Rights Agreement or (ii)
if the Investor reasonably determines, in its sole discretion, at any time that
the adoption of, or change in, or any change in the interpretation or
application of, any law, regulation, rule, guideline or treaty (including, but
not limited to, changes of capital adequacy) makes it illegal or materially
impractical for the Investor to fulfill its commitment pursuant to this
Agreement, but in the case of either (i) or (ii) above, Investor may terminate
this Agreement only after a 60-day period in which the parties negotiate in good
faith, in the case of (i), a reasonable substitute for such provision or, in the
case of (ii), a reasonable alternative manner not illegal or impossible for the
Investor to fulfill its commitment pursuant to this Agreement.
XI.
NOTICES, COSTS AND EXPENSES, INDEMNIFICATION
11.1 Notices. All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified, return receipt
requested, postage prepaid, or delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice:
If to the Company, to:
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Elcom International, Inc.
10 Oceana Way
Norwood, Massachusetts 02062
Attention: Robert J. Crowell
Facsimile No.: (781) 551-0409
With a copy (which shall not constitute notice) to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Douglas A. Neary, Esq.
Facsimile No.: (216) 241-0816
If to the Investor, to
Cripple Creek Securities, LLC c/o The Palladin Group
195 Maplewood Ave.
Maplewood, New Jersey 07040
Attention: Robert L.
Facsimile No.: (973) 313-6491
With a copy (which shall not constitute notice) to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attention: L. Stevenson Parker, Esq.
Facsimile No.: (202) 942-5999
Subject to Section 2.3(d), notice shall be deemed given on the date of service
or transmission if personally served or transmitted by telegram, telex or
facsimile during normal business hours of the recipient. Notice otherwise sent
as provided herein shall be deemed given on the third (3rd) business day
following the date mailed or on the second business day following the date of
deposit for delivery of such notice with a reputable air courier service.
11.2 Costs and Expenses. The Company shall be responsible for the
Investor's reasonable (a) legal fees and related expenses incurred in entering
into this Agreement up to a maximum amount of $40,000, which shall be payable
upon execution and delivery of this Agreement, and (b) out-of-pocket costs and
expenses in connection with the performance of its obligations hereunder up to a
maximum amount of $35,000 initially, and $7,500 quarterly thereafter. The
Company agrees to pay the Investor the amounts due under clause (b) of the
preceding sentence within thirty (30) days following the Investor's request
therefor upon presentation of supporting documentation. In the event payment is
not received within such
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thirty (30) day period, Investor shall have the right to deduct any such amounts
owed by the Company to the Investor from any amounts owed by the Investor to the
Company pursuant to Section 2.4(a) herein.
11.3 Indemnification.
(a) Indemnification of Investor. The Company
agrees to indemnify and hold harmless the Investor and each person, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability,
claim, damage and reasonable expense whatsoever, as incurred, arising out of any
untrue statement of a material fact contained in the Registration Statement (or
any amendment thereto) or the Prospectus, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statement therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability,
claim, damage and reasonable expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, based upon any such untrue
statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Section 11.3(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all reasonable expenses
whatsoever, as incurred (including the fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened in writing, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above; provided, however, that no indemnity obligation of the Company shall not
apply to any loss, liability, claim, damage or expense to the extent arising out
of any untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Investor expressly for use in the Registration
Statement (or any amendment thereto), including the Prospectus (or any amendment
or supplement thereto).
(b) Indemnification of Company. The Investor
agrees to indemnify and hold harmless the Company, its directors, each of its
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or
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omissions, made in the Registration Statement (or any amendment thereto),
including the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Investor expressly for use in the Registration Statement (or any
amendment or supplement thereto) or the Prospectus.
(c) Action against Parties; Notification. Each
indemnified party shall give notice as promptly as reasonably practicable to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder, in
any case, to the extent it is not prejudiced as a result thereof and in any
event shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party reasonably promptly after receiving the aforesaid notice from
such indemnified party, to assume the defense thereof. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
own counsel in any such case but the reasonable fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless (i)
the employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action at the expense
of the indemnifying party, (ii) the indemnifying party shall not have employed
counsel to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnified party or
parties shall have reasonably concluded that there are fundamental defenses
available to it or them which are inconsistent with those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified parties), in any of which events such reasonable fees and expenses
of one additional counsel shall be borne by the indemnifying party. In no event
shall the indemnifying party be liable for fees and expenses of more than one
counsel (in addition to one local counsel) separate from their own counsel for
the indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry or any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 11.3 or Section 11.4 hereof
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each such nonconsenting indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of an any such nonconsenting indemnified party.
(d) Settlement without Consent if Failure to
Reimburse. If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for the fees and expenses
of counsel, such indemnifying party agrees, subject to the arbitration
provisions set forth in this paragraph, that it shall be liable for any
settlement of the nature contemplated by Section 11.3(a)(ii) effected without
its written consent if (i) such
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settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) such indemnifying party shall not have reimbursed
such indemnified party in accordance with such request prior to the date of such
settlement; provided, however, that if the indemnifying party disputes the
reasonableness of the fees and expenses of the indemnified party, each party
agrees that such dispute shall be governed by and finally settled under the
rules of binding arbitration of the American Arbitration Association (the "AAA")
by a panel of three arbitrators familiar with Delaware corporate law (at least
one of whom shall be an attorney) appointed by the AAA. Any such claim or
controversy under this Section 11.3(d) shall first be promptly submitted to the
AAA under its minitrial procedures. Until such dispute is resolved in accordance
with this paragraph, the indemnifying party shall not be liable for any
settlement effected without its written consent and such fees and expenses shall
not become payable, unless otherwise agreed to by the indemnifying party and the
indemnified party.
11.4 Contribution. If the indemnification provided for in Section
11.3 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses to the extent provided for herein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred (a) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Investor on the other hand from the offering of
the Common Stock pursuant to this Agreement and the receipt of Warrants issued
or issuable hereunder or (b) if the allocation provided by clause (a) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (a) above but also the relative
fault of the Company on the one hand and of the Investor on the other hand and
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and
the Investor on the other hand in connection with the offering of the Common
Stock pursuant to this Agreement shall be deemed to be in the same respective
portions as the total proceeds from the offering of the Common Stock pursuant to
this Agreement received by the Company from the Investor, on the one hand, and
the total profits received by the Investor upon the sale of such Common Stock
and the receipt of Warrants issued or issuable hereunder, on the other hand,
bear to the aggregate public offering price.
The relative fault of the Company on the one hand and the Investor
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Investor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 11.4 were determined on a
pro-rata allocation or by any
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other method of allocation which does not take account of the equitable
considerations referred to above in this Section 11.4. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 11.4 shall be deemed to include any
reasonable legal or other expenses reasonably incurred by such indemnified party
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 11.4, the Investor
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Common Stock purchased by it and resold to the
public and the value of Warrants issued or issuable hereunder exceeds the amount
of any damages which the Investor has otherwise been required to pay by reason
of any such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 11.4, each person, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Investor, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as the Company.
11.5 General Indemnification. Each party shall indemnify the other
against any material loss, cost or damages (including reasonable attorney's fees
and expenses) incurred as a result of such party's breach of any representation,
warranty, covenant or agreement in this Agreement.
11.6 Indemnification of Accountants. The Investor hereby agrees to
hold harmless the Company's independent auditors from any liability that may
arise out of the delivery of an "agreed upon procedures" letter pursuant to
clause (b)(ii) in the third paragraph of Section 3.3 hereof.
XII.
MISCELLANEOUS
12.1 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument.
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12.2 Survival; Severability. (a) The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. The indemnity and contribution agreements contained in Sections 11.3
and 11.4 hereof shall survive and remain operative and in full force and effect
regardless of (i) any termination of this Agreement or of the Commitment Period,
(ii) any investigation made by or on behalf of any indemnified party or by or on
behalf of the Company, and (iii) the consummation of the sale or successive
resales of the Common Stock. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
12.3 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
12.4 Effectiveness of the Agreement. This Agreement shall
be effective as of the Effective Date.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the date
hereof.
CRIPPLE CREEK SECURITIES, LLC ELCOM INTERNATIONAL, INC.
By: /s/ Robert L. Chender By: /s/ Peter A. Rendall
Name: Robert L. Chender Name: Peter A. Rendall
Title: Principal Title: Chief Financial Officer
Exhibit 10.8
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Rights Agreement"), entered
into as of December 30, 1999, between Cripple Creek Securities, LLC, a New York
limited liability company (the "Investor"), and Elcom International, Inc., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Structured Equity Line Flexible
Financing Agreement by and between the Company and the Investor (the
"Agreement"), the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may elect to issue to the Investor,
and, at the Company's option, the Investor shall purchase from the Company, from
time to time as provided in the Agreement, shares of the Company's common stock
(the "Common Stock"), par value $.01 per share, for a maximum aggregate purchase
price of $50,000,000;
WHEREAS, the Company has agreed to issue to the Investor warrants (the
"Warrants") to purchase up to an aggregate of 750,000 shares of Common Stock
(the "Shares") at prices determined pursuant to the Agreement upon the
occurrence, if any, of certain circumstances set forth in the Agreement; and
WHEREAS, pursuant to the terms of and in partial consideration for, the
Investor's commitment to enter into the Agreement, the Company has agreed to
provide the Investor with certain registration rights with respect to the Shares
as set forth in this Rights Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Agreement, the Warrants and this Rights Agreement and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intended to be legally bound hereby, the Company and the Investor
agree as follows:
1. Certain Definitions. Capitalized terms used in this Rights Agreement and not
otherwise defined herein shall have the same meaning ascribed to them in the
Agreement. The following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Investor" shall include the Investor and any permitted assignee or
transferee of the rights under the Agreement and the Warrants to whom the
registration rights conferred by this Rights Agreement have been transferred in
compliance with Section 9 of this Rights Agreement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing an appropriate registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
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"Registration Expenses" shall mean, subject to Section 11.2 of the
Agreement, all expenses to be incurred by the Company in connection with
Investor's exercise of its registration rights under this Rights Agreement,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, reasonable fees and disbursements of counsel to Investor for a "due
diligence" examination of the Company and review of the Registration Statement
(as defined below), and the expense of any special audits incident to or
required employees of the Company, which shall be paid in any event by the
Company); provided, however, that in no event shall the aggregate amount paid by
the Company under this Rights Agreement and under the Agreement exceed the
limitations, to the extent applicable, set forth in Section 11.2 of the
Agreement.
