<PAGE> 1
As filed with the Securities and Exchange Commission on April 11, 2000
Registration No. 333-94743
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------
ELCOM INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
04-3175156
- --------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)
10 Oceana Way, Norwood, Massachusetts 02026, telephone (781) 440-3333
- --------------------------------------------------------------------------------
(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. [x]
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.
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> 2
SUBJECT TO COMPLETION, DATED APRIL 11, 2000
PROSPECTUS
ELCOM INTERNATIONAL, INC.
2,853,418 Shares of Common Stock
This prospectus relates to the offer and sale of common stock of Elcom
International, Inc. Of the 2,853,418 shares offered, we are selling up to
2,500,000 and Wit Capital Corporation, the selling stockholder, is selling up to
353,418 shares issuable upon the exercise of outstanding warrants.
We are selling shares pursuant to the terms of an agreement between us
and Cripple Creek Securities, LLC. 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. Under the terms of the agreement:
- We can sell only a maximum of $50 million of common stock over
the 18-month period of the agreement; and
- We will sell the common stock at a price equal to the average
purchase price of the five trading days preceding the sale,
but in no event lower than $8.00 per share.
For further information regarding the terms governing the issuance of
shares under the agreement, see "Underwriting" on page 14.
Wit Capital, the selling stockholder, 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 Wit Capital, but we will receive proceeds upon the
sale of the shares, if any, under the agreement and upon a cash exercise, if
any, of the warrants by Wit Capital.
Our common stock is quoted on the Nasdaq National Market under the
symbol "ELCO." On April 10, 2000, the last reported sale price for the common
stock was $10.125 per share.
The underwriter has an option in the form of a call right, exercisable
during any monthly period for which we elect to sell common stock, to purchase
an amount of common stock up to the amount sold by us in the same monthly
period, but not less than $1 million.
----------------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
----------------------------------------
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.
----------------------------------------
CRIPPLE CREEK SECURITIES, LLC
The date of this prospectus is , 2000
<PAGE> 3
TABLE OF CONTENTS
Page
----
RISK FACTORS...............................................................3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS...........................10
ABOUT ELCOM...............................................................10
USE OF PROCEEDS...........................................................12
SELLING STOCKHOLDER.......................................................13
UNDERWRITING..............................................................13
PLAN OF DISTRIBUTION BY SELLING STOCKHOLDER...............................16
LEGAL MATTERS.............................................................17
EXPERTS...................................................................17
WHERE YOU CAN FIND MORE INFORMATION.......................................17
INFORMATION INCORPORATED BY REFERENCE.....................................18
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" or "the underwriter" refer to Cripple Creek
Securities, LLC. "Wit Capital" or "the selling stockholder" refer to Wit Capital
Corporation.
2
<PAGE> 4
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 $42.5 million for the year ended
December 31, 1999. As of December 31, 1999, we had an accumulated deficit of
approximately $58.7 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.
OUR STOCK PRICE COULD BE ADVERSELY AFFECTED BY THE RISK OF OWNERSHIP DILUTION
CAUSED BY THE ISSUANCE OF SHARES UNDER THE EQUITY LINE OR BY ADDITIONAL SHARES
OF OUR COMMON STOCK BECOMING AVAILABLE FOR SALE IN THE FUTURE.
Under the equity line, we may sell up to $10 million of common stock
and the underwriter may exercise its option to purchase up to an additional $10
million of common stock during each monthly investment period (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 by us to the underwriter.
Because the price of the shares that may be sold under the equity line is based
on the market value of the common stock at the time of the sale, the number of
shares sold will be greater if the price of the common stock declines, which
would cause greater ownership dilution. The equity line agreement limits the
price at which common stock may be sold to $8.00 per share, although we have no
present intention of selling shares at that price. Therefore, while this
prospectus relates to the offering of up to 2,500,000 shares under the equity
line, if we sold shares of common stock at the $8.00 per share minimum floor
price allowable under the equity line agreement, we would, subject to filing a
subsequent registration statement, issue 6,250,000 shares of common stock.
The perceived risk resulting from the sale of shares (down to $8.00 per
share) could cause some of our stockholders to sell their stock, thus causing
the price of our stock to further decline. In addition, the downward pressure on
our stock price could cause some of our stockholders to engage in short sales of
our common stock, which may cause the price of our stock to decline even
further.