"Registrable Securities" shall mean any Shares or other securities
issued or issuable to the Investor or any holder or transferee upon the exercise
of the Warrants until (i) a registration statement under the Securities Act
covering the offering of such Shares has been declared effective by the
Commission and such Shares have been disposed of pursuant to such effective
registration statement, (ii) such Shares are sold under circumstances in which
all of the applicable conditions of Rule 144 (or any similar provision then in
force) under the Securities Act ("Rule 144") are met, (iii) such Shares have
been otherwise transferred and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive
legend, or (iv) such time as, in the opinion of counsel to the Company, which
counsel shall be acceptable to the Investor in its reasonable discretion, all
such Shares may be sold without any time, volume or manner limitation pursuant
to Rule 144(k) (or any similar provision then in effect) under the Securities
Act.
2. Registration Requirements. The Company shall use its reasonable best
efforts to effect the registration of the Registrable Securities contemplated by
the Warrants (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as would permit or facilitate the
sale or distribution of all the Registrable Securities in the manner (including
manner of sale) and in all states reasonably requested by the warrant holder for
purposes of maximizing the proceeds realizable by the Investor from such sale or
distribution. Such reasonable best efforts by the Company shall include without
limitation the following:
(a) Subject to the terms and conditions of this Rights Agreement,
the Company shall file with the Commission (i) no later than thirty (30) days
from the date of execution of the Agreement, an appropriate registration
statement under the Securities Act for the registration of the resale by the
Investor of the Registrable Securities (the "Registration Statement") which
Registration Statement shall have been declared effective by the Commission no
later than one hundred twenty (120) days from the Effective Date. Furthermore,
at the time of filing of the Registration Statement, the Company shall file (A)
such blue sky filings as shall have been requested by the Investor; and (B) any
required filings with the National Association of Securities Dealers, Inc. or
exchange or market where the Shares are traded. The Company shall use its best
efforts to have all filings declared effective as promptly as practicable.
(b) (i) If the Company (A) fails to file the Registration Statement
complying with the requirements of this Rights Agreement within thirty (30) days
from the date
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of the execution of the Agreement or if the Registration Statement has not
become effective on or before one hundred twenty (120) days from the Effective
Date, the Investor shall have, in addition to and without limiting any other
rights it may have at law, in equity or under the Agreement, or this Rights
Agreement (including the right to specific performance), the right to receive,
as liquidated damages, the payments as provided in subparagraph (ii) of this
section.
(ii) In the event the Company fails to obtain the effectiveness
of a Registration Statement within the time period set forth in Section 2(a),
the Company shall pay to the Investor an amount equal to (A) $100, in cash, for
each day of the thirty (30) day period following the date by which such
Registration Statement was required to have been declared effective and (B)
$500, in cash, for each day after such first thirty (30) day period. In addition
to the foregoing, in the event the Company fails to maintain the effectiveness
of a Registration Statement (or the use of the underlying prospectus) throughout
the period set forth in Section 5(a), other than suspensions as set forth in
Section 4, the Company shall pay to the Investor an amount equal to $500, in
cash, per day, in which a suspension has occurred.
(c) The Company shall enter into such customary agreements and take
all such other reasonable actions in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities.
3. Registration Procedures. The Company will keep the Investor advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its reasonable best efforts to:
(a) Keep such registration effective for the period ending sixty
(60) months, as extended pursuant to Section 4 hereof, following the Effective
Date of the Agreement, or until such shorter period that will terminate when
there are no Registrable Securities outstanding.
(b) Furnish such number of prospectuses and amendments and
supplements thereto, and other documents incident thereto as the Investor from
time to time may reasonably request.
(c) Prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to keep
such Registration Statement effective for the applicable period; cause the
related prospectus to be supplemented by any required prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 under the Securities Act;
and comply with the provisions of the Securities Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
or supplement to such prospectus;
(d) Notify the Investor and its counsel (as designated in writing by
the Investor) promptly, and confirm such notice (a "Notice") in writing, (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to the Registration
Statement or related prospectus or for additional information, (iii) of the
issuance by the
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Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purposes, (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event as a result of which the prospectus included in the
Registration Statement (as then in effect) contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein (in the case of the prospectus or
any preliminary prospectus, in light of the circumstances under which they were
made) not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate or
that there exist circumstances not yet disclosed to the public which make
further sales under such Registration Statement inadvisable pending such
disclosure and post-effective amendment;
(e) Upon the occurrence of any event contemplated by Section 3(d)(ii)
- -(vi) and immediately upon the expiration of any Blocking Period (as defined in
Section 4), prepare, if the occurrence of such event or period requires such
preparation, a supplement or post-effective amendment to the Registration
Statement or related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements, in light of the
circumstances under which they were made, not misleading;
(f) Obtain the withdrawal of any order suspending the effectiveness of
the Registration Statement, or the lifting of any suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction,
at the earliest possible moment;
(g) Cause all Registrable Securities subject to the Registration
Statement at all times to be registered or qualified for offer and sale under
the securities or blue sky laws of such jurisdictions as any Investor reasonably
requests in writing; use its best efforts to keep each such registration or
qualification effective, including through new filings or amendments or
renewals, during the period the Registration Statement is required to be kept
effective and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, however, that the Company will
not be required to qualify to do business or take any action that would subject
it to taxation or general service of process in any jurisdiction where it is not
then so qualified or subject;
(h) Cause the Registrable Securities covered by the Registration
Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities in accordance with the
chosen method or methods of distribution; and
(i) Cause all Registrable Securities included in such
Registration Statement to be listed, by the date of first sale of Registrable
Securities pursuant to such Registration Statement, on the principal securities
exchange or automated interdealer system on which the same type of securities of
the Company are then listed or traded.
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4. Suspensions of Effectiveness. The Company may suspend dispositions under
the Registration Statement and notify the Investor that it may not sell the
Registrable Securities pursuant to any Registration Statement or prospectus (a
"Blocking Notice") if the Company's management determines in its good faith
judgment that the Company's obligation to ensure that such Registration
Statement and prospectus are current and complete would require the Company to
take actions that might reasonably be expected to have a materially adverse
effect on the Company and its shareholders; provided that such suspension
pursuant to a Blocking Notice or Prospectus Inadequacy Notice (as defined below)
or as a result of the circumstances described in Section 3(d)(ii)-(vi) may not
exceed ninety (90) days (whether or not consecutive) in any twelve (12) month
period. The Investor agrees by acquisition of the Registrable Securities that,
upon receipt of a Blocking Notice or "Prospectus Inadequacy Notice" from the
Company of the existence of any fact of the kind described in the following
sentence, the Investor shall not dispose of, sell or offer for sale the
Registrable Securities pursuant to the Registration Statement until such
Investor receives (i) copies of the supplemented or amended prospectus, or until
counsel for the Company shall have determined that such disclosure is not
required due to subsequent events, (ii) notice in writing (the "Advice") from
the Company that the use of the prospectus may be resumed and (iii) copies of
any additional or supplemental filings that are incorporated by reference in the
Prospectus. Pursuant to the immediately preceding sentence, the Company may
provide such Prospectus Inadequacy Notice to the Investor upon the determination
by the Company of the existence of any fact or the happening or any event that
makes any statement of a material fact made in the Registration Statement, the
prospectus, any amendment or supplement thereto, or any document incorporated by
reference therein untrue in any material respect, or that requires the making of
any additions to or changes in the Registration Statement or the prospectus, in
order to make the statements therein not misleading in any material respect. If
so directed by the Company in connection with any such notice, each Investor
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Investor's possession, of the prospectus
covering such Registrable Securities that was current immediately prior to the
time of receipt of such notice. In the event the Company shall give any such
Blocking Notice or Prospectus Inadequacy Notice, the time regarding the
effectiveness of such Registration Statement set forth in Section 5(a) shall be
extended by one and one-half (1-1/2) times the number of days during the period
from and including the date of the giving of such Blocking Notice or Prospectus
Inadequacy Notice to and including the date when the Investor shall have
received the copies of the supplemented or amended prospectus, the Advice and
any additional or supplemental filings that are incorporated by reference in the
prospectus. Delivery of a Blocking Notice or Prospectus Inadequacy Notice and
the related suspension of any Registration Statement shall not constitute a
default under this Rights Agreement. However, if the Investor's ability to sell
under the Registration Statement is suspended for more than the ninety (90) days
period described above, the Investor may elect, in its sole and absolute
discretion, to terminate the Agreement pursuant to Section 10.4(b)(i) of the
Agreement.