The total number of shares that may be issued under the equity line
depends on the market price of our common stock at the time that the shares are
sold and whether we choose to sell shares, and the number of shares we choose to
sell from time to time, to the underwriter. The following table illustrates the
effect of variations in the market price in our common stock, and resulting
variations in sales prices to the underwriter, on the number of shares issued --
assuming that we choose to sell all possible shares under the equity line. The
equity line permits us to choose to sell no shares, or as many shares as we
wish, subject to limitations contained in the equity line agreement.
3
<PAGE> 5
Price Per Share Number of Shares Issued
--------------- -----------------------
$10.125 4,938,272
$9.50 5,263,158
$8.00 6,250,000
The numbers of shares issued shown above represent, respectively, 14.6%, 15.4%
and 17.8% of the total number of shares outstanding, when added to the number
of shares outstanding as of December 31, 1999. This table illustrates how the
ownership dilution resulting from the sale of shares under the equity line
agreement increases as the market value of the common stock declines.
Our decision to choose to sell all possible shares under the equity
line as reflected above would be influenced by, among other things, whether it
is in the best interests of the stockholders to sell at lower market prices,
limitations in the equity line agreement on the total number of shares that the
underwriter may purchase, and other factors. In that connection, we have only
registered 2,500,000 shares for sale with the Securities and Exchange
Commission, which represents 8.0% of our stock outstanding as of December 31,
1999. Although we are required to register additional shares if we choose to
sell such shares, we have not decided at this point to sell such shares, and may
elect not to do so under the equity line.
This prospectus also relates to the resale of up to 353,418 shares of
common stock issuable upon exercise of outstanding warrants, having an exercise
price of $28.71 per share, held by Wit Capital. In addition, the equity line
agreement requires us to 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 at which the common stock is sold under the equity line.
In addition, as of December 31, 1999, we had an aggregate of 28,870,846
shares of common stock outstanding, of which 24,915,918 shares were held by
non-affiliates and are freely tradeable in the public market without
restriction. The remaining 3,954,928 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.
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 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 December 31, 1999, our
borrowings from Deutsche Financial were $29.9 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-
4
<PAGE> 6
percentage may be diluted. We cannot be certain that additional financing will
be available to us. If we 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
5
<PAGE> 7
computers and related products and office supplies, to provide significant
revenue growth. As Internet 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
6
<PAGE> 8
and local computer stores, among others. With respect to our PECOS procurement
software applications, 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, our 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
7
<PAGE> 9
percentage of our current product inventories each quarter to certain
manufacturers as we assess each 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, many computer systems and software
products could produce erroneous results or fail unless they have been modified
or upgraded to process date information correctly. We have completed the process
of evaluating our computer systems and software and believe our systems and
software are Year 2000 compliant. We have not experienced any significant
problems internally or with customers, clients or electronic trading partners in
connection with Year 2000 compliance. Nevertheless, we cannot assure you that
Year 2000 problems will not arise in the future, 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;
8
<PAGE> 10
- 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
9
<PAGE> 11
- 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.
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 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.
10
<PAGE> 12
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 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 of 1999, $12.2 million in
the third quarter of 1999 and $28.3 million in the fourth quarter of 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.
11
<PAGE> 13
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 could receive, before expenses, up to $50 million in proceeds under
the equity line. In addition, Cripple Creek, the underwriter, 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 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 such exercise of the warrants.
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 Wit Capital or Cripple Creek 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 sell common stock under the terms of the
equity line; and
- whether Cripple Creek exercises its option 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
12
<PAGE> 14
- expenses incurred in connection with the equity line
agreement, including the payment of the placement fee to Wit
Capital, as described below in "Selling Stockholder."
SELLING STOCKHOLDER
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
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.
The following table shows the number of shares owned by the selling
stockholder prior to this offering and the number of shares of common stock
being registered hereby. Because any or all of the shares of common stock listed
below may be offered for sale by the selling stockholder from time to time, no
estimate can be given as to the number and percentage of common stock that will
be held by the selling stockholder upon termination of sales pursuant to this
prospectus.
Shares Owned Number of
Prior Shares
Name to Offering to be Registered
---- ----------- ----------------
Wit Capital Corporation ................ 353,418 (1) 353,418 (1)
- -------------
(1) Represents shares of common stock issuable upon the exercise of outstanding
warrants held by Wit Capital. Eighty percent of the warrants became exercisable
upon issuance and the remaining 20% became exercisable upon the date of this
prospectus. The warrants expire on December 20, 2002.