5. Indemnification.
(a) Company Indemnity. The Company will indemnify the Investor, each
of its officers, directors and partners, and each person controlling the
Investor, within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and the rules and regulations thereunder with respect to
which registration, qualification or compliance has been
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effected pursuant to this Rights Agreement, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus (including any related registration statement, notification or
the like or any amendment thereto) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse the Investor, each of its
officers, directors and partners, and each person controlling the Investor, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission (or alleged untrue statement or omission) that
is made in reliance upon and in conformity with written information furnished to
the Company by the Investor and stated to be specifically for use therein. In
addition to any other information furnished in writing to the Company by the
Investor, the information in the Registration Statement concerning the Investor
under the captions "Selling Shareholders" (or any similarly captioned Section
containing the information required pursuant to Item 507 of Regulation S-K
promulgated pursuant to the Securities Act) and "Plan of Distribution" (or any
similarly captioned Section containing information required pursuant to Item 508
of Regulation S-K) shall be deemed information furnished in writing to the
Company by the Investor to the extent it conforms to information actually
supplied in writing by the Investor. The indemnity agreement contained in this
Section 5(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent will not be unreasonably withheld).
(b) Investor Indemnity. The Investor will, if Registrable Securities
held by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and the rules and regulations
thereunder, each other Investor (if any), and each of their officers, directors
and partners, and each person controlling such other Investor (if any), and each
of their officers, directors, and partners, and each person controlling such
other Investor against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement (or any amendment thereto) or prospectus or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, and will reimburse the
Company and its directors, officers and partners, or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
and defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by the Investor and stated to be
specifically for use therein, and
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provided that no Investor shall be liable under this indemnity for an amount in
excess of the proceeds received by the Investor from the sale of the Registrable
Securities pursuant to such Registration Statement; provided, however, that
nothing contained herein shall limit the Investor's obligation to provide
indemnification pursuant to Section 11.3 of the Agreement. In addition to any
other information furnished in writing to the Company by the warrant holder, the
information in the Registration Statement concerning the Investor under the
captions "Selling Shareholders" (or any similarly captioned Section containing
the information required pursuant to Item 507 of Regulation S-K promulgated
pursuant to the Securities Act) and "Plan of Distribution" (or any similarly
captioned Section containing information required pursuant to Item 508 of
Regulation S-K) shall be deemed information furnished in writing to the Company
by the Investor to the extent it conforms to information actually supplied in
writing by the Investor. The indemnity agreement contained in this Section 5(b)
shall not apply to amounts paid in settlement of any such claims, losses,
damages or liabilities if such settlement is effected without the written
consent of the Investor (which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. The Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Party, provided, however,
that if separate firm(s) of attorneys are required due to a conflict of
interest, then the indemnifying party shall be liable for the reasonable fees
and expenses of each such separate firm. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
6. Contribution. If the indemnification provided for in Section 5 hereof is
unavailable to the Indemnified Party in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
as between the Company and the Investor on the one hand and the underwriters on
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the other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Investor on the one hand or underwriters, as the
case may be, on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and of the Investor on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and the Investor
on the other, in such proportion as is appropriate to reflect the relative fault
of the Company and of the Investor in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Investor on the other shall be deemed to be in the same proportion as the
proceeds from the offering received by the Company from the initial sale of the
Registrable Securities by the Company to the Investor pursuant to this Rights
Agreement bear to the proceeds received by the Investor from the sale of
Registrable Securities pursuant to the Registration Statement. The relative
fault of the Company on the one hand and of the Investor on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Investor.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 6 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 5(a) or Section 5(b) hereof had been
available under the circumstances.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 6 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Investor shall be required to
contribute any amount in excess of the amount by which the Investor, the total
price at which the shares of Common Stock offered by the Investor and
distributed to the public, or offered to the public, exceeds the amount of any
damages that the Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
7. Survival. The indemnity and contribution agreements contained in Section
5 and Section 6 shall remain operative and in full force and effect regardless
of (i) any termination of the Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company and (iii) the consummation of the sale or successive resales of
the Registrable Securities.
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8. Information by Investor. The Investor shall promptly furnish to the
Company such information regarding the Investor and the distribution proposed by
such Investor as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Rights Agreement. All information provided to the
Company by the Investor shall be accurate and complete in all material respects
and the Investor shall promptly notify the Company if any such information
becomes incorrect or incomplete.
9. Transfer or Assignment of Rights. Neither this Rights Agreement nor any
rights of the Investor or the Company hereunder may be assigned by either party
to any other person. Notwithstanding the foregoing, upon prior written notice to
the Company, the Investor's rights and obligations under this Rights Agreement
may be assigned, in whole or in part, to any Affiliate of the Investor (a
"Permitted Transferee"), and the rights and obligation of the Investor under
this Rights Agreement shall inure to the benefit of, and be enforceable by and
against, any such Permitted Transferee.
10. Miscellaneous.
(a) Entire Agreement. This Rights Agreement, together with the
Agreement, contains the entire understanding and agreement of the parties
relating to the registration of Registrable Securities, and may not be modified
or terminated except by a written agreement signed by both parties.
(b) Notices. All notices, demands, requests, consents, approvals or
other communications required or permitted to be given hereunder or which are
given with respect to this Rights Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: If to the Company,
to:
Elcom International, Inc.
10 Oceana Way
Norwood, Massachusetts 02062
Attention: Robert J. Crowell
Facsimile No.: (781) 551-0409
With a copy to (which shall not constitute notice) to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Douglas A. Neary, Esq.
Facsimile No.: (216) 241-0816
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If to the Investor, to
Cripple Creek Securities, LLC c/o The Palladin Group
195 Maplewood Ave.
Maplewood, New Jersey 07040
Attention: Robert L. Chender
Facsimile No.: (973) 313-6491
With a copy (which shall not constitute notice) to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attn. L. Stevenson Parker, Esq.
Facsimile No.: (202) 942-5999
Subject to Section 2.3(c) of the Agreement, notice shall be deemed given on the
date of service or transmission if personally served or transmitted by telegram,
telex or facsimile during normal business hours of the recipient. Notice
otherwise sent as provided herein shall be deemed given on the third business
day following the date mailed or on the second business day following delivery
of such notice by a reputable air courier service.
(c) Gender of Terms. All terms used herein shall be deemed to include
the feminine and the neuter, and the singular and the plural, as the context
requires.
(d) GOVERNING LAW; CONSENT OF JURISDICTION; WAIVER OF JURY TRIAL.
THIS RIGHTS AGREEMENT AND THE VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. THE
PARTIES HERETO HEREBY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY OR
INDIRECTLY FROM OR IN CONNECTION WITH THIS RIGHTS AGREEMENT SHALL BE LITIGATED
ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW
YORK. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO CONSENT TO
THE JURISDICTION AND VENUE OF THE FOREGOING COURTS AND CONSENT THAT ANY PROCESS
OR NOTICE OF MOTION OR OTHER APPLICATION TO EITHER OF SAID COURTS OR A JUDGE
THEREOF MAY BE SERVED INSIDE OR OUTSIDE THE STATE OF NEW YORK OR THE SOUTHERN
DISTRICT OF NEW YORK BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO
THE SUCH PARTY AT ITS ADDRESS SET FORTH IN THIS RIGHTS AGREEMENT (AND SERVICE SO
MADE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME HAS BEEN POSTED AS
AFORESAID) OR BY PERSONAL SERVICE OR IN SUCH OTHER MANNER AS MAY BE PERMISSIBLE
UNDER THE RULES OF SAID COURTS. THE
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<PAGE>
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY
LITIGATION PURSUANT TO THIS RIGHTS AGREEMENT.
(e) Titles. The titles used in this Rights Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Rights Agreement.
(f) Rule 144. The Company will use its reasonable best efforts to file
all reports required to be filed by it under the Securities Act and the Exchange
Act and it will take such further action as holders of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
the Investor to sell Registrable Securities without registration under the Act
within the limitation of the exemptions provided by (a) Rule 144, as such Rule
may be amended from time to time, or (b) any similar role or regulation
hereafter adopted by the Commission. If at any time the Company is not required
to file such reports, it will, upon the request of the Investor, make publicly
available other information so long as necessary to permit sales pursuant to
Rule 144. Upon the request of the Investor, the Company will deliver to the
Investor a written statement as to whether it has complied with such
requirements.
(g) Counterparts. This Rights Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the date first above written.
CRIPPLE CREEK SECURITIES, LLC ELCOM INTERNATIONAL, INC.
By: /s/ Robert L. Chender By: /s/ Peter A. Rendall
Printed: Robert L. Chender Printed: Peter A. Rendall
Title: Principal Title: Chief Financial Officer
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
Exhibit 10.9
FORM OF WARRANT AND MINIMUM COMMITMENT WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
ELCOM INTERNATIONAL, INC.
Common Stock Purchase Warrant
Elcom International, Inc., a Delaware corporation (the "Company"),
hereby certifies that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cripple Creek Securities, LLC, a
New York limited liability company having an address at c/o The Palladin Group,
L.P., 195 Maplewood Ave., Maplewood, New Jersey 07040 ("Purchaser"), or any
other Warrant Holder (as hereinafter defined) is entitled, on the terms and
conditions set forth below, to purchase from the Company at any time during the
period beginning on the date hereof and ending sixty (60) months after the date
hereof, up to ________ [in the case of the Warrant, the Warrant Share Amount; in
the case of the Minimum Commitment Warrant, the number of shares equal to
150,000 less the Warrant Share Amount, or, if the condition set forth in Section
2.6(b) of the Agreement relating to the adverse effect on the timing or
marketability of an elcom.com, inc. public offering occurs, 100,000 shares]
fully paid and nonassessable shares of the common stock, par value $.01 per
share, of the Company (the "Common Stock") at the Purchase Price (hereinafter
defined), as the same may be adjusted pursuant to Section 5 herein.