UNDERWRITING
We entered into an Amended and Restated Structured Equity Line Flexible
Financing Agreement and a related registration rights agreement with Cripple
Creek, the underwriter.
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 sold to Cripple Creek
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. 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.
13
<PAGE> 15
However, under the equity line agreement, we may not sell common stock for less
than $8.00 per share. 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 for that investment period, 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 sold, which may be less than the amount indicated in
the put notice and call notice. Specifically, the amount of common stock sold
during each monthly investment period will be equal to the lesser of:
- the amount indicated in the put notice and call notice, if
any,
- an amount equal to 8% 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
- 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 may be sold if there are any trading days during
the period in which the volume-weighted average price of the common stock is
below the minimum price that we set for the period.
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. The
registration rights agreement requires us to register the shares issuable upon
exercise of the warrants that are issued to Cripple Creek.
14
<PAGE> 16
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.
Cripple Creek has advised us that it may sell the common stock offered
by this prospectus from time to time primarily in transactions on the Nasdaq
National Market or in other types of transactions, including those described in
"Plan of Distribution of Selling Stockholder."
The equity line agreement provides that we must indemnify the
underwriter in certain circumstances against certain liabilities, including
liabilities under the Securities Act, and contribute to payments that the
underwriters may be required to make in respect of those liabilities. The
underwriter is required by the equity line agreement to indemnify us in certain
circumstances against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments that we may be required to make in
respect of those liabilities.
The underwriter may create a short position in the common stock for its
own account by selling more shares of common stock than we have actually sold to
it under the equity line. The underwriter may elect to cover any short position
by purchasing the shares of common stock in the open market or by delivering a
call notice to us in any investment period for which we have delivered a put
notice. Under the equity line agreement, the underwriter is prohibited from
making any sales with the intention of reducing the price of our common stock to
the underwriter's benefit. Cripple Creek has advised us that it is a registered
broker-dealer under the Securities Exchange Act of 1934.
The following table indicates the expenses payable by us in the
offering. All amounts are estimates, other than the SEC Registration Fee and the
Nasdaq Additional Listing Fee.
<TABLE>
<S> <C>
SEC Registration Fee....................................................... $ 19,321
Accounting Fees (for the Company, underwriter and selling stockholder)..... $ 140,000
Fees and Expenses of Counsel (for the Company, underwriter
and selling stockholder).................................................. $ 200,000
Nasdaq Additional Listing Fee.............................................. $ 17,500
Placement Fee ............................................................. $ 3,500,000
Miscellaneous.............................................................. $ 23,179
Total............................................................. $ 3,900,000
</TABLE>
As indicated in the above table, we are required to pay a placement fee
to Wit Capital, the selling stockholder and our financial advisor, in an amount
equal to the greater of $700,000 or 7% of the gross proceeds received by the us
in connection with the equity line agreement. In its capacity as financial
15
<PAGE> 17
advisor, Wit Capital introduced Elcom to Cripple Creek, the underwriter. See
"Selling Stockholder." The estimated placement fee set forth above of $3.5
million assumes the sale of $50 million of common stock, the maximum amount that
may be sold under the equity line agreement. Wit Capital also received warrants
to purchase 353,418 shares of common stock, 80% of which became exercisable upon
issuance in December 1999 and the remaining 20% of which became exercisable upon
the date of this prospectus.
PLAN OF DISTRIBUTION BY SELLING STOCKHOLDER
The selling stockholder may, from time to time, sell all or a portion
of the 353,418 shares of common stock issuable upon exercise of outstanding
warrants:
- 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.
The warrants are exercisable at a price of $28.71 per share. The
selling stockholder is not restricted as to the price at which it may sell the
shares of common stock offered by this prospectus. The shares may be sold by the
selling stockholder 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
stockholder may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling stockholder, 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 stockholder 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 stockholder, it will purchase
as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the selling stockholder. 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
16
<PAGE> 18
shares commissions as described above. The selling stockholder also may sell the
shares in accordance with Rule 144 under the Securities Act, rather than under
this prospectus.
From time to time the selling stockholder 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 stockholder engages in such
transactions, the price of our common stock may be affected. From time to time
the selling stockholder may pledge its shares pursuant to the margin provisions
of its agreements with its brokers. Upon a default by the selling stockholder,
the broker may offer and sell the pledged shares from time to time.
The selling stockholder 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, including Regulation M, to the
extent it applies. The Securities Exchange Act and related rules may limit the
timing of purchases and sales of any of the shares by the selling stockholder or
any other such person that may affect the marketability of the shares. The
selling stockholder 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 stockholder 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 consolidated financial statements and schedules of Elcom
International, Inc. and subsidiaries as of and for the year ended December 31,
1999 incorporated by reference in this prospectus have been audited by KPMG LLP,
independent certified public accountants. The consolidated financial statements
and schedules of Elcom International, Inc. and subsidiaries as of and for the
years ended December 31, 1998 and 1997 incorporated by reference in this
prospectus have been audited by Arthur Andersen LLP, independent certified
public accountants. The consolidated financial statements and supporting
schedules referred to above have been incorporated by reference in reliance upon
the reports of those firms and upon the authority of those firms as experts in
accounting and auditing.
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.
17
<PAGE> 19
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
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,
1999; and
(b) 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
18
<PAGE> 20
================================================================================
ELCOM INTERNATIONAL, INC.
2,853,418 SHARES
COMMON STOCK
----------
PROSPECTUS
----------
CRIPPLE CREEK SECURITIES, LLC
, 2000
================================================================================
<PAGE> 21
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:
<TABLE>
<S> <C>
SEC Registration Fee......................................................... $ 19,321
Accounting Fees (for the Company, underwriter and selling stockholder)....... $ 140,000
Fees and Expenses of Counsel (for the Company, underwriter
and selling stockholder).................................................... $ 200,000
Nasdaq Additional Listing Fee................................................ $ 17,500
Placement Fee ............................................................... $ 3,500,000*
Miscellaneous................................................................ $ 23,179
Total........................................................................ $ 3,900,000
</TABLE>
- ----------------
*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
Stockholder." The estimate set forth assumes the sale of $50 million of Common
Stock, the maximum amount that may be sold 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
<PAGE> 22
of the Director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith that 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> 23
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> 24
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 Amendment
No. 2 to the 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 11th day of April, 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
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 11, 2000.
SIGNATURE TITLE
--------- -----
/s/ Robert J. Crowell Chairman of the Board of Directors
- -------------------------- and Chief Executive Officer
Robert J. Crowell (Principal Executive Officer)
/s/ Peter A. Rendall Chief Financial Officer
- -------------------------- (Principal Financial and Accounting Officer)
Peter A. Rendall
* Director
- --------------------------
Richard J. Harries, Jr.
* Director
- --------------------------
John W. Oritz
* Director
- --------------------------
William W. Smith
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 2 to the Registration Statement pursuant to the Powers of Attorney
executed by the above-named directors of the Company and which have been filed
with the Securities and Exchange Commission on behalf of such directors.
/s/ Robert J. Crowell
- -------------------------------------
Robert J. Crowell, Attorney-in-Fact
<PAGE> 25
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 Amended and Restated Structured Equity Line Flexible Financing
Agreement, dated April 7, 2000, between the Registrant and Cripple
Creek Securities, LLC.
10.8 Amended and Restated Registration Rights Agreement, dated April 7,
2000, between the Registrant and Cripple Creek Securities, LLC.
10.9 Form of Warrant and Minimum Commitment Warrant of the Registrant
issuable to Cripple Creek Securities, LLC.
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.
23.3 Consent of KPMG LLP.
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) Previously filed.
<PAGE> 1
Exhibit 10.7
AMENDED AND RESTATED STRUCTURED EQUITY LINE FLEXIBLE FINANCING(SM)
AGREEMENT dated as of April 7, 2000 (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");
WHEREAS, the parties previously entered into that certain
Structured Equity Line Flexible Financing Agreement dated as of December 30,
1999 ("Original Agreement");
WHEREAS, the parties now deem it necessary and desirable to make
certain changes and modifications to the Original Agreement as set forth below;
and
WHEREAS, the parties desire that the Original Agreement shall no
longer have any force and effect, and instead shall in its entirety be replaced
with and restated by this Agreement;
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.
"AGREEMENT" shall have the meaning set forth in the introductory
paragraph hereof.
"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.