1. Definitions.
(a) The term "Purchase Price" shall mean $______ per share [in the case of
the Warrant, the Warrant Exercise Price; in the case of the Minimum Commitment
Warrant, 120% of the average of the Stock Prices for the five (5) Trading Days
preceding the termination of this Agreement in accordance with its terms].
(b) The term "Warrant Holder" shall mean the Purchaser or any permitted
assignee of all or any portion of this Warrant, on the terms and subject to the
limitations set forth herein.
(c) The term "Warrant Shares" shall mean the shares of Common Stock or
other securities issuable upon exercise of this Warrant.
(d) Other terms used herein which are defined in that certain Structured
Equity Line Flexible Financing Agreement between the Company and Purchaser dated
as of December __, 1999 (the "Agreement") or that certain Registration Rights
Agreement between the Company and Purchaser dated as of December __,
<PAGE>
1999 (the "Rights Agreement"), shall have the same meanings herein as therein.
2. Exercise of Warrant.
This Warrant may be exercised by Warrant Holder, in whole or in part,
at any time and from time to time, on or prior to the date sixty (60) months
from the date hereof, by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with cash, a
certified check or wire transfer of immediately available funds to an account
designated by the Company representing the aggregate Purchase Price of the
number of Warrant Shares for which the Warrant is being surrendered and the form
of subscription attached hereto as Exhibit A, duly executed by Warrant Holder
("Subscription Notice"), at the offices of the Company; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in part,
in a "cashless" or "net-issue" exercise by delivering to the offices of the
Company or any transfer agent for the Common Stock this Warrant, together with a
Subscription Notice specifying the number of Warrant Shares to be delivered to
such Warrant Holder ("Deliverable Shares") and the number of Warrant Shares with
respect to which this Warrant is being surrendered in payment of the aggregate
Purchase Price for the Deliverable Shares ("Surrendered Shares"); provided that
the Purchase Price multiplied by the number of Deliverable Shares shall not
exceed the value of the Surrendered Shares. For the purposes of this provision,
each Warrant Share as to which this Warrant is surrendered will be attributed a
value equal to the Fair Market Value (as defined below) of the Warrant Share
minus the Purchase Price of the Warrant Share.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised, and the Company, at its expense, shall forthwith
issue and deliver to Warrant Holder a new Warrant of like tenor in the name of
Warrant Holder or as Warrant Holder (upon payment by Warrant Holder of any
applicable transfer taxes) may request, reflecting such adjusted Warrant Shares.
3. Delivery of Certificates.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the proper exercise of this Warrant in full or in part, and in
any event within three (3) Trading Days thereafter, the Company shall transmit
the certificates (and as soon as reasonably practicable thereafter shall
transmit any other stock or other securities or property to which Warrant Holder
is entitled upon exercise) by messenger or overnight delivery service to reach
the address designated by such holder within three (3) trading days after the
receipt of the Warrant, the Subscription Notice and payment of the aggregate
Purchase Price in Section 2(a) or 2(b), as appropriate ("T+3"). Provided that a
registration statement is then effective under the Securities Act with respect
to the Warrant Shares, in lieu of delivering physical certificates representing
the Common Stock issuable upon exercise, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon written request of the Warrant
Holder, the Company shall use its best efforts to cause its
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<PAGE>
transfer agent to electronically transmit the Common Stock issuable upon
exercise to the Warrant Holder by crediting the account of Warrant Holder's
prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system. The time periods for delivery described in the immediately preceding
paragraph shall apply to the electronic transmittals described herein.
(b) This Warrant may not be exercised as to fractional shares of Common
Stock. In the event that the exercise of this Warrant, in full or in part, would
result in the issuance of any fractional share of Common Stock, then in such
event Warrant Holder shall be entitled to cash equal to the Fair Market Value of
such fractional share. For purposes of this Warrant, "Fair Market Value" equals
the closing bid price of the Common Stock on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market, whichever is the
principal trading exchange or market for the Common Stock (the "Principal
Market") on the Trading Day immediately preceding the date of exercise.
4. Representations and Covenants.
(a) Representations and Covenants of the Company.
(i) The Company shall use its reasonable best efforts to insure that a
registration statement under the Securities Act covering the resale or
other disposition thereof of the Warrant Shares by Warrant Holder is
effective to the extent provided in the Rights Agreement or, to the extent
applicable, pursuant to Section 3.2(a) of the Agreement.
(ii) The Company shall take all necessary actions and proceedings as
may be required of it and permitted by applicable law, rule and regulation,
including, without limitation the notification of the National Association
of Securities Dealers, for the legal and valid issuance of this Warrant
and, upon proper exercise hereof, the Warrant Shares to the Warrant Holder
under this Warrant.
(iii) From the date hereof through the last date on which this Warrant
is exercisable, the Company shall take all steps reasonably necessary and
within its control to insure that the Common Stock remains listed on the
Principal Market and shall not amend its Certificate of Incorporation or
Bylaws so as to adversely affect any rights of the Warrant Holder under
this Warrant.
(iv) The Company shall at all times reserve and keep available, solely
for issuance and delivery as Warrant Shares hereunder, such shares of
Common Stock as shall from time to time be issuable as Warrant Shares.
(v) The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and
non-assessable. The Company has authorized and reserved for issuance to
Warrant Holder the maximum number of shares of Common Stock issuable
pursuant to this Warrant.
(vi) With a view to making available to Warrant Holder the benefits of
Rule 144 promulgated under the Securities Act and any other rule or
regulation of the Commission
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<PAGE>
that may at any time permit the Warrant Holder to sell securities of the
Company to the public without registration, the Company agrees to use its
reasonable best efforts to:
(A) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(B) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and
the Exchange Act; and
(C) furnish to any Warrant Holder forthwith upon written request
by such Warrant Holder, at such time as such Warrant Holder has a bona
fide intention to sell and in no event more than twice in any fiscal
year, a written statement by the Company that it has complied with the
reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by the
Company as may be reasonably requested, all at the Warrant Holder's
expense, to permit any such Warrant Holder to take advantage of any
rule or regulation of the Commission permitting the selling of any
such securities without registration.
(b) Representations and Covenants of the Purchaser. The Purchaser shall not
resell Warrant Shares, unless such resale is pursuant to an effective
registration statement under the Act or pursuant to an applicable exemption from
such registration requirements.
5. Adjustment of Exercise Price and Number of Shares.
The number and kind of securities purchasable upon exercise of this
Warrant and the Purchase Price shall be subject to adjustment from time to time
as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company shall at
any time after the date hereof but prior to the expiration of this Warrant
subdivide its outstanding securities as to which purchase rights under this
Warrant exist, by split-up, spin-off, or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant exist, the number of
Warrant Shares as to which this Warrant is exercisable as of the date of such
subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate adjustments shall also be
made to the Purchase Price payable per share, so that the aggregate Purchase
Price payable for the total number of Warrant Shares purchasable under this
Warrant as of such date shall remain the same.
(b) Stock Dividend. If at any time after the date hereof but prior to the
expiration of this Warrant, the Company declares a dividend or other
distribution on all of its outstanding Common Stock payable in Common Stock or
other securities or rights convertible into Common Stock ("Common Stock
Equivalents") without payment of any consideration by holders of Common Stock
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
conversion thereof), then the number of shares of Common Stock for which this
Warrant may be exercised shall be increased as of the record date (or the date
of such dividend distribution if no record date is set) for determining which
holders of Common Stock shall be entitled to receive such dividends, in
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<PAGE>
proportion to the percentage increase in the number of outstanding shares (and
shares of Common Stock issuable upon conversion of all such securities
convertible into Common Stock) of Common Stock as a result of such dividend, and
the Purchase Price per share shall be adjusted so that the aggregate Purchase
Price for the Warrant Shares issuable hereunder immediately after the record
date (or on the date of such distribution, if applicable), for such dividend
shall equal the aggregate Purchase Price immediately before such record date (or
on the date of such distribution, if applicable).
(c) Other Distributions. If at any time after the date hereof but prior to
the expiration of this Warrant, the Company distributes to holders of all of its
outstanding Common Stock, other than as part of its dissolution, liquidation or
the winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any of its assets (other than cash, Common Stock or securities
convertible into or exchangeable for Common Stock), then the number of Warrant
Shares for which this Warrant is exercisable shall be increased to equal: (i)
the number of Warrant Shares for which this Warrant is exercisable immediately
prior to such event, (ii) multiplied by a fraction, (A) the numerator of which
shall be the Fair Market Value per share of Common Stock on the record date for
the dividend or distribution, and (B) the denominator of which shall be the Fair
Market Value per share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of the
value (as determined in good faith by the Board of Directors of the Company) of
any and all such evidences of indebtedness, shares of capital stock, other
securities or property, so distributed. The Purchase Price shall be reduced to
equal: (i) the Purchase Price in effect immediately before the occurrence of any
such event (ii) multiplied by a fraction, (A) the numerator of which is the
number of Warrant Shares for which this Warrant is exercisable immediately
before the adjustment, and (B) the denominator of which is the number of Warrant
Shares for which this Warrant is exercisable immediately after the adjustment.
(d) Merger, Etc. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity (a
"Transaction"), then the Company shall deliver notice of the Transaction no
later than twenty (20) business days prior to the consummation of the
Transaction (the "Merger Notice"). If (i) the Warrant Holder does not deliver
notice of exercise of the Warrant pursuant to Section 2 hereof and properly
exercise the Warrant prior to consummation of the Transaction and (ii) the
Transaction is consummated within sixty (60) business days after delivery of the
Merger Notice, this Warrant shall be canceled in its entirety upon consummation
of the Transaction.
(e) Reclassification, Etc. If at any time after the date hereof there shall
be a reorganization or reclassification of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Warrant Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Purchase Price then in effect,
the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
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<PAGE>
6. No Impairment.
The Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Warrant Holder against impairment. Without limiting
the generality of the foregoing, the Company (a) will not increase the par value
of any Warrant Shares above the amount payable therefor on such exercise, and
(b) will take all such action as may be reasonably necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares on the proper exercise of this Warrant.
7. Notice of Adjustments.
Whenever the Purchase Price or number of Warrant Shares purchasable
hereunder shall be adjusted pursuant to Section 5 hereof, the Company shall
execute and deliver to the Warrant Holder a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Purchase
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by first
class mail, postage prepaid) to the Warrant Holder.
8. Rights as Stockholder.
Prior to exercise of this Warrant, the Warrant Holder shall not be
entitled to any rights as a stockholder of the Company with respect to the
Warrant Shares, including (without limitation) the right to vote such shares or
execute consents in respect thereof, receive dividends or other distributions
thereon or be notified of stockholder meetings. However, in the event of any
taking by the Company of a record of the holders of Common Stock for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution (other than a cash dividend), any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 days prior to the date specified, therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
9. Limitation on Exercise.
Notwithstanding anything to the contrary contained herein, this Warrant
may not be exercised by the Warrant Holder to the extent that, after giving
effect to Warrant Shares to be issued pursuant to a Subscription Notice, the
total number of shares of Common Stock deemed beneficially owned by such Warrant
Holder (other than by virtue of ownership of this Warrant, or ownership of other
securities that have limitations on the holder's rights to convert or exercise
similar to the limitations set forth herein), together with all shares of Common
Stock deemed beneficially owned by the Warrant Holder's Affiliates that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934 exists
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<PAGE>
("Beneficial Ownership"), would exceed 4.9% of the total issued and outstanding
shares of the Common Stock. Notwithstanding the foregoing, the Warrant Holder
shall have the right to waive this restriction, in whole or in part, upon 61
days prior written notice to the Company; provided, however, that such waiver
shall not be permitted to the extent that, if the Warrant Holder were to acquire
additional shares of Common Stock pursuant to such waiver, its Beneficial
Ownership of shares of the Common Stock would exceed 9.9% of the total issued
and outstanding shares of the Common Stock. The delivery of a Subscription
Notice by the Warrant Holder shall be deemed a representation by such holder
that it is in compliance with this paragraph. The terms "deemed beneficially
owned" and "Beneficial Ownership" as used in this Warrant shall exclude shares
that might otherwise be deemed beneficially owned by reason of the exercise of
this Warrant.
10. Replacement of Warrant.
On receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of the Warrant and, in the case of any
such loss, theft or destruction of the Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company at the Warrant Holder's expense will execute and deliver,
in lieu thereof, a new Warrant of like tenor.
11. Specific Enforcement; Consent to Jurisdiction and Choice of Law.
(a) The Company and the Warrant Holder acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND THE WARRANT HOLDER
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT
UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW.
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<PAGE>
(c) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
SUCH STATE'S PRINCIPLES OF CONFLICT OF LAWS.
12. Entire Agreement: Amendments.
This Warrant, the Exhibits hereto and the provisions contained in the
Agreement, the Rights Agreement and incorporated into this Warrant and the
Warrant Shares contain the entire understanding of the parties with respect to
the matters covered hereby and thereby and except as specifically set forth
herein and therein, neither the Company nor the Warrant Holder makes any
representation, warranty, covenant or undertaking with respect to such matters.
This Warrant and any term thereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
13. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery or
delivery by telex (with correct answer back received), or upon transmittal by
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery or transmittal (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company:
Elcom International, Inc.
10 Oceana Way
Norwood, MA 02062
Attn: Robert J. Crowell
Fax: (781) 551-0409
with a copy to:
Calfee Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attn: Douglas A. Neary, Esq.
Fax: (216) 241-0816
If to the Purchaser:
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<PAGE>
Cripple Creek Securities, LLC
c/o The Palladin Group
195 Maplewood Ave.
Maplewood, New Jersey 07040
Attn: Robert L. Chender
Fax: (973) 313-6491
with a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
Attn: L. Stevenson Parker, Esq.
Fax: (202) 942-5999
Either party hereto may from time to time change its address for notices under
this Section 13 by giving at least 10 days prior written notice of such changed
address to the other party hereto.
14. Miscellaneous.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provisions.
15. Assignment.
This Warrant may not be assigned, by the Warrant Holder, in whole or in
part, without the prior written consent of the Company; provided, however, that
upon written notice to the Company, the Warrant Holder may assign this Warrant,
in whole or in part, to an Affiliate of the Warrant Holder without the Company's
consent. In either case, to effect a transfer of this Warrant, the Warrant
Holder shall submit this Warrant to the Company together with a duly executed
Assignment in substantially the form and substance of the Form of Assignment
which is attached to this Warrant as Exhibit B, and, upon the Company's receipt
hereof, and in any event, within three (3) business days thereafter, the Company
shall, at Warrant Holder's expense, issue a Warrant to the Warrant Holder to
evidence that portion of this Warrant, if any, as shall not have been so
transferred or assigned.
9
<PAGE>
Dated: _______________
ELCOM INTERNATIONAL, INC.
By:
Printed:
Title:
Attest:
By:
Its:
[SIGNATURE PAGE TO WARRANT]
Exhibit 10.10
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE UNDERLYING SHARES OF COMMON
STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR IT IS OTHERWISE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
To Purchase 353,418 Shares of Common Stock,
Par Value $.01 Per Share,
of
ELCOM INTERNATIONAL, INC.
A Corporation Incorporated Under the Laws of the State
of Delaware VOID AFTER 5:00 P.M., Boston, Massachusetts
Time December 30, 2002
WHEREAS, Wit Capital Corporation ("Wit Capital" or "Holder")
entered into that certain Letter Agreement (the "Letter Agreement") dated July
8, 1999, with Elcom International Inc., a Delaware corporation (the "Company")
WHEREAS, as compensation for services rendered pursuant to the
Letter Agreement and subject to and upon the conditions set forth therein, the
Company is to issue to Wit Capital a warrant (the "Warrant") to purchase that
number of shares (subject to the provisions of Sections 3 and 5(d) hereof and
subject to adjustment as provided in this Warrant) of Common Stock, par value
$.01 per share (the "Common Shares"), of the Company as set forth in the title
hereof;
NOW, THEREFORE, THIS CERTIFIES that, for value received, the
undersigned Holder hereof, is entitled to purchase, on the terms and conditions
stated herein, between 5:00 p.m. Boston, Massachusetts time on December 30, 1999
and 5:00
<PAGE>
p.m. Boston, Massachusetts time on December 30, 2002 both inclusive,
subject to the exercisability and vesting conditions contained in Section 3
hereof and subject to the Cash Payment (as defined in Section 5(d) hereof) (the
period between and including said times, the "Exercise Period"), an aggregate of
up to 353,418 Common Shares of the Company, subject to adjustment as set forth
in Section 5 hereof.
1. Purchase Price. The purchase price upon any exercise of
this Warrant shall be twenty-eight dollars and seventy-one cents ($28.71) for
each Common Share purchased (the "Purchase Price"), subject to adjustment as
hereinafter provided. The term "Warrant," as used herein, shall include this
Warrant and each succeeding warrant issued in accordance with Section 2 or
Section 5 hereof.
2. Exercise and Issuance. Subject to the provisions of
Sections 3 and 5(d) hereof, this Warrant may be exercised in whole or in part at
any time or times during the Exercise Period, upon written notice in the form of
the Purchase Form attached hereto (to which this original Warrant shall be
annexed) executed by the Holder and sent to the Company at the principal office
of the Company, 10 Oceana Way, Norwood, Massachusetts 02062, Attention: Chairman
(or such other address as the Company may designate by written notice), by
certified or registered mail or by Federal Express or a similar express delivery
service. Any such Purchase Form shall specify the number of Common Shares with
respect to which this Warrant is being exercised and shall be accompanied by the
aggregate Purchase Price for such shares, which shall be tendered by the Holder
to the Company in cash, by wire transfer, by bank or certified check or, upon
prior written approval of the Company, which approval shall be in the sole
discretion of the Company, by delivery of Common Shares having a Current Market
Value (as defined below) on the date of exercise equal to the aggregate Purchase
Price and which
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Common Shares shall have been owned by the Holder for a period of at least six
months prior to the exercise of this Warrant.