<PAGE> 2
"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.
"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" shall have the meaning set forth in the introductory
paragraph hereof.
"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.
2
<PAGE> 3
"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.
"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.
3
<PAGE> 4
"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;
PROVIDED THAT the Company shall not designate the Floor Price at a dollar amount
less than $8.00. In the event a Floor Price Notice is not 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" shall have the meaning set forth in the introductory
paragraph hereof.
"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
2.3(c) hereof.
4
<PAGE> 5
"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.
"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. Section 9601 ET SEQ. and hazardous
wastes as defined under the Resource Conservation and Recovery Act, 42 U.S.C.
Section 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
recitals above.
"MINIMUM COMMITMENT WARRANT" shall have the meaning set forth in
Section 2.6(b).
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"ORIGINAL AGREEMENT" shall have the meaning set forth in the
recitals above.
"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.
5
<PAGE> 6
"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.
"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
6
<PAGE> 7
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.
"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
7
<PAGE> 8
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.
(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.
8
<PAGE> 9
(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 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.
9
<PAGE> 10
s (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.
(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
10
<PAGE> 11
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 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
11
<PAGE> 12
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 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
12
<PAGE> 13
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.
(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
13
<PAGE> 14
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 Common Stock to be
acquired pursuant to this 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 December 31, 1999, 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.
14
<PAGE> 15
(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.
(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.
15
<PAGE> 16
(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 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
16
<PAGE> 17
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 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
17
<PAGE> 18
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 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.
18
<PAGE> 19
IV.
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company as follows:
4.1 [Reserved.]
4.2 [Reserved.]
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 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
19
<PAGE> 20
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 [Reserved.]
4.13 [Reserved.]
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 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.
20
<PAGE> 21
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.
(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.
21
<PAGE> 22
(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 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.
22
<PAGE> 23
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 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.
23
<PAGE> 24
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 March 31, 2000. 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
Act, as the case may be, and the rules and regulations of the SEC
24
<PAGE> 25
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)
disclosed in the Company's most recent Form 10-K or any SEC Document filed
subsequent to such Form 10-K or (ii) incurred by the Company or any of its
Subsidiaries since December 31, 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 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.
25
<PAGE> 26
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 December 31, 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 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;
26
<PAGE> 27
(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.
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
27
<PAGE> 28
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 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
28
<PAGE> 29
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 [Reserved.]
5.22 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. To the Knowledge of
the Company, since December 31, 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 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
29
<PAGE> 30
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 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
30
<PAGE> 31
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 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.
31
<PAGE> 32
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 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 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:
(a) At any time from and after the effective date of
the applicable registration statement: (i) incident to the exercise of the
Warrants; and (ii) 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
32
<PAGE> 33
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 the sale of Common Stock issued
pursuant to a Closing or resale of Common Stock issued upon exercise of the
Warrants.
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 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
33
<PAGE> 34
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 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.
34
<PAGE> 35
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:
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
35
<PAGE> 36
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
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 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
36
<PAGE> 37
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 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
37
<PAGE> 38
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 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.
38
<PAGE> 39
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 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.
39
<PAGE> 40
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.
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.
40
<PAGE> 41
12.4 EFFECTIVENESS OF THE AGREEMENT. This Agreement shall be
effective as of the Effective Date.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
41
<PAGE> 42
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
[SIGNATURE PAGE TO
AMENDED AND RESTATED
STRUCTURED EQUITY LINE FLEXIBLE FINANCING AGREEMENT]
<PAGE> 43
EXHIBIT A
FORM OF WARRANT AND MINIMUM COMMITMENT WARRANT
43
<PAGE> 44
EXHIBIT B
FORM OF LETTER OF THE COMPANY'S INDEPENDENT COUNSEL
44
<PAGE> 45
EXHIBIT C
FORM OF LEGAL OPINION
45
<PAGE> 1
Exhibit 10.8
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Rights
Agreement"), entered into as of April 7, 2000, 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 Amended and Restated Structured
Equity Line Flexible Financing Agreement by and between the Company and the
Investor dated April 7, 2000 (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;
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;
WHEREAS, the parties previously entered into that certain Registration
Rights Agreement dated as of December 30, 1999 ("Original Rights Agreement");
WHEREAS, the parties now deem it necessary and desirable to make
certain changes and modifications to the Original Rights Agreement as set forth
below; and
WHEREAS, the parties desire that the Original Rights Agreement shall no
longer have any force and effect, and instead shall in its entirety be replaced
with and restated by 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:
<PAGE> 2
"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.