Upon prior written approval of the Company, which approval shall be in
the sole discretion of the Company, the Holder also may exercise this Warrant,
in whole or in part, in a "cashless" or "net-issue" exercise by delivering to
the offices of the Company or any transfer agent for the Common Shares this
Warrant, together with a Purchase Form specifying the number of Warrant Shares
to be delivered to the Holder ("Deliverable Shares") and the number of Warrant
Shares (as such term is defined below) otherwise acquirable under this Warrant,
which are being surrendered in payment of the aggregate Purchase Price for the
Deliverable Shares ("Surrendered Shares"); provided that the Purchase Price
multiplied by the number of Deliverable Shares shall not exceed the value of the
Surrendered Shares. For purposes of this provision, each of the Surrendered
Shares will be attributed a value equal to the Current Market Value (as defined
below) of the Warrant Share minus the Purchase Price of the Warrant Share.
If such Purchase Form and payment are received by the Company in proper
form during the Exercise Period, the Company shall as promptly as practicable,
and in any event, within ten business days thereafter, issue and deliver to the
Holder a share certificate or certificates, in the denominations and registered
in the appropriate name, for all of the fully paid and non-assessable Common
Shares for which this Warrant has been properly exercised (hereinafter, "Warrant
Shares"); provided, however, that the Company may, as a condition precedent to
any such issuance and in the exercise of its reasonable discretion, request an
opinion of counsel to the Holder (which counsel and form of opinion shall be
reasonably acceptable to the Company and its counsel) to the effect that the
issuance of the Warrant Shares upon such exercise is allowable under all
applicable securities laws. Any issuance and documentary taxes or other charges
to be
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paid in connection with such issuance of Warrant Shares shall be borne by the
Company, provided that the Company shall not be responsible for any taxes or
other governmental charges attributable to any transfer by the Holder of any
Warrant Shares or attributable to the issue of any certificate(s) for Warrant
Shares in any name other than that of the registered Holder of this Warrant, and
in such case, the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the Company's reasonable satisfaction that no such tax or other
charge is due. Upon receipt by the Company of all of the foregoing deliveries
called for upon exercise of this Warrant, Holder shall, for all purposes, be
deemed to have become the holder of record of such Warrant Shares on the date on
which the last of such deliveries was made, irrespective of the date of delivery
by the Company of the stock certificate(s) therefor; except that if such date is
a date when the stock transfer books of the Company are closed, Holder shall be
deemed to have become the holder of such Shares at the beginning of business on
the next date on which the stock transfer books are open. If this Warrant is
exercised only in part, the Company, at the time of delivery of said share
certificate or certificates, shall deliver to the Holder a new Warrant, at the
sole cost and expense of the Company, in substantially the form hereof
evidencing the right of the Holder to purchase the balance of the Warrant Shares
covered by this Warrant.
At the time of exercise each certificate for such Common Shares shall
bear on its face or on the reverse side thereof the following legend (and any
additional legend(s) required by applicable law):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. They may not be sold,
offered for sale, transferred or otherwise disposed of except pursuant
to an effective registration statement under the Securities Act and any
applicable state securities laws, or it is otherwise established to the
satisfaction of the Company that such registration is not required."
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Any certificate issued at the time in exchange or substitution for any
certificate bearing the foregoing legend with respect to the Securities Act
shall bear said legend unless the Company otherwise directs or unless, in the
written opinion of the applicable Holder's counsel obtained at Holder's expense,
reasonably satisfactory to the Company's counsel, such legend no longer applies.
For purposes of this Warrant Agreement, "Current Market Value" per
Common Share at any date means the consolidated volume-weighted average trading
price for the Common Shares on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market, to the extent the Common Shares are
listed or included for trading thereon, during the primary trading session
currently ending at 4:00 p.m. on the trading day immediately preceding such date
of determination.
3. Limitation on Exercise of Warrant. This Warrant shall be
exercisable with respect to eighty percent (80%) of the aggregate Common Shares
subject to this Warrant at any time during the Exercise Period beginning on the
date hereof. This Warrant shall become exercisable with respect to the remaining
twenty percent (20%) of the aggregate Common Shares (the "20% Vesting Amount")
subject to this Warrant upon the earlier to occur of (i) the Company's
registration statement on Form S-3 (the "Form S-3") filed pursuant to the Equity
Line Arrangement (as defined below) being declared effective by the Securities
and Exchange Commission or (ii) one-hundred and twenty (120) days after the date
of this Warrant. Notwithstanding any other provision herein to the contrary, the
20% Vesting Amount shall not become exercisable in the event that the Company
terminates that certain Structured Equity Line Flexible Financing Agreement
between the Company and Cripple Creek Securities, LLC dated as of December 30,
1999 (the "Equity Line Arrangement") and such termination is a result of the
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determination pursuant to Section 2.6(b) of the Equity Line Arrangement by the
Board of Directors of the Company that that the review by the SEC of the
Company's registration statement filed on Form S-3 may have an adverse effect on
the timing or marketability of a public offering of securities by elcom.com,
inc., a Subsidiary of the Company.
4. Transferability; Limitation on Rights. The Holder of this
Warrant shall not be entitled to give, sell, transfer (by operation of law or
otherwise), pledge, mortgage, hypothecate or otherwise dispose of this Warrant
without the prior written approval of the Company, which approval shall be in
the sole discretion of the Company. Notwithstanding the foregoing, the Holder
shall be entitled to transfer this Warrant, without the consent of the Company,
to any entity that is part of an "affiliated group" with the Company, as such
term is defined in Section 1504(a) of the Internal Revenue Code of 1986, as
amended.
5. Antidilution Provisions
(a) Changes in Capitalization. In the event
that at any time or from time to time the Company shall (i) pay a dividend or
make a distribution on its Common Shares payable in Common Shares or other
equity interests of the Company, (ii) subdivide its outstanding Common Shares
into a larger number of Common Shares, (iii) combine its outstanding Common
Shares into a smaller number of Common Shares or (iv) increase or decrease the
number of Common Shares outstanding by reclassification of its Common Shares,
then the number of Common Shares issuable upon exercise of the Warrant
immediately after the happening of such event shall be adjusted to a number
determined by multiplying the number of Common Shares that the Holder would have
owned or have been entitled to receive upon exercise had the Warrant been
exercised immediately prior to the happening of the events described above (or,
in the case of a dividend or distribution of Common Shares or other shares
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of capital stock, immediately prior to the record date therefor) by a fraction,
the numerator of which shall be the total number of Common Shares outstanding
immediately after the happening of the events described above and the
denominator of which shall be the total number of Common Shares outstanding
immediately prior to the happening of the events described above; and subject to
Section 5(g), the Exercise Price for each Warrant shall be adjusted to a number
determined by dividing the Exercise Price immediately prior to such event by the
aforementioned fraction. An adjustment made pursuant to this Section 5(a) shall
become effective immediately after the effective date of such event, retroactive
to the record date therefor in the case of a dividend or distribution of Common
Shares or other shares of the Company's capital stock.
(b) Rights Issued to All Holders of Common Shares.
In the event that at any time or from time to time the Company shall issue to
all holders of Common Shares, without any charge, rights, options or warrants
entitling the holders thereof to subscribe for Common Shares, or securities
convertible into or exchangeable or exercisable for Common Shares, entitling
such holders to subscribe for or purchase Common Shares at a price per share
that is lower at the record date for such issuance than the then Current Market
Value per Common Share other than in connection with the adoption of a
shareholder rights plan by the Company, then the number of Common Shares
issuable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of Common Shares theretofor issuable upon
exercise of the Warrant by a fraction, the numerator of which shall be the
number of Common Shares outstanding on the date of issuance of such rights,
options, warrants or securities plus the number of additional Common Shares
offered for subscription or, purchase or into or for which such securities that
are issued are convertible, exchangeable or exercisable, and
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the denominator of which shall be the number of Common Shares outstanding on the
date of issuance of such rights, options, warrants or securities plus the total
number of Common Shares that the aggregate consideration received or to be
received by the Company upon exercise or conversion in full of all such rights,
options, warrants or securities would purchase at the then Current Market Value
per Common Share. Subject to Section 5(g), in the event of any such adjustment,
the Exercise Price shall be adjusted to a number determined by dividing the
Exercise Price immediately prior to such date of issuance by the aforementioned
fraction. Such adjustment shall be made immediately after such rights, options
or warrants are issued and shall become effective, retroactive to the record
date for the determination of stockholders entitled to receive such rights,
options, warrants or securities.
(c) Other Issuances of Common Shares or Rights.
In the event that at any time or from time to time the Company shall issue (i)
Common Shares (subject to the provisions below), (ii) rights, options or
warrants entitling the holder thereof to subscribe for Common Shares (provided,
however, that no adjustment shall be made upon the exercise of such rights,
options or warrants), or (iii) securities convertible into or exchangeable or
exercisable for Common Shares (provided, however, that no adjustment shall be
made upon the conversion, exchange or exercise of such securities), and in any
event other than for Excluded Shares (as defined in Section 5(j)) at a price per
share at the record date of such issuance that is less than the then Current
Market Value per Common Share, then the number of Common Shares issuable upon
the exercise of the Warrant shall be increased to a number determined by
multiplying the number of Common Shares theretofore issuable upon exercise of
the Warrant by a fraction, the numerator of which shall be the number of Common
Shares outstanding immediately after such sale or issuance plus the number of
additional Common Shares offered for subscription or
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<PAGE>
purchase or into or for which such securities that are issued are convertible,
exchangeable or exercisable, and the denominator of which shall be the number of
Common Shares outstanding immediately prior to such sale or issuance plus the
total number of Common Shares which the aggregate consideration expected to be
received by the Company (assuming the exercise or conversion in full of all such
rights, options, warrants or securities, if any) would purchase at the then
Current Market Value per Common Shares, and subject to Section 5(g), the
Exercise Price shall be adjusted to a number determined by dividing the Exercise
Price immediately prior to such date of issuance by the aforementioned fraction.