"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:
2
<PAGE> 3
(a) Subject to the terms and conditions of this Rights
Agreement, the Company shall file with the Commission no later than thirty (30)
days from the date of the issuance of Warrants pursuant to 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 filing
thereof. Furthermore, at the time of filing of the Registration Statement, the
Company shall file (i) such blue sky filings as shall have been requested by the
Investor; and (ii) 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 the
time periods set forth in Section 2(a) hereof, 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 a period of sixty (60)
months, as extended pursuant to Section 4 hereof, 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
3
<PAGE> 4
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 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
4
<PAGE> 5
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.
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
5
<PAGE> 6
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 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
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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
8
<PAGE> 9
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.
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:
9
<PAGE> 10
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
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
Attention: 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
10
<PAGE> 11
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 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 rule 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]
11
<PAGE> 12
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 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]
<PAGE> 1
Exhibit 10.9
EXHIBIT A
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 Amended and
Restated Structured Equity Line Flexible Financing Agreement between the Company
and Purchaser
<PAGE> 2
dated as of April 7, 2000 (the "Agreement") or that certain Amended and Restated
Registration Rights Agreement between the Company and Purchaser dated as of
April 7, 2000 (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
-2-
<PAGE> 3
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.
(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
-3-
<PAGE> 4
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
-4-
<PAGE> 5
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.
-5-
<PAGE> 6
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
-6-
<PAGE> 7
("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.
-7-
<PAGE> 8
(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:
-8-
<PAGE> 9
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> 10
Dated: _______________
ELCOM INTERNATIONAL, INC.
By:___________________________
Printed:
Title:
Attest:
By:_____________________________
Its:____________________________
[SIGNATURE PAGE TO WARRANT]
<PAGE> 11
EXHIBIT A
---------
SUBSCRIPTION NOTICE
(FORM OF WARRANT EXERCISE)
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO _______________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant:
_____(A) for, and to purchase thereunder, _______________
shares of Common Stock of Elcom International, Inc.,
a Delaware corporation (the "Common Stock"), and
herewith, or by wire transfer, makes payment of
$_____therefor; or
_____(B) in a "cashless" or "net-issue exercise" for, and to
purchase thereunder _______________ shares of Common
Stock, and herewith makes payment therefor with
__________ Surrendered Warrant Shares.
Tendered herewith is payment for all taxes payable upon
exercise of this Warrant, including transfer taxes, stamp taxes and other taxes.
The undersigned requests that the certificates for such shares
be issued in the name of, and
_____(A) delivered to ___________________, whose address is
_____________________; or
_____(B) electronically transmitted and credited to the
account of ______________ undersigned's prime broker
(Account No. _______________) with Depository Trust
Company through its Deposit Withdrawal Agent
Commission system.
Dated: _______________
_________________
--------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
--------------------------
(Address)
Tax Identification Number: _____________
<PAGE> 12
EXHIBIT B
---------
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and
transfers unto ______________ (the "Transferee") the right represented by the
within Warrant to purchase ____ shares of Common Stock of Elcom International,
Inc., a Delaware corporation, to which the within Warrant relates, and appoints
_________ Attorney to transfer such right on the books of Elcom International,
Inc., a Delaware corporation, with full power of substitution of premises.
Dated: _______________
----------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
----------------------------------
(Address)
Signed in the presence of:
- --------------------------
The undersigned Transferee accepts the assignment and transfer of the
right represented by the within Warrant to purchase ______ shares of Common
Stock of Elcom International, Inc. and hereby agrees to be bound by the terms
and conditions of such Warrant.
----------------------------------
Signature
----------------------------------
(Address)
<PAGE> 1
Exhibit 23.2
[ARTHUR ANDERSEN LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Elcom International, Inc.:
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, 1999 and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
April 10, 2000
<PAGE> 1
Exhibit 23.3
Consent of Independent Public Accountants
The Board of Directors
Elcom International, Inc.:
We consent to the use of our reports dated February 9, 2000 included in Elcom
International, Inc.'s December 31, 1999 Annual Report on Form 10-K which is
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the prospectus.
KPMG LLP
Boston, Massachusetts
April 10, 2000