For purposes of this Section 5(c) only, any issuance of Common Shares, or
rights, options or warrants to subscribe for, or other securities convertible
into or exercisable or exchangeable for, Common Shares, which issuance (or
agreement to issue) (A) is in exchange for or otherwise in connection with the
bona fide acquisition of property (excluding any such exchange exclusively for
cash) of any person or entity and (B) is at a price per share equal to the fair
market value thereof at the time an agreement in principle is reached or at the
time a definitive agreement is entered into, shall be deemed to have been made
at a price per share equal to the Current Market Value per share at the record
date with respect to such issuance (or, if applicable, the time of closing or
consummation of such exchange or acquisition) if such definitive agreement is
entered into within 120 days of the date of such agreement in principle. For
purposes of the foregoing sentence, (x) in the case of an issuance of Common
Shares in an amount less than 5% of the then-outstanding Common Shares on a
fully diluted basis, the Company's Board of Directors, in its reasonable
discretion, shall have determined that the price per share times the aggregate
Common Shares issued is equal to the fair market value of the property received
in exchange therefor or (y) in the case of an issuance of Common Shares in an
amount greater than 5% of the then-outstanding Common
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Shares on a fully diluted basis, the Company shall obtain a fairness opinion
from a reputable investment banking firm or, as appropriate, an appraisal or
other report from a reputable individual or entity engaged in the business of
rendering such appraisals or reports as to the fair market value of such
property received or to be received by the Company in exchange for the Common
Shares.
(d) Merger. If at any time after the date
hereof there shall be a merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity, then the Company shall deliver notice of such transaction no later than
ten (10) business days prior to the consummation of such transaction (the
"Merger Notice"). If (i) the Holder does not deliver notice of exercise of the
Warrant pursuant to Section 2 hereof, within eight (8) business days after
delivery of the Merger Notice and (ii) such transaction is consummated with
thirty (30) business days after delivery of the Merger Notice, this Warrant
shall be canceled in its entirety upon consummation of the transaction.
(e) Spin-Off. If at any time after the date
hereof the Company shall make a distribution on its Common Shares in the form of
assets of the Company (including the capital stock of any subsidiary of the
Company), the Purchase Price set forth in Section 1 hereof shall be adjusted to
a number determined by multiplying the Purchase Price in effect immediately
prior to such distribution by a fraction, the numerator of which shall be the
volume-weighted average of the Current Market Value of the Common Shares for the
five trading days following the distribution and the denominator shall be the
volume-weighted average of the Current Market Value of the Common Shares for the
five trading days immediately preceding the distribution.
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(f) Superseding Adjustment. Upon the expiration
of any rights, options, warrants or conversion or exchange privileges which
resulted in adjustments pursuant to this Article 5, if any thereof shall not
have been exercised in full, then the number of Warrant Shares issuable upon the
exercise of the Warrant shall be readjusted pursuant to the applicable section
of Article 5 as if (A) only Common Shares issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the Common Shares, if
any, actually issued upon the exercise of such rights, options, warrants or
conversion or exchange privileges and (B) Common Shares actually issued, if any,
were issuable for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options, warrants or
conversion or exchange privileges whether or not exercised and the Exercise
Price shall be readjusted inversely.
(g) Minimum Adjustment. The adjustments
required by the preceding Sections of this Article 5 shall be made whenever and
as often as any specified event requiring an adjustment shall occur, except that
no adjustment of the Exercise Price or the number of Common Shares issuable upon
exercise of Warrants that would otherwise be required shall be made unless and
until such adjustment, either by itself or with other adjustments not previously
made, increases or decreases by at least 0.05% the Exercise Price or the number
of Common Shares issuable upon exercise of the Warrant immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Article 5 and not
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
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business on the date of its occurrence. In computing adjustments under this
Article 5, fractional interests in Common Shares shall be rounded to the nearest
whole number of Common Shares.
(h) Notice of Adjustment. Whenever the Exercise
Price or the number of Common Shares issuable upon exercise of the Warrant is
adjusted, as herein provided, the Company shall deliver to the Holder a
certificate setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated, and
specifying the Exercise Price and the number of Common Shares issuable upon
exercise of Warrants after giving effect to such adjustment, which absent patent
error shall be final and conclusive.
(i) Adjustment to Warrant Certificate. The
form of Warrant Certificate need not be changed because of any adjustment made
pursuant to this Article 5, and Warrant Certificates issued after such
adjustment may state the same Exercise Price and the same number of Common
Shares issuable upon exercise of the Warrant as is stated in the Warrant
Certificate initially issued pursuant to this Agreement. The Company, however,
may at any time in its sole discretion make any change in the form of Warrant
Certificate that it may deem appropriate to give effect to such adjustment and
that does not affect the substance of the Warrant Certificate or otherwise have
an adverse effect on the Holder, and any Warrant Certificate thereafter issued
or countersigned, whether in exchange or substitution for an outstanding Warrant
Certificate or otherwise, may be in the form as so changed.
(j) Exceptions to Antidilution Provisions.
Without limiting any other exception contained in this Section 5, and in
addition thereto, no adjustment need be made for any of the following
(collectively, the "Excluded Shares"):
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(i) grants or exercises of rights granted to directors, officers,
employees, consultants and others pursuant to any stock option plan or
agreement, stock purchase plan or agreement, compensatory stock issuance or
restriction agreement, stock ownership plan (ESOP), consulting agreement,
or such other compensatory options, issuances, warrants, agreements or
plans approved by a majority of the members of the Board of Directors or
applicable committee thereof;
(ii) options, warrants or other agreements or rights to purchase
capital stock of the Company entered into prior to the date of the issuance
of this Warrant, and any issuance of Common Shares in connection therewith;
(iii) rights to purchase Common Shares pursuant to a Company plan for
reinvestment of dividends or interest;
(iv) a change in the par value of Common Shares (including a change
from par value to no par value or vice versa);
(v) Common Shares (or options, warrants, rights to purchase or
convertible or exchangeable securities therefor) issued or issuable in
connection with the acquisition by the Company or any of its subsidiaries
of all or substantially all of the assets, or the acquisition of the common
stock of another corporation or business organization where the Company is
the surviving or acquiring entity;
(vi) Common Shares or preferred stock (or options, warrants, rights to
purchase or convertible or exchangeable securities therefor) issued or
issuable in connection with any joint venture, strategic alliance, or other
similar relationship, or otherwise in connection with the grant of, or
acquisition by, the Company of license, distribution, marketing or similar
rights in consideration of the exchange or transfer of intellectual
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property or proprietary rights, whether of the Company or any third party;
provided, however, that the Board of Directors of the Company, in its
reasonable discretion, determines that the price per share times the
aggregate Common Shares issued is equal to the fair market value of the
property received in exchange therefor; or
(vii) options, warrants or other agreements or rights to purchase
capital stock of the Company entering into in connection with the Equity
Line Arrangement.
6. Dissolution, Liquidation, Winding-Up. If the Company at any time
during the Exercise Period shall dissolve, liquidate or wind-up its affairs, the
Holder may thereafter receive upon the proper exercise hereof in accordance with
Section 2 on or prior to the record date for any such action, in lieu of each
Common Share or fraction thereof that it would have been entitled to receive,
the same kind and amount of any securities or assets as may be issuable,
distributable or payable with respect to such Common Share or fraction thereof
upon any such dissolution, liquidation or winding-up. Upon notice delivered by
the Holder to the Company at any time prior to the record date for any
liquidation or winding-up of the Company, and notwithstanding that the Warrants
evidenced by this Warrant Agreement have not yet been exercised, the Holder
shall be entitled to be treated as if this Warrant Agreement had been exercised
to the fullest extent that it is exercisable as of such record date and shall be
entitled to receive out of the assets distributed in such liquidation or
winding-up (on a pari passu basis with the holders of common stock) such assets
as the Holder would have received as a holder of common stock upon the exercise
to the fullest extent that it is exercisable hereunder as of such record date,
less the sum total that would have been payable by the Holder as the Purchase
Price upon such exercise. Subject to this Section 6, the Warrants shall lapse,
and this Warrant
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Agreement shall terminate and be of no further force and effect, upon any
liquidation or winding-up of the Company.
7. Notice. Upon (a)any taking by the Company of a record of the holders
of any class of securities for which this Warrant may be exercised for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend payable out of surplus of the Company) or
other distribution, (b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, (c)
any merger of the Company other than a merger of the Company with an Affiliate
(as such term is defined in Rule 12b-2 of the regulations promulgated under the
Securities and Exchange Act of 1934, as amended) or a merger in which the
shareholders of the Company prior to such merger will continue to own at least
fifty percent (50%) of the shares of the surviving entity, or (d) any voluntary
or involuntary dissolution, liquidation or winding-up of the Company or sale or
transfer of all or substantially all of the assets of the Company, then and in
each such event, the Company shall mail or cause to be mailed to Holder a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend or distribution, and stating the amount and character of such
dividend or distribution, or (ii) the date on which any such reorganization,
reclassification, recapitalization, merger, dissolution, liquidation, winding-up
or sale or transfer of assets is to take place, and the date, if any, as of
which the holders of record of Common Shares shall be entitled to vote thereon
or to exchange their Common Shares for securities or other property deliverable
upon such dissolution, liquidation or winding-up. Such notice shall be mailed at
least twenty (20) days prior to the record date therein specified.
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8. Representations, Warranties and Covenants.
(a) Representations and Warranties of the Company. The Company
hereby represents and warrants to the Holder as follows:
(1) The Company has full legal right, power and authority to
enter into and perform this Warrant Agreement and the execution, delivery
and performance by the Company of this Warrant Agreement is within the
Company's corporate powers, has been duly authorized by all necessary
corporate action, and does not and will not contravene (a) the Company's
Restated Certificate of Incorporation, as amended, or By-laws, (b) any
applicable law, rule, regulation or the requirement of any jurisdiction to
which the Company is subject or (c) result in a breach of or default under
any material agreement or arrangement required to be filed as an Exhibit to
the Company's SEC filings to which the Company may be a party.
(2) This Warrant Agreement is duly executed and delivered and
constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The Warrant
Shares issuable upon exercise of the Warrant have been duly authorized and
reserved for issuance and, when issued in accordance with the terms of the
Warrant, will be validly issued, fully paid and non-assessable, and without
violation of any preemptive rights.
(b) Representations and Warranties of the Holder. The Holder hereby
represents and warrants to the Company as follows:
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(1) the Holder is entering into this Agreement for its own account
and not with a present view to or for sale in connection with any
distribution thereof to others and the Holder has no present arrangement
(whether or not legally binding) to sell at any time the Warrant (or the
securities underlying the Warrant) to or through any person or entity.
(2) the Holder is a sophisticated investor (as described in Rule
506(b)(2)(ii) of Regulation D under the Securities Act) and an accredited
investor (as defined in Rule 501 of Regulation D under the Securities Act),
and the Holder has such experience in business and financial matters that
it is capable of evaluating the merits and risk of the investment
represented by this Warrant Agreement. The Holder acknowledges that the
investment represented by this Warrant Agreement is speculative and
involves a high degree of risk, and that the Holder is able to afford the
complete loss of its investment represented by the Warrant Agreement.
(3) the Holder has full legal right, power and authority to
enter into and perform this Warrant Agreement.
(4) the execution and delivery of this Warrant Agreement by
it and the consummation of the transactions and performance of other
covenants contemplated hereby do not and will not contravene its
Certificate of Incorporation or bylaws (a) any applicable law, rule,
regulation or the requirement of any jurisdiction to which the Holder is
subject or (b) result in a breach of or default under any material
agreement or arrangement to which the Holder may be a party.
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(5) this Warrant Agreement constitutes the legal, valid and
binding obligation of the Holder, enforceable against it in accordance with
its terms.
9. Reservation of Shares. The Company shall at all times reserve and keep
available, free from preemptive rights, for issuance and/or delivery upon
exercise of this Warrant Agreement, such number of its duly authorized and
unissued Common Shares, or Common Shares held in its treasury, as shall be
required for issuance and delivery of Warrant Shares upon exercise in full of
all outstanding Warrants.
10. Listing on Securities Exchange. The Company will, to the extent
permissible under the rules of the Nasdaq National Market (or other principal
market on which the Common Shares are then listed), at its expense, list
thereon, maintain and increase when necessary such listing of, all Common Shares
issued when and to the extent the Warrant Shares are issued or issuable upon the
exercise of this Warrant so long as any Common Shares shall be so listed.
11. No Fractional Shares. Notwithstanding any other provision to the
contrary contained herein, no fractional Common Shares will be issued in
connection with any exercise hereof. Fractional interests in Common Shares shall
be rounded to the nearest whole number of Common Shares.
12. No Stockholder Rights. Holders of unexercised Warrants shall not be
considered stockholders and shall not be entitled to (i) receive dividends or
other distributions, (ii) receive notice of or vote at any meeting of the
stockholders, (iii) consent to any action of the stockholders, (iv) receive
notice as stockholders of any other proceedings of the Company, (v)
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exercise any preemptive rights or (vi) exercise any other rights whatsoever as
stockholders of the Company.
13. Satisfaction of Equity Fee in Letter Agreement. The Holder hereby
acknowledges and agrees that the issuance of this Warrant Agreement by the
Company fully and completely satisfies any obligation the Company may owe to the
Holder with respect to the Equity Fee (as such term is defined in the Letter
Agreement).
14. Governing Law; Consent to Venue and Jurisdiction; Arbitration. This
Warrant Agreement shall be governed by and construed under Delaware law, without
regard to the conflict of laws principles thereof. Each of the parties hereto
agrees that all disputes arising in connection with this Warrant Agreement shall
be governed by and finally settled under the rules of binding arbitration of the
American Arbitration Association ("AAA") by a panel of three arbitrators
familiar with Delaware corporate law (at least one of whom shall be an attorney)
appointed by the AAA. Any such claim or controversy hereunder shall first be
promptly submitted to AAA under its minitrial procedures. All arbitration
proceedings shall take place in Boston, Massachusetts.
15. Notices. All notices shall be in writing delivered as follows:
If to Company, to:
(a) Elcom International, Inc.
10 Oceana Way
Norwood, MA 02602
Attn: Chairman
Telecopier: (781) 551-0409
With a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
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Attn: Douglas A. Neary
Telecopier: (216) 241-0816
(b) If to the Holder, to:
Wit Capital Corporation
826 Broadway
New York, New York 10003
Attn: Chief Financial Officer
Telecopier: (212) 253-4410
With a copy to:
Wit Capital Corporation
826 Broadway
New York, New York 10003
Attn: Office of General Counsels
Telecopier: (212) 253-5289
or to such other address as may have been designated in a prior notice. Notices
may be sent by (a) overnight courier, (b) facsimile transmission, or (c)
registered or certified mail, postage prepaid, return receipt requested; and
shall be deemed to have been given (a) in the case of overnight courier, the
second business day after the date sent, (b) in the case of facsimile
transmission, on the date of such transmission, and (c) in the case of mailing,
five business days after being mailed, and otherwise notices shall be deemed to
have been given when received.
16. Binding Effect. Except as may be otherwise provided
herein, this Warrant Agreement shall be binding upon and inure to the benefit of
the parties and their respective allowable successors and permitted assigns.
17. Waivers. Compliance with the provisions of this Warrant
Agreement may be waived only by a written instrument specifically referring to
this Warrant Agreement and signed by the party waiving compliance. No course of
dealing, nor any failure or delay in
20
<PAGE>
exercising any right, shall be construed as a waiver, and no single or partial
exercise of a right shall preclude any other or further exercise of that or any
other right.
18. Amendment or Modification. No supplement, modification or
amendment of this Warrant Agreement shall be binding unless made in a written
instrument which is signed by all of the parties and which specifically refers
to this Warrant Agreement.
IN WITNESS WHEREOF, the Company and Holder have caused this
Warrant Agreement to be executed as of this 30th day of December, 1999.
ELCOM INTERNATIONAL, INC.
("Company")
By: /s/ Peter A. Rendall
Name: Peter A. Rendall
Title: Chief Financial Officer and Secretary
WIT CAPITAL CORPORATION
("Holder")
By: /s/ Bernard Siegel
Name: M. Bernard Siegel
Title: Senior Vice President and
Chief Financial Officer
21
Exhibit 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated March 23, 1999
included in Elcom International, Inc.'s Form 10-K for the year ended December
31, 1998 and to all references to our Firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 14, 2000
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Elcom International, Inc. on Form S-3 of our reports each dated 21 March 1997
(relating to the financial statements of Elcom International Limited and AMA
(UK) Limited as of and for the year ended 31 December 1996), appearing in the
Annual Report on Form 10-K of Elcom International, Inc. for the year ended 31
December 1998 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE
DELOITTE & TOUCHE
Chartered Accountants
London, England
14 January 2000
Exhibit 24.1
DIRECTOR AND/OR OFFICER OF ELCOM INTERNATIONAL, INC.
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of Elcom
International, Inc., a Delaware corporation (the "Corporation"), hereby
constitutes and appoints Robert J. Crowell, Laurence F. Mulhern and Peter A.
Rendall, or any of them, with full power of substitution and resubstitution, as
attorneys or attorney of the undersigned, for him or her and in his or her name,
place and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's Common Stock, and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such substitute.
EFFECTIVE as of December 14, 1999.
/s/ Richard J. Harries, Jr. Director
Richard J. Harries, Jr. Title
<PAGE>
DIRECTOR AND/OR OFFICER OF ELCOM INTERNATIONAL, INC.
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of Elcom
International, Inc., a Delaware corporation (the "Corporation"), hereby
constitutes and appoints Robert J. Crowell, Laurence F. Mulhern and Peter A.
Rendall, or any of them, with full power of substitution and resubstitution, as
attorneys or attorney of the undersigned, for him or her and in his or her name,
place and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's Common Stock, and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such substitute.
EFFECTIVE as of December 14, 1999.
/s/ John W. Ortiz Director
John W. Ortiz Title
<PAGE>
DIRECTOR AND/OR OFFICER OF ELCOM INTERNATIONAL, INC.
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of Elcom
International, Inc., a Delaware corporation (the "Corporation"), hereby
constitutes and appoints Robert J. Crowell, Laurence F. Mulhern and Peter A.
Rendall, or any of them, with full power of substitution and resubstitution, as
attorneys or attorney of the undersigned, for him or her and in his or her name,
place and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's Common Stock, and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such substitute.
EFFECTIVE as of December 14, 1999.
/s/ William W. Smith Director
William W. Smith Title
